Submitting to an Expert’s Jurisdiction is a One Way Street

November 3, 2016

Submitting to an Expert’s Jurisdiction is a One Way Street

Contracts often provide for the appointment of independent experts to resolve any disputes arising, and voluntary submission to their jurisdiction is usually irrevocable. One building contractor found that out after it was ruled liable for potentially dangerous defects in a student accommodation block.

An American university agreed to purchase the building in London from a company on the basis that major renovation and conversion works would be carried out before the sale was completed. The vendor company employed a building contractor to carry out those works. However, after the sale went through, the university complained of numerous defects in the work, some of which were safety critical.

The university estimated that the defects would cost in the region of $9 million to put right. In accordance with the terms of the purchase agreement, an expert surveyor was appointed to sit in judgment on the dispute. He found that the vendor company and the contractor were jointly liable for many of the defects. His decision was later confirmed by a US court, which directed an 'attachment' of the assets of both companies in the sum of $7.2 million.

It was only at that point that the contractor argued that it had no direct contractual obligations to the university and that the expert thus had no jurisdiction to make findings against it. It launched High Court proceedings, seeking an injunction to prevent enforcement of the expert's decision.

In rejecting the application, however, the Court noted that the vendor company and the contractor company were closely linked and both appeared to be part of a larger corporation. It found that the contractor had, by its actions, impliedly agreed to the expert having jurisdiction and had waived any right that it might have had to challenge the same.