Is an expert determination binding?

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KordaMentha

Contributor

KordaMentha, an independent firm in Asia-Pacific, specializes in cybersecurity, financial crime, forensic, performance improvement, real estate, and restructuring services. With a diverse team of almost 400 specialists, they provide customised solutions to help clients grow, protect from financial loss, and recover value. Trusted since 2002, they deliver bold, impactful solutions for clients.
Federal Court decision examines the circumstances in which an unsatisfied party can object to an expert determination.
Australia Litigation, Mediation & Arbitration

Jacqueline Woods, Executive Director in our Sydney office, discusses a Federal Court decision that examines the circumstances in which an unsatisfied party can object to an expert determination.

The following case review - just one of over 3,500 recent cases reviewed by KordaMentha Forensic - is a summary from the upcoming Expert Evidence: Recent Cases Edition 3 to be released in October. If you would like a complimentary copy of the eBook, click here to register your interest.

As alternative dispute resolution approaches become more utilised to circumvent lengthy and high-cost litigation, this article examines a case where the expert determination was tested in Court.

In the matter of ThoughtWare Australia Pty Limited v IonMy Pty Ltd [2023] FCA 906.

A common subject of expert determination, this case relates to a post-acquisition dispute whereby the purchase price, of the sale of a business by ThoughtWare, was $7.5 million, to be paid in five instalments spanning 30 June 2021 to 30 June 2025. The quantum of instalments would be reduced in a manner specified in the Business Sale Agreement ('BSA') depending on the level of "gross profit" generated by the business in the two financial years preceding the due date of any instalment.

Expert determination was sought as to the meaning of the term "gross profit" as used in the BSA.

IonMy sought to challenge the expert determination under the assertion that it was not binding on the parties, and did not pay the first or second instalments of the purchase price on the dates dictated by the BSA in the amounts determined by the expert.

IonMy's challenge was not predicated on there having been any problems with the referral to the expert, the terms of the expert determination agreement or even the BSA itself, which stated that "the expert's decision is final and binding". Rather, IonMy's challenge boiled down to its contention that "in the absence of clear contractual terms to the contrary, 'matters of objective fact, such as the meaning and effect of the agreement, are matters for the court whilst matters involving discretion or opinion are matters for an expert'".

For reasons you can explore in the full article on this case, the Judge ruled that the expert performed the task required of him and the determination was binding upon ThoughtWare and IonMy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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