What is a mandatory expert determination clause? And will the courts stay a claim and require parties to comply with such a clause as an alternative to litigation/arbitration?

In Dandara South East Ltd v Medway Preservation Ltd & Anor [2024], the High Court considered the enforceability and scope of expert determination clauses in construction contracts. In particular, the court considered whether an expert determination clause is separable from the underlying agreement, such that it survives the termination of that agreement. This is a novel point that does not appear to have received judicial consideration before this case.

We examine the decision in Dandara in more detail below.

Background facts

  • The dispute arose out of the termination of a contract for the sale of land between Dandara South East Ltd (the claimant), Medway Preservation Ltd (the first defendant) and Medway Preservation & Development Ltd (the second defendant).
  • The contract was conditional upon the completion of certain earthworks by the second defendant, which were necessary to facilitate the development of the property.
  • The claimant terminated the contract, claiming that the second defendant had failed to meet the condition precedent by the applicable long stop date, and sought the return of its deposit.
  • After the claimant commenced court proceedings, the defendants applied for a stay of those proceedings, arguing that the dispute should be resolved through expert determination as stipulated in the contract. The defendants submitted that the expert determination clause – a "one-stop shop" clause applying to all disputes arising out of the contract – was separable; like an arbitration clause, and thus remained enforceable even after the termination of contract.
  • The claimant submitted that the expert determination clause was not separable from the main contract, which had been terminated, and did not therefore apply to the dispute in question. The claimant disagreed that the clause was a "one-stop shop" for all disputes and argued that it should be construed as only applying to certain disputes under the contract.
  • The claimant further argued that expert determination was not suitable for the dispute in question, due to its complexity.

The expert determination clause

The dispute resolution clause in the contract mandated that "any dispute or difference between the parties as to any matter under or in connection with this contract shall be submitted for the determination of an Expert".

It further provided that the expert's determination was to be "conclusive and binding on the parties save in the case of manifest error or omission."

The contract also contained a further clause providing that the "courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this contract or its subject matter or formation (including non-contractual disputes or claims)".

The Court's analysis

Construction and scope of the expert determination clause

Master Brightwell observed that expert determination clauses are often carved out of the "primary jurisdiction given to the court" (as in Secretary of State for Transport v Stagecoach South Western Trains Ltd [2009]). In such cases, expert determination clauses generally anticipate some disputes being resolved by an expert, and some disputes by the court (or arbitration if applicable).

However, this was not the case here: the language of the clause was broad and inclusive, covering "any dispute or difference between the parties as to any matter under or in connection with this contract". This mirrored the "breadth of disputes generally subject to an arbitration clause". As such, it was held to be an all-embracing (or "one-stop shop") provision which was intended to cover all disputes arising from the contract, including those related to its termination.

This did not, however, "denude clause 31 [exclusive jurisdiction of the courts of England and Wales] of all effect". Instead, the court confirmed that the procedure would be as follows:

  1. the expert would make its determination of what one party to the contract is required to do, as a resolution of the dispute between the parties; and
  2. if that party fails to comply with the determination, the other(s) can apply to court for an order to enforce it.

Principle of separability

Drawing parallels with arbitration clauses, Master Brightwell found that the authorities support the view that there is a "strong connection between the one-stop principle and separability".

He noted that there was no authority directly on point but that it "must be a matter of contractual construction" with the question being dependent on the parties' objective intentions. It had been established that the parties intended for all disputes relating to the contract to be subject to expert determination. Therefore, the burden was on the claimant (i.e. the party arguing against separability) to explain why the parties would objectively have intended some disputes nonetheless to be resolved by the courts. The claimant had not done so.

The court therefore held that Clause 28 was separable and thus enforceable independent of the main contract, for the purposes of determining a dispute as to whether the contract had been terminated.

Suitability for expert determination

The claimant had also asserted that the dispute was too complex for expert determination, involving intricate factual and legal issues that required judicial intervention.

The court rejected this argument. It highlighted that parties to construction contracts often agree that disputes of fact will be resolved by an expert in a short period of time, without disclosure of the kind that would be ordered in court proceedings. The court found no fundamental flaws in the procedural scheme of Clause 28 that would render it unsuitable for resolving the present dispute.

In light of the above, the court granted the defendants’ application for a stay of proceedings, to enable the parties' compliance with the expert determination clause.

Taking care with drafting dispute resolution clauses

This case serves as a critical reminder for legal practitioners to draft and review dispute resolution clauses in construction contracts with care. The decision in Dandara turned on the construction of the clause in question as a "one-stop shop" for resolution of all disputes under the contract. The judgment confirms that, where this is the case, the principle of separability will apply such that the clause will survive termination of the contract.

If the parties intend for certain issues to be referred to expert determination (or another form of alternative dispute resolution) with others to be resolved in litigation / arbitration, then those specific issues must be expressly carved out for expert determination. Whether or not such clauses would be regarded as separable from the underlying agreement was not addressed in the judgment and remains to be seen.

If you have any questions about this article, please get in touch with Daniel Wood or Emma Knight.