Expert Determination: Can The Courts Intervene?

Do the courts have the power to order further reasons from the umpire in an expert determination? This week's High Court decision in Halifax Life Limited v The Equitable Life Assurance Society has confirmed that they do. Although there is no statutory power in the context of expert determinations, the court found that they had power to direct the umpire either (i) by way of remedy in relation to the relevant contractual provisions; and/or (ii) under the inherent jurisdiction, or by way of case management powers.

Implications

In view of this decision, parties may need to rethink the pros and cons of appointing an expert as opposed to an arbitrator to determine a dispute:

Parties who had previously been wary of an expert determination on the basis of its arbitrary and uncertain nature can now have confidence that a decision should at least be reasoned (albeit briefly);

An expert determination may not be as final as the parties had imagined and may still be subject to court intervention;

The decision also serves as a reminder for parties to ensure clear terms of reference are drawn up when appointing an umpire in an expert determination. In this case, the court's decision may have been different if the terms of reference had not included a clause requiring the umpire to give reasons for his decision.

Background

The parties entered into an agreement whereby the claimant agreed to reinsure the defendant's unit linked and non-profit making business. The umpire was appointed pursuant to the agreement, to determine the precise balance of premium payable between the parties to the agreement, which was a matter in dispute. Terms of reference were agreed: he would act as an expert, not an arbitrator; his decision would be binding on the parties save for manifest error and he would include with the decision, reasons for the decision.

The umpire gave his determination in September 2006. The claimants were not satisfied with the decision and issued a claim form seeking a declaration that the determination was not binding on the grounds that i) the expert had departed significantly from the agreed terms of reference by failing to provide adequate reasons for his decision and ii) the decision contained a manifest error.

Decision

Mr Justice Cresswell said it was necessary to construe the relevant provisions of the reinsurance agreement and the terms of reference to see as a matter of contract i) what the parties agreed to remit to the expert for...