ZVI Construction Co LLC v University of Notre Dame (USA) in England  EWHC 1924 (TCC)
The courts have provided a recent summary of the principles that apply to the enforcement of a decision of an independent expert appointed by parties under a contract.
TJAC Waterloo LLC (TJAC) had agreed to sell a property at Conway Hall London to the University of Notre Dame in England. The sale was conditional upon building works being carried out to the property. ZVI Construction would carry out the construction works and was made a party to the development contract. There was also a separate duty of care agreement between ZVI and Notre Dame.
The development contract provided that disputes between the parties would be referred to an independent expert whose decision would be final and binding.
Confusingly, the development contract also contained an arbitration provision in respect of disputes about the meaning or interpretation of the development contract. The arbitrator had to be a solicitor or barrister.
Notre Dame alleged the work carried out by ZVI was defective and triggered the expert determination. The independent expert decided that TJAC and ZVI were liable for the bulk of the defective work.
Notre Dame became worried about the ability of TJAC and ZVI to pay the potential sum due ($9,000,000) as compensation for the defective work so they obtained a judgment from a Court in the USA freezing the assets of ZVI and TJAC.
In the USA proceedings ZVI argued, for the very first time, they were a mere nominal party to the development contract and that any claim against ZVI should be through the English courts (not expert determination) under a specific clause under the duty of care agreement. ZVI then tried to persuade the independent expert in London that he had no jurisdiction to make the determination he had made about the defective works.
ZVI then issued a court application in the English courts arguing that the independent expert did not have jurisdiction to decide the defects dispute and also sought an injunction preventing Notre Dame from enforcing the independent expert’s determination.
The court decided that the issue as to whether the independent expert had jurisdiction to determine the defects dispute actually fell into the arbitration clause. However, the court decided that ZVI had “submitted” to the independent expert determination and had participated “without reservation”. Therefore, the decision of the independent expert was final and binding. Notre Dame could then pursue the protection they had put in place in the USA having frozen the assets of ZVI and TJAC in reliance upon the independent expert determination.
- Expert determination is final and binding with no appeal. The case confirms the growing trend of commercial parties to try and find cheaper, quicker but potentially less formal ways of dispute resolution rather than the courts or arbitration.
- If a party participates in an expert determination without reservation then it is stuck with any unfavourable decision.
- An independent expert’s decision can be enforced in a number of creative ways, including freezing of assets of the losing party.