In Dandara South East Ltd v Medway Preservation Ltd & another [2024] EWHC 2318 (Ch), the High Court ordered that proceedings arising following the termination of a contract should be stayed so that the parties can comply with a contractual provision requiring expert determination. 

Background 

The claimant, Dandara South East Limited, had terminated the contract – which was for the sale of land by the first defendant to the claimant – and sought repayment of a deposit. The defendants disputed the jurisdiction of the court and sought a stay of proceedings, arguing that the dispute should be resolved through expert determination as per the contract terms.

The issues to be determined

The issues for the court were:

1. Scope and construction of the Expert Determination Clause: Whether the dispute falls within the scope of the expert determination clause in the contract. 
2. Separability of the Expert Determination Clause: Whether the expert determination clause is separable from the main contract given that the contract had come to an end. 
3. Suitability of Expert Determination: Whether the expert determination procedure is suitable for resolving the dispute.

The provisions of the contract

The court set out a number of the clauses of the contract in its judgment, the key ones being:

Clause 28 – “Disputes”

28.1 Any dispute or difference between the parties as to any matter under or in connection with this contract shall be submitted for the determination of an expert (the Expert) …

Clause 31

Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this contract or its subject matter or formation (including non-contractual disputes or claims).

High Court’s decision

The court first addressed construction and separability.

It noted that was no apparent decided authority on the question of whether an expert determination clause can be separable from the underlying agreement, in the same way that an arbitration clause is separable (unless the parties have otherwise agreed). In arbitration agreements, the principle of separability is expressly provided for in section 7 of the Arbitration Act 1996. 

The court identified that it was logical to look at the interpretation of clause 28 before considering whether it is separable from the contract. 

Construction

The scope of an expert determination clause is determined by the language of the contract. The court found that clause 28 of the contract was an all-embracing provision requiring all disputes concerning the contract to be subject to expert determination. The language of the clause was broad and mandatory, covering any dispute or difference between the parties as to any matter under or in connection with the contract: 

“The natural reading of the clause is that any dispute concerning the Contract will be so subject. This would include a dispute as to whether the contract had been validly terminated, or whether one party was in continuing breach.”

The court noted that the wording of clause 28.1 mirrors the breadth of disputes generally subject to an arbitration clause and considered that businesspeople can be objectively taken to know that the wording used would cover all disputes arising in relation to the agreement. It was also noted that expert determination clauses are generally limited to certain matters that are considered suitable for resolution by such method. 

The claimant argued that, considering the tension with clause 31, clause 28 should be construed so that it only applies to disputes arising under or in relation to the contract which are suitable for expert determination. This was rejected on the basis that this distinction was not justified by any commercial rationale, or by any wording contained within the contract. 

The court therefore favoured a “one-stop construction” of clause 28.

In respect of the applicability of clause 31, the court found that, if a party fails to comply with an expert determination, the other(s) can apply to court for an order to enforce it (under clause 31). 

Separability

The claimant argued that clause 28 was not separable from the contract, which had been terminated. However, the court’s view was that, “…once it is established that a party to an agreement intends for all disputes relating to it to be subject to a prescribed form of dispute resolution, the burden is on the party arguing that such resolution procedures are not separable from the agreement to explain why the parties would objectively have intended some disputes nonetheless to be resolved by the courts.” The claimants had not satisfied this burden. 

The court held that clause 28 was separable from the main contract. The principle of separability, although primarily associated with arbitration clauses, was deemed applicable to expert determination clauses. Whether or not an expert determination clause can be separable is a matter of contractual construction. The court noted that the parties' objective intention was to create a one-stop shop for resolving all disputes related to the contract through expert determination and considered there to be a presumption of separability accordingly, as there is with arbitration clauses.

Suitability

The claimant argued in the alternative that the court should refuse to grant a stay as a matter of discretion.

The court rejected the claimant's argument that the expert determination procedure was unsuitable for resolving the dispute, noting that only high-level submissions were made on the point. The court noted that parties to construction contracts often agree to resolve disputes of fact through expert determination within a short period, and the issues raised by the claimant were not beyond the capability of an expert. 

Conclusion

The court granted the defendants' application for a stay of proceedings, directing the parties to comply with clause 28 of the contract and proceed to expert determination. 

As this judgment demonstrates, parties should pay close attention when drafting dispute resolution clauses in their contracts. If it is intended that only certain disputes should be determined in accordance with an identified dispute resolution mechanism, this should be addressed expressly. Further, if it is intended that certain clauses should survive the termination of the agreement, this can be expressly set out. 

It is important to keep in mind the practicalities of a dispute resolution clause. Avoid creating procedures that are going to be burdensome and potentially difficult to adhere to. Remember that you’ll most likely be referring to the clause when the parties’ relationship has broken down, so keep things precise to avoid challenges to how the process is supposed to work.