Lyn Crawford is a partner at law firm DAC Beachcroft
In a dispute over the completion of groundworks as a precondition to the purchase of land, the court recently ruled that an expert determination clause (EDC) can be separable from the underlying agreement, even if that agreement has been terminated.
Here, the clause was held to be a ‘one-stop shop’ for all disputes under the contract.
It is common to find an EDC in a construction contract, but they are not always suitable for all types of dispute.
Background
In Dandara South East Limited v Medway Preservation Limited [2024], the contract concerned the sale of land conditional on the completion of certain groundworks by the defendant.
“Prior to this decision, there was no decided case law on whether an EDC could be separable”
A dispute arose and the claimant sought to terminate the contract and 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 claimant argued that (i) 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 unsuitable to the present dispute, and the court should exercise its discretion and not grant a stay.
The decision
The judge decided that clause 28 was a ‘one-stop’ provision for any matters 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, as it was wide in scope.
However, in response to the assertion that the clause was unsuited to a dispute of fact, he said: “Parties to construction contracts regularly agree that disputes of fact will be resolved by an expert in a short period of time, without disclosure of the kind that would be ordered in court proceedings.
“The claimant’s assertion that the dispute in this case would be just too complex for an expert was maintained only at a high level.”
The judge said that 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.
Clear drafting
An EDC can be a quick and cost-effective method for parties to construction contracts to determine a dispute without legal proceedings. Prior to this decision, there was no decided case law on whether an EDC could be separable. The judge decided that there was no reason, in principle, why such clauses could not be separable.
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 parties can resolve disputes in the most appropriate manner. Being forced to use an EDC for all disputes will not always be the best option.
