Braceforth Warehousing v Mediterranean Shipping - expert determination and limitation (1)

The case of Braceforth Warehousing v Mediterranean Shipping (2) looked at a point not really covered before: when does an expert determination start for the purposes of the law of limitation? The judge also looked at the very important point of whether the law of limitation actually applies to expert determinations. While this case was decided last year, it has only recently come to notice by being put up on Bailii (http://www.bailii.org/) and it deserves consideration.

Background

The law of limitation provides longstops for the bringing of proceedings - normally six years for contractual actions or actions in tort (such as negligence), although the time for when the period starts to run differs in actions in contract and tort. Many contracts these days have some sort of hybrid dispute resolution clause providing that e.g. technical disputes should go to expert determination while commercial disputes should be heard in the courts. Knowing the time limit for bringing actions is therefore key - leave it too late to bring proceedings, and your action could be struck out as time-barred.

You should not confuse expert determination and arbitration - they are very different. Arbitration is a much more formal process, akin to court proceedings, albeit private, and has the benefit of international conventions to assist in enforcing arbitration awards. An expert determination has none of the formality of an arbitration and can be very different.

Facts

The agreement in question was for a lease dated 6 December 2001 and it provided that disputes (other than on points of law) should be determined by an expert. The clause provided that the parties should agreed the identity of the expert, but if they could not do so, either party could apply for an expert to be appointed by the President of the Royal Institute of Chartered Surveyors. By the agreement, the claimant had to build a warehouse, but the defendant claimed that the warehouse was defective.

Contractual disputes on the contract had to be brought within six years, and so the defendant's solicitors wrote to the claimant on 14 November 2007 to propose an agreement on extending the limitation period to 6 December 2008, which the claimant agreed to.

About a year later on 24 November 2008, and after further discussions between the parties, the defendant's solicitors wrote again to the claimant. They referred to the expert determination clause and proposed a named individual as the expert who would provide the determination.

As no reply was received, on 8 December 2008, the defendant's solicitors applied to the President of the Royal Institute of Chartered Surveyors for an expert to be appointed, which was done on 28 January 2009. The nominated expert wrote to the parties on 4 February 2009 but after that the claimant raised the question of his jurisdiction, as they said he had been appointed out of time. It can be seen from the facts above that the limitation period expired on 6 December 2008, whereas the defendant's solicitors had only applied for the appointment of an expert by the RICS on 8 December 2008.

Much hung on this - the dispute at the heart of the matter was for some ?3.7 million and it was clearly worth the claimant issuing proceedings of its own and arguing that the matter was time-barred and that therefore the expert had no jurisdiction to hear the dispute.

The decision

The judge in fact held that the expert determination was properly begun by the defendant's solicitors' letter of 24 November 2008 putting forward the name of an expert to act in the matter. While it was not necessary for his decision, the judge further thought that the law of limitation did not apply to expert determination. While the judge did not explain his reasons for this, it may be because the Limitation Act 1980 refers to "actions" not being begun outside the limitation period. It is possible that an expert determination, being a contractual method of dispute resolution, is not an "action", which is defined in the Act itself as including "any proceeding in a court of law".

Just as importantly, the claimant's application to have the court order that matters should proceed in the courts rather than through an expert determination failed - the court upheld the original contract.

What can we learn from this decision?

Jurisdiction and dispute resolution clauses are often regarded as so much boilerplate - and frequently attention is not given to them in favour of negotiating other, more obviously important clauses.

In large IT contracts, some form of Alternative Dispute Resolution is often provided for - and many disputes are directed to expert determination or arbitration, not least because that way some privacy will be maintained should the parties fall out later. Two important points come out of this decision:

• First, it may be sensible to include in any expert determination clause a time limit for bringing any such determination - bearing in mind that this case tells us that expert determinations are commenced when one party writes to the other proposing an expert or requiring agreement as to that expert
• Secondly, it is worth noticing that even in a comparatively large (£3.7m) and presumably complex dispute such as this, the parties' contractual choice of expert determination will be upheld by the courts and the court will not intervene to change the contract later just because of the way things have turned out

In short, do not treat dispute resolution clauses as boilerplate, not to be reviewed or negotiated - consider if the procedure proposed is really appropriate for what might happen in the future.

Notes

(1) Copyright Richard Stephens 2010. The law is stated as at 17 August 2010.

This note is intended to provide general information about legal developments in England & Wales and you should not apply any of the advice or information contained in it to specific situations without seeking professional advice first.

(2) [2009] EWHC 3829 (QB)