JULIET CATHERINE WHITE & Ors v HANNAH NICHOLSON

Where an expert determination is contractually final and binding subject to manifest error, the court does not conduct a review or appeal of the expert’s reasoning. The challenge is confined to an oversight or blunder so obvious as to admit no difference of opinion, and the error must also be capable of affecting the determination materially. A decision that is merely arguably or even actually wrong is insufficient. The court may consider the material relied upon by the expert, including extrinsic evidence, when deciding whether the threshold is met. Contractual terms should be construed objectively, with implied terms considered where necessary for practical coherence and obvious against the relevant background. An expert’s treatment of advances as liabilities was not manifestly erroneous where the contractual language reasonably supported that conclusion.

The claimants sought specific performance of a shareholder agreement and a deed governing the sale of the defendant’s shares in Delilah Cosmetics Ltd. The parties had agreed that the market price determined by an identified expert would be final and binding, subject only to manifest error or fraud.

The defendant challenged the valuation. She alleged that the expert had wrongly treated shareholder loans as liabilities, failed to account properly for stock movements, used forecast rather than updated figures, and double-counted losses. The central issue was whether any of those matters constituted manifest error capable of materially affecting the valuation.

1. The claim succeeded. The court declared the expert’s determination binding and ordered specific performance of the shareholder agreement.
2. The agreed wording confined the court’s role. This was not a review or appeal of the valuation. The relevant question was whether the determination contained a manifest error. The court adopted the demanding approach expressed in Veba Oil Supply & Trading GmbH v Petrotrade Inc [2002] 1 All ER 703: the error must be an obvious oversight or blunder, obviously capable of affecting the determination, and admitting no difference of opinion.
3. The court applied the principles in Walton Homes Ltd v Staffordshire County Council [2013] EWCA Civ 542, Jones v Sherwood [1992] 1 WLR 277, Cadogan Petroleum Plc v Tolley [2009] EWHC 3291 (Ch) and Franbar Holdings Ltd v Casualty Plys Ltd [2011] EWHC 1161. An arguably wrong conclusion did not satisfy the test.
4. The White Loans could reasonably be treated as liabilities. Construed objectively, the Venson Agreement did not lock the loans in until a sale or flotation. The court considered the approach to implication of terms in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 and explained that it remained consistent with Attorney General of Belize v Belize Telecom Ltd [2009] 2 All ER 117. It was unnecessary finally to determine the contractual construction because the expert’s view was not an obvious error.
5. The forecast and stock-movement complaints did not establish manifest error. The calendar-year and financial-year confusion was an error, but it could not materially alter the result. The two-stage test therefore failed.