Expert Determination is a quick, cost effective and increasingly popular method of resolving disputes. Pell v Bindi concerns a case brought to enforce the determination of an Expert where the losing party contended that the Expert had been guilty of actual and perceived bias or partiality. The case confirms that the courts will enforce Expert’s decisions even if there are errors, even gross errors, in the decision, unless there is evidence that the Expert has answered the wrong question, or of fraud, collusion or bias. The case serves as a useful reminder of the principles which govern challenges to an Expert’s Determination and gives guidance to practitioners drafting Expert Determination provisions.
Pell was a building company contracted by Bindi to perform various works at its property. Work was not complete when it left the site, and a dispute arose concerning payment. The expert was appointed under an agreement between the parties that included a term that the parties would be bound by the decision of the Expert (the “Agreement”). The Expert appointed to the dispute attended the premises and gave a detailed written decision in favour of Pell. When Bindi persisted in its refusal to pay, Pell sought enforcement of the Expert’s determination. Bindi contended that the Agreement to refer the dispute to Expert Determination contained an implied term that the decision was only enforceable if free from gross or obvious error or perversity in its conclusions. Bindi also argued that the Expert was guilty of actual and perceived bias and partiality on a number of grounds and that the Expert’s conclusions contained “gross and obvious errors” and were perverse.
The Court concluded that the effect of such an implied term would be to frustrate the commercial purpose of the Agreement, rather than promote it; largely because the Agreement had intended to give rise to a final and binding decision. There is no requirement that the rules of due process or natural justice be followed in an Expert Determination. If the Expert answered the question put to him or her, his or her decision is binding even if he or she made errors. If not, his or her decision is a nullity. Moreover, there was no evidence of actual bias on the part of the Expert, nor was the test for apparent bias (the view of a fair-minded and informed observer) met. The Expert’s decision answered the issue referred to him, and was within the scope of the agreement. It was not open to the court to refuse to enforce the decision by reason of errors in the determination, even if gross, obvious or perverse; a determination is binding and enforceable even if it is wrong.
The case is a reminder of the importance of recognising that the scope for challenging decisions made by an Expert is limited, even if reasons are given. That the decision contains errors, no matter how great, is no bar to enforcing it, save where the Expert has materially departed from his or her instructions so as to answer the wrong question; fraud; collusion; or actual bias.
In drafting Expert Determination clauses, if you want to widen the scope of any challenge so as to increase the chance of challenging the decision on the grounds of obvious error:
- It is open to the parties to an Expert Determination clause to stipulate that the decision only be binding “in the absence of manifest error”.
- This widens the scope for potential challenge of the decision but does not automatically invalidate the result if an error is made.
- Consideration should be given when drafting an Expert Determination clause as to whether this is desirable, since it gives a further right of challenge to either party.
- Where a fast and final solution is desirable, it is advisable not to include such a clause. Nor is it advisable, in these circumstances, to require that the Expert gives reasons for his or her conclusion.
Owen Pell Limited v Bindi (London) Limited, Birmingham District Registry 19 May 2008