Halifax Life Ltd v The Equitable Life Assurance Society

An expert determination is governed by the parties’ contract and the expert’s mandate. A material departure from the instructions will prevent the determination from binding the parties. Where the mandate requires reasons, they must be intelligible and adequate in context. Brief reasons may suffice, but they must explain the conclusions on the principal important controversial issues. The court may direct the expert to provide further reasons and adjourn the challenge pending them.

Halifax Life and Equitable Life entered into a reassurance agreement under which the initial premium was to be finally determined by agreement between their appointed actuaries or, failing agreement, by an umpire acting as an expert. The umpire’s decision was to be final and binding save for manifest error, and the agreed terms of reference required reasons.

After the umpire determined that Equitable Life should pay Halifax Life £14.612 million, Halifax Life challenged the decision. It alleged that the reasons did not explain the rejection of its principal contentions or identify the information obtained during private meetings with Equitable Life’s actuaries. The central issue was whether the reasons were contractually sufficient and what consequence followed from any deficiency.

1. A mistake made while an expert is carrying out the task within the instructions ordinarily binds the parties. A material departure from the instructions does not. The determination is then not binding, whether or not the departure affected the result. A departure is material unless plainly trivial or de minimis. [2001] EWCA Civ 1832.
2. Where a decision is binding save for manifest error, that expression means an oversight or blunder so obvious, and obviously capable of affecting the determination, as to admit of no difference of opinion. [2001] EWCA Civ 1832.
3. Paragraph 10 of the terms of reference required a speaking decision. “Reasons” meant reasons that were intelligible and adequate in the contractual and commercial circumstances. They could be brief, but had to explain the conclusions on the principal important controversial issues and the material information taken into account.
4. The umpire had identified Halifax Life’s four basic areas of concern and had held private meetings with both sides, including Equitable Life’s actuaries. His decision did not explain his conclusions on those concerns, the evidence and information considered, or the extent to which he had checked underlying figures. It was insufficient merely to infer that Halifax Life’s contentions had been rejected.
5. The court rejected an immediate declaration that the decision was not binding. It directed the umpire to state further reasons addressing the four areas of concern and the relevant information and checks. The Part 8 claim was adjourned and ordered to be restored when the reasons became available. The court held that it had power to give that direction under the contractual provisions and/or its inherent jurisdiction, alternatively under its case-management powers.