Australian Vintage Limited v Belvino Investments No. 2 Pty Limited

Can the Court Intervene

1. The parties to the lease have agreed that the expert is deemed to act as an expert and not as an arbitrator, and that his determination shall be final and binding. There was agreement before me that the circumstances in which the Court can intervene and set aside an expert determination are limited.
2. Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 was a case in which an expert had been appointed to assess market rental for the purpose of a rent review clause in a lease. Both Mahoney JA and Priestley JA were of the view that the trial judge had erred in his conclusion that the valuer had valued the premises at the wrong time and held that the declaration by the trial judge that the valuation was not binding on the lessee had to be set aside. McHugh JA was of the view that the valuer had made a mistake but he held that the mistake was one in the process of valuation, "not a departure from the terms of the contract" and accordingly his Honour came to the same result as the other members of the Court.
3. The Privy Council rejected an appeal from the Court of Appeal in A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1986) 61 ALJR 280 agreeing that no mistake had been made by the valuer and at page 281 their Lordships noted that they were "not concerned to consider the kinds of mistake which might justify the intervention by the Court with valuation of an expert".
4. Both parties proceeded on the basis that the test to be applied is that identified by McHugh JA in Legal & General namely: "In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract." In view of the decision of the Court of Appeal in Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2002] NSWCA 180; (2002) 11 BPR 20,201 and Firedam Civil Engineering Pty Ltd v Shoalhaven City Council [2010] NSWCA 59 (overturned by the High Court on a different basis in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38) and Holt v Cox [1997] NSWSC 144 (per Mason P, Priestley JA) I think that they are correct in so proceeding.
5. A critical question which falls for determination in this case is whether it is open to a party dissatisfied with the expert's determination because, it is said, he misinterpreted the clause under which he was required to make his determination, to challenge the final and binding quality of the determination.
6. There have been a number of cases since Legal & General in which Australian Courts have given consideration to the question of whether an expert's determination is binding. In Shoalhaven the High Court, upholding an appeal from the NSW Court of Appeal and reinstating the judgment of the trial judge, found that there was no inconsistency in the reasons given by the expert and hence no basis to conclude that the expert had failed to give reasons as he was obliged by the contract to do. The plurality, French CJ, Crennan and Kiefel JJ at [27], noted that a deficiency or error in reasons given may disclose that "the expert has not made a determination in accordance with the contract and that the purported determination is therefore not binding" (see p 316 [27]) but they also noted as a general proposition that "a mistake in the reasons given for an expert determination does not necessarily deprive them of the character of reasons as required by the relevant contract nor deprive the determination of its binding force 40 There are mistakes which may have that effect and others that will not." Legal & General, Holt v Cox and AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd (formerly Txu Networks (Gas) Pty Ltd) [2006] VSCA 173 ("AGL") are the cases cited at footnote 40.
7. In Firedam in the Court of Appeal Macfarlan JA (with whom Beazley JA agrees and with whom Campbell JA, with some qualifications, agreed) had held that there was inconsistency in the expert's reasons, that the contract required reasons to be given and that therefore the determination was not one of the contractual description- applying the reasoning of McHugh JA in Legal & General. His Honour also noted that the Court of Appeal in Kanivah had applied McHugh JA's approach in Legal & General.
8. In Kanivah in the Court of Appeal, Stein AJ (with whom Beazley JA and Giles JA agreed) stated: "[50] As McHugh JA observed in Hudson, by providing that the decision of the valuer be final and binding, the parties agree to accept the valuer's honest and impartial valuation. They rely on his skill and judgment. The valuation stands even if made negligently. A mistake by the valuer will only matter if it shows that the valuation was not made in accordance with the contract. His Honour made the point that even if a valuation proceeded on the basis of error, or was a gross under or over value, it matters not. Further, a failure to take account of relevant matters (or the converse) is not a vitiating mistake. [51] In my opinion, Palmer J's decision was correct. There is no vitiating error to be found. Once Mr Norris had found the highest and best use as a retail/commercial site, he was not obliged to carry out a detailed feasibility study. He did not have to envisage with precision what building could be constructed on the site on an economically viable basis. The appellant's submission to this effect must be rejected."
9. Giles JA added: "[70] It is necessary to emphasise, lest others misguidedly pursue the same course as the appellant, the reasoning of McHugh JA in Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314. [71] McHugh JA states the question whether the valuation complies with the terms of the contract. Lying behind the question is that a valuer may make a mistake or arrive at an unreasonable valuation, the valuation remaining binding on the parties to the contract. [72] Ordinarily in providing for a valuation the contract will be taken to mean a valuation according to usual valuation principles, but a valuation not so made may still comply with the terms of the contract. If the contract says that the valuer is to value Blackacre, provided the valuer does so he complies with the contract, even though he does so negligently. The reasoning places what the contract says shall be done at a level of generality permitting mistake or an unreasonable value. [73] When the contract goes further and says (as here) that the valuer is to have regard to the highest and best use of the land and to usual valuation principles, the reasoning is the same. No doubt the parties expect that the valuer will correctly assess the highest and best use and correctly apply usual valuation principles. But they do not contract that he must do so in order that the valuation be binding upon them. They contract that the valuer shall have regard to the highest and best use and usual valuation principles, and the valuer can be mistaken in the regard he has. [74] There is good reason for an expert valuation clause to operate in this way. There is not necessarily one correct valuation answer, and there is certainly likely to be room for dispute. This is what the parties to the contract seek to avoid, agreeing to rely on the honest and impartial decision of the valuer but also agreeing that they will be bound even if the valuer makes a mistake in doing what the contract says shall be done. [75] The reasoning of McHugh JA must be appreciated, as much as the statement of the question. The appellant focussed on the question, submitting that failure to arrive at the correct highest and best use and error in applying valuation principles vitiated the valuation. With the proper focus on the reasoning it can be seen that, even if there were the mistakes for which the appellant contended, they were not such that the valuation should be set aside."
10. In AGL Nettle JA (as his Honour then was), with whom Maxwell P and Bongiorno AJA, agreed described the trial judge as having accepted that: "where parties to a contract have agreed that an expert determination shall be final and binding, it is ordinarily not open to a court to review the determination on the grounds of mistake unless the mistake is such as to show that the determination has not been carried out in accordance with the contract or, to put it another way, that the expert has not performed the task entrusted to the expert by the contract."
11. The Court held that the determination by the expert was not in accordance with the contract and could be reopened due to a significant error as to the volume of gas extracted from the transmission system. At [43] and part of [44] his Honour said: "[43] After referring to the several tests identified in the authorities for determining the extent to which a court may review expert valuations and determinations, his Honour adopted the test propounded by McHugh JA in Legal & General Life of Aust Ltd v A Hudson Pty Ltd: that where parties to a contract have agreed that an expert determination shall be final and binding, it is ordinarily not open to a court to review the determination on the grounds of mistake unless the mistake is such as to show that the determination has not been carried out in accordance with the contract or, to put it another way, that the expert has not performed the task entrusted to the expert by the contract. [44] As is apparent, that test is more in the nature of a statement of conclusion than one which identifies relevant criteria of distinction." At [51]- [53] his Honour said: "[51] I agree with the judge that the question of whether it is open to review an expert determination on the ground of error is in the first place to be decided according to whether the determination answers the contractual description of what the expert was required to determine. I also agree with the judge that the question of whether an error in determination deprives the determination of compliance with the contractual description of what the expert was required to determine is in the first place to be answered according to whether the error occurred in respect of a task which the contract entrusted to the expert. As Mason, P. explained in Holt v Cox, although mistake is not itself a ground for vitiation of a final and binding expert determination, a mistake may still be of such a nature that the resultant determination is beyond the realm of contractual contemplation - beyond anything which the parties may be supposed to have intended to be final and binding - and therefore susceptible to review. [52] The situation is analogous to that which faces a court in a cases of judicial review of administrative error. Just as an administrative decision maker has an area within which he or she may make mistakes without relevant consequence, so too an expert appointed under contract has an area within which the contract contemplates that he or she may make mistakes without relevant consequence. Similarly, just as there are some administrative mistakes which amount to jurisdictional error, and so expose a decision to judicial review, those appointed under contracts to make determinations may make errors which are beyond the area of tolerance which it is to be supposed the contract had in view. [53] Therein lies the distinction drawn in some of the authorities, and observed by the judge in this case, between an error in the exercise of a judgment, opinion or discretion entrusted to an expert, and an error which involves objective facts or a mere mechanical or arithmetical exercise. Subject to the contract in question, it is easier to suppose that parties to a contract contemplate that an error of the former kind be beyond the realm of review than it is to think that they intend to be fixed with errors of objective fact or in processes of mechanical calculation." (Emphasis added)
12. In Savcor Pty Ltd v New South Wales [2001] NSWSC 596 Barrett J (as his Honour then was) in dealing with the question of whether a contractual condition relating to the determination of an expert as a threshold to arbitration is an arbitration agreement said [35]: "In the absence of factors such as fraud and collusion, an expert determination declared by contract to be final and binding is open to challenge only to the extent that it is not in conformity with the enabling contract, including such implied terms as there may be as to the conduct and procedures of the expert." and he held that the dispute, including whether a remedy akin to a Trade Practices remedy was available, was "within the purview of the "Process" of expert determination provided for in the head contract. See [40].
13. In addition to Legal & General, AGL, Savcor, Firedam and Shoalhaven, the parties included in their Combined Book of Authorities the following expert determination cases: Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd [No 2] [2008] VSC 478, Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2001] NSWSC 405, Downer Engineering Power Pty Ltd v P & H Minepro Australiasia Pty Ltd [2007] NSWCA 318 and Belvino Investments No 2 Pty Ltd v Australian Vintage [2014] NSWSC 978 (15 July 2014). Also included was Mercury Communications Ltd v Director General of Telecommunications [1996] 1 WLR 48.
14. Candoora was a case concerned with whether, where an expert's determination has been set aside by a Court, the same expert should be retained to determine the matter. The case provides authority for the reference back to the expert for determination in such a circumstance. I did not perceive Belvino to assert that that would not be the appropriate course if AVL was otherwise successful in having the determination set aside.
15. In Downer Engineering the valuer had been given the task of determining an amount payable on completion of a sale of business agreement, inter alia in relation to work in progress, in the event of dispute. Downer (the vendor) was required to provide to Minepro (the purchaser) a completion statement containing claimed figures, and Minepro was entitled, if it disputed the figures, to have the matter referred to the valuer. Minepro claimed that the completion statement provided to it by Downer did not comply with the contract so that the terms of clause 5.4 calling for expert determination were not engaged, and with the further consequence that Minepro was not to be taken to have agreed to Downer's figures.
16. A District Court Judge accepted Minepro's contention that the completion statement did not comply with the contract and was not binding in the absence of a request for referral to a valuer. The Court of Appeal unanimously upheld the appeal. Hoeben J (as his Honour then was) with the concurrence of Giles JA, held that the completion statement did comply except in one respect but he held in relation to that compliance that the issues litigated in the District Court were issues which Minepro should have referred to the valuer. Hoeben J said: "[79] There seems to be ample authority for questions such as this, ie questions of mixed fact and law, to be referred to third party experts albeit that most of those decisions are at first instance (Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587; The Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646 at [30] and M1 v L1 [2007] NSWSC 346 at [24]). In Straits Exploration (Australia) Pty Ltd v Murchison United NL (2005) 31 WAR 187 Wheeler JA, whilst not in terms dealing with questions of law being referred to experts, implicitly approved such a practice. I see nothing inappropriate in the matters which were in issue in this case being referred to the Valuer under cl 5.4."
17. Basten JA, agreeing in the result, said: "[17] It is well-established that the effect of a determination by a valuer depends upon the construction of the contract pursuant to which the referral takes place: see Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 (Mahoney, Priestley and McHugh JJA) followed in Holt v Cox (1997) 23 ACSR 590 ; 15 ACLC 645; Strang Patrick Stevedoring Pty Ltd v James Patrick & Co Pty Ltd (1993) 32 NSWLR 583 (Giles J), Goldspar Australia Pty Ltd v The Council of the City of Sydney [2001] NSWCA 246 (Giles JA, Beazley and Stein JJA agreeing) and by the Victorian Court of Appeal in AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 (Nettle JA, Maxwell P and Bongiorno AJA agreeing) at [43]-[44] and [51]-[54]. (Nettle JA in the last case, at [52], sought to draw an analogy between a challenge to the determination of an expert appointed under a contract and judicial review of an administrative decision based on the concept of jurisdictional error. The analogy is evocative, but may need to be treated with caution: administrative action is not necessarily reviewable only for jurisdictional error; further, there may be limits as to the extent to which an administrative officer can be vested with power to determine questions of law. Different principles apply in relation to the construction of a contract between private parties.) [18] The operation of these principles may be tested in the present case by asking whether, if the particular disputes now under consideration had been referred to a valuer, his or her determination would have been binding. The indications in the contract relied upon by the Respondent do not demonstrate that it would not have been. Accordingly, a dispute of the kind now in issue was within the contemplation of the parties as one which could properly be referred to the valuer. In the absence of such a referral, the Respondent is bound by the figures contained in column 2 of the completion statement, as provided by the Appellant."
18. I think Basten JA's approach and probably that of Hoeben J as well provide support for Belvino's contention in the present case, but the precise question that falls for determination here was not in issue in Downer. Indirect support can also be obtained I think from the Victorian Court of Appeal's decision in Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VR 16 at 21(per Crockett, Kaye and Gray JJ) where the Court held that the words 'reasonable rental' should mean whatever the expert considers is reasonable having regard to all the circumstances which the valuer considers are relevant. The Court then said: "It was said by Mr. Graham that unless the Court gave some guidance to the valuer as to what was relevant, the parties would probably be back before the Court. It would appear to us that the rent assessment could not be attacked upon the ground that relevant matters had been disregarded or irrelevant matters considered. As the parties have agreed to be bound by the valuer's assessment, they will be bound unless the assessment is vitiated by fraud, collusion or mistake: Karenlee Nominees Pty. Ltd. v Gollin and Co. Ltd. [1983] 1 VR 657, at p. 670." The case is cited by Nettle JA in AGL at [32] and by McHugh JA in Legal & General at p 335B and see also Kanivah 10 BPR 18,825 at first instance. The decision in Kanivah in the Combined Book of Authorities is to Palmer J's decision at first instance. I have already referred to the Court of Appeal's decision which upheld Palmer J's decision.
19. Before the expert was appointed, but after it was obvious that AVL and Belvino had different views on how clause 4.26 should be interpreted, Belvino commenced proceedings in this Court seeking declarations as to the meaning of clause 4.26 including the matters in dispute before me now. AVL sought to stay those proceedings. In July 2014 White J rejected the various arguments of Belvino, and held that Belvino should be held to the bargain, namely that all issues would be determined by the specifically identified expert. In directing that the expert determination should proceed his Honour said: "[47] The fact that a non-lawyer has been given the task by the parties of making a determination that may involve questions of law is not itself a reason for refusing to hold the parties to their agreement as to the procedure for determining the issues (Badgin Nomines Pty Ltd v Oneida Ltd at [133]-[134]; Savcor Pty Ltd v New South Wales at 599 [44]; Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646 at [30]; Downer Engineering Power Pty Ltd v P&H Minepro Australasia Pty Ltd [2007] NSWCA 318 at [79]). ….. [54] If the expert determined that Production Capacity had not been reduced to less than 50% of Average Production Capacity but had been reduced by more than 50% of Average Production Capacity due to a Natural Disaster and if the construction of cl 4.26 contended for by the plaintiff is correct, then it would be at least arguable that the determination would not be binding as it would not have been made in accordance with the terms of the lease. Indeed, I understood counsel for the defendant to assert that that would be the position. I prefer to express no concluded view about that. However this might be, I do not think that the raising of the argument is a sufficient reason not to hold the parties to the process to which they had agreed."
20. Belvino draws attention to the fact that AVL was not willing to take up the option of having the Court direct the expert (yet to be appointed) in the proper meaning of the clause- inherently because on AVL's position it was clear that the expert was authorised, and required, to form his own view on that matter.
21. I think that White J was clearly of the view that the expert was able and required to form a view as to the meaning of clause 4.26(f). It is equally clear that he was expressing no view on whether, if the expert did reach a conclusion based on a wrong interpretation of the clause that would prevent the determination from being binding.
22. One case to which reference was made in Shoalhaven (and it is also referred to in AGL and Holt v Cox) is Jones v Sherwood Computer Services plc [1992] 1 WLR 277. In Jones, the English Court of Appeal (Dillon and Balcombe LJJ) rejected an attack on an expert determination by chartered accountants determining the amount of sales made by a software company for the purpose of a share acquisition contract. The plaintiff alleged that the expert had not taken into account transactions which ought to have been taken into account. The relevant clause provided that the expert's determination was to be final and binding. The Court said: "The present case is quite different, however, as Coopers have done precisely what they were asked to do. They were asked to consider only the points on which Peats and Deloittes were not in agreement, to decide whether the two classes of disputed transactions were or were not to be included in the total of sales as defined in appendix 1, and to determine the amount of sales accordingly; that is what they have done. Under para 7 of appendix 1 a decision of the accountants under para 3, if the accountants are in agreement, is to be as conclusive, final and binding as the decision of the expert if the accountants disagree with each other. But the argument for the plaintiffs has, as it seems to me, to go the length of asserting that if Deloittes had agreed with Peats that the disputed transactions were to be excluded from the total amount of sales and had consequently agreed on Peats' figures as the total amount of sales the plaintiffs could still have applied to the court to determine the true (in the court's view) amount of the sales and to hold the (ex hypothesis) joint view of the accountants not binding. I do not believe that that is the law. Any number of issues could arise under the various sub-paragraphs of para 2 of appendix 1 as to the application of the wording of those sub-paragraphs to particular facts. All these issues are capable of being described as issues of law or mixed fact and law, in that they all involve issues as to the true meaning or application of wording in para 2. I cannot read the categorical wording of para 7 as meaning that the determination of the accountants or of the expert shall be conclusive and binding for all purposes 'unless it involves a determination of an issue of law or mixed fact and law in which case it shall only be binding if the court agrees with it'." (Emphasis added)
23. I think that Jones is authority for the proposition that any question of construction of the clause under which the expert is to operate is as much part of the task of the expert as the determination of facts and the calculation of figures and not open to review by a Court.
24. AVL places reliance on McHugh JA's judgment in Legal & General and says that the mistake or error on the part of Mr Scholefield was of a kind which shows that his determination was "not one in accordance with the contract", and one which does not comply with the terms of the contract. I set out the passage in which McHugh JA rejected the contention that the valuation should be set aside: "Is the mistake in the present case of a kind which enables the court to set aside the valuation? In my opinion it is not of the relevant kind. There is nothing in the contract which would enable the valuation to be set aside on the simple ground that the valuer made a mistake. Nor do I think it possible to imply a term to that effect: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. The rent review clause makes the decision of the valuer final and binding on the parties to this lease. Nothing in the lease suggests that it was not to be final and binding if it was the result of error or mistake or was unreasonable. The decision - whatever it is - is to bind the parties. It is true that the valuer is acting as an expert and not as an arbitrator. But those words which have been commonly used in agreements since the Common Law Procedure Act 1854 serve the purpose of excluding the provisions of the Arbitration Act 1902. They avoid the necessity for the valuer to hear evidence and the parties and to determine judicially between them. They enable him to rely on his own investigations, skill and judgment: Re Dawdy (1885) 15 QBD 426 at 429, 430. Indeed they reinforce the view that the parties, as between themselves, rely on the honest and impartial skill and judgment of the valuer."
25. As Giles JA emphasised in Kanivah one has to examine carefully McHugh JA's reasons for refusing to set aside the valuation notwithstanding the mistake that McHugh JA identified, and not simply the question posed by his Honour.
26. AVL in its submissions refers to Mercury. At p 586-587 of Mercury Lord Slynn, with whom other law lords agreed, said: "If the Director misinterprets these phrases ["fully allocated costs" and "relevant overheads"] and makes a determination on the basis of an incorrect interpretation, he does not do what he was asked to do. If he interprets the words correctly then the application of those words to the facts may in the absence of fraud be beyond challenge. In my view when the parties agreed in cl 29.5 that the Director's determination should be limited to such matters as the Director would have power to determine under condition 13 of the British Telecommunications licence and that the principles to be applied by him should be 'those set out in those conditions', they intended him to deal with such matters and such principles as correctly interpreted. They did not intend him simply to apply such meaning as he himself thought they should bear. His interpretation could therefore be reviewed by the court. There is no provision expressly or impliedly that these matters were remitted exclusively to the Director, even though in order to carry out his task he must be obliged to interpret them in the first place for himself. Nor is there any provision excluding altogether the intervention of the court. On the contrary, cl 29.5 contemplates that the determination shall be implemented 'Not being the subject of any appeal or proceedings'. In my opinion, subject to the other points raised, the issues of construction are ones which are not removed from the court's jurisdiction by the agreement of the parties." (Emphasis added).
27. In Mercury the critical question for the Court was whether the proceedings brought by Mercury were incompetent and should have been struck out as the Court of Appeal, by majority, had decided they should. The context was one of a statutory licence which was to incorporate contractual terms to be agreed or if they could not be agreed then to be determined by the Director of Telecommunications. The Director was required by the contract to determine matters in accordance with the principles set out in the clauses previously determined. Lord Slynn noted at p 56B that there was no issue before the Court "as to whether Mercury is right as to its interpretation of the phrases in dispute. The sole issue is whether Mercury can raise these questions by the procedure which it has adopted or at all" The House of Lords held that Mercury's proceedings should not have been struck out as an abuse of process.
28. It will be observed that Lord Slynn regarded it as significant that there was no provision expressly or impliedly that the matters were remitted to the director exclusively and no provision excluding the intervention of the Court but on the contrary, a clause which contemplated that there might be an appeal or proceedings arising out of the Director's decision. His Lordship held that there were "issues of construction are ones which are not removed from the court's jurisdiction by the agreement of the parties" (p 59B). Lord Slynn did refer to Jones at p 58F and was not critical of the decision saying that the expert there had done exactly what was asked of him. He also referred to a decision of Norwich Union Life Insurance Society v P & O Property Holdings Ltd [1993] 1 EGLR 164 without criticism although the question in that case was really akin to the matter that White J had to decide in Belvino rather than the matter I have to decide here.
29. Read in isolation from the context the words highlighted in [44] above do offer support for AVL's contention but given that in Mercury there was not given to the Director's determination a final and binding quality, or even the characterisation as an expert determination, that Lord Slynn interpreted the clause as not having remitted expressly or impliedly a determination of the meaning of the clause (and of the principles to which regard were to be had by the Director), and his Lordship's lack of criticism of Jones, I do not think that the comments in Mercury ought be seen as undermining the line of authority to which I have referred.
30. Belvino submits that Mr Scholefield's determination establishes that the expert understood precisely the task which he had to perform and that the complaint that he did not carry out the task entrusted to him by the contract is really a complaint that he adopted a construction of the clause which was not that advanced by AVL and which AVL asserts is incorrect. Belvino submits that the decision as to which construction was to be preferred was very much part of the task that the expert was required to perform and which he did perform, hence that the determination was one made in accordance with the contract.
31. I accept that an expert may so misunderstand the task which the parties have retained him to perform that what he has done does not meet the requirements of the contract but where the parties have entrusted to an expert a determination which requires him to ascertain facts and figures and also to decide as between competing constructions of the meaning of the clause under which he is to operate I do not think that it can be said that the determination was not made in accordance with the terms of the contract. The 'final and binding' clause is not qualified and does not say, for example, "subject to a right of appeal on a question of law".
32. As a matter of objective construction of clause 4.26 I conclude that the parties intended to leave to the expert all questions of interpretation of the clause that were pertinent including deciding between any contending views advanced by the parties in support of one or other figures for lost tonnage (and the categorisation of the reasons for that loss in deciding the question of Natural Disaster). The parties must have contemplated that the expert would have to make a judgment about how the clause was to operate either by choosing between the competing interpretations advanced by the parties or even rejecting both and adopting another interpretation for which, in his opinion, the clause called. The construction of the clause is not an objective fact such as which property or which vineyard was under consideration. The interpretation of the clause and its application are, to use the phraseology of Nettle JA in AGL, matters involving the expert's "discretion, judgment and opinion" and very much within "the realm of contractual contemplation". It involved the expert's "skill and judgment" per McHugh JA in Legal & General even though he is not legally trained as the parties were well aware, and it was "within the contemplation of the parties" as a matter which was referred to the expert: per Basten JA in Downer.
33. Mr Scholefield determined that (a) Production (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined), and (b) that had Production Capacity (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined).
34. I should add that whilst the area of concern has some similarity to the questions in administrative law as to whether a tribunal's error amounts to a jurisdictional error I do not think it is necessary to venture in to that territory: see the competing views on this of Nettle JA in AGL at [52] and the similar views of Mason P (and Priestly JA) in Holt v Cox on the one hand, and Basten JA in Downer at [17] on the other, although I would add that it is difficult to comprehend that a Judge's determination of the meaning of a clause in a contract could amount to "a jurisdictional error" hence that an expert's conclusion on that aspect could be akin to a jurisdictional error: see "Jurisdictional Error and Beyond" in M.Groves (ed) Modern Administrative Law in Australia Concepts and Context (Cambridge, 2014) p 256, and see Craig v State of South Australia (1995) 184 CLR 163 at pp 177-179 and Kirk v Industrial Relations Commission (NSW) [2010] HCA 1, (2010) 239 CLR 531 AT [71]-[72].

Estoppel

1. AVL asserts that by reason of what Belvino did or said before White J in resisting the reference to the expert of all matters pertaining to clause 4.26 Belvino is now precluded from contending in the current proceedings that the Court should not itself determine what is the correct construction of clause 4.26(f). Mr Goodman, who conducted this part of AVL's case before me, pointed to the following matters: 1. That Belvino had submitted before White J that it had the right to approach the Court to obtain declarations as to the meaning of terms used in the clause and that it asserted that the expert, not being a lawyer was not the appropriate person to determine the construction of the clause under which he was operating. Thus Belvino was contending that the Court was not excluded from construing the contract: see T43 (17 February 2015). 2. He also complains that Belvino did not submit to White J that the Court would be excluded by reason of the contract from questions of construction once the expert had made his determination. 3. That at T14.36 of the transcript proceedings before White J Mr Dick SC is recorded as having submitted: "HIS HONOUR: What about cl 4.26(g); the expert's determination is to be final and binding on the parties? DICK: Sure. Quite. But then, as your Honour knows, that determination must be in accordance with the contract. HIS HONOUR: Yes DICK: There's a question as to whether that gets resolved before or after the expert has made his determination. We submit one would always look at the particular issues that have arisen. In this case, the issues that have arisen are essentially questions of contract construction. That might not arise in every case. The parties might not be disputing whether or not the frost events were a natural disaster or an act of God, for example."
2. Mr Goodman submitted that Belvino should not be permitted to advance a case different to that which it had advanced before White J and that the principle of Anshun estoppel applied. He referred also to the case of Oswal v Yara Australia Pty Ltd [2011] WASC 355 in which Kenneth Martin J held that a party could not advance in one set of proceedings a clause based on the existence of an agreement and in another proceeding contend that the agreement was void, at least not whilst the earlier proceedings had not been concluded. Such a course Martin J held was an abuse of process and AVL contended that Belvino was embarking on a similar abuse here. Mr Goodman also contended that his client was led to believe that there would be no argument that should the expert reach a conclusion based on an erroneous interpretation of the contract it was open to review and may have taken a different course had they been appraised of that attitude.
3. There therefore appear to be three threads to AVL's contentions: 1. an assertion of an abuse of process on the part of Belvino 2. a general estoppel claim 3. Anshun estoppel
4. It appears clear that before White J Mr Dick was accepting the possibility that after the expert's determination the disgruntled party might be able to seek to establish that the determination was not one in accordance with the contract but it was not part of the case advanced to persuade the Court that the declarations sought should be made that this was the case. The Court determined Belvino's application adversely to it determining that all matters relevant to the task required by clause 4.26 were to be determined by the expert. The Court expressed no view one way or the other on the question of whether a misinterpretation of the clause of the expert would require the determination to be set aside, and it was not therefore a prevalent element of White J's reasoning to reach the conclusion to which he came.
5. That parties should not be permitted to advance fundamentally inconsistent claims in two different proceedings (or in the same proceedings: see Uniform Civil Procedure Rule 14.18) is well recognised but the present situation has no similarity to Oswal at all. Belvino contended in the earlier proceedings that declarations should be made, the Court rejected Belvino's arguments and ordered that the expert determination proceed. Those proceedings are at an end and the result of them was that the expert was appointed to deal with all matters over the opposition of Belvino. In my view Belvino is not, by contending that the expert's determination is binding, engaging in an abuse of process.
6. In relation to the general estoppel claim no evidence was called in support of the assertions made. I infer that had Belvino advanced such a contention AVL would, as it does now, have contended that it was not correct. I reject the claim that Belvino is estopped from relying on the final and binding nature of the determination.
7. The High Court in Anshun stayed proceedings brought by the Port of Melbourne Authority against Anshun Pty Ltd, a crane company operating at the port, seeking indemnity pursuant to an agreement between the Authority and Anshun. In earlier proceedings brought by an injured stevedore arising out of the use of the crane at the Port of Melbourne, the Authority and Anshun had been adjudged liable as tortfeasors and the Authority had not pleaded in defence to the cross-claim brought against it by Anshun the indemnity agreement. The High Court held that the Authority was estopped from bringing fresh proceedings because the Authority had not raised the indemnity in the first proceeding and that matter was so relevant to the subject of the matter of the first action that it was unreasonable for the Authority not to have done so: see 602-603 per Gibbs CJ, Mason and Aickin JJ.
8. A decision as to whether the matter was one so relevant to the later matter is so relevant that the failure to raise it was unreasonable involves "a value judgment to be made referable to the proper conduct of modern litigation" per Allsop P in Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, (2010) 75 NSWLR 245 at [3] and see CG Maloney Pty Ltd v Noon [2011] NSWCA 397 [60]-[62] per Giles JA (with whom Allsop P and Handley AJA agreed). In Anshun a very important consideration of the Court was the fact that second proceedings raised the spectre of inconsistent judgments (ie that the crane operator was required in the first proceedings to pay 20% of the plaintiff's judgment and in later proceedings that the crane operator would, if the Authority was successful, be required to pay all of the stevedore's judgment by way of indemnity). There is no such prospect here.
9. In my view all that can be said of Belvino here is that it did not submit to White J that no stay should be granted because if a stay was granted the expert's determination would be final with no means of redress. That is an assertion which it was entitled to advance or not as it saw fit, and one reason for not advancing it would be a concern that if the determination of the expert was adverse to Belvino it might be said that it had agreed that it would be a final and binding determination or if the Court had based its decision on that point, that there was an issue estoppel. I do not think that Belvino can be precluded from putting an argument concerning the effect of an expert's determination after it had sought to have the Court make declarations concerning the meaning of the clause and its application was resisted by AVL and its contentions rejected by the Court.
10. It follows that in my view there is no impediment to Belvino maintaining that the expert's determination is final and binding and that the Court should not form its own view as to the correct interpretation of clause 4.26(f).
11. I conclude that the case is not one in which the Court should embark upon its own assessment of the clause hence that the relief sought by AVL should be refused.
12. It follows that it is not necessary for me to express a view on whether the expert fell into error. Against the possibility that I am in error in relation to the first point however, I will express my views on this topic as well.
13. I am not persuaded that the expert fell into error and for the following reasons: 1. I think that on a natural reading of the clause it is offering to AVL two different bases for a claim to bring the lease to an end: 1. The first is that the actual tonnage of grapes produced in a year is reduced as a result of a Natural Disaster (option 1) 2. The second is that the tonnage of grapes that the vineyard is capable of producing is reduced as a result of a Natural Disaster (option 2) 1. In the case of option 1 the reduction that must be demonstrated is a reduction of the average two year tonnage yield to the actual production which reduction must be greater than 50% of the average two year yield. 2. In the case of option 2 the reduction that must be demonstrated is a reduction of the tonnage of grapes which the vineyard is capable of producing from the average two year yield which reduction must be greater than 50% of the average two year yield. 3. I note that apart from the need to read the words "in that vintage" between "whether" and "Production" in f(i) and (ii), an insertion on which both parties are agreed, neither party contended that any words should be read into clause 4.26(f). 4. If the words "reduced by more than 50% of Average Production capacity" do not contain both the comparator and the extent of reduction required but rather just provide the figure for the extent of reduction required the clause does not expressly provide from what Production and Production Capacity must be reduced. Neither party contended that the clause was void for uncertainty. 5. I do not accept AVL's contention that the Production Capacity which is referred to in (f)(i) is the pre frost Production Capacity. I think it is more likely that the lessee was by the clause given an opportunity to measure post frost Production Capacity and to use that as one of the two comparables ie option 2. AVL chose to use a pre frost figure which was high and seeks to have that compared to the actual production for the affected year. The clause does not expressly call for that comparison and if no other words are to be read in to the clause I do not think that the clause as it stands can be read as requiring a comparison between "Production Capacity" and "Production". 6. In my view, AVL having put forward a figure for Production Capacity prior to the frost, presumably because it, or those advising it, thought that would produce a higher differential, and which had the opposite effect when utilised in the clause to that for which they had hoped, does not provide any support for the construction for which AVL contends. Once it is appreciated that the clause called for a comparison between post frost Production or Production Capacity on the one hand and the two year average yield on the other, it can be seen that provision to the expert by AVL of a figure for pre frost Production Capacity has produced what AVL claims is an odd result. The expert may have fallen into error in accepting AVL's pre frost Production Capacity as one of the two comparators under option 2 but AVL does not attack his determination for that reason and nor does Belvino. Mr Scholefield has however in my view correctly identified that he needed to compare Production Capacity (as determined) with the two year average yield, so if he did fall into error in accepting the pre frost Production Capacity figure advanced by AVL it is not a relevant error or one which AVL can (or does) rely. 7. As a matter of logic I can accept that one measure of loss might be the difference between Production Capacity prior to the frost in comparison to Production Capacity after the frost but that is not what the clause says and AVL did not in any event provide the expert with a figure for post frost Production capacity. 8. I see an important element in the operation of clause 4.26 as being to ensure that the average two year yield (ie using the two previous vintages) was the yardstick. It may have been a less generous test than a comparison between actual Production and pre frost Production Capacity but that is what the parties agreed on. 9. I accept Belvino's contention that subclause 4.26(c)(iii) and 4.26(i) emphasise that the parties were treating the two year yield (ie Average Production Capacity) as the key benchmark reinforcing the correctness of the interpretation of clause 4.26(f) which the expert adopted. Subclause 2.3(b)(xi) uses a different measure for the requirement of notice to be given but it also focuses on actual production (the year before) not Production Capacity. 10. I would add that one of AVL's contentions is that the expert wrongly used as his benchmark the Average Production Capacity rather than 50% of the Average Production Capacity. Ironically, if the expert had used 50% of the Average Production Capacity as the benchmark there would have been no reduction at all since Production, at 15,260 tonnes, was greater than 50% of Average Production Capacity (see page 36 of Plaintiff's submissions Tab 10 Exh A). I think that the expert was treating the clause as containing both the comparator and the measure of the reduction. 11. I do not accept that the expert was not comparing the post frost situation with a pre frost situation (see plaintiff's submissions para 40). He was comparing post frost yield to pre frost yield but was required, for the pre frost situation, to use the two year average yield. 12. I do not accept that by comparing Production Capacity to the two year average yield the expert was treating the words "reduced by more than 50% of Average Production Capacity" as something different to what was stated. To be entitled to rely on the clause AVL had to establish that Production Capacity was reduced- if it chose a figure that involved no reduction (as it did) the clause could not operate in its favour. I do not accept that Energy World Corp Pty Ltd v Maurice Hayes & Associates Pty Ltd (2007) 239 ALR 457 has any relevance here. 13. As Belvino's submissions point out the construction that AVL put forward for comparing Production Capacity with Production does not work if Production was chosen ie for both the "before" and "after" scenario. There is nothing to which actual Production can be compared hence AVL is driven to assert that actual production also should be compared to Production Capacity. 14. Mr Hutley contended that as the crop came closer to harvest Production Capacity and actual production became virtually the same. I can accept that but I do not accept that this permits clause 4.26 to be read as requiring a comparison between actual production and Production Capacity, moving the calculation away from an agreed benchmark of the two year average yield. One reason for the parties to have included Production Capacity was in recognition that vines may be well off from harvest at the time of the disaster and to permit the impact to be assessed without awaiting the harvest for that year. AVL did not provide a figure for post frost Production Capacity and the inference was that post frost Production Capacity and actual production were the same. 15. Belvino in its submissions claims that the expert determined that there was no permanent damage to the vines (see defendant's submissions [41]-[48] and see plaintiff's submissions in reply [31]-[33])- I accept Mr Hutley's point that the expert was required to determine whether there has been a reduction in Production Capacity for a particular vintage. I do not see how this assists AVL however. The expert accepted AVL's own proposed figure for Production Capacity. He was, having accepted that figure, required to compare it to the two year average yield which is what he did. 16. In summary then, I think Mr Scholefield has taken the correct approach to clause 4.26(f).
14. It follows in my view that even were I persuaded that the Court could set aside the determination of the expert if satisfied that the interpretation adopted by the expert was incorrect I would not be persuaded that it is appropriate to do so. It also follows that there is no need to consider whether the Court should express its views on the meaning of Natural Disaster as used in the clause, but consistent with what I have said earlier I think that also was a matter wholly for the consideration and determination of the expert.

Conclusion

1. I therefore answer the questions posed at [8] as: 1. Yes. 2. (a) Mr Scholefield determined that (a) Production (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined), and (b) Production Capacity (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined). (b) Yes. 1. (a) No. (b) No. 1. Not necessary to answer but yes. 2. Does not arise. 3. Does not arise.
2. The relief sought in the Amended Summons and Amended Cross Claim should be refused. I will hear the parties on the appropriate cost orders both in respect of the Amended Summons and Amended Cross Claim. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 March 2015