Plaintiff Opposes Expert Determination Regarding Lease Payables
Canaipa Developments Pty Ltd v TLC Jones Pty Ltd [2021] QSC 237 (17 September 2021)
The plaintiff and defendant are parties to a commercial lease over retail premises. A dispute arose about the outgoings payable. A mediation agreement provided for a joint expert to be appointed to assess and determine the annual allowable expenditure incurred on outgoings under the lease. However the plaintiff seeks to set aside the expert determination alleging that the expert was invalidly appointed. The Court, in determining whether the expert determination is finding, relied upon the general principles of interpretation that apply to the lease and to the agreement.
Facts:
The plaintiff (as landlord) and the defendant (as tenant) are parties to a commercial lease over retail premises. A dispute arose over the outgoings that were payable by the defendant to the plaintiff under the lease. The defendant commenced proceedings in the District Court of Queensland, claiming it had overpaid outgoings, and the plaintiff counterclaimed, alleging that the defendant had underpaid outgoings payable to it. The parties then entered a mediation agreement providing for a joint expert to be appointed to assess and determine the annual allowable expenditure incurred on outgoings under the lease.
The parties agreed to appoint the firm of Cushman & Wakefield as a joint expert. Ms Vicki Rudken, a Director of Cushman & Wakefield, undertook work and produced what the plaintiff has described as “the First Draft Report” as well as “the Second Draft Report”. When she left Cushman & Wakefield on or about 17 September 2020. Another Director of Cushman & Wakefield, Mr Simon Cox, then took over the task of completing the determination.
He produced “the Purported Report”. The plaintiff applies to set aside the expert determination alleging that Mr Cox was not validly appointed. Furthermore, even if Mr Cox was validly appointed, he did not fulfill his function as an expert because he relied on the draft (and incomplete) reports prepared by Ms Rudken. He worked out the amount overcharged by the plaintiff for certain (but not all) invoices.
However, the expert’s task was to “assess and determine the annual allowable expenditure incurred on Outgoings under the Lease for the 2012/13 to 2019/20 financial years, pursuant to clause 4.6 of the Lease”. The plaintiff seeks "a declaration that no Joint Expert determination has been made pursuant to the Mediation Agreement between the Plaintiff and the Defendant dated 23 June 2020”. An alternative order is sought that the determination made by Mr Cox be set aside. A further or alternative declaration is sought that the determination is not final and binding on the plaintiff or the defendant.
The plaintiff's prayer of relief sought an order that “an independent third party be appointed as an expert to make a Joint Expert determination pursuant to the Mediation Agreement, with amendments to the timeframes”.
Issues:
I. Whether or not the expert was validly appointed.
II. Whether or not the expert determination is binding.
Applicable law:
AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (formerly TXU Networks (Gas) Pty Ltd) [2006] VSCA 173 - where the distinction between errors in the exercise of a judgment, opinion or discretion and errors about “objective facts” was addressed.
Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd [2015] NSWCA 275; (2015) 90 NSWLR 367 - provided that the availability of review depends on whether the expert has carried out the task which he or she was contractually required to undertake.
Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd [2011] NSWSC 1039 - held that in many public law contexts decision-makers have jurisdiction to make erroneous decisions. In some contexts, such as adjudication decisions, a decision-maker may have jurisdiction to interpret the provisions of a contract, such as a building contract, and to make an adjudication based upon an erroneous interpretation without invalidating the determination.
Legal & General Life of Aust Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 - provided that if the expert in fact carried out the task in accordance with the contract, a mistake or error does not invalidate the determination.
Mercury Communications Ltd v Director General of Telecommunications [1994] CLC 1125 - Lord Hoffmann explained the proposition regarding the fact that an exercise of judgment is involved in resolving a question of interpretation does not mean that “the ascertainment of that meaning was necessarily left to the expert, such that the expert’s determination was immune from review by the Court”.
Mercury Communications Ltd v Director General of Telecommunications [1995] UKHL 12; [1996] 1 All ER 575 - Lord Slynn observed that if the director misinterpreted those phrases and a determination was made on the basis of an incorrect interpretation, “he does not do what he was asked to do”.
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[2015] HCA 37; (2015) 256 CLR 104 - where the relevant principles governing the construction of such an agreement are authoritatively stated.
Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd [2013] NSWCA 27; (2013) 85 NSWLR 1 - explained the fact that the contract is open to more than one construction and that reasonable minds differ does not alter the fact there can be only one true meaning.
Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38; (2011) 244 CLR 305 - held that the expert determination process is neither arbitral nor judicial.
Sino Iron Pty Ltd v Mineralogy Pty Ltd (2019) 55 WAR 89 - where the matter or matters that the parties have entrusted to the expert determination ultimately turns on a proper construction of the contract.
TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 - Brereton J (as his Honour then was) referred to an expert who had effectively “misconceived his function, asked himself the wrong question or applied the wrong law or applied the wrong test” to the determination required under the contract.
Analysis:
The defendant submits that on a proper construction of the agreement, the expert appointed to make a determination was the firm Cushman & Wakefield. Furthermore, the parties committed to that expert the entire assessment and determination of the annual allowable expenditure incurred on outgoings and the expert’s tasks did not miscarry in any way that would render the determination something other than what was contractually contemplated by the parties. According to the plaintiff, once Ms Rudken was allocated as the expert, Cushman & Wakefield could not allocate another person with the required expertise following her resignation without the parties’ further agreement.
However, the text of the agreement, and the opening words of clause 3 in particular, suggest that the firm of Cushman & Wakefield is appointed as a “joint expert” and that the expression “the Joint Expert” is used in the following clauses of the Agreement as a convenient reference to that firm. The plaintiff’s submissions place undue emphasis upon a distinction between the lowercase “joint expert” and the uppercase “Joint Expert”.
Conclusion:
The Court concluded that the plaintiff has failed to establish all but one of its challenges to the expert determination. The parties are to be heard on the forms of orders to be made by the Court and any question of costs the Court is asked to determine. The matter is directed to be adjourned to a date to be fixed for the making of orders and any submissions as to costs.
