The rise of expert determination: a better alternative than Arbitration?

1. The rise of Expert Determination:
a better alternative than Arbitration?
Presentation by Robert Hunt
B Sc (Eng) Dip Laws LLM LFIAMA FCIArb MIEAust CPEng(Ret)
Chartered Arbitrator,Mediator, Adjudicator, Barrister
Past President, Institute of Arbitrators &Mediators Australia
LEADR/IAMA ‘kon gres 2015 Sydney

2. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
• Introduction
• Differences between Expert Determination and
Arbitration
• Procedure in an Expert Determination
• Suitability of disputes for Expert Determination
• Perceived benefits and detriments of Expert
Determination compared with Arbitration
• Popularity of Expert Determination compared with
Arbitration
• Conclusions

3. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Introduction
• Until at least the late 1980's, most commercial and construction
disputes in Australia, New Zealand, the U.K. and most other
developed countries were determined either by litigation in the
Courts, or by arbitration.
• With the rise of consumerism and demands from government
organisations and commercial clients for more efficient cost-
effective dispute resolution, there has been an increasing trend in
Australia and overseas away from traditional litigation and
arbitration as the preferred means of determining commercial and
construction disputes.
• Arbitration was perceived as having become bogged down with
processes derived from litigation which made the practice of
arbitration much more costly and less efficient than it should
otherwise have been.

4. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Introduction (ctd)
• Mediation and Conciliation are consensual ADR processes in which the
parties are assisted in resolving their dispute by a neutral third party,
whereas Expert Determination and Expert Appraisal are adjudicative ADR
processes in which the dispute is determined based on the decision of a
neutral third party.
• Proponents of these processes see them as offering the prospect of less
formal processes (often with no lawyers involved) with substantial savings
in time and legal costs.
• These days, it is common for large commercial or construction contracts to
prescribe expert determination as part of a ‘tiered’ dispute resolution
process. For example, the New South Wales Government GC21 General
Conditions of Contract contain a dispute resolution process which includes
expert determination, which is final and binding unless the expert
determines that one party pay the other party not less than Aus$500,000
(in which case either party may elect to submit the dispute to arbitration).

5. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Differences between Expert Determination and Arbitration
• Expert Determination is a process whereby particular identified issues in
dispute are referred for determination by a third party neutral, who is
appointed by agreement (or appointed according to a procedure
agreed) between the parties. It involves two agreements: firstly, an
agreement between the parties for the dispute to be determined by
expert determination; and secondly, an agreement between the parties
and the Expert for that determination to be performed by the Expert.
• Arbitration is an adversarial process, in which the decision is required to
be based on the properly admissible material which the parties choose to
place before the arbitrator. Various statutory requirements or common
law principles govern procedure in the arbitration. Subpoenas are
available to compel production of evidentiary material. An adverse
determination may be overturned on appeal, instigated as of right or by
leave of the Court. Arbitrators enjoy statutory immunity from suit. An
Arbitration Award is enforceable by statute.

6. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Differences between Expert Determination and Arbitration (ctd)
• In contrast, Expert Determination is (or should be) normally conducted as an inquisitorial
investigation, in which:
 the Expert determines the use (if any) of material submitted by the parties;
 questions of admissibility do not arise;
 the Expert is expected to use (and is not constrained from using) his or her expertise
and personal judgment to determine the issue in dispute;
 the procedure and any immunity from suit are determined wholly and solely by the
agreement with the Expert to conduct the Expert Determination, and not by reference to
any statutory provisions or common law principles;
 subpoenas are not available to compel production of evidentiary material;
 there is no appeal process to reverse an adverse determination;
 Enforcement of the Expert’s determination is a contractual right, which may require
proceedings to be brought in a Court; and
 the circumstances in which the Courts will decline to enforce a Binding Expert
Determination are very narrow, namely that there has been fraud or the Expert has acted
contrary to the Agreement appointing him.

7. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Differences between Expert Determination and Arbitration (ctd)
• Subject to any contrary provision in the Expert Determination Agreement, one particularly
significant advantage which an Expert enjoys is the ability to use his or her expertise and
personal judgment as ‘evidence’ in making the Determination. This is something which an
Arbitrator cannot do, as can be seen from the decision of the English Court of Appeal in Annie
Fox & Ors v P J Wellfair Limited (1981) 2 Lloyds Reports 514.
• In that case, the arbitrator was a practising barrister, chartered architect and chartered
surveyor. The owners of a residential flat sought damages against the builders, which were
said to arise out of defects in the block of flats. Only the owners appeared at the hearing. A
number of experts gave evidence on behalf of the owners that the repairs would cost
£93,000. This evidence was not contested due to the builders' non- appearance. The
arbitrator awarded the owners only £13,000. The owners appealed, seeking to set aside the
award on the grounds of misconduct. In an affidavit filed in the appeal proceedings, the
arbitrator set out the basis of his decision, indicating that he had rejected much of the expert
evidence given on behalf of the owner and had replaced this evidence with his own opinions.
His award was set aside. The English Court of Appeal held that he was in error in not
communicating to the owners that he was rejecting the evidence led by them, and giving
them the opportunity to address his views on the value of the repair costs.

8. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Procedure in an Expert Determination
• In making a Determination, an Expert is only constrained by the terms of
any agreement between the parties, or any agreement to which the
Expert is a party, setting out the procedure to be used or the process to be
followed.
• If the agreement is silent on particular matters of procedure, then the
Expert shall determine the procedure to be followed (per Cole J, as he
then was, in Triano Pty Limited v Triden Contractors Limited (1992) BCL
305, at p. 307.
• Where parties have agreed to appoint an Expert but have not agreed on
the terms of the appointment, they should be taken to have agreed to
appoint the Expert on terms which are reasonable (see 1144 Nepean
Highway Pty Ltd v Abnote Australasia Pty Ltd [2009] VSCA 308, at [29]; and
Watpac Construction NSW Pty Ltd v Taylor Thompson Whitting (NSW) Pty
Ltd [2015 NSWSC 780, at [59] – [62].

9. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Procedure in an Expert Determination (ctd)
• Where parties have agreed that the Expert will, in the absence of
agreement between them, be appointed by an appointing authority, they
must have impliedly agreed absent any other terms that the appointment
would be on terms identified by the appointing authority (see Watpac
Construction NSW Pty Ltd v Taylor Thompson Whitting (NSW) Pty Ltd
[2015 NSWSC 780, at [60] – [62].
• If the appointing authority is LEADR/IAMA, then this would incorporate by
reference the provisions of the IAMA Expert Determination Rules (2010),
which include provisions for immunity from suit, and not subpoenaing the
Expert or documents from the Expert (The IAMA Rules are available on-
line at http://www.iama.org.au/resources/expert-determination-rules ).

10. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Suitability of disputes for Expert Determination
• From my experience, the only matters which are unsuitable for Expert
Determination are those where there are factual issues to be determined
which are entirely dependent on questions of credit (ie. choosing
between two competing versions based entirely on whether the Expert
believes the version of A or, conversely the version of B), because the
documentary material or inferences which may properly be drawn from
that documentary material etc. do not assist in determining which
particular version should be accepted.
• In such cases, the only satisfactory method of determining those issues is
for oral evidence to be given, and for the witnesses to be made available
for cross-examination, which in turn may lead to a possible application for
leave to appeal by the unsuccessful party, on the basis that the procedure
adopted was in fact an arbitration (but see Northbuild Constructions Pty
Ltd v Discovery Beach Project Pty Ltd [2008] QCA 160, at [86] – [104]).

11. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Perceived advantages and disadvantages of Expert
Determination compared with Arbitration
Advantages
• Less formal process, which should result in substantial savings in time and
cost in obtaining a Determination
• The skill and experience of the Expert and the co-operation of the parties
will have a bearing on the saving in time and cost
Disadvantages
• The ‘smoking gun’ – discovery/inspection of documents and subpoenas
not available to compel production of useful documents by the other
party
• If Determination not complied with by the losing party, need to bring
Court proceedings to compel compliance with the Determination
• Do not have the benefit of international enforcement which an Arbitration
Award has under international Conventions to which Australia is a party

12. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Popularity of Expert Determination compared with
Arbitration
• The ‘tiered’ dispute resolution processes result in a reduction in disputes
proceeding to Arbitration after Expert Determination
• The private nature of the Expert Determination process is such that
information on useage is not readily available
• My own experience over the past few years has been many more Expert
Determinations than Arbitrations – agreed in anecdotal information from
other dispute resolvers I have spoken to
• What is the experience of other dispute resolvers, lawyers, advisers and
clients?

13. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
Popularity of Expert Determination compared with Arbitration
(ctd)
• Information from LEADR/IAMA staff on requests from 1 January to 31 July 2015
suggests more requests for Arbitration than Expert Determination
Arbitration Expert Determination
NSW 12 4
ACT 0 2
VIC 9 3
TAS 0 0
SA 0 0
WA 11 1
NT 0 0
QLD 1 0
Total 33 10
Any possible explanation for this?

14. LEADR/IAMA ‘kon gres 2015 Sydney
The rise of Expert Determination: a better alternative than Arbitration?
Robert Hunt
• Conclusions ?