determination to be final and binding on the parties.
Candoora applied to the Supreme Court of Victoria to have the valuation report and certificate, which concluded that the valuation of Candoora’s shares was $962,500, set aside. That application was successful. Hargrave J found that the valuer had essentially based his determination on the value of Wingara as a going concern, or the “market” value (an objective standard). The report contained no reference to the need for the valuer to ensure that the value which was determined was “fair”, being the required contractual standard and one which allowed the valuer to take into account a wider range of circumstances than those relevant to “market” valuations (i.e. a largely subjective test).
More recently, in Australian Vintage v Belvino Investments No 2 [2015] NSWCA 275, the NSW Court of Appeal held that if an expert acts upon the wrong meaning of a contractual clause or formula which forms part of the task which he or she is required to undertake, this being an objective matter outside the expertise of such a person, then the determination will not be in accordance with the terms of the contract and may be subject to review.
Take home points
1. Expert determination has the potential to provide an informal, speedy and effective way of resolving disputes, however in practice this will largely depend on the particular wording which the parties have adopted in the relevant clause in their contract. If the expert determination clause is not carefully worded, it may leave one or both of the parties dissatisfied with the process and/or outcome and lead to further dispute. 2. Ensure that the contract is explicit as to the procedures to be adopted by the parties and the expert in relation to disputes falling within the expert determination clause. 3. The contractual standard which the parties choose for the expert to determine may have serious ramifications and is therefore worthy of careful consideration. For example, in the valuation context there is a well-established distinction between a "market value", "fair value" and “fair market value” test. See, further, MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451 commencing at [52]. 4. It will likely be extremely difficult to have a court set aside an expert determination which the parties have agreed in advance will be “final and binding”.