Civil Engineering Reference
In-Depth Information
In
Veba Oil Supply & Trading GmbH
v.
Petrograde Inc
(2002), the principle was
stated (following Lord Denning in
Campbell
v.
Edwards
(1976)) that:
If an expert makes a mistake whilst carrying out his instructions, the parties are
neverthelessboundbyitfortheverygoodreasonthattheyhaveagreedtobebound
by it. Where, however, the expert departs from his instructions, the position is very
different: in those circumstances the parties have not agreed to be bound.
It was said that once a material departure from instructions is established, the court is
not concerned with the effect of that on the result. The departure itself is sufficient to
render the decision non-binding. he case set out the test for establishing whether an
expert has materially departed from his instructions. It was said that any departure
would be material unless it could truly be characterized as trivial or
de minimis
.In
considering what parties would have regarded as being material, the court will take
into account the subject matter and express terms of the contract and all the relevant
circumstances.
Decisions of experts can be subject to scrutiny by the courts in certain circum-
stances, see
Bernhard Schulte GmbH & Co. KG
. In that case, there were claims that
the reference to the expert had been made outwith the timescales allowed for in the
contract, that the expert acted outwith his mandate, that the expert conducted the
reference unfairly and that the expert, without regard for the agreed procedure, made
findings without giving one of the parties adequate opportunity to make submissions
to him and did not properly take into account the submissions they did make.
The court recognized that there was a distinction between the expert making a mis-
take in carrying out his functions, on one hand (which was said to be part of the risk
run by parties in agreeing to be bound by the expert's decision) and failures to carry
out his instructions, on the other (which would mean the expert's determination had
not been made under the contract and would therefore not be binding due to the
failure to adhere to the contract requirements and failure to carry out the functions
required of him). It was also noted that where the contract provides for the decision
of an expert to be final and binding, it binds the parties as long as there is no fraud,
collusion, bias or material departure by the expert from his instructions.
The courts again indicated a willingness to be involved in the regulation of expert
determination in
Halifax Life Ltd
v.
he Equitable Life Assurance Society
(2007). In this
case, the contract between the parties provided for certain disputes to be dealt with
by a binding expert determination. A dispute arose and the parties agreed the expert's
terms of reference. hese included provisions that his decision would be binding, save
for manifest error, and that he would provide a reasoned decision. Halifax were dis-
satisfied with the expert's decision and sought a declaration from the court that the
determination was not binding. This was on the basis that the expert had 'materially
departed from the agreed terms of reference by failing to provide any adequate rea-
sons for his decision'. It was also said the determination contained a manifest error.
Inrelationtothequestionofmanifesterror,thecourtobservedthat:
If a decision is issued in a dispute where it is binding 'save for manifest error' a party
wishing to challenge the decision may face insuperable difficulties if the expert is
not obliged to give reasons and fails to set out the reasons for his decision.
