Experts’ statements setting out which issues are agreed – or not – are useful, and may be binding, writes Guy Fetherstonhaugh QC, Falcon Chambers.
It has been common for a long time for tribunals to direct that experts appearing before them should prepare a statement showing the topics on which they agree and those on which they disagree. This is as useful a tool in arbitration as it is in litigation: it clears the air, and leaves the parties with a secure basis for their submissions, and the tribunal with a ready means of understanding the departure point for the dispute.
In litigation, parties are free to reopen concessions in such a statement, unless they have agreed to be bound by it (CPR 35.12(5)). The court would be most unlikely itself to depart from the agreed position. The position in other forms of dispute resolution calls for more thought.
Arbitration
The question that arises in circumstances where the dispute resolver wishes to go behind the parties’ agreement was dealt with in an arbitration context in Techno Ltd v Allied Dunbar Assurance plc [1993] 1 EGLR 29.
In that case, a rent review clause specified that the rent should be calculated by reference to a notional building. An arbitrator who had been appointed to resolve the dispute stated that it would assist him if the parties’ surveyors would clarify the main assumptions to be made in assessing the rent at review, and thus eliminate as many areas of dispute or uncertainty as possible.
The parties’ surveyors thereupon agreed a statement of agreed facts. This went beyond the rent review clause, in making assumptions as to the age, height, construction and layout of the notional building.
In his award, the arbitrator expressed surprise at the parties’ assumptions, and discarded them. The tenant applied to set aside the award on the ground that the arbitrator had misconducted himself.
Counsel for the tenant (Hazel Williamson QC, latterly Her Honour Hazel Marshall QC, and late of this column) argued that the statement constituted a package of terms agreed between the parties, and was a contract binding on them (and the arbitrator).
Counsel for the landlord (Paul Morgan QC, now Morgan J) submitted that the statement was no more than a series of concessions which it was open to either party to withdraw.
The judge examined the legal nature and effect of such statements. He first decided that the statement did indeed constitute a binding contract. He went on to consider whether the arbitrator was nevertheless bound by the parties’ agreement, and concluded that, since the statement was intended to be only a tool in the conduct and determination of the existing arbitration, it was a contract of a special character. It was a contract which could be enforced or given effect to only in the arbitration, and its very nature required as a special incident of such contract that the arbitrator should be entitled either to enforce it or to release the parties from it as the demands of justice required.
He considered that this “arbitrator’s entitlement” arose either as an implied term (to the effect that the assumed facts were to continue in force only until the arbitrator determined otherwise); or (more probably) as part of the arbitral tribunal’s ability to refuse to enforce the statement where it would be inequitable to do so.
He went on to give examples of when it might be appropriate for the arbitrator to release the parties, including circumstances where the statement of facts proves ambiguous or unworkable, or leads to problems or consequences unforeseen by the parties when entered into, or contains mistakes which subsequently come to light.
He went on to consider what the arbitrator should do if intending to release the parties from the statement, holding that principles and common sense further require that in exercising his discretion the arbitrator must have regard to the reasons relied on by the party seeking its exercise: good reason must be required if effect is not to be given to a bargain deliberately made. Likewise attention must be given to the stage which the proceedings have reached: the later the stage, the greater the potential injustice to one party of allowing the other to be freed from the fetters in the litigation which it has voluntarily assumed.
Expert determination
What has never been clear is the extent to which parties are free to resile from their agreed positions in the case of an expert determination. A new authority decides this point for the first time.
In Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd [2018] EWHC 1460 (Ch), the parties to a land sale agreement could not agree on the assumed value for the sale. An independent expert was appointed to determine their dispute, and directed that the parties should agree a statement of agreed facts. The parties duly did so, including as part of their agreement the valuation date for the determination of the assumed value.
Subsequently, a legal assessor appointed by the expert took the view that the valuation date was a different date. When the defendant (whom the different date favoured) sought to resile from the statement, the claimant took proceedings for a declaration that the independent expert was bound by the statement, and could only make his determination in accordance with it.
The judge agreed. The expert’s powers and duties are set out in the contract pursuant to which he or she is appointed, and it is not open to the expert to depart from those terms. In this case, the terms included the parties’ agreement, as recorded in their statement.
It was not open to the expert to rule, as he proposed, on the status of the statement or whether he was bound to adopt the specified valuation date, for the same reason that he could not rule on the proper construction of the contract. To do so would be to allow him to rule on the extent of his authority in the absence of any agreement that he should have such power.
