Expert determination

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Standard court proceedings might not be best for complex technical cases

Some commercial disputes can involve highly complex issues of evidence and fact.

Whilst commercial litigation proceedings may be appropriate for most commercial disputes, a judge making the final decision will not always have the necessary understanding of the respective businesses and the technical issues involved in a particular industry or field.

• a Judge’s expertise is in the law and legal aspects of a claim.  
• what this means is that where a dispute involves highly technical issues, there is an increasing requirement for the input of expert witnesses (which add even more cost to long, expensive and procedurally complex legal proceedings) – adding to the cost and complexity of the claim itself.

One way to simplify matters is to settle complex technical disputes by using Expert Determination – which is a form of alternate dispute resolution.

How do the parties seek Expert Determination?

As with any ADR process, expert determination requires the engagement of all parties.  It is completely inappropriate where one party refuses to consider this method of resolving a dispute, and in those circumstances then – if pre-action correspondence is ineffective – the only remaining option is to commence commercial litigation proceedings.

• dependant on which Expert Determination rules are adopted, the parties do not even need legal advisors. 
• however, we would recommend seeking legal advice so that you can properly understand what your full suite of options are, and to enable the first stage of any dispute resolution by engaging in pre-action correspondence with the other party (s), parties can just agree to an expert becoming involved to settle their dispute.

Expert Determination is not wildly different to Early Neutral Evaluation, but for the fact that the opinion of an expert (who may not be legally qualified) is sought to determine a matter.

• additionally, the expert’s determination may not determine the entire ambit of the dispute,
• sometimes it can be just a discrete area (for example whether a task has been carried out in accordance with a specific standard or term and a decision is required as to whether the task was performed correctly and fully).

As with Early Neutral Evaluation, the expert is independent, jointly instructed and is provided with various documents, information etc relating to the dispute.  The expert could be an accountant, a surveyor, an engineer or anyone with specific expertise in the field where the dispute has arisen, and the costs of such a determination will usually be shared equally between the parties.

Expert Determination rules

As Expert Determination is part of a suite of ADR options, it is not formally regulated.

Various regulatory bodies and trade organisations have their own rules on Expert Determination – for example,

• the Institute of Chartered Accountants for England and Wales (ICAEW) have specific rules setting out who can be an expert and the procedure for any such expert determination.
• the International Chamber of Commerce (ICC) also has rules on expert determination, which should be coordinated in conjunction with the ICC.

Where an agreement is entered into for such expert determination, it should refer to whose rules that the determination is to abide by and deal with any regulatory or membership requirements beforehand.

Whilst an expert determination is not binding on either party legally and can be subject to confidentiality clauses making such an agreement and any determination not disclosable in legal proceedings, it can be held enforceable with in the parameters of the adopted scheme rules.

For example,

• the ICC scheme rules provide that an expert determination may be admitted in Court proceedings (giving the parties further reason to follow the determination, as legal proceedings will only add cost).
• however, these same rules provide that such admissibility is “unless otherwise agreed” – so the parties and their legal advisors should ensure that they seriously consider such risks before signing off any such agreement under any such specified rules.

When is Expert Determination appropriate?

Expert determination is usually necessary for the purposes of either

• a valuation; or
• to resolve a technical dispute that would be resolved, but for the lack of agreement on such expert matters.

Where such a dispute exists, it would not appear in the parties’ interests to issue legal proceedings when instead an expert determination can be sought.

Of course, in some litigation proceedings the use of an expert is just a component to resolve the value of a loss – for example in unfair prejudice proceedings an order may be sought (once the alleged unfair prejudice has been proven) to put a value on the company and/or the loss or a party’s interest (perhaps for buy out purposes).  In this scenario a standalone expert determination would not be sufficient.

• often in negotiations between business owners, one may (for retirement or lifestyle reasons) seek to acquire the other’s interest, but there is no agreement as to value.
• in these circumstances (which we have considerable experience of) a valuation may be sought for the company, its business or a specific asset.

Where the dispute is more technical, but resolving it will lead to a solution, then a more formal expert determination can be sought. However, for extensive disputes where factual evidence is disputed and an interpretation of behaviour or events may be sought, it is likely not the correct ADR method to resolve the dispute.

Advantages and disadvantages of an Expert Determination

The advantages of an expert determination are that

• the expert is independent,
• there is no partisan aspect of their determination; and
• the standalone cost of their services (and the necessary support from your legal advisors) are considerably less expensive than extensive legal proceedings issued and managed in accordance with the Civil Procedure Rules 1998 (as amended).

The disadvantage is that

• there is very little control over the process (other than the documents submitted); and
• once the expert has determined the matter (especially if the determination is capable of being submitted in legal proceedings under the relevant rules adopted) then this is a finding you are stuck with.

This can be an advantage to either party – potentially encouraging a prospective claimant to continue to issue proceedings (if no agreement can then be negotiated) and potentially enabling a defendant to be more forthright in denying the remedy sought or upholding the offer they have made.

It is for this reason that expert determination, in a similar fashion to other ADR options, have become very popular because they have a very strong success rate where used to support the resolution of a dispute.

At Francis Wilks & Jones we have experience of expert determination and valuation issues, both within ongoing legal proceedings and on a standalone basis. As part of our advice, we can explain whether an expert determination is appropriate to your dispute and your other ADR options.

I was greatly impressed with the commercial, tactical and technical ability of the team at FWJ. They quickly got to grips with a complex set of facts and, through their hard work, had the proceedings against me dropped and a significant proportion of my legal fees repaid. I couldn’t recommend them highly enough.

A director we defended in legal proceedings