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Don’t overstep the mark: what can an independent expert decide in a rent review determination?

The old saying goes “if you give them an inch, they’ll take a mile”, but the Court of Appeal has reaffirmed that an independent expert appointed by parties to make a binding determination in relation to their dispute is not entitled to anything more than that inch. The scope and nature of an expert’s powers are granted to him/her by the contract between the parties, so where the contract does not confer express rights on the expert, he/she simply does not have them.

It is usual for parties to a commercial lease to agree in advance how they want to settle any dispute over a rent review, with the typical choices being a referral to an arbitrator or an independent expert for determination. Both options have the benefit of confidentiality over court proceedings, as well as typically being quicker. However, an independent expert appointed by parties to a rent review dispute must be sure he or she has the jurisdiction to determine all of the issues in dispute.

In Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd, the parties entered into a contract for the sale of land. The contract was conditional on a number of things, including the parties agreeing the value of the property or referring the valuation to an independent expert valuer. The parties submitted a statement of agreed facts, recording their agreement of the valuation date. The expert appointed a legal assessor, who mistakenly gave his opinion on the correct interpretation of the valuation date (as it was not in dispute between the parties), which differed from the parties’ agreement. The expert based his determination on the legal assessor’s advice, instead of sticking to the date in the statement of agreed facts.

The claimant applied to court to set aside the determination, arguing that (a) the statement of agreed facts was binding on the expert; and (b) the expert did not have the jurisdiction to determine a matter of legal interpretation, as the parties had not granted him such rights.

Before the case reached the Court of Appeal, the Supreme Court’s decision in MWB Business Exchange Centres Ltd v Rock Advertising laid the first argument to rest. The contract provided that it could only be varied in a specific way. As the statement of agreed facts did not comply, it could not be binding on the parties and the expert.

However, the Court of Appeal agreed with the claimant on the second argument. The interpretation of the correct valuation date was a legal issue and the parties retained the right to access the courts to decide the point. There was nothing in the contract which granted jurisdiction to the expert to override this right.

The lesson to learn? The parties to a rent review dispute should take care when referring a matter to an independent expert that he does in fact have the jurisdiction to determine all issues put to him. As for the expert, it would be prudent to raise with the parties any apparent “agreements” in a statement of agreed facts which relate to legal interpretation to avoid accidentally overstepping the mark.