In the recent decision of the High Court in Dandara South East Ltd v Medway Preservation Ltd EWHC [2024] 2318 (Ch), the Court confirmed for the first time that the doctrine of separability can apply to expert determination clauses. The applicability of this point will be a question of contractual interpretation in each instance but, essentially, it may be possible for parties to a contract to continue to refer disputes to expert determination even after the underlying contract containing the expert determination clause has been terminated.

The Facts

The contract between the parties concerned a contract for the sale of land (the “Contract”) which was conditional on the completion of certain groundworks by Medway Preservation Ltd (“Medway”). The Parties disputed whether the groundworks had been completed. Dandara South East Ltd (“Dandara”) sought to terminate the Contract alleging that the groundworks had not been completed and issued proceedings in the High Court claiming repayment of a deposit. 

Once proceedings were brought by Dandara, Medway successfully sought a stay of proceedings on the grounds that the Contract’s expert determination clause required all disputes to be submitted to an expert. 

The expert determination provision contained at Clause 28.1 of the Contract provided as follows:

“Any dispute or difference between the parties to any matter under or in connection with this contract shall be submitted to the determination of an expert (the Expert) and the following provisions of this clause 28 shall apply to any submission and to any other matter required to be dealt with by the Expert.”

Dandara’s Arguments

In the High Court Dandara argued that the expert determination clause did not apply to the dispute in question and/or did not survive termination of the Contract. Dandara’s arguments in this regard were three-fold: 

1. that the dispute did not fall within the scope of the expert determination clause (“Argument 1”);
2. that the doctrine of separability did not apply to the expert determination clause (“Argument 2”); and 
3. that expert determination was unsuitable for resolving this dispute (“Argument 3”). 

The Decision

The Court gave Dandara’s first and third arguments short shrift. 

The judge considered that Clause 28.1 of the Contract was broadly drafted such that all disputes and differences under or concerning the Contract were required to be subject to expert determination. Argument 1 was therefore dismissed on the basis that the expert determination clause was a “one-stop shop” as it was “all-embracing” and its drafting both “broad” and “mandatory”.

Similarly, Argument 3 was quickly dismissed on the basis that there was no evidence to suggest that the subject matter was beyond the capabilities of an expert. In particular, the judge noted that parties to construction contracts regularly agree for complex disputes to be resolved by experts in short time periods. 

In respect of Argument 2, however, it was acknowledged by both the parties and the Court that there was no direct authority on whether the principle of separability applied to expert determination clauses. 

The judge found that, where parties to a contract have created a “one-stop shop” for the resolution of disputes, as in this case, there will be a presumption of separability in the same way as an arbitration clause, however this would be subject to contractual interpretation in each instance. 

Therefore, while this judgment gives some certainty that the “principle of separation” can apply to expert determination clauses, the applicability of the decision may be relatively narrow, as the breadth of Clause 28.1 in this case was unusual. In many cases, rather than being a “one-stop shop”, expert determination clauses are commonly limited to certain matters (e.g. valuations) and therefore whether such clauses are considered in the same way is yet to be determined.

Key Takeaways

• The Importance of Accurate Drafting

This judgment makes clear that the doctrine of separability can apply to an expert determination clause in much the same way as it does to an arbitration clause where the expert determination clause is broadly drafted and operates as a “one-stop shop” for the resolution of all disputes. Contractual parties and their legal advisors will therefore need to ensure any expert determination clauses they wish to rely upon are carefully drafted to reflect the parties’ desired intentions, as unintentionally loose or broad-brush drafting could accidentally result in all disputes under a contract being subject to such provisions (even following termination). 

• Applicability to Construction Contracts

The case Dandara South East Ltd v Medway Preservation Ltd EWHC [2024] 2318 (Ch) was not based upon a construction contract, but the decision will no doubt have applicability across the construction sector given the widespread use of expert determination clauses in construction contracts. While the courts are yet to consider this issue in a construction law context, it is safe to assume that the decision will not be permitted to impact upon a party to a construction contract’s right under the Housing Grants, Construction and Regeneration Act 1996 (as amended) to adjudicate at any time. Notwithstanding that, consideration should be given to the specific contractual dispute resolution provisions in each instance in order to determine the most appropriate and cost-effective forum for the resolution of disputes.

This article was written by Henry Dalton.