The scope of an expert’s remit will depend on the terms of reference agreed by the parties. If they stipulate that his decision is final, the court cannot set it aside, even if the decision is wrong, because the parties have agreed to abide by it. However, if the expert exceeds his authority because he answers the wrong question or fails to comply with any conditions agreed by the parties, the court can set aside the decision because it is not one that the parties have agreed to accept. The court may also be able to set aside a decision if the parties have agreed that the expert’s decision will be final and binding, except in the case of manifest error.
Walton Homes Ltd v Staffordshire County Council [2013] EWHC 2554 (Ch); [2013] PLSCS 231 concerned an expert determination as to the amount payable under an overage agreement. The council sold the land in 2000 for £107,000, on condition that it would receivehalf of any uplift in the value of the property following the grant of planning permission for development. The buyer sat on the land for several years, before selling it on. The new owner obtained permission for residential development, which increased the value of the land to £1.24m.
The overage agreement provided that the overage was to be calculated by reference to the difference in the open market value of the land with the benefit of planning permission and its value on the assumption that the permission did not exist. The buyer interpreted the provisions literally. It claimed that the valuer should ignore the planning decision notice itself, but not the recommendation to the planning committee that permission ought to be granted, or the committee’s resolution to grant planning permission for development. If this were correct, the overage payable would be in the region of £125,000.
The parties had provided that, in the event of a disagreement, the determination of the expert appointed to resolve their dispute should, in the absence of some manifest error, be final and binding. The valuer appointed to determine the dispute sought counsel’s opinion on the meaning of the overage agreement and accepted his advice that, despite its literal meaning, a court would construe the overage agreement to avoid the commercial absurdity that would result from the buyer’s interpretation of the agreement. This meant that the valuer should take account of the planning decision notice and the steps in the planning process leading up to it (but not the planning application itself).
The court refused to accept that this was manifestly wrong. It was not entitled to construe the agreement itself and must consider only whether the determination should be set aside because it was manifestly erroneous. A “manifest error” is one that is obvious or easily demonstrable without extensive investigation.” However, there was no such error here. Consequently, the determination should stand.
It is difficult to disagree with the outcome in this case. However, the decision illustrates the difficulties of challenging expert determinations. Parties who are concerned about an expert’s power to determine legal points can address this by stating that a determination shall be final, except where there is a manifest error or on matters of law.
Allyson Colby is a property law consultant
