Factual and Procedural Background
The Plaintiff and Defendant entered into a Share Purchase Agreement ("SPA") whereby the Plaintiff sold a company engaged in manufacturing mobile food trucks to the Defendant. The SPA included an Earn-Out mechanism involving additional contingent payments based on financial performance, specifically Gross Profit calculations for defined periods. A dispute arose concerning the calculation of the Second Earn-Out Amount for the period 1 September 2023 to 31 August 2024, centering on whether six invoices issued in August 2024 but relating to deliveries in September 2024 should be included in the Second Earn-Out Period's revenue.
The parties agreed to resolve disputes by expert determination rather than litigation, appointing an independent accountant as Expert. Despite this, the Plaintiff initiated court proceedings seeking a declaration that the Expert is bound by the SPA’s contractual definition of "Gross Profit" and should not consider external accounting standards or practices. The Expert determination process had not commenced at the time of the court application.
Legal Issues Presented
- Whether the court should grant a declaration limiting the Expert's discretion by binding her to the contractual definition of "Gross Profit" without regard to other accounting standards or practices.
- Whether the courts should interfere in advance of the expert determination process in disputes contractually referred to expert determination.
- Whether the Plaintiff's initiation of court proceedings constitutes a permissible step or amounts to premature and wasteful litigation contrary to the parties' agreement to alternative dispute resolution.
Arguments of the Parties
Plaintiff's Arguments
- The Plaintiff contended that the court should clarify the parameters of the Expert’s decision-making by declaring that the Expert is bound by the SPA’s definition of "Gross Profit."
- The Plaintiff argued that the declaration would promote efficiency by preventing potential errors and multiple determinations by the Expert.
- The Plaintiff emphasized the short timeframe to hearing (10 weeks) as a reason supporting court intervention to facilitate a speedy resolution.
- The Plaintiff claimed not to seek to delay the expert determination process but to enable a clearer and quicker resolution of the dispute.
Defendant's Arguments
- The Defendant maintained that the expert determination process must proceed without court interference, consistent with the parties’ agreement.
- The Defendant argued that it is unprecedented and improper to seek to limit the Expert’s discretion or to pre-empt the expert’s decision through court declarations.
- The Defendant pointed out that the SPA expressly empowers the Expert to request representations and apply her judgment, including consideration of accounting standards.
- The Defendant contended that the Plaintiff’s court application improperly obstructs the agreed expert determination process and imposes unnecessary litigation costs.
- The Defendant reserved the right to seek an order fixing the Plaintiff with the costs of the court proceedings.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Dunnes Stores v McCann [2020] 3 I.R. 1 |
Courts should not interfere in expert determinations in advance of the expert's decision except in exceptional circumstances; parties’ agreements to expert determination must be respected. |
The court applied the principle that the expert determination process should proceed without prior court interference, rejecting the Plaintiff’s application as premature and wasteful litigation. |
| Mercury Communications Ltd v Director General of Telecommunications [1994] C.L.C. 1125 |
It is wasteful and premature to litigate before the expert has made a decision. |
Quoted approvingly to support non-interference in expert determination prior to expert decision. |
| Thorne v Courtier [2011] EWCA Civ 104 |
Courts should avoid interfering in expert determinations to prevent unnecessary litigation and associated costs. |
Used to reinforce the policy against court interference in expert determinations to avoid waste of time and costs. |
| Lett & Company Ltd v Wexford Borough Council & The Minister for Communications [2012] IESC 14 |
Litigation is the most protracted and expensive way of resolving disputes. |
Referenced to underline the importance of alternative dispute resolution and avoidance of litigation costs. |
| Bourbon v Ward [2012] IEHC 30 |
High Court litigation costs can be prohibitive. |
Referenced to highlight the practical significance of avoiding litigation costs through alternative dispute resolution. |
| Beakonford Limited v Stokes [2025] IEHC 22 |
Judges have repeatedly called for reform of litigation costs due to their prohibitive nature. |
Referenced to emphasize the court’s awareness of litigation cost issues and encouragement of alternative dispute resolution. |
| Tweedswood Ltd & Anor v Power [2015] IESC 18 |
Litigation often leads to delay, stalemate, and expensive stasis rather than speedy dispute resolution. |
Used to illustrate that litigation rarely provides a speedy resolution, undermining the Plaintiff’s argument for court intervention based on speed. |
| Word Perfect Translation Services Ltd v Minister for Public Expenditure and Reform [2023] IECA 189 |
Court costs orders should avoid inefficient use of court resources and costly nit-picking. |
Referenced regarding the court’s approach to costs and encouraging efficient dispute resolution. |
Court's Reasoning and Analysis
The court began by emphasizing the parties’ contractual agreement to resolve disputes through expert determination rather than litigation, highlighting the public policy preference to respect such agreements to avoid the prohibitive costs and delays of court proceedings. The leading precedent, Dunnes Stores v McCann, was pivotal in establishing that courts should not interfere in expert determinations before the expert has made a decision, except in exceptional circumstances which were not present here.
The court noted that the Plaintiff’s attempt to obtain a pre-emptive declaration limiting the Expert’s discretion effectively amounted to litigating a dispute that the parties had agreed to resolve by alternative means. This was described as "wasteful and premature" litigation, contrary to the principles articulated by the Supreme Court.
The court rejected the Plaintiff’s argument that the declaration would promote efficiency, explaining that disagreements and potential errors are inherent in expert determinations and can be addressed after the expert’s decision if necessary. The court also dismissed the Plaintiff’s reliance on the short time to hearing, observing that litigation rarely provides speedy resolution and may lead to prolonged delay including appeals.
The court underscored the illogicality of allowing court interference in expert determinations, particularly where the expert is appointed for her specialized knowledge, as here with an accountant deciding accounting issues. Allowing courts to dictate how the expert applies contractual terms would undermine the purpose of alternative dispute resolution.
Finally, the court found no indication that the Expert would act outside her mandate and noted that remedies exist if the Expert exceeds her authority, but these are to be pursued after the determination, not in advance.
Holding and Implications
The court REFUSED the Plaintiff’s application for a declaration limiting the Expert’s discretion in advance of the expert determination process.
The direct effect of this decision is that the Expert determination process will proceed without court interference, in accordance with the parties’ contractual agreement. The court emphasized that parties must honour their agreement to resolve disputes by alternative dispute resolution, particularly to avoid the prohibitive costs and delays associated with litigation.
No new legal precedent was established beyond affirming the principles set out in the Dunnes Stores v McCann case. The court indicated its preliminary view that the Plaintiff should bear the Defendant’s legal costs incurred in defending the application, reinforcing the principle that parties should not circumvent agreed dispute resolution mechanisms through premature litigation.