Ackerman v Ackerman & Ors

An expert determination is binding where the expert answers the question entrusted to him honestly and in good faith, even if his substantive conclusion is mistaken. The court may nevertheless review whether the expert acted within the contractual mandate and complied with express or implied procedural instructions.

An expert’s procedural unfairness does not automatically invalidate the determination. The court must ask whether the decision was inevitable and consider all the circumstances, the nature of the departure and its effect on the decision-making process. Actual bias, rather than apparent bias, is required in this contractual expert context.

On the construction of the Agreement, the expert had broad powers to make adjustments, but was required to inform each side of adjustments proposed by the other before announcing the Lottery results. The breaches found were not material and the claim was dismissed.

The claimant challenged a provisional adjustment report prepared by the third defendant, Mr Andrew Thornhill, under an agreement governing the separation of the interests of two branches of the Ackerman family in a property and corporate group.

The claimant alleged that Mr Thornhill had misconstrued the Agreement, exceeded his powers, acted unfairly, colluded with or showed actual bias towards the defendants, and repudiated the Agreement. He sought declarations that the Report and transactions carried out under it were invalid, together with discharge of the Agreement.

The central issues were whether construction of the Agreement was for the court or the expert, the scope of the expert’s powers and information duties, whether procedural breaches were material, and whether the Agreement had been repudiated.

1. Construction and expert mandate. The construction of the Agreement was a matter for the court. Clauses 11 and 15 did not make Mr Thornhill the final arbiter of the legal meaning of the Agreement. If he applied the wrong construction, he departed from his mandate. The court would not, however, intervene in matters within the expert’s jurisdiction merely because his substantive conclusion was wrong.
2. Removed Assets and adjustments. “Removed Assets” meant assets removed from the joint assets for the benefit of one side only. The term was broad as to the nature of the benefit, but it required a benefit to one side rather than merely an unauthorised use of joint assets. “Adjustments” under clause 10(a) included cash payments, property or share transfers and adjustment of liabilities. They could address depletion, mismanagement and claims which could reasonably be advanced, and were not confined to formal legal claims.
3. Information and fairness. Clause 9(B)(c) required Mr Thornhill to inform each side of adjustments proposed by the other, including proposed transfers of shares or property. The obligation was not limited to a single exchange made immediately after execution of the Agreement. He was not required to disclose his own intended conclusions, and clause 15 did not require consultation with both sides on every matter.
4. Breach and materiality. Mr Thornhill breached clause 9(B)(c) by failing to inform Joseph of Naomi’s proposals, and technically breached clause 9(B)(d) by failing to copy certain questions and answers. He also breached the implied obligation of procedural fairness. Applying the approach in Amec Civil Engineering Ltd v Secretary of State for Transport and Worrall v Topp, the procedural breaches were not material. Mr Thornhill would have reached the same substantive conclusion, and the Report was provisional: Joseph could still make representations during the third stage.
5. Bias, repudiation and disposal. Actual bias and collusion were not established. The breaches were neither conditions nor sufficiently serious breaches of an innominate term to amount to repudiation. The claim was dismissed. The parties were to proceed under the Agreement’s final stage, subject to directions and an amended timetable if required.