University of the Arts London v Legal & General Pensions Limited & Anor.

Where a contract provides that an expert’s decision is final and binding unless a party serves a notice within a specified period, the court must construe the contractual scheme as a whole. Time may be of the essence even where the contract does not use those words. A failure to serve the notice within time can therefore make the expert’s decision final and binding.

An expert determination of a contractual construction issue may be final and binding even though a related rectification issue remains unresolved, particularly where the expert had no jurisdiction to grant rectification. Summary judgment may determine that issue where the contractual language is clear and no further evidence is likely to affect the result.

The claimant leased two student accommodation properties from the defendants. The leases required disputes concerning construction to be referred to an expert. The expert determined that the claimant was liable to reimburse the defendants for VAT included in management fees, but left any rectification issue unresolved.

The claimant later sought declarations on construction and, alternatively, rectification. The defendants applied to strike out the construction claims or obtain summary judgment, arguing that the expert’s determination had become final and binding because the claimant had served its notice of dissatisfaction outside the 20-working-day period in clause 28.8.

The issues were whether the expert had made a final determination, whether time was of the essence, and whether there was a compelling reason to leave those questions for trial.

1. Summary judgment granted. The defendants were entitled to summary judgment, and the relevant paragraphs of the Particulars of Claim were to be struck out. The claimant could nevertheless pursue its alternative rectification claim.
2. The expert had determined the Construction Issue referred to him. The Rectification Issue was distinct and had not been referred for determination. In any event, rectification was a remedy available only from the court. It would produce an artificial and commercially unacceptable result if the expert’s detailed determination could never become binding because a related rectification issue remained unresolved. The running of the 20-working-day period therefore began when notice of the expert’s decision was given on 19 January 2021.
3. Clause 28 had to be construed as a whole. Clause 28.4(d) stated that the expert’s decision was final and binding unless notice under clause 28.8 was served, in which event it remained binding until court proceedings produced a different judgment. Those provisions supplied the consequence of failing to serve notice within the specified period. The absence of the expression “time being of the essence” was not decisive.
4. The time limit in clause 28.8 was of the essence and required strict compliance. The defendants did not need to prove detriment. Commercial certainty, the requirement that the expert’s decision be given effect forthwith, and the contractual structure all supported that conclusion.
5. The existence of the rectification claim did not provide a compelling reason to defer determination. Although the court would later construe the leases when deciding rectification, the expert’s determination was binding as a matter of contract and the issue could properly be resolved summarily. The claimant remained entitled to argue at trial that rectification should be granted and that the approach in Woodford Land Ltd v Persimmon Homes Ltd should not be followed.

First-instance decision. No prior appellate decision is stated in the judgment.