Expert Valuer: Interpretation of contract and jurisdiction of courts

Expert Valuer: Interpretation of contract and jurisdiction of courts

The recent case of Great Dunmow Estates (“GDEL”) v Crest Nicholson Operations Ltd (“Crest”) [2019] has provided some useful guidance on the scope and nature of an expert’s jurisdiction regarding the disputed interpretation of an option contained in a contract for sale of land.

The Court underlined that an expert’s jurisdiction was determined by the terms of the contract between the parties. The Court also found that there was nothing in the particular contract which excluded the rights of the parties to refer the question of construction of the contract (and therefore jurisdiction) to the Courts.

The case

This case concerned a valuer, acting as an expert, required to determine the market value of agricultural land for the purposes of an option agreement (“Option“).

The parties could not agree the purchase price and the Option provided for that issue to be resolved by a valuer, carrying out a Red Book valuation, on the Market Value basis. The Option did not specify a valuation date, but the parties agreed this should be the date the Valuer issued his determination (“Later Date“).

The parties appointed a valuer (“Valuer“) who directed that a statement of agreed facts (“Joint Statement“) should be produced. This was done, but during the process the Valuer sought his own legal advice. That advice confirmed (even though advice had not been sought on the point) that the correct date of valuation was not the date of the Valuer’s determination, but when the period for challenging the planning permission expired (“Earlier Date“).

The Earlier Date suited Crest but GDEL maintained that Crest were bound by the Later Date agreement contained in the Joint Statement. The Valuer determined that the Earlier Date was the correct one and that the Joint Statement did not contractually bind the parties.

High Court decision

GDEL applied to the High Court to set aside the Valuer’s determination and sought a declaration that the Later Date was correct, or that the parties had agreed as much in any event. Crest filed their own application, seeking an order that the Court did not have jurisdiction to set aside the Valuer’s determination, unless it was manifestly wrong or lay outside the scope of his decision making authority.

The Judge ruled that the Valuer had been right to accept his legal adviser’s view that the Earlier Date was correct and that aspect of his decision was not appealed by GDEL. The Judge dismissed Crest’s application and held that the effect of the Joint Statement was contractual and therefore bound the Valuer. This led to the rather unsatisfactory conclusion that on a true interpretation of the Option the correct valuation date is the Earlier Date, but that the parties will be held to the Later Date.

Crest appealed on the grounds that:

  • the determination of the valuation date was squarely within the Valuer’s sole jurisdiction, either as a matter of contract or as a result of subsequent events;
  • the Joint Statement was not a contractual agreement; and
  • even if it was, a power should have been implied, which allowed the Valuer to release the parties from its contractual effect.

Contractual Arguments

Crest argued that the purpose of the Joint Statement was to inform the Valuer about what remained in issue between the parties. As such, positions could change and it cannot have been intended that, by agreeing the statement, the parties would be agreeing a variation of the Option, by amending the valuation date.

The Option had the usual “entire agreement” clause, which provided that any variation of the contract had to be effected in writing, using specific wording and be signed by the parties. The Court of Appeal found that the Joint Statement did not comply with the terms of this clause, therefore the decision of the High Court Judge on this issue was wrong and the appeal must succeed. However, this may not be the end of GDEL’s arguments on this point. The Supreme Court has left open the possibility of a non-compliant variation having legal effect, by operation of the doctrine of estoppel.

Jurisdiction Argument

The Court of Appeal did not need to look into whether the Valuer had jurisdiction to determine the valuation date, as it had already decided that the appeal must succeed on the contractual arguments and GDEL had not appealed the valuation date issue.

However, they set out a useful summary of the scope and nature of an expert’s jurisdiction. This, they said, is determined by the contract between the appointing parties. There is no other source of authority and experts remain unregulated by statute in this regard. It all comes down to contractual interpretation and that includes the fundamental issue of whether the expert can rule on his own jurisdiction.

The issue of the correct valuation date is a question of law and the Valuer is tasked to value the property as at the correct valuation date. There was nothing in the relevant clauses, which gave the Valuer the jurisdiction to determine which of the two alternative dates was correct. Equally he had no power to prevent that issue of contractual interpretation being referred to the Court.

Limits of Valuer’s authority

The Court will only intervene where the Valuer has gone outside the limits of his decision making authority. One way of straying from the right path is for the Valuer wrongly to interpret what the valuation principles are, rather than just valuing in accordance with them. The contract has a meaning and even if it is ambiguous, the parties have asked for a valuation on those terms and that is what must be delivered.

A valuer must, of course, inform himself of what the principles are, in order to deliver the valuation. However, if a valuer provides a valuation based on his own incorrect contractual interpretation (as the Court sees it) then he has gone outside his decision making authority. The Valuer’s role is to apply the principles on their correct legal interpretation, not to apply such a meaning as he sees fit.

The case of Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826 concerned a clause where a valuer was given jurisdiction to construe the terms of a contract. The Court of Appeal decided that even that wording was not sufficient to exclude the right to challenge on such a point of law.

The Valuer in the Great Dunmow case did not follow the correct procedure to produce a binding valuation. Furthermore, there was nothing in the relevant clause in the Option which made him sole arbiter of the question of valuation, so the Court had authority to determine legal issues regarding jurisdiction.

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