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One of the forms of alternative dispute resolution (ADR) that is becoming more popular is to have parties engage in expert determination. The process is determined by a clause added to a contract between the parties. Further, it involves an independent third party who decides an issue in dispute between the parties. This independent third party will usually be a specialist or person with extensive experience or knowledge in the area of the dispute. This makes expert determination a favourable way to resolve disputes that are highly technical in their nature, such as those in the building and construction industry. Additionally, you may find it to be a faster and more effective method to resolve your dispute. This article will explain what expert determination is and its advantages and disadvantages. 

What Are the Features of Expert Determination?

There are several features of expert determination, including:

  1. the process is very informal: there are no rules of evidence or formal documents that are typically required in court proceedings;
  2. the parties have control over the process: they agree to the expert determination clause in the contract and the process of the determination;
  3. experts have industry experience and knowledge: the conclusions they are able to reach will be more targeted to fit the dispute. It is why expert determinations are typically used in the building industry, where disputes can arise over valuations or structural defects;
  4. experts are impartial: both parties chose them by agreement;
  5. the process and outcomes are very much guided by consent of both parties; and
  6. the process is cheap and efficient: parties usually bear their own costs unless the contract terms allow for the awarding of costs against the losing party.

What Are the Rules Surrounding Expert Determination?

You can usually find the rules surrounding expert determination in the dispute resolution clauses of a contract. 

For example, the Home Building Contract for works over $20,000, provided by NSW Fair Trading, specifically includes a clause that states: 

if a person has a dispute under the contract and they are not able to resolve the dispute with the builder, “Parties may confer with a mutually agreed third party whose role will be to assist in the resolution of the dispute by mediation or expert appraisal of the work.”

Additionally, there are several aspects of expert determination that both parties should agree to, including:

  • appointment of the expert. What criteria should you use to determine their appointment? Typically, both parties will need to agree on the expert;
  • how the determination process will be conducted;
  • what issues the expert will have jurisdiction over;
  • whether a decision by the expert will be final and binding;
  • how you will award costs; and
  • how you will pay the expert’s fees. 

Before agreeing that expert determination should be the primary mode of ADR under a contract, make sure you have covered the above points at a minimum. This is done to avoid ambiguity of the process that may leave an expert’s decision up for challenge.

When Does Expert Determination Work Best?

Expert determination is most beneficial where the nature of the dispute requires specific answers to technical questions. For example, suppose you discovered a structural defect was on a property. However, the builders who completed the work are adamant that they completed the work to standard. In that case, it would be beneficial to engage an expert to analyse the defect.

It is also beneficial where parties are willing to be bound by the decision of the expert. This allows the process of dispute resolution to be more efficient. 

What Are the Disadvantages of Expert Determination?

Expert determinations may not be the most beneficial in situations where:

  • a losing party does not comply with the outcome of the determination. This would require further enforcement through other ADR measures or court;
  • an aggrieved party wishes to challenge the determination. There is generally no appeal process after expert determination, so they will need to take the matter to court;
  • the real issues in dispute devolve into problems regarding who said what. Because there is no formal process, an expert has no legislative power to make determinations on evidence or witnesses. If parties are disputing the particular narrative of events, expert determination might not best suit the matter; and
  • the jurisdiction of the expert falls outside of the narrow questions of the dispute. Suppose an expert must make interpretations about contract terms to make their determination. In that case, it opens up further dispute if a party is unhappy with the way an expert interprets the contract.

Key Takeaways

Expert determinations are a cheap and efficient way for parties to resolve disputes. This is provided both parties accept the terms of the process. Therefore, if you are drafting a contract, consider expert determination as a form of resolving disputes that might arise from your contract. Make sure the clauses surrounding the process are clear but thorough. Doing this will avoid any misinterpretation about the process from either side. If you have questions about how to draft a contract to include the appropriate ADR clause, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill in the form on this page.

Frequently Asked Questions

What is expert determination?

It is a form of ADR that involves an independent third party deciding an issue in dispute between the parties. The third party will generally be a specialist or a person with extensive experience or knowledge in the area of the dispute.

When is expert determination beneficial?

It is useful where the nature of the dispute is highly technical and requires specific answers to technical questions. For example, it is common with disputes in the building and construction industry.

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