In a dispute over the completion of groundworks as a pre-condition to the purchase of land, the court ruled that an expert determination clause ("EDC") can be separable from the underlying agreement, even if that agreement has been terminated. This is new authority on the effect of such clauses, which usually cover a specific type of dispute and aim to avoid the time and expense of legal proceedings. Here the clause was held to be a "one-stop" shop for all disputes under the contract. Parties therefore need to be aware of the potential wide scope of such clauses.
Background
In Dandara South East Limited v Medway Preservation Limited [2024], the contract concerned the sale of land conditional upon the completion of certain groundworks by the Defendant. A dispute arose and the Claimant sought to terminate the contract, issuing proceedings in the High Court to claim repayment of the deposit. The Defendant applied to stay the proceedings on the basis that the EDC was a mandatory requirement prior to the issue of any legal proceedings.
Clause 28.1 of the contract stated "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)…."
The claimant argued that (i) on its true construction the EDC did not apply to the present dispute; (ii) now that the contract had come to an end, the EDC was not separable from it; and (iii) regardless of separability, the EDC was plainly unsuitable to the present dispute and the court should exercise its discretion and not grant a stay.
Decision
The Judge decided that clause 28 was an "all-embracing" or "one-stop" provision for any matters under or in connection with the contract, including both the disputed termination and the claim for repayment of the deposit. He therefore stayed the proceedings so the EDC could be followed.
He remarked that clause 28 was unusual for an EDC, which generally anticipate some disputes being resolved by an expert and some disputes by a court, and that clause 28 mirrored the breadth of disputes usually covered by an arbitration clause, which the parties (as commercially experienced business people) should be taken to understand.
The Judge referred to authorities on the one-stop principle and separability of arbitration clauses. He said that the burden was on the Claimant to show why the parties would objectively have intended the courts to resolve some disputes, and they had presented no such argument. In this case, there was no reason why the EDC could not be separable, as a matter of contractual construction. Furthermore, the contract and the clause existed before the dispute arose, which supported the view that the EDC was separable; it was not as if there was a dispute that a binding contract never existed.
Comment
An EDC can be a quick and cost effective method of determining a dispute without reference to a court or arbitration. Prior to this decision there was no decided case law on whether an EDC can be separable, like arbitration clauses. The Judge decided that there was no reason in principle why such clauses could not be separable, and that it was a matter of ordinary contractual interpretation. The EDC in this case could be considered unusual due to its wide scope, as such clauses are more commonly restricted to specific issues, such as valuations. It is therefore key to use clear drafting to identify the scope of disputes referred to in an EDC, in order that the parties can resolve any disputes in the most appropriate manner.
