How “final and binding” is an expert determination?
Andrew Lacey & Nathan Jones
Expert determination is becoming an increasingly common Alternative Dispute Resolution (ADR) process provided for in the terms of contracts between parties. In general terms it involves an independent third party, with recognised expertise in the subject matter, resolving an issue or issues in dispute between the parties by making a determination. It has been referred to as “a relatively quick and effective way of resolving disputes which are simple in content or are essentially technical in nature” (Resolution Institute). The process affords those parties involved confidentiality and privacy.
The provision under an existing contract for a matter to be referred to expert determination is generally expressed to be “final and binding” on the parties to the dispute. But what exactly does “final and binding” mean in this context?
The role of an expert
In Holt v Cox (1994) 15 ACSR 313, Santow J referred (at 332) to “the distinction is that an arbitrator exercises a quasi-judicial function to whom is submitted for decision a formulated dispute to be decided between the competing contentions of the parties, while an expert determines matters from the expert’s own experience and expert knowledge, making his or her own investigations”.
The courts have held that a failure to specify a procedure to be adopted by the expert will not render void for uncertainty an agreement to enter into an expert determination process. The procedure to be followed is a matter for either agreement between the parties, or determination by the expert. See Heart Research Institute v Psiron [2002] NSWSC 646 at [28]-[29].
The Law Society of New South Wales has developed Rules for Expert Determination to be used in the absence of specifically designated rules, as has the Resolution Institute. Thus it is not uncommon for a contract to state that any dispute is to be submitted to expert determination to be "conducted in accordance with the [specify Rules] which set out the procedures to be adopted, the process of selection of the expert and the costs involved and which terms are deemed incorporated" (or similar).
Setting aside an expert determination The classic statement of the legal principles to be applied, which continues to be often cited by courts today, was made by McHugh JA in Legal & General Life