EWJ 60 April 2025 web - Journal - Page 76
Expert Determination Clauses: Hammers,
Howlers & the ‘Manifest Error’ Exception
Expert determination clauses have become an increasingly popular feature of commercial contracts,
providing an efficient and cost-effective method for parties to resolve specific technical or industryrelated disputes. However, the recent judgment in WH Holding Limited v E20 Stadium LLP [2025]
EWHC 140 (Comm) is an important reminder that parties should always consider the appropriateness
of opting for expert determination, and if they choose to do so, the implications of any "manifest error"
exception.
meaning of manifest error may depend on the
particular contract and the context in which it is used,
generally:
Expert determination clauses
Expert determination clauses allow parties to refer
specific types of contractual disputes to an independent expert, rather than resolving them through
arbitration or litigation. In practice, expert determination operates as a streamlined alternative dispute
resolution method, which is often used for technical or
valuation issues in the context of, for example, an SPA,
rent review clause, or clause determining whether
goods or services complied with a certain specification.
The independent expert is tasked with evaluating the
issues and rendering a decision that is usually final and
binding on the parties, subject to limited grounds for
challenge.
1. A "manifest error" is one that is obvious or easily
demonstrable without extensive investigation.
2. "Obvious or easily demonstrable" errors include those
oversights and blunders so obvious and obviously capable of affecting the determination, that there can be
no difference of opinion.
3. Demonstrable "without extensive investigation" may
depend on context. Unless the contract specifies otherwise, extrinsic evidence will be admissible. It may
not be necessary to be able to demonstrate the error
immediately but in most cases, this will be done readily (by a narrow, time-limited investigation).
Expert determination can enable the parties to reach
a resolution more quickly than arbitration or litigation, minimising disruption to ongoing projects and
preserving business relationships. Given its relative
speed and simplicity of procedure, it can also be costeffective, making it an attractive option for smaller disputes or when budget constraints exist. Additionally,
parties maintain a degree of control over the process,
including the choice of expert and procedure.
The judge distinguished the exercise of determining
whether a manifest error has occurred from the
court's task when determining an appeal. It is not the
court's role to determine whether the expert erred in
law, but rather to decide whether the claimant has
proved the manifest errors it contends for. Thus, while
a manifest error exception provides a means by which
a party may seek to challenge the decision of an
expert, the scope to do so is heavily constrained.
Background facts
In 2013, E20, the owner of the Olympic Stadium,
granted a 99-year concession to WHH, the holding
company of West Ham Football Club, effectively entitling the club to use the stadium as a home ground.
The agreement provided for E20 to share in gains
made by the shareholders of WHH if they sold or
transferred their interests in the club through the payment of a "Stadium Premium Amount". The agreement also contained an expert determination clause,
providing that any dispute between the parties relating to payments be determined by an expert, and that
"the expert's determination shall (in the absence of manifest
error) be final and binding on the parties and not be subject
to appeal".
Decision
The judge went on to hold that the expert had erred
in finding WHH liable to pay the £3.6 million Stadium
Premium Amount, which rested on E20's contention
that the share sales and the option agreement formed
a single transaction. The expert had accepted E20's
approach, which involved undertaking two separate
calculations in relation to the share sales and the option agreement, each undertaken on a different basis,
which were then blended into a hybrid calculation to
arrive at the Stadium Premium Amount. However,
the judge concluded that there was no basis to justify
such an approach and even if the share sales and
option were categorised as a single transaction, there
was no mechanism in the agreement from which the
Stadium Premium Amount could be calculated.
In 2021, a dispute arose as to whether a Stadium
Premium Amount of £3.6 million became due after
various WHH shareholders entered into share sales
and an option agreement. The parties agreed to put
their dispute before an expert, who concluded that
the premium was payable by WHH to E20. However,
WHH challenged the determination, claiming the
expert had made two "manifest" errors.
As to whether those errors were manifest, E20 submitted that even if the expert had erred in reaching
his original conclusion, those errors were not manifest as they could not be said to be "a howler", something that "hit you between the eyes" or "so obvious a
blunder that there really can be no dispute about it". However, the judge did not consider that terminology such
as 'howler' could be a guide to the necessary qualities
What is a manifest error?
The authorities indicate that, while the precise
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