Summary of Opinion

Factual and Procedural Background

The Claimant and the Defendant contracted for the sale of a leasehold interest in a property (the "Property") to be developed as a luxury hotel. The Claimant entered into a sale and purchase agreement ("SPA") with the Defendant on or about 13 June 2015, later varied by a written Variation Agreement dated 16 February 2017. The parties also entered into a hotel operating agreement ("AOSA") with Company A concerning operation of the hotel. A dispute arose concerning how three categories of cost (preliminaries; mechanical & electrical subcontractor overheads and profit; and firefighting lift costs — together "P, M and F") were to be apportioned between the parties pursuant to the Costs Apportionment appended to the SPA and AOSA.

The dispute (including the Apportionment Issue) was referred to an expert, Judge Planterose, for determination under the SPA's dispute resolution clause. Judge Planterose issued a Determination dated 8 July 2020. He concluded (i) that the SPA and AOSA, as originally construed, required the apportionment set out in the Costs Apportionment (column 3) and (ii) that, notwithstanding that construction, the parties had subsequently reached a variation by which the Defendant's liability for P, M and F was capped at £800,000.

The Claimant (referred to in the opinion as "GSY" and anonymised here as "Claimant") applied for summary judgment seeking a declaration that the Determination was erroneous in law and/or contained a manifest error and therefore was not binding in relation to the Apportionment Issue. The Defendant (referred to as "GCDL" and anonymised here as "Defendant") had also applied for summary judgment, that application being resolved except in relation to costs.

Legal Issues Presented

1. Whether the expert's Determination in relation to the Apportionment Issue was vitiated by an error of law or a manifest error such that it was not binding on the parties under clause 18.1(e) of the SPA.
2. Whether an alleged subsequent oral or informal agreement (variation) capping the Defendant's liability at £800,000 was effective despite "no oral modification" clauses in the SPA and AOSA.
3. Whether summary judgment is appropriate to declare the Determination not binding on the basis that the expert departed from his mandate in a material respect.

Arguments of the Parties

Claimant's Arguments

• The expert correctly construed the SPA as providing for the apportionments in column 3 of the Costs Apportionment, but nevertheless erroneously found that the parties had later agreed a variation capping the Defendant's liability at £800,000.
• The alleged variation was not evidenced in writing and therefore contravened the SPA's and AOSA's "No Oral Modification" ("NOM") clauses; the expert failed to consider those NOM clauses and relevant authority.
• Because clause 18.1(e) of the SPA provides that decisions of the Specialist are final and binding except in the case of manifest error or in relation to questions of law, the Determination should be set aside for legal error and/or manifest error and a declaration granted that the Determination is not binding in relation to the Apportionment Issue.
• The Claimant sought summary judgment limited to the declaration that the Determination was not binding; it did not seek to determine the correct outcome of the Apportionment Issue on a summary basis.

Defendant's Arguments

• The Defendant accepted that the expert's reasoning might be open to challenge, but argued the Determination reached the right result albeit for the wrong reasons.
• The Defendant relied on an alternative basis (estoppel by convention) founded on the same factual material to justify the capping of its contribution at £800,000; if that estoppel case succeeds at trial, the Determination's outcome would be correct notwithstanding the expert's flawed reasoning.
• The Defendant argued that a declaration that the Determination was erroneous would be premature and of no practical utility given that the estoppel case would require trial and might produce the same outcome.

Table of Precedents Cited

Court's Reasoning and Analysis

The court proceeded through the following analytical steps, relying only on the material and authorities set out in the opinion:

1. Construction of the expert's mandate: The court identified clause 18.1(e) of the SPA as the relevant provision governing the Specialist's remit, which provided that the Specialist's decisions would be final and binding except in the case of manifest error or in relation to questions of law.
2. Assessment of the Determination's content: The court noted that Judge Planterose agreed with the Claimant's construction that the SPA/AOSA required the apportionments in column 3 of the Costs Apportionment, but nonetheless concluded that the parties had later agreed an oral variation capping the Defendant's liability at £800,000.
3. Identification of omitted legal considerations: The court found that Judge Planterose did not refer to or consider the SPA's and AOSA's "No Oral Modification" clauses (NOMs) and did not consider the Supreme Court's decision in MWB Business Exchange Centres Ltd v Rock Advertising Ltd, which addresses the legal effect of NOMs and the limited role of estoppel in displacing them.
4. Application of principle from Premier Telecommunications: The court applied the summary of principles in Premier Telecommunications (as articulated by Moore-Bick LJ) to conclude that where an expert departs from his instructions in a material respect the determination is not binding. The first steps required by that framework are construing the mandate and ascertaining whether the expert adhered to it and applied the correct principles.
5. Conclusion on material departure: Because Judge Planterose failed to ask himself the right questions and did not apply the correct legal principles (specifically failing to consider the NOMs and MWB), the court held that he had departed from his mandate in a material respect.
6. Consequent legal effect: Applying the Premier Telecommunications principle (proposition (7)), the court held that once a material departure from mandate is shown, it is not concerned with whether the departure altered the result — the determination is not binding.
7. Rejection of Defendant's alternative justification for denying summary relief: Although the Defendant relied on estoppel by convention as an alternative basis that could vindicate the Determination's outcome, the court held that the material departure ground required setting aside the Determination and that it need not resolve the estoppel argument for the purposes of the summary declaration sought by the Claimant.

Holding and Implications

HOLDING: The court granted summary judgment in favour of the Claimant on the limited issue before it and declared that the Determination of Judge Planterose in relation to the Apportionment Issue was erroneous in law and/or contained a manifest error and therefore is not binding on the parties in respect of that Issue.

Implications:

• Direct effect: The expert Determination insofar as it fixed or treated as binding the alleged variation capping the Defendant's liability at £800,000 for P, M and F is set aside and is not binding on the parties.
• Remaining matters: The court did not determine what the practical consequences of setting aside the Determination will be (for example, questions of interest or whether estoppel by convention might nevertheless apply). Those consequences remain to be determined in due course, and the court expressly declined to decide them on the summary judgment application before it.
• Precedential effect: The judgment applies established principles concerning the limits of expert determinations and the enforcement of "no oral modification" clauses as articulated in the authorities cited; the court’s decision was an application of those principles to the facts and the expert's conduct rather than the creation of a novel legal principle.

Note: This summary is based exclusively on the content of the provided opinion. Where the opinion itself referred to documents or evidence not reproduced in the text (for example, the detailed wording of appendices or witness statements), those materials were not summarised here because they were not included in the provided opinion.