The recent decision in WH Holding Limited v E20 Stadium LLP provides helpful guidance on the meaning of “manifest error” in the context of an expert determination clause. 

Successful challenges to expert determinations are unusual, so the Court’s comments in this case are a useful insight into the likely future treatment of such claims. In particular, parties considering expert determination as a dispute resolution mechanism should be aware of the very limited scope for challenging an expert’s decision. 

What happened?

E20 Stadium LLP (E20), WH Holding Limited (WHH) and West Ham United FC entered into a concession agreement whereby WHH was permitted to run sporting events at the stadium in the Queen Elizabeth Olympic Park and West Ham United FC could use the stadium as their home ground. 

The concession agreement contained an “anti-embarrassment” clause under which, if its provisions were met, WHH would be obliged to pay E20 a certain amount (the Stadium Premium Amount). 

A dispute arose as to whether the anti-embarrassment clause had been triggered, and hence whether the Stadium Premium Amount was payable. The parties referred the dispute for expert determination in accordance with the relevant clause in the concession agreement. 

The parties had agreed, in the concession agreement, that the expert determination was to be binding, save for in the case of “manifest error”. 

The expert determined that WHH was liable to pay the Stadium Premium Amount (of £3.6m) to E20 plus costs. 

WHH contended that the expert determination contained manifest errors, and therefore sought a declaration in the High Court that the expert determination was not final and binding on WHH.

What did the Court say? 

The Judge summarised the legal principles relevant to the dispute as follows:

• this was an expert determination (not an arbitration). As such, this was not, and could not be, an appeal. The Court’s role was limited to determining whether WHH had proved the manifest errors it alleged;
• the parties had expressly agreed to be bound by the expert’s determination “in the absence of manifest error”. The starting point therefore was that the parties should be held to that agreement;
• the Court’s role was limited to determining whether there had been a “manifest error”. Even if the Court might reach a different conclusion to the expert on a legal question, that did not automatically lead to the conclusion that the expert’s determination contained a “manifest error”;
• to prove a “manifest error”, the error must be so obvious and obviously capable of affecting the determination as to admit of no difference of opinion; and
• while such terms have been used in previous cases, proving a “manifest error” does not require proving that the expert has committed a “blunder” or a “howler”. Such potentially derogatory terms would cast unfair aspersions on the expert’s approach, and would involve subjective judgment. 

The Judge concluded that in this case the expert had nonetheless made a “manifest error” - one that is obvious and obviously capable of affecting the determination - for the following reasons:

• first, the expert had misread the word “or” in the relevant definition to mean “and”;
• secondly, the expert had used two different values for the variable “A” in the relevant formula for calculating the Stadium Premium Amount. These errors went to the heart of the expert’s determination; and 
• the provisions of the agreement were “admirably clear”. This was not a case where the relevant terms of the agreement were ambiguous, such that there was scope for a reasonable difference of opinion on the correct contractual interpretation. The errors were therefore manifest. 

The declaratory relief sought by WHH was accordingly granted. 

Comment 

Expert determination clauses, such as the one in issue here, which are expressed to be final and binding (save for manifest error) have both benefits and drawbacks. 

Expert determination is often used as a dispute resolution mechanism for technical matters, where it has the advantage that a final conclusion on an issue in dispute can be reached more quickly and efficiently than is usually the case with court or arbitral processes. 

However, parties choosing expert determination need to be aware that, unlike with court and arbitral processes, there is generally no route of appeal – for example, there is no equivalent of s.69 Arbitration Act 1996 which permits parties to an arbitral award to appeal on points of law. Challenges to expert determinations are usually limited to the “manifest error” exception in question in this case (though this is ultimately a question of how the parties have drafted their expert determination clause).

When negotiating expert determination clauses, parties should consider carefully whether they would prefer a quick, final and binding determination of an expert or a potentially slower, more expensive process but with more scope for appeal.