Streamlining Contractual Disputes With An Expert

Carefully drafted alternative dispute resolution ("ADR") clauses can be tailored to parties' needs in solving disputes in a timely manner. Binding arbitration has commonly been implemented to limit the time and cost spent in court by providing finality to the dispute at issue. Similarly, limits on discovery can streamline issues and in a recent Alberta Court of Queen's Bench case, the Court confirmed that a properly drafted contractual clause can provide selected experts with significant decision making authority, including the ability to consider and resolve legal issues when fulfilling their mandate.

In Applied Industrial Technologies, LP v Sirois, 2018 ABQB 818 ("Applied") Applied Industrial Technologies, LP (the "Purchaser") was scheduled to purchase the shares of several companies known as the Reliance Group (the "Vendors") pursuant to a share purchase agreement ("SPA"). A term of the SPA provided that disputes over certain adjustments to the purchase price of the Vendors were to be determined by a nationally recognized accounting firm "as expert and not arbitrator", the expert's determination was to "be final and binding on all parties" and "not be subject to appeal, absent manifest error".

In this case the Purchaser delivered a Closing Balance Sheet to the Vendors, who objected, thus engaging the expert determination process. The Vendors' objection included the argument that the relevant figures for Reliance USA (one of the Vendors) at April 30, 2014 in the Closing Balance Sheet and the Combined Target April 2014 Net Profits Statement must be converted from US dollars to Canadian dollars at the prevailing exchange rate at closing, rather than at par. The parties selected a mutually agreeable expert pursuant to the SPA and the expert determined that...