NSW Court of Appeal on whether expert determination made under a contract is open to review

By 18/09/2015Contract
expert determination

How “final and binding” is an expert determination? This important question is examined in Australian Vintage Limited v Belvino Investments No 2 Pty Ltd [2015] NSWCA 275 (11 September 2015) per Bathurst CJ, Beazley P and McColl JA.

Background

The contract involved a lease for the development and operation of a vineyard. The lease dealt with circumstances where the productivity of the vineyard was affected by a natural disaster, and included clauses enabling an expert determination of reduced productivity. Following a severe frost the lessee sought an expert determination of reduced productivity. The lessee disagreed with the expert determination. The lease provided that the expert determination was final and binding on the parties.

As the case turned on its own facts I have not set them out here, but rather just set out the relevant legal principles.

Principles (at [74] to [85], citations omitted)

1.     Whether an expert determination is open to review depends on whether or not the expert has carried out the task which he or she is contractually required to undertake.

2.     If the expert has carried out that task, the fact that errors were made, or irrelevant matters were taken into account does not render the determination challengeable.

3.     If the expert has not performed the task contractually conferred on him or her, but rather performed some different task, or carried out the task in a way not within the contractual contemplation of the parties, objectively ascertained, then the determination will be liable to be set aside.

4.     That is not to say that questions of mixed fact and law, or pure questions of law, cannot be left for the determination of the expert. Whilst it is a matter of contractual construction in each case, the parties are more likely to have left to an expert matters involving discretion or opinion, rather than matters of objective fact.

5.     There will be cases where the expert, for the purpose of performing his or her task, will be required to consider objective matters, including the construction of a contract. Whilst the objective analysis required by the process of contractual construction can only produce one true meaning, it does not follow that the ascertainment of that meaning is necessarily left to the expert, such that the expert’s determination is immune from review by the Court:

“… in questions in which the parties have entrusted the power of decision to a valuer or other decision-maker, the courts will not interfere either before or after the decision. This is because the court’s views about the right answer to the question are irrelevant. On the other hand, the court will intervene if the decision-maker has gone outside the limits of his decision-making authority.

One must be careful about what is meant by ‘the decision-making authority’. By ‘decision-making authority’ I mean the power to make the wrong decision, in the sense of a decision different from that which the court would have made. Where the decision-maker is asked to decide in accordance with certain principles, he must obviously inform himself of those principles and this may mean having, in a trivial sense, to ‘decide’ what they mean. It does not follow that the question of what the principles mean is a matter within his decision-making authority in the sense that the parties have agreed to be bound by his views.

Even if the language used by the parties is ambiguous, it must (unless void for uncertainty) have a meaning. The parties have agreed to a decision in accordance with this meaning and no other. Accordingly, if the decision-maker has acted upon what in the court’s view was the wrong meaning, he has gone outside his decision-making authority. Ambiguity in this sense is different from conceptual imprecision which leaves to the judgment of the decision-maker the question of whether given facts fall within the specified criterion.”

6. The fact that the contract provides that an expert determination is final and binding makes very little difference to whether it is reviewable. To the extent that the decision is made in accordance with the terms of the contract, it will be final and binding. To the extent that it is not, it will be subject to review.