Expert determination: a user's guide
Successful expert determination depends on setting ground rules first, says Tim McGoldrick.
In its simplest terms expert determination is a relatively quick, cost-effective and binding method of alternative dispute resolution (ADR).
While adjudication is a far more common method of ADR in construction, expert determination may be found in projects with an engineering element, such as waste-to-energy plants, or in overseas projects. It is hailed as
an informal process, but establishing the rules for an expert determination is anything but informal.
Expert determination is a procedure written into the contract between the parties, by means of an express provision entitling the reference of a dispute or disputes to an expert. Alternatively there can be an ad-hoc agreement.
The outcome of an expert determination is legally binding, and it is specifically suited to isolated disputes of a technical or specialist nature. Examples might be such as whether a pump or boiler is functioning in accordance with the specification, or the valuation of works carried out, or how much a change order should cost.
It is not suited to major disputes that have complex issues of causation and require large amounts of documentation and possibly witness evidence. Similarly, it is not suitable for disputes that are essentially of a legal nature, or hinge on matters of contract interpretation.
Unlike litigation, arbitration (the Arbitration Act 1996) and adjudication (the Construction Act 2009), there is no substantial body of case law or statutory provision that governs the procedure, the rights of the parties or the powers of the expert. These and related matters must be the subject of agreement between the parties either at the time they enter into the contract or as the matter is referred.
Some may consider it expedient to name the expert in the contract but this could ultimately be self-defeating. The expert may not be able to act for reasons such as illness, pressure of work or conflicts not apparent at the time he or she agreed to be named. And in the absence of a default appointment mechanism, the parties may face difficulties in getting a court to appoint a new expert or stipulate the use of any particular nominating procedure.
As a means of avoiding these scenarios, the express provisions should allow the parties to agree the name of the expert at the time the dispute is referred and, if agreement is not reached within a stipulated timescale, allow for application to be made to a nominating body such as the RIBA, ICE, IChemE, RICS or IMechE.
The procedure for managing the reference may be set out in the express provisions of the contract, which in turn refer to a separate set of rules, or in the Terms of Reference (a document agreed between parties at the time the matter is referred to the expert). The matters to be addressed include the timetable for submission of documents, the need for meetings, site visits, equipment testing and the date for the issue of the decision. An example of a procedure and the depth of detail to be considered is the IChemE Rules for Expert Determination, Fourth Edition, 2005.
Once a dispute has arisen, one party may become obstructive. It is therefore preferable that the key issues of the procedure are set out in the express terms of the contract, leaving matters of detail to be determined by the expert. An expert has no statutory powers to compel the parties to comply with a timetable, thus dragging a recalcitrant party through the process can be time-consuming and expensive.
A solution would be to give the expert binding powers within the contract to finally determine the procedure, or at least those matters that are not already agreed within the express terms.
Scope of powers
It is an absolute pre-requisite to a speedy and cost-effective expert determination that the expert’s powers are clearly agreed at the outset. Whilst the Terms of Reference, or similarly named document, will deal with the specifics of the dispute, it is the powers granted to the expert which govern the manner in which the decision is reached.
For instance, does the expert have the power to make enquiries, to decide matters of fact, to order disclosure of documents, to decide on interpretation of the contract, to revise or overrule the decisions of the architect, engineer or project manager?
Examples of the type of decisions an expert may be empowered to make are contained in Section 10 of the IChemE Rules and include the power to:
- order the payment of money and interest;
- order a party to do or refrain from doing something; and
- make an order for provisional relief.
With regard to the power to overrule decisions, does the power apply to all decisions of the project manager etc, or exclude those stated in the contract as final and binding? And does the expert then have the power to award any cost or losses incurred by a contractor in compliance with the original decision?
If the expert’s decision is final and binding, does this mean a decision given in respect of an interim certificate of payment is binding upon all subsequent interim certificates and the final certificate? It is important to consider the implications.
Given that expert determination is designed to be final and binding (and thus exclude any future reference to arbitration or litigation) the parties may wish to limit the types of dispute that may be referred to the expert and may do so by expressly listing these in the express provisions.
Tim McGoldrick is vice president and executive director of Knowles