Expert Determination In Construction Contracts

"Expert determination" can refer to a broad range of decisions – binding or non-binding – made by a third party. Expert determination has been used for a long time under construction contracts as a way of settling disputes by the engineer or contract administrator. With a vast array of dispute resolution options available to contracting parties, expert determination certainly has a role to play. But what makes it different to, say, arbitration or adjudication? A recent Australian case (which is also relevant where English law applies) examined some of its distinguishing features.

Background

The construction contract in question provided:

for disputes to be resolved by expert determination, following (unsuccessful) executive negotiation; that "the expert must act as an expert and not arbitrator; ... and must issue a certificate in a form the expert considers appropriate, stating the expert's determination and giving reasons...", and that the expert's decision would be final and binding if it imposed an aggregate liability on one party to the other not exceeding AUD$500,000. Disputes erupted between the owner and the contractor. The disputes centred upon whether the contractor was entitled to certain time extensions, and conversely whether the owner was entitled to claim damages against the contractor for late performance. The extension of time clause contained a time-bar provision (i.e. it made an EOT conditional upon a timely notice), but the contract also conferred upon the owner an independent power to grant an EOT to the contractor even if it failed to claim an EOT within the time limit.

The expert determined that:

the contractor was not entitled to any EOT, as it had not provided requisite notice or details of its EOT claim (i.e. its EOT claim was time barred), but because the owner had actually contributed to the delays suffered by the contractor, it was appropriate for the owner's independent power to grant an EOT to be exercised, so as to give the contractor an EOT (but not for the full period claimed), and reduce its liability for liquidated damages. In other words, the expert stepped into the owner's shoes (as he was entitled to do) and awarded a discretionary EOT. In monetary terms, the expert decided that some AUD$497K was due from the owner to the contractor. Being just under the AUD$500K threshold, the expert's determination was binding on the parties unless a ground for challenging it could be made out. The contractor –...