Court confirms narrow scope of “manifest error” in expert determinations

A recent decision from the High Court highlights the limited circumstances in which the court will intervene in an expert’s determination. The case of WH Holding Ltd v London Stadium LLP is a useful illustration of how English courts approach “manifest error” clauses in expert determination agreements.

Background: WH Holding Ltd v London Stadium LLP

Expert determination is a private dispute resolution mechanism where parties appoint an independent expert, often an accountant, surveyor, or engineer, to decide a specific issue relating to valuation or technical matters. Typically, parties agree that the expert’s decision will be final and binding, subject only to limited exceptions such as “manifest error”.

In this case, the dispute arose out of financial arrangements connected to the London Stadium. The parties had agreed that certain accounting or financial questions would be referred to an expert, whose determination would be binding unless it could be shown to contain a “manifest error”.

The Court of Appeal held that the High Court had been wrong to interfere with the expert’s determination and reaffirmed the high threshold required to establish a “manifest error”. As a result, the expert’s determination was reinstated, with London Stadium LLP entitled to recover approximately £3.6 million, together with costs.

What is “manifest error”?

The court reaffirmed that “manifest error” sets a very high threshold. It does not mean any mistake or even a serious error.

Instead, it refers to an error that is:

• Obvious and self-evident, without the need for extensive argument
• Clear on the face of the decision or its reasoning; or
• Not dependent on re-evaluation of evidence or detailed analysis.

In other words, the court will not simply interfere because the expert has made a mistake or reached the “wrong conclusion”. It has to amount to manifest error.

Practical tips for non-lawyers

If you’re entering into a contract with an expert determination clause, the following points should be considered and/or discussed with your lawyers before you sign anything:

• Be careful what you agree to – if any wording is unclear, ask questions from your legal advisors to explain this to you. Sometimes wording in a contract can be vague – ensure that this is not done on purpose
• If the clause says “final and binding except for manifest error,” you are accepting very limited rights to challenge the outcome.
• Define the expert’s role clearly – what will they decide? Who pays their costs? Who decides the expert?
• Specify exactly what the expert can decide and what methodology they should use. You can enquire with other experts to ensure that the expert you have selected is along the right lines.
• Since your choice of expert is concrete, their competence and neutrality are crucial.

How Hamlins can help

The Hamlins Real Estate Disputes team regularly advises on contractual dispute resolution mechanisms including expert determination clauses and challenged to expert decisions. We provide practical, commercial advice both at the contract stage and when disputes arise.

If you would like to discuss any concerns before entering into an agreement, or need advice on an existing determination, please get in touch.