Geowin Construction Pte Ltd (in liquidation) v Management Corporation Strata Title No 1256

• Jurisdiction: Singapore
• Judge: V K Rajah J
• Judgment Date: 29 December 2006
• Neutral Citation: [2006] SGHC 245
• Date: 29 December 2006
• Subject Matter: Whether court may intervene to set aside expert's decision where no fraud or collusion involved,Parties agreeing expert's assessment to be final and no appeal to lie against it,Civil Procedure,Parties agreeing to submit claims against each other for assessment by expert,Experts,Setting aside expert's decision
• Docket Number: Suit No 1209 of 2003
• Published date: 04 January 2007
• Defendant Counsel: Tan Chee Kiong (Seah Ong & Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: T S Oon (T S Oon & Bazul)

29 December 2006

V K Rajah J

1 The plaintiff was the main contractor engaged by the defendant to carry out addition and alteration works to Nadia Mansion (“the works”). The plaintiff asserts that it has completed the works while the defendant disagrees claiming that on the contrary, various portions of the works were either incomplete and/or defective.

2 Unable to resolve their differences, the defendant subsequently made a successful demand on a performance bond provided by the plaintiff as security for its contractual obligations. The plaintiff in turn promptly disputed the defendant’s right to do so and maintains on the contrary that it is the defendant that owes it money.

3 Eventually the plaintiff commenced proceedings to recover the amount allegedly due to it. However just prior to the commencement of the trial the parties entered into a compromise which was later embodied in a Settlement Agreement dated 11 January 2006 (“SA”).

4 The terms of the SA provided:

1) An independent Expert shall be appointed to assess the sums due for work done under the contract and for variation works carried out by the Plaintiffs and for claims for defects and outstanding works (including any allowance for the costs of rectification, and expenses incurred or to be incurred) and for liquidated damages by the Defendants. The procedure of the Reference, the manner in which parties may make representations and any investigations and surveys required shall be in the sole discretion of the Expert. …

…

5) The Expert shall be appointed as an expert and his decision as to the final account and the sums due is final and no appeal shall lie against such decision.

[emphasis added]

5 Pursuant to the terms of the SA, it was envisaged that the court had no further role to play in the dispute save for the assessment of costs. An expert, Ms Kee Bee Kheng (“the Expert”), was appointed in accordance with the terms of the SA. In her Report dated 23 February 2006 (“the Award”), the Expert assessed that:

(a) the value of the work completed by the plaintiff should be fixed at $986,663.03;

(b) no liquidated damages were due to the defendant; and

(c) as a positive balance accrued to the plaintiff, the defendant ought to return the amount paid by the plaintiff through the call on the performance bond as well as the sum of $146,462.22.

6 The defendant was dissatisfied with the Expert’s decision and filed an application to set aside the Award on 8 May 2006. The defendant’s grievances can be summarised within a brief compass. First, it alleges that the Expert had made assumptions of fact, thereby failing to properly make an “assessment”. Secondly, it asserts that the Expert made “manifest” errors and has accordingly failed to “assess” the plaintiff’s work. Thirdly, it contends that the Expert failed to use reasonable skill to discharge her responsibilities. I dismissed the defendant’s application and as it has appealed against my decision, I now set out the reasons for my decision.

Differences between an arbitrator and an expert

7 I had in Evergreat Construction Co Pte Ltd v Presscrete Engineering Pte Ltd [2006] 1 SLR 634 (“Evergreat”) at [27] to [29] reviewed the legal principles to be applied in defining an expert’s role and responsibilities:

27 … The starting point for the modern statement on the law relating to experts is to be found in Campbell v Edwards [1976] 1 WLR 403, where Lord Denning MR opined at 407:

It is simply the law of contract. If two persons agree that the price of property should be fixed by [an expert] on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it. If there were fraud or collusion, of course, it would be very different. Fraud or collusion unravels everything. [emphasis added]

28 In Baber v Kenwood Manufacturing Co Ltd and Whinney Murray & Co [1978] 1 Lloyd’s Rep 175 Lawton LJ said at 181:

They [the auditors] were to be experts. Now experts can be wrong; they can be muddle-headed; and, unfortunately, on occasions they can give their opinions negligently. Anyone who agrees to accept the opinion of an expert accepts the risk of these sorts of misfortunes happening. What is not acceptable is the risk of the expert being dishonest or corrupt.

29 In the absence of fraud or any corrupt colouring of the IA’s determination, there is neither liberty nor latitude to interfere with or rewrite the parties’ solemn and considered contractual bargain, see [5]. It is quite inappropriate for a court to substitute its own view on the merits when the parties have already agreed to rely on the expertise of an expert for a final and irrevocable determination…

[emphasis added in bold italics]

And at [34] to [37]:

34 Both arbitration and expert awards, however, have the same fundamental and common foundation – contract law. The law upholds and recognises such agreements and the consequential awards because of the sanctity it accords to contractual arrangements. I can do no better than to echo the observations of Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 353:

[T]hose who make agreements for the resolution of disputes must show good reasons for departing from them, …

An expert’s decision can be set aside on the basis of fraud or partiality. Beyond that it is probably correct to say that only a breach of an expert’s terms of appointment would suffice to set aside his decision. Errors of fact or law will not vitiate an award if the expert acts within his contractual mandate. In contrast, there is a statutory mechanism albeit a very limited one for the review of both domestic and international arbitration awards.

35 At the end of the day, the modern distinction between an expert and arbitrator does not lie purely in whether the office holder is performing a judicial, quasi-judicial or purely discretionary function. The essential difference is in the duties and/or functions the terms of appointment impose on an appointee. The labelling of an appointment as “arbitrator” or “expert” is not in itself always conclusive. It is the precise contractual arrangement and the ensuing obligations of the office holder that is, in the final analysis, paramount. Is he obliged to act solely on the evidence before him and the submissions made to him or does he have a discretion to adopt an inquisitorial function? Does he have complete discretion over the applicable rules of procedure? If he has the sole discretion to arrive at his determination without being hamstrung by procedural and evidential intricacies or niceties, it is most unlikely that the court will view the proceedings to be arbitration proceedings. An expert is permitted to inject into the process his personal expertise and to make his own inquiries without any obligation to seek the parties’ views or consult them. An expert is also not obliged to make a decision on the basis of the evidence presented to him. He can act on his subjective opinion; that is the acid test.

36 There are two fundamental aspects or facets of natural justice that generally apply to dispute resolution. The first is that a decision maker should be disinterested in the outcome. The second is due process; both parties have the right to be heard on all the issues that are to be determined. This second facet of natural justice does not apply to an expert’s determination. This is the single most significant distinction between expert determination and litigation/arbitration.

37 I should further add that there is nothing wrong or contrary to public policy in allowing an expert to resolve all disputes in a matter; regardless of whether such issues are legal or factual. An expert’s role need not be confined to giving opinions on matters that are not in dispute. While experts have historically acted mainly in valuations and “look and sniff” evaluations, the sphere has now evolved to include other areas of dispute resolution. Granting that references to experts are commonly found in construction documents, there is no reason as a matter of policy why parties cannot by contract extend this practice to other disputes. This is part of a wider trend for an expeditious, economical and user-friendly alternative to litigation and arbitration. Expert determination is particularly suitable for resolving technical issues and/or disputes. The court’s jurisdiction is not completely excluded or ousted by such an arrangement. Its jurisdiction to police the contract to ensure that the expert has not exceeded his remit continues to prevail. Like the ubiquitous “conclusive evidence” clauses, “expert” clauses will be upheld on the basis that they are contractual arrangements; see Standard Chartered Bank v Neocorp International Ltd [2005] 2 SLR 345 at [19] where it was stated:

The real foundation for the legal efficacy of such a clause is contract. It can be cogently argued that if parties expressly agree on the modalities for determining a matter, such an agreement should be upheld in the absence of any relevant public policy considerations. Indeed, this is the very basis on which the court recognises and gives effect to arbitration agreements, conclusive certificates of engineers and architects found in construction contracts and experts’ decisions, amongst others.

[emphasis added in bold italics]

I must emphasise that it is common ground in these proceedings that the Expert has been appointed as an expert and not as an arbitrator.

Challenging an expert’s award

8 In Evergreat ([7] supra), I also stated at [41] to [42]:

41 The crux of the matter is that if the parties agree to appoint an expert to resolve a dispute, his report or award cannot be challenged unless the expert has departed from his instructions in some material respect. In Shell UK Ltd v Enterprise Oil plc [1999] 2 Lloyd’s Rep 456 at [98], Lloyd J declared:

I...