Ackerman v Ackerman & Ors

Where an expert’s contractual task includes a prescribed procedure, a more-than-insignificant departure from that procedure may mean that the parties are not bound by the resulting determination. The fact that the outcome would probably have been the same is not necessarily material. Where an interim report is capable of review under the agreement, that mechanism does not automatically make procedural compliance irrelevant. An appellate court is slow to interfere with a trial judge’s assessment of an expert’s fairness and reliability. A stay may be continued where enforcement would probably cause bankruptcy and stifle the appeal, while there is no evidence of asset dissipation. Security for costs may be adjourned where the applicant presently lacks means to provide more than nominal security.

The appellant challenged a report prepared by the third respondent, an expert appointed under an agreement governing the separation of a family property business. The High Court, Vos J, held that the expert’s failure to disclose proposals made by another party was a procedural breach, but that the report remained valid and binding because the likely outcome would not have been materially different. The High Court also rejected challenges based on alleged unfairness and on the construction of the expert’s powers.

In the Court of Appeal the appellant sought permission to appeal, a stay of interim costs payments and protection against security-for-costs conditions. The central issue on the principal ground was whether the report was binding despite the failure to follow the agreed procedure.

1. Permission to appeal. Permission was granted, but only on whether the report was binding. The other grounds were refused.
2. Procedural breach. It was arguable that the High Court had erred in treating the expert’s failure to disclose proposals as immaterial because the result would probably have been much the same. The contractual procedure required the parties to provide information and arguments for consideration. The authorities supported the view that the critical question was whether the expert had departed, to more than a de minimis degree, from the agreed procedure. The fact that the result would have been the same was arguably irrelevant, as illustrated by Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832.
3. The Court recognised an alternative argument that the report was provisional and that the agreement provided a mechanism for correction in the Final Report. That argument was not sufficiently strong to remove a real prospect of success, since the provisional report might acquire a status that would be difficult to dislodge.
4. Repudiation and construction. There was no real prospect of overturning the trial judge’s factual findings that the expert had acted in good faith and could complete the task fairly. Nor was there a real prospect of establishing error in construing “claims” broadly, or in holding that the agreement permitted substantial departures from equal allocation, including transfer of all assets to one side together with a money claim.
5. Interim payments and security. The stay of the interim costs-payment orders was continued. Enforcement was likely to force bankruptcy and might stifle the appeal, while there was no evidence of likely asset dissipation. The applications to make payment a condition of pursuing the appeal were dismissed. The security-for-costs application was adjourned generally, with liberty to apply on 14 days’ notice if evidence showed that the appellant could provide more than nominal security.

• Court of Appeal (Civil Division): Permission to appeal was granted on the binding-effect issue only. Permission was refused on the grounds concerning alleged repudiatory unfairness and construction. The stay of interim costs payments was continued, the respondents’ conditional-payment applications were dismissed, and the security-for-costs application was adjourned generally with liberty to apply.
• High Court of Justice, Chancery Division: Vos J dismissed the claim for a declaration that the report was invalid and without effect and held that the report was valid and binding: [2011] EWHC 3428 (Ch).