The case concerned is an appeal from the decision of the New South Wales Supreme Court. The development deed in which the parties entered into contained the following expert determination clause “If the Dispute is not resolved, the parties must within the 14 day period use reasonable endeavours to appoint an expert (Expert) by agreement.”

After a dispute arose as to Lepcanfin’s entitlement to an increase in facilitation fee to compensate for non-payment of an advance, an expert was appointed to determine a dispute concerning Lepcanfin’s entitlement to the increase in the Facilitation Fee.

The expert determined that while Lepcanfin had not waived its right to collect the fee, but the fee was, nevertheless, unenforceable as a penalty.

Question for the court

Had the expert exceeded her mandate by finding the penalty unenforceable?

Decision of the Court of Appeal

The NSWCA affirmed the NSWSC decision that the expert’s decision was within their mandate. Leave to appeal was granted in relation to the question of mandate. The Court held that the Applicant’s narrow construction of the expert determination clause was uncommercial and thereby rejected it.

Lessons Learned

Commercial common sense dictated that expert determination clauses should be given a broad and liberal interpretation in light of the deed’s context and purpose, and it should not be construed narrowly unless the words in their context should be read more narrowly.