Dandara South East Ltd v Medway Preservation Ltd & Anr

[2024] EWHC 2318 (Ch)

Medway made an application for a stay to enable the dispute (about termination and the repayment of a deposit) between the parties to be resolved by an expert determination procedure. Dandara said that the expert determination provisions did not extend to the current dispute and that, as the contract had now come to an end, the provision no longer applied as it was not separable from the contract. 

Clause 28.1 of the Contract provided 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 (the Expert) …”.

Clause 31 provided that: “Each party irrevocably agrees 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)”.

Amongst the issues in dispute were whether the alleged Practical Completion Statement was valid as well as certain geotechnical and environmental information. Dandara said that the factual questions were complex and “plainly unsuitable” for resolution by an expert in accordance with clause 28.

Master Brightwell first considered the question of separability. Section 7 of the 1996 Arbitration Act provides that unless otherwise agreed by the parties, an arbitration agreement which forms part of another agreement shall not be regarded as invalid or ineffective because that other agreement is invalid or has become ineffective. Medway said that this principle applied to expert determination clauses.

In Barclays Bank plc v Nylon Capital LLP [2012] Bus LR 542, Thomas LJ set out the key distinctions between an arbitration and an expert determination clause:

“It is also clear that where parties have made an agreement for a particular form of dispute resolution, then they should be held to that agreement … 

However, although parties must adhere to the agreement which they have made, I do not consider that the approach to an expert determination clause should be the same as that which must now be taken to an arbitration clause … [where] parties should normally be taken, as sensible businessmen, to have chosen one forum for the resolution of their disputes … 

In contradistinction, expert determination clauses generally presuppose that the parties intended certain types of dispute to be resolved by expert determination and other types by the court … as the parties have agreed to two types of dispute resolution procedure for disputes which might arise under the agreement. … The simple question is whether the dispute which has arisen between the parties is within the jurisdiction of the expert conferred by the expert determination clause or is not within it and is therefore within the jurisdiction of the English court. It is a question of construction with no presumption either way.”

In other words, because expert determination clauses generally anticipate some disputes being resolved by an expert and some disputes by the court, the one-stop principle applicable to arbitration clauses would not generally apply. Here, the Master looked at clause 28. It applied to: “any dispute or difference between the parties as to any matter under or in connection with” the Contract. This was an all-embracing provision, requiring all disputes concerning the Contract to be subject to expert determination. The natural reading of the clause was that any dispute concerning the Contract would be so subject, including any dispute as to whether the Contract had been validly terminated. The wording of clause 28.1 therefore mirrored the breadth of disputes generally subject to an arbitration clause. 

This was unusual, as expert determination clauses are generally limited those matters, which are considered to be suitable for resolution by such a method.  Therefore, the fact that the expert determination procedure was not carved out of the court's jurisdiction was a factor favouring a one-stop construction of clause 28. Equally, clause 31 could still apply. If a party failed to comply with a determination, the other could apply to court for an order to enforce it. 

The Master concluded that whilst: “there may be no authority holding that an expert determination clause can be separable but it must be a matter of contractual construction, so the parties' objective intentions matter. In circumstances where, as I have found it, they have created a one-stop shop in the form of clause 28, I consider there to be a presumption of separability as there is with arbitration clauses”.

The burden was on Dandara to show why the parties would objectively have intended the courts to resolve some disputes. They had not done this. There was no reason why the expert determination clause could not be separable. The contract and the clause existed before the dispute arose. Clause 28 was the contractually agreed method for the resolution of all disputes in relation to the Contract. It was also separable from the Contract, at least for the purposes of determining a dispute as to whether it has been terminated by a supervening event.

It was further argued that the expert determination clause was unsuited to a dispute of fact. How could an expert (and, especially, if a solicitor) could determine within 30 days whether a Practical Completion Statement was properly able to be issued before certain date. Perhaps, unsurprisingly, the Master noted that: 

“Parties to construction contracts regularly 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 claimant's assertion that the dispute in this case would be just too complex for an expert was maintained only at a high level.”

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