Griffin v Wainwright & Anor

An expert determination is not final merely because the expert has signed it. Where the instructions require the determination to be sent to the parties, the expert remains entitled to revise it until issue, and becomes functus officio only on sending it.

An expert must comply materially with the contractual instructions. A requirement to obtain professional valuations ordinarily requires the expert to use those valuations, rather than substitute an unauthorised valuation of her own. An expert also owes an implied duty of procedural fairness. If one party makes substantial further representations which may affect the decision, the other should generally have an opportunity to respond. Material departures from the instructions or from procedural fairness invalidate the determination.

The petitioner and the respondents were shareholders in Hi2 Ltd. Their dispute was compromised by an agreement under which the petitioner’s minority shares were to be purchased at a price determined by an independent expert.

The expert signed a determination on 17 February 2016 but did not release it because her fees had not been paid. After the petitioner supplied further information concerning the value of company property, the expert revised the determination and sent it to both parties on 17 May 2016.

The respondents challenged its validity on four grounds: functus officio; departure from instructions concerning property valuation; failure to apply the required minority discount; and procedural unfairness in considering the petitioner’s further submissions without inviting a response.

1. Functus officio. The expert was not functus officio when she signed and dated the first version. Under the instructions, the determination became binding only when sent to the parties. Until then, she could change her mind. Hiscox v Outhwaite was distinguishable because it concerned where an award was made, not when the arbitrator became functus officio. The reasoning in Camden v McInerney supported the same conclusion.
2. Property valuation. Clause 4.8 required the properties to be professionally valued by independent valuers selected by the expert. It required the expert to use those valuations in calculating the property element of the company’s value. The expert materially departed from that instruction by adjusting the valuation of The Boathouse by reference to a later Foxtons asking price. She could have asked the independent valuers to reconsider their valuation, but, after Charterfields confirmed that its original valuation should stand, she could not substitute her own assessment or use clause 4.6.5 to circumvent clause 4.8. The departure was material.
3. Minority discount. Clauses 4.2 and 4.3 required a minority discount, but did not require a uniform percentage across every category of asset. The expert had a broad discretion and could apply a 0% discount to sums treated as a debt under clause 4.6.1, provided that a discount was applied to other assets.
4. Procedural fairness. An expert has an implied obligation of fairness, although not necessarily to observe every rule of natural justice. The petitioner’s further communications were substantial, were intended to persuade the expert to revise the valuation, and concerned the company’s most valuable asset. The respondents had made no submissions on the later Foxtons price and might have made relevant observations about it. The failure to give them an opportunity to respond was therefore a material breach, irrespective of which proposed test of materiality was adopted.
5. The challenge succeeded on the property valuation and procedural fairness grounds, but failed on the functus officio and minority discount grounds. The determination sent on 17 May 2016 was invalid. Further submissions on the injunction application were adjourned.

The judgment records related County Court proceedings concerning interest and an interim injunction application before Rose J, but this was a first-instance determination of the validity of the expert determination.