Blurred lines: The right to request information in an expert determination

Monday, 9 December 2019

By Bridgette Barker

Anglo American Metallurgical Coal Assets Pty Ltd v Middlemount South Pty Ltd [2019] QSC 211

Introduction

Expert determination is a form of alternative dispute resolution process by which an independent expert is appointed to decide a dispute that has arisen between parties to a commercial contract.

Unlike arbitration, the expert determination process is governed by the contract and not supported by legislation or the rules of a particular arbitration body. Typically, the contract will set out inter alia, the type of expert to be appointed, how the expert determination process is to be conducted and how the determination outcome is to be expressed. The powers granted to the expert are entirely dependent on contractual provisions.

This case considered whether the appointed expert to a dispute crossed the line and acted as an arbitrator.

Background

By a Share Purchase Agreement dated 4 April 2016 (‘SPA’), Anglo American Metallurgical Coal Assets Pty Ltd (‘First Defendant’ or ‘Vendor’) agreed to sell all of its shares in Anglo Coal (Foxleigh) Pty Ltd to Middlemount South Pty Ltd (‘Plaintiff’ or ‘Purchaser’).

The key events can be summarised as follows:

• On 29 August 2016, completion under the SPA occurred.
• On 30 January 2017, the Vendor delivered a Dispute Notice to the Purchaser pursuant to clause 8.5(a) of the SPA.
• On 23 February 2017, the Plaintiff provided a response to the Dispute Notice.
• On 11 June 2018, PwC agreed to be appointed as Independent Accountant as there were matters on which the parties remained in dispute.
• On 6 July 2018, PwC delivered its expert determination (the ‘Determination’).

In forming their opinion, PwC had regard to the requirements of the SPA and information provided by the Vendor and Purchaser pursuant to clause 8.5(g) of the SPA, including various submissions and responses to requested information.

The Plaintiff challenged the validity of the Determination on a variety of grounds. The first ground of invalidity advanced by the Plaintiff and heard by the Supreme Court of Queensland was that PwC had acted as an arbitrator, not as an expert.
 

The difference between acting as an expert and an arbitrator

Expert determination is a contractual process and unlike arbitration, is not governed by legislation or the rules of particular arbitration bodies.

In this case, clause 8.5 of the SPA provided the dispute resolution process to be followed, including that if the Vendor and Purchaser had not resolved a dispute within a specific time period, the dispute was to be submitted for determination to the Independent Accountant to determine the matter/s in dispute.

Relevantly:

• Clause 8.5(f) provided that the disputed matters had to be referred to the Independent Accountant by written submission.
• Clause 8.5(g) provided that the Vendor and Purchaser had to supply the Independent Accountant with any information, assistance and cooperation requested by the Independent Accountant.
• Clause 8.5(h) provided that the Independent Accountant had to act as an expert and not as an arbitrator, and its written determination would be final and binding on the parties in the absence of manifest error. [emphasis added]

The Plaintiff submitted PwC had acted as an arbitrator by requesting further information and submissions from the parties, after receiving the written submissions and before delivering the Determination.
 

Interpretation

As noted by Ashurst in their article dated 27 July 2017¹, in contracts where the parties seek to refer issues to expert determination, the words “act as an expert and not as an arbitrator” are commonly included. This is to avoid the necessity for the expert to hear evidence from the parties and to determine judicially between them, as well as to enable the expert to rely on their own investigations, skill and judgment. 

In the present case, the Court held that “Requesting submissions or information on particular points is not a matter that distinguishes an arbitrator from an expert. Receiving documents from the parties is not hearing evidence in the sense of a judicial or quasi-judicial proceeding.” ²

The Court concluded that PwC had acted within the powers conferred on them by clause 8.5 of the SPA, by which the disputed matters were to be referred by written submissions, and the parties were to supply the Independent Accountant with any information requested.

The Plaintiff also submitted that PwC had considered matters not relevant to or within scope of the contract. The Court found they were not matters which would constitute PwC acting as an arbitrator.
 

Significance

During the expert determination process, an expert may require further information to supplement submissions made by the parties, particularly where the expert has been provided with competing versions of the facts.

In this case, the Court found that requesting further information to supplement submissions does not cause an expert to exceed the scope of their contractual function³. The Court ultimately held that the Independent Accountant acted within their powers conferred by the contract. As such, the Court held the Determination was final and binding.