London calling: Expertly Separated

Dandara South East Ltd v Medway Preservation Ltd [2024]

Background

The matter concerned a contract for the sale of land which contained a condition precedent for certain earthworks to be carried out. The Claimant terminated the contract, alleging that the condition precedent had not been met, and commenced court proceedings to reclaim its deposit.

The Defendant sought a stay of proceedings on the basis that the contract contained an expert determination clause. The Claimant's response was that, since the contract had been terminated, this provision no longer applied and that it was not separable from the contract.

The key provisions were as follows:

• Clause 28 – Expert Determination: “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” and that expert determination was to be “conclusive and binding on the parties save in the case of manifest error or omission”.
• Clause 31 - Jurisdiction: "each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this contract or its subject matter or formation (including non-contractual disputes or claims)”."

Decision

The English High Court considered the expert determination clause to be a "one-stop shop" requiring all disputes to be subject to expert determination. It held that the expert determination clause was separable from the underlying contract and so unaffected by termination. Its view was that the seeming conflict between Clause 28 and Clause 31 was resolved by interpreting Clause 31 as remaining applicable to disputes over a party's failure to comply with Clause 28.

Comments

This matter involved a close analysis of the contractual language by the Court. The contract was unusual in that expert determination clauses are typically drafted to apply only to certain types of dispute. Nevertheless, the case establishes that the principle of separability will apply to expert determination clauses and that they will not be affected by termination of the contract.

Dandara South East Ltd v Medway Preservation Ltd [2024] EWHC 2318 (Ch)

Kind regards

Stephanie Morton / Brian Perrott

Senior Associate / Partner