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Scope of jurisdiction: Court of Appeal decides expert’s determination invalid

The RICS recently undertook a rigorous review of its adjudication panel, with some members leaving and a handful of high quality new members joining. On speaking to one of those new members, he commented that “this adjudication lark isn’t as easy as it looks, is it?”. Quite.

One of the most difficult areas concerns jurisdiction, not only because it can concern complex issues, but also because the adjudicator has to determine the issue of his jurisdiction quickly so that the parties know whether the adjudication is proceeding and, if it is, the scope of the adjudicator’s jurisdiction.

An adjudicator’s jurisdiction

Sometimes an adjudicator may have less than 24 hours to resolve thorny issues such as whether a contract exists or the dispute has crystallised. I recently had to reach a conclusion on whether around 20 distinct claims had already been decided in a previous adjudication. If I got my conclusion wrong and decided that certain matters had already been determined when this wasn’t actually the case, then I would have breached the rules of natural justice for failing to deal with part of the dispute referred. Conversely, if I concluded that certain matters hadn’t been determined when in fact they had, then I would be exceeding my jurisdiction by deciding matters that had already been decided in an adjudication.

Therefore, it is critical to establish the scope of an adjudicator’s jurisdiction. However, that can equally be said of other forms of dispute resolution and, in this week’s blog, I want to tell you about a recent case where the Court of Appeal upheld a judge’s decision that an expert’s determination was not valid and enforceable because he had misinterpreted his jurisdiction. However, before doing so it is worth summarising the limited grounds for challenging an expert’s determination.

Challenging the expert

Unlike a court judgment or an arbitrator’s award, an expert’s determination cannot generally be appealed or otherwise challenged. The parties may expressly provide for grounds to challenge it (like including wording that the determination will be binding “in the absence of manifest error”). If they don’t, it will only be open to challenge on one of the following grounds:

  • Fraud or collusion.
  • Where the expert fails to treat the parties fairly or there is actual or apparent bias (but note that the principles of natural justice do not apply).
  • If the expert materially departs from his instructions or misinterprets his jurisdiction.
  • If the expert fails to provide reasons for his decision.

Shafi v Rutherford

In Shafi v Rutherford, the parties had entered into an agreement setting out how to calculate the precise consideration for the sale of a 50% share in a dental practice. A dispute arose over the treatment of certain leases in the company accounts and an expert was subsequently appointed to determine the amount to be paid.

The expert identified an error in the treatment of certain leases in the accounts, but concluded that it was outside the scope of his instruction to correct that error. He therefore proceeded on the basis of the accounts as they were.

The Court of Appeal agreed with the judge at first instance that the question of how the leases should be treated, and the impact on the company accounts, were within the scope of the expert determination and the specific wording of the letter of instruction. Therefore, the expert had committed an error in deciding that he was prevented from applying the correct accounting policy. This meant his determination was not valid and enforceable and it was proper for the court to intervene.

Not always “final and binding”

I think that the Court of Appeal’s judgment is a really useful reminder that an expert’s determination is not final and binding under all circumstances. While jurisdictional challenges in expert determination are somewhat rarer than we find in adjudication, they can nevertheless succeed under certain circumstances, such as where the expert misinterprets his jurisdiction.

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