Homepace Ltd v Sita South East Ltd

An independent expert’s certificate is binding where the expert answers the question remitted by the contract, even if the answer is wrong. The court may consider admissible evidence, including the expert’s reasons and subsequent correspondence, to establish whether the expert departed from the instructions. A material departure from the instructions makes the certificate a nullity, regardless of its effect on the result. Whether a question of contractual construction falls within the expert’s remit depends on the proper construction of the contract. Necessary subsidiary questions ordinarily fall within the remit, but latent and fundamental construction issues which are not an obvious part of the certification process may remain for the court or an agreed arbitration. Where an independent certification procedure is intended to determine exhaustion or economic recoverability, the certificate is final and binding by necessary implication, subject to a failure to follow instructions.

Homepace Limited granted a 999-year lease of Knockdown Quarry to Hughes Waste Management Limited. The lease was assigned to Sita South East Limited. It provided for a base rent which would cease on service of a Minerals Exhaustion Certificate confirming that the minerals were exhausted or economically irrecoverable.

An independent surveyor issued a certificate stating that the minerals were not economically recoverable. Homepace contended that the surveyor had wrongly excluded limestone reserved to Homepace but not all of the reserved material. The issues were whether the court could examine evidence beyond the certificate, whether the surveyor had departed from his instructions, and whether a valid certificate would be conclusive.

1. Construction of the lease. The Reserved Minerals comprised up to 12,000 tonnes each year of specified limestone. They did not comprise all limestone of the specified types. The surveyor therefore had to consider the economic recoverability of all Minerals, allowing for the reserved annual quantity.
2. Evidence. The court was entitled to consider the surveyor’s report and correspondence. The contract did not restrict the evidence admissible to prove a departure from instructions, and the certificate’s apparent compliance with the lease was not conclusive on that issue.
3. Departure from instructions. The authorities, particularly Jones v Sherwood Computer Services Plc [1992] 1 W.L.R. 277 and Veba Oil Supply & Trading GmbH v Petrotrade Inc. [2002] 1 All E.R. 703, establish a distinction between a mistake made while carrying out instructions and a failure to carry them out. A mistaken answer to a question within the remit remains binding. An expert who considers the wrong subject matter has materially departed from the instructions, and the determination is not binding.
4. Scope of the remit. Whether construction issues were remitted to the expert depended on the contract. Questions such as the meaning of exhausted and economically recoverable were necessary to the surveyor’s task. The latent construction issues concerning the definitions of Minerals and Reserved Minerals, and the effect of clause 7, were not obvious necessary parts of the certification. They therefore fell within the arbitration clause rather than the surveyor’s remit.
5. By considering only crushed rock, Mr Hill considered only part of the required subject matter. The certificate was consequently a nullity.
6. Obiter on finality. If valid, the certificate would have been final and binding. That conclusion was implied to give business efficacy to the independent certification procedure, subject to a failure to carry out instructions. The claim accordingly succeeded on the invalidity issue.