In a recent decision, which overturns the High Court, the Court of Appeal has made clear how difficult it can be to appeal an expert determination for a “manifest error”. A manifest error is one that is “so obvious and obviously capable of affecting the determination as to admit no difference of opinion”. As a result, even a well-founded allegation of error will not be sufficient to set aside an expert determination if there is any room for argument about the existence of an error or its impact on the outcome of the determination.
The decision is the latest is the long-running series of disputes between the holding company of West Ham United Football Club, WH Holding Limited (“WHH”) and London Stadium LLP (“E20”) relating to the Olympic Stadium in London. In February 2023, an expert determination determined that a “Stadium Premium Amount” payable by WHH to E20 was £3.6 million more than WHH had contended. WHH appealed the decision to the High Court on the basis that the expert had made a “manifest error”. The crux of the alleged error was whether a share purchase and call option could, for the purpose of valuing shares, be treated as a single transaction for a valuation formula. The expert had treated them as a single transaction and WHH argued (and the High Court agreed) that this was a manifest error as there was no contractual basis for doing so. It was said that the expert had made a simple error of interpreting an “or” in the calculation as an “and”.
Philips LJ giving the Court of Appeal’s leading judgment stated that he “saw the force” of those arguments and that “if I were determining the proper interpretation of the Agreement, I might arrive at the conclusion that they are correct”. However, he was clear that this was not the correct test: in order to be manifest an error had to be so obvious as to admit no difference of opinion. The approach taken by the expert was “based on an arguable finding that there was one qualifying transaction” and so there was no manifest error. The judgment also stated that there is no special category of terms for “mathematical formula” (as WHH had argued) as opposed to general contractual terms.
Whilst it does not contain any new law, the decision is a welcome reminder for practitioners that it is very difficult to appeal an expert determination, even if it is likely that the expert has made an error in the application of a contractual formula. It also serves as a reminder that, if an expert determination clause states that a decision will be binding without an exception for “manifest error”, then the decision cannot be appealed even if there is a manifest error unless the expert has materially departed from their instructions. Expert determination can often be an appropriate dispute resolution mechanism in a wide range of disputes but parties should be aware of the risk that they could be stuck with a decision with which they do not agree but are unable to challenge.
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