VEBA OIL SUPPLY AND TRADING G.m.b.H. PETROTRADE INC. [2001] EWCA Civ 1832

An expert determination clause binds the parties only to a determination made within the expert's contractual remit. Where the contract specifies both a quality standard and the testing method, the expert must use that method. A customary method at the loading installation cannot displace an express contractual method.

By the majority approach of Simon Brown and Tuckey LJJ, a departure from instructions is material unless it is truly trivial or de minimis, so that it is obvious that it can make no possible difference to either party. The court does not decide materiality by investigating whether the departure altered the physical result. Dyson LJ agreed that the determination was invalid, but formulated materiality by reference to what reasonable parties would regard as sufficient to invalidate it.

The sellers supplied a cargo of gasoil FOB Antwerp. The contract required the density specification to be tested by ASTM method D1298. An agreed independent inspector instead used D4052, the customary and more accurate method at Antwerp, and certified a result within specification.

The buyers alleged that the cargo failed the corresponding quality requirement in their on-sale. They contended that the inspector's certificate was not final and binding because the stipulated test had not been used. Morison J dismissed the sellers' application for summary judgment under CPR Part 24.2.

The sellers appealed. The central issue was whether use of the wrong testing method was a material departure from the inspector's instructions, although use of the stipulated method would have produced the same result on the samples tested.

1. Appeal dismissed unanimously. The inspector's determination was not binding. The sellers were ordered, by consent, to pay the buyers' costs of £12,448.40. Permission to appeal to the House of Lords was refused.

2. Simon Brown LJ held, with Dyson LJ expressly agreeing on this point, that clause 4 stipulated both the density standard and ASTM method D1298 for testing it. Clause 10, requiring the inspector to act in the customary manner at the installation, governed the manner of carrying out required tests and tests for which no method was otherwise specified. It did not authorise substitution of D4052 for the expressly stipulated method.

3. Simon Brown and Tuckey LJJ held that an expert's departure from instructions invalidates the determination unless it is genuinely trivial or de minimis. The question is not whether the departure affected the ultimate physical result. The parties agreed to be bound only by the stipulated determination, and the court should not speculate why a particular method was required. Jones v Sherwood Services Limited plc [1992] 1 WLR 277 supported the distinction between a mistake made while carrying out instructions and a failure to carry them out.

4. Dyson LJ concurred in the result, but preferred an implied-term analysis. In the absence of an express definition, a departure is material if reasonable parties would regard it as sufficient to invalidate the determination. The contract, its subject matter, the nature of the departure, and the circumstances are relevant. Even on that formulation, use of the wrong contractual testing method was material.

5. Simon Brown LJ additionally expressed obiter views. He considered that the former material-mistake approach in Dean v Prince [1954] Ch 409 and Frank H Wright (Constructions) Ltd v Frodoor Ltd [1967] 1 WLR 506 should no longer govern experts' mistakes. He also considered that a manifest error should be both obvious and obviously capable of affecting the determination. Those observations were unnecessary because the material departure from instructions already invalidated the certificate.

• Court of Appeal (Civil Division) — dismissed the sellers' appeal and upheld the conclusion that the inspector's determination was not binding.
• Commercial Court — Morison J dismissed the sellers' application for summary judgment on 2 May 2001. No reported or neutral citation for that decision is stated in the judgment.