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When does “final and binding” mean “final and binding”?

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When does “final and binding” mean “final and binding”?

14 January 2019

References to expert determination are extremely common in modern commercial contracts, such as commercial leases. For commercial parties, it is generally thought that the principal advantages of such expert determination are the speed of decision-making and – critically – the finality which such a determination which achieve.

Nevertheless, over the years the courts, including the Court of Session, have regularly had to deal with challenges to expert determinations brought by the disgruntled “loser” of the expert determination process. Such actions are often brought on the footing that the expert has “answered the wrong question”, that generally being accepted to be a valid ground of challenge. If, however, the expert has merely “answered the right question in the wrong way”, the determination or decision will not be capable of challenge.

In the recent case of Cine-UK Limited v Union Square Developments Limited [2019] CSOH 3, the parties were respectively tenant and landlord of a multiplex cinema in Aberdeen. At review, there was a dispute about the open market rent. That dispute was referred to expert determination of the “Independent Surveyor”, whose decision, it was expressly provided in the lease, was to be “final and binding on the parties hereto both on fact and law”.

In determining the reviewed rent, the lease made provision (as is normal, of course) in respect of a number of assumptions and disregards. In short, the Pursuer argued that the Independent Surveyor had misconstrued the terms of the lease in relation to certain assumptions and disregards with the effect, so the Pursuer contended, that the Independent Surveyor had not carried out the task which had been remitted to her by the parties, in other words, that she had answered the wrong question.

Lady Wolffe, however, accepted the argument for the landlord that, as a matter of construction of the lease, it was plain that part of the task which had been remitted to the Independent Surveyor was the construction of the provisions of the lease concerning rent review, the application of which was a necessary part of the task of fixing the reviewed rent. Since the lease provided that the Independent Surveyor’s decision on fact and law was “final and binding” it followed, in short, that a mere allegation that the Independent Surveyor had erred in her construction of the rent review provisions was insufficient to support the Pursuer’s claim for reduction of the award.

In addition, the Court also rejected the remaining arguments for the Pursuer including, notably, its allegation that the Independent Surveyor had actually erred in her construction of the lease.

David Thomson QC, of Axiom Advocates, appeared for the successful landlord, the Defender.

A copy of Lady Wolffe’s Opinion is available here.