Carlisle Homes Pty Ltd v Nexus Office Pty Ltd
[2023] VSC 753
•15 December 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
S ECI 2023 01104
| CARLISLE HOMES PTY LTD (ACN 106 263 209) | Plaintiff |
| v | |
| NEXUS OFFICE PTY LTD (ACN 065 049 292) | First Defendant |
| and | |
| SALTA PROPERTIES (WEST) PTY LTD (ACN 078 622 821) | Second Defendant |
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JUDGE: | Croft J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 December 2023 |
DATE OF JUDGMENT: | 15 December 2023 |
CASE MAY BE CITED AS: | Carlisle Homes Pty Ltd v Nexus Office Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 753 |
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EXPERT DETERMINATION — Consideration of nature and ambit of the dispute referred to expert for determination — Construction of agreement engaging the expert — Whether expert discharged mandate and produced a binding determination — Legal & General Lift of Australia v A Hudson Pty Ltd [1985] 1 NSWLR 314 — Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2015] VSC 104 — Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636 — Schott AG v Melton Willows Pty Ltd [2023] VSC 364 — Bevendale Pty Ltd v Lucky Eights Pty Ltd [2020] VSCA 312 — Commonwealth v Wawbe Pty Ltd [1998] VSC 82 — Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 — Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr JAF Twigg KC and TG Sedal | Lander & Rogers |
| For the Defendants | MA Robins KC and NM Elias | HWL Ebsworth Lawyers |
HIS HONOUR:
Preliminary question
By orders made on 13 October 2023, the following question was ordered to be heard and determined before the trial of any other issues in these proceedings:
Did Tony Moleta (the Expert), fail to determine the Disputes (as that term is defined at Item 2 of the Schedule to the Expert Determination Deed) in accordance with the Agreement for Lease as entered into on about 28 March 2019 and the Expert Determination Deed as entered into on 25 August 2021 and varied by the parties on 13 October 2021, such that the parties are not bound by the Expert’s determination dated 22 December 2021 as clarified by the Expert’s letter dated 9 February 2022? (“the Preliminary Question”).
The plaintiff, Carlisle Homes Pty Ltd (ACN 106 263 209) (“Carlisle”), submits that the Court should answer this question “Yes”. The defendants, Nexus Office Pty Ltd (ACN 065 049 292) (“Nexus”) and Salta Properties (West) Pty Ltd (ACN 078 622 821) (“Salta”), on the other hand, submit that the Court should answer this question “No” on the basis that the Expert properly and appropriately determined the Disputes and that the parties are bound by that determination.
Background
Agreement for Lease
The Agreement for Lease (“AFL”) dated 28 March 2018 was entered into between the plaintiff, Carlisle, and the first defendant, Nexus, as trustee for 633‑647 Springvale Road Unit Trust in relation to the premises on the ground floor (part), levels 1 and 2 and level 3 (part) at 633 Springvale Road, Mulgrave, Victoria (“the Premises”).
Nexus and Salta are the landlords, respectively, of the following premises: Ground Floor, Levels 1 and 2 and Part Level 3, 2 Nexus Court, Mulgrave, Victoria (“the 2 Nexus Premises”); and the Premises. Nexus and Carlisle executed the AFL and Salta and Carlisle executed a deed of surrender of Lease dated 28 March 2019 between Salta (as landlord) and Carlisle (as tenant) in respect of the 2 Nexus Premises. The effect of these agreements was to provide for Carlisle to transition as tenant from the 2 Nexus Premises to the Premises.
Pursuant to the AFL, Nexus and Carlisle agreed, among other things, as follows:
·Nexus must provide Carlisle Homes with at least 10 business days written notice of the anticipated Date of Practical Completion and will make the Nexus Superintendent available to undertake a joint inspection of the Landlord’s Works (clause 9.1);
·‘Practical Completion’ is defined to mean when:
(a)the Landlord's Works are substantially completed except for:
(i)any minor omissions or defects which did not prevent the Premises from being reasonably capable of being used for their intended purpose; or
(ii)any works which cannot be completed until after the completion of the Fitout and which do not delay or hinder the completion of the Fitout;
…
(c)all omissions or defects have been rectified other than items: …
(ii)which do not cause any legal impediment to Carlisle Homes’ use or occupation of the Premises;
…
(v)which do not prevent the Premises from being used for the intended Permitted Use.
·Within two Business Days after Nexus notifies Carlisle that Nexus considers that Practical Completion has occurred, Carlisle must (acting reasonably), together with Nexus, inspect the Landlord’s Works and give written notice to Nexus of any defect in or omission from the Landlord’s Works requiring further work before Practical Completion can be reached (clause 9.2);
·Once either (clause 9.3):
(a) the parties agree during or after the Inspection under clause 9.2 that there is no Further Work or any Further Work has been completed; or
(b) the Landlord’s Architect, acting in good faith, professionally and without bias to either party, certifies that the Further Work:
(i) has been completed; or
(ii) is not necessary to be performed in order for Practical Completion to be achieved,
Nexus will procure the issue by the Landlord’s Architect of a certificate stating that Practical Completion has been reached and specifying the date on which Practical Completion was reached;
·On the Commencement Date, Nexus will grant to Carlisle and Carlisle will take from Nexus a lease of the Premises for the Term commencing on the Commencement Date (clause 2(a));
·The Commencement Date is to be determined under clause 16 of the AFL, which provides that:
(a)The Commencement Date of the Lease will be the last to occur of:
(i)the day after the day on which the Certificate of Practical Completion is issued;
(ii)the day that is twelve (12) weeks after the Tenant is first granted non‑exclusive access to the Ground Floor of the Premises;
(iii)the day that is eight (8) weeks after the Tenant is first granted non‑exclusive access to Levels 1, 2 and Part Level 3 of the Premises; and
(iv)the day that water, gas, power and telecommunications are available for connection to the Premises (but the Tenant will be responsible for arranging connection of the services).
Under the Deed of Surrender, Carlisle and Salta agreed, among other things, that Carlisle would surrender the 2 Nexus Premises on the date that is eight weeks after the Commencement Date as defined in the AFL (item 4 of the Reference Schedule to the Deed of Surrender of Lease).
The AFL also makes provision for dispute resolution:
·clause 28.1 provides that:
If a dispute between the Landlord and Tenant arises out of or in connection with this Agreement each party must before instituting any proceedings against the other … furnish in writing to the other party detailed particulars of the dispute and/or claim (“Claim”);
·clause 28.3 provides that:
If the Claim is not accepted within 5 Working Days or the party making the Claim is dissatisfied with the Reply then a dispute is deemed to exist and must be referred for written determination to the Expert[1] …;
·clause 28.5 provides, among other things, that the Expert’s determination is conclusive and binds both parties, and that the Expert will provide reasons for his or her determination, as a condition of his or her appointment; and
·clause 28.6 requires the parties to promptly enter into a Deed with the Expert to incorporate the terms set out in clause 28.5 of the AFL.
[1]“Expert” was defined under clause 1.1 of the AFL as ‘Rider Levett Bucknall Victoria Pty Ltd or such other expert as agreed between the Landlord and the Tenant’.
Expert determination
On 6 July 2021, Carlisle made a “Claim” pursuant to clauses 9.4 and 28.1 of the AFL, by issuing a notice of Dispute (“NOD”). In the NOD, Carlisle alleged that:
(a) Practical Completion was not achieved on 29 April 2021 because there were 33 items of incomplete and defective works which would, inter alia, affect Carlisle’s use or occupation of the Premises;
(b) as Practical Completion was not achieved on 29 April 2021, the Certificate should not have been issued; and
(c) as a result, the Lease did not commence on 14 May 2021.
On 13 July 2021, Nexus issued a reply to the NOD (“RNOD”) under clause 28.2 of the AFL. Nexus joined issue with Carlisle, disputing, inter alia, that the items of alleged incomplete and defective work identified in the NOD were incomplete or defective, and disputing whether the alleged incomplete and defective works would affect Carlisle’s use of the Premises. Nexus stated that it ‘rejects the whole of the Claim as set out in the Notice of Dispute dated 6 July 2021’. As such, Nexus did not accept the Claim within five Working Days and so, by operation of clause 28.3 of the AFL, a dispute was deemed to exist on 13 July 2021 which ‘must be referred for written determination to the Expert’.
On 25 August 2021, the parties executed the Expert Determination Deed pursuant to clause 28.6 of the AFL.
On 17 September 2021, Carlisle raised a further Claim by issuing a further notice of dispute relying upon two specific defects (disability access and location of the ground floor door) that it said meant that Practical Completion had not been achieved, that the Certificate of Practical Completion should not have been issued and that the Lease accordingly did not commence on 14 May 2021. On 1 October 2021, Nexus served a reply to the further notice, in which it joined issue. In October 2021, the parties agreed by further deed to incorporate the further notice of dispute in the expert determination process: the further deed being the Variation to the Expert Determination Deed which was entered into on 13 October 2021.
Applicable law
The seminal authority on the question of whether an expert’s determination made under a contract is binding upon the parties is the judgment of McHugh JA in Legal & General Lift of Australia Ltd v A Hudson Pty Ltd (“Legal & General”).[2] His Honour’s reasons have been considered and affirmed in Victoria in a number of cases, including in Epping Hotels Pty Ltd v Serene Hotels Pty Ltd (“Epping Hotels”) and with reference to some other authorities, as follows:[3]
[2][1985] 1 NSWLR 314.
[3][2015] VSC 104 (Croft J) (citations omitted).
55 … [I]t has long been accepted that in order to determine whether a valuation is binding upon the parties, it is necessary to consider the terms of the parties’ contract — the valuer’s “charter” — that is, the terms of the lease. In Legal & General Life of Australia Ltd v A Hudson Pty Ltd, McHugh JA (as his Honour then was) restated the law governing when a valuation will be binding upon the parties. The following passage from his Honour’s judgment is very well known but it is nevertheless helpful in the present context to set it out as follows:
In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v Kenwood Manufacturing Co Ltd. A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer’s mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is “final and binding on the parties”. By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah; Arenson v Arenson. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. 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.
56 As McHugh JA makes clear, the central question for determination is: “Was the valuation made in accordance with the contract?” Put differently, but in equally clear language, Nettle JA in AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [[2006] VSCA 173] said (Maxwell P and Bongiorno AJA agreeing):
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.
57 In Commonwealth v Wawbe Pty Ltd [[1998] VSC 82], Gillard J agreed with McHugh JA’s statement of the law in Legal & General before stating that:
In my opinion it follows that the court should consider three questions —
(i)What did the parties agree to remit to the expert?
(ii)Did the valuer make a mistake and if so what was the nature of the mistake?
(iii)Is the mistake of such a kind which demonstrates that the valuation was not made in accordance with the terms of the contract and accordingly does not bind the parties?
In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd,[4] Maxwell P (with whom Ashley and Redlich JJA agreed) said:
The question, first and last, is one of contract. What did the parties bargain for? If the determination does not satisfy the terms of the contract, then it is of no effect and, at the option of the parties, must be done again. If, on the other hand, the determination complies with the contract, the parties are bound by it.
In Dura[5] their Honours distinguished between a determination involving a mere “mechanical computation”, requiring no exercise of judgment, and a “discretionary judgment”, which even if erroneous is not to be subject to review if the expert has complied with the contract.
[4](2013) 41 VR 636 (“Dura”) at 643, [15].
[5](2013) 41 VR 636 at 645–646, [19]–[22].
Similarly, in Schott AG v Melton Willows Pty Ltd, Stynes J said:[6]
54.The question to be determined by the Court in deciding whether the Expert Determination is open to review on the ground of error is whether or not the Expert carried out the task which he was contractually required to undertake.
55.If the Expert carried out that task, the fact that he made errors or took irrelevant matters into account does not render the Determination challengeable. However, if objectively ascertained, the Expert did not perform the task, but rather performed some different task or carried out the task in a way that was not within the contractual contemplation of the parties, then the Determination may be liable to be set aside.
[6][2023] VSC 364 at [54]–[55].
Similarly, in Bevendale Pty Ltd v Lucky Eights Pty Ltd,[7] the Court of Appeal approved the approach of McHugh JA in Legal & General and further cited the judgment of Gillard J in Commonwealth v Wawbe Pty Ltd[8] with approval where his Honour summarised the three questions that the Court should consider (as set out in the passage from Epping Hotels which is set out above).
[7][2020] VSCA 312 at [256] (per Kyrou and McLeish JJA).
[8][1998] VSC 82 at [45].
Thus it is clear from the authorities that the courts are reluctant to examine an expert determination and will only do so if it is plainly wrong and contrary to the contractual mandate under which the Expert has been engaged.
It follows that the identification of the matter or matters that the parties have entrusted to expert determination turns on a proper construction of the contract.[9] Depending upon the terms of the contract, questions of mixed fact and law, or, for that matter, pure questions of law, may be left for the binding determination of an expert.[10] A dispute resolution clause, including a clause by which the determination of a dispute is entrusted to an expert, is to be construed like any other clause in a commercial contract — that is, by reference to the language used by the parties, the circumstances known to them and the commercial purpose or objects to be secured by the contract.[11] In other words, ordinary principles of construction apply to contracts for an expert determination.
[9]Sino Iron Pty Ltd v Mineralogy Pty Ltd (2019) 55 WAR 89 at 333 [198].
[10]Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd [2015] NSWCA 275; (2015) 90 NSWLR 367 at 385 [76].
[11]Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155 at [79]–[80] per Bell P (with whom Payne and McCallum JJA agreed).
It is also now well settled that contractual constructions which work commercial inconvenience or make commercial nonsense are to be avoided,[12] and the task before the Court is to achieve a businesslike and commercial common‑sense construction.[13] But where the contract in question is unambiguous, there is a limit as to the extent the Court may have regard to surrounding circumstances. Thus, as the High Court stressed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd:[14]
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[12]Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640 at 656–7 [35]; 661–662 at [47]–[51].
[13]MLW Technology Pty Ltd v May [2005] VSCA 29 per Gillard AJA, Winneke P and Buchanan JA agreeing at [49]–[53] and [76]–[81].
[14](2015) 256 CLR 104 at 116 [48].
Helpful observations in relation to the commercial purpose of a procedure providing for expert determination were made by Almond J in Funtastic Ltd v Madman Film and Media Pty Ltd, as follows:[15]
Here, the independent accountant was appointed as an expert, not an arbitrator, in order to provide an expeditious and cost‑effective means of resolving disagreements with respect to the draft completion accounts. For this confined purpose, the parties eschewed the more formal rules and procedures of arbitration or curial process. Instead, they agreed to rely on the expertise and skill of the independent accountant, a highly experienced person in the field. The parties granted to the independent accountant a wide discretion to decide matters of procedure for determination of the draft completion accounts and were required to give all reasonable assistance requested by the independent accountant. The SSA contained a tight timetable for the provision of submissions and preparation of the independent accountant's report. The parties were required to instruct the independent accountant to make a decision on the disagreement as soon as practicable after receiving any submissions from the parties. It is evident that there was an emphasis on expedition and prompt resolution of disagreements regarding the draft completion accounts.
[15][2016] VSC 708 at [54] (citations omitted).
Expert’s task
What was the dispute referred to the Expert?
The task the Expert was required to perform is expressly provided for in the Expert Determination Deed which was executed by the parties on 25 August 2021. The Recitals to that Deed state:
RECITALS
A. Nexus and Carlisle have entered into the AFL.
B. On 6 July 2021, Carlisle issued a Notice of Dispute to Nexus pursuant to clause 28.1 of the AFL.
C. On 13 July 2021, Nexus issued a Reply to the Notice of Dispute dated 6 July 2021 pursuant to clause 28.2 of the AFL.
D. Pursuant to clause 28.3 of the AFL, Nexus and Carlisle have referred the Dispute to Tony Moleta of Rider Levett Bucknall Victoria Pty Ltd for written expert determination.
E. Pursuant to clause 28.6 of the AFL, Nexus, Carlisle and the Expert agree to have the Dispute determined by the Expert on the terms set out in this Deed.
Clause 1 defines “Dispute” as having the meaning in Item 2 of the Schedule and clause 2 states that the parties acknowledge and agree that:
a.The Expert will determine the matters listed in Item 2 of the Schedule in the form of a written determination, and will not determine any other matter unless agreed in writing by the Parties and the Expert;
b.The Expert’s determination is conclusive and binds both Parties.
Critically, Item 2 of the Schedule provides that the Expert is to determine:
a.Whether Nexus achieved Practical Completion on 29 April 2021, in accordance with clause 9 of the AFL.
b.Whether the surrender date for the 2 Nexus Premises is 9 July 2021, pursuant to clause 35 of the AFL.
c.Whether the Commencement Date of the lease in respect of the Premises occurred on 14 May 2021, pursuant to clause 16(a) of the AFL.
d.Whether the Certificate of Practical Completion dated 13 May 2021 should have been issued, pursuant to clause 9 of the AFL.
e.If Practical Completion was not achieved on 29 April 2021, has it yet been achieved? If yes, on what date was it achieved and on what date was the 2 Nexus Court lease surrendered and what is the Commencement Date for the lease of the Premises?
On 13 October 2021, Nexus and Carlisle and the Expert entered into a Variation to the Expert Determination Deed (“the Variation Deed”).
The Recitals to the Variation Deed provide:
A.On 27 August 2021, Nexus, Carlisle and the Expert entered into an Expert Determination Deed.
B.On 17 September 2021, Carlisle issued a further Notice of Dispute to Nexus pursuant to clause 28.1 of the AFL (“Further Notice”).
C.On 1 October 2021, Nexus issued a Reply to the Further Notice pursuant to clause 28.2 of the AFL.
D.The Parties agree to incorporate the Further Notice for the purpose of the Determination and to Amend the Expert Determination Deed in accordance with this Variation Deed to give effect to this.
Clause 2 of the Variation Deed provide for amendment of the Expert Determination Deed as follows:
(a)Clause 2 is amended as follows:
2.EXPERT DETERMINATION
The Parties acknowledge and agree that:
(a)The Expert will determine the matters listed in Item 2 of the Schedule in the form of a written determination, and will not determine any other matter unless agreed in writing by the Parties and the Expert;
(b)If the Expert determines that Practical Completion has occurred in accordance with the terms of the AFL, Carlisle acknowledge, agrees and undertakes not to rely on any further matter or issue any further dispute notice pursuant to clause 28 of the AFL or otherwise, in relation to the matters listed in Item 2 and/or clause 9 of the AFL; and
(c)The Expert's determination is conclusive and binds both Parties.
(d)For the avoidance of doubt, if the Authority issues a notice after the Expert delivers his written Determination clause 2(b) applies.
The provision was also made for further written submissions by the parties as a consequence of the variations.
Thus the parties entrusted to the Expert for determination the five questions set out in Item 2 of the Schedule. The Expert was simply required to answer the questions that were put to him to resolve the Dispute as so defined.
Did the Expert perform the agreed task?
Carlisle’s submissions
Carlisle submits that the Expert made the following mistakes:
(a) he refused to answer Questions (d) and (e) as set out in Item 2 of the Schedule;
(b) he misconstrued Question (a) as set out in Item 2 of the Schedule as a question about whether the Certificate of Practical Completion satisfied “the operational requirements of Clause 9”;
(c) because of the abovementioned mistakes, he failed to consider, determine or give reasons in relation to the matters raised in Carlisle’s Claim which (together with the rejection of that Claim by Nexus) comprised the dispute that was deemed to exist under clause 28.3 of the AFL and which had been referred to him for determination, namely:
(iii) the alleged defects and incomplete works (including the expert reports relied upon by the parties);
(iv) whether Practical Completion was in fact achieved on 29 April 2021; and
(v) whether the Certificate of Practical Completion should have been issued; and
(d) he compounded his errors in misconstruing question (a) and refusing to answer question (d) when considering questions (b) and (c), the answers to which were contingent upon a determination of whether Practical Completion had in fact been achieved and whether the Certificate of Practical Completion should have been issued.
Thus it is submitted that the Expert did not perform the task he was engaged to perform; he performed a different task, and determined matters which were not in dispute and that he was not engaged to determine — by determining whether the Certificate of Practical Completion was affected by bad faith, unprofessionalism or bias, and whether that Certificate satisfied the “operational requirements” of clause 9 of the AFL. Moreover, it was submitted that the parties chose the Expert for his expertise, including his expertise to determine whether in fact Practical Completion of the Landlord’s Works was achieved, the determination of which would have enabled him to answer each of the questions referred to him for determination logically and consistently. It is said, however, that the Expert did not bring his expertise to bear and that by refusing to answer two of the questions and his reasons in relation to the questions that he did answer simply recited matters that were not in dispute.
It follows, it is said, that the Expert made no assessment of the alleged defects and incomplete work, he did not consider whether Practical Completion had in fact been achieved, he did not determine whether the Certificate of Practical Completion should have been issued, and he gave no reasons in relation to those matters. Consequently, it is said that the Expert simply failed to carry out the task which the contract required he undertake whereby he undertook a different task that was not referred to him under the provisions of the contract. On the basis of the authorities to which reference has been made it is contended that as the Expert did not carry out his contractual mandate and so failed to determine the dispute. Thus, it is said, the Expert Determination dated 22 December 2021 was not made in accordance with the contract, and therefore the parties are not bound by it.
Nexus’s submissions
In its submissions Nexus emphasises that as a matter of contract the parties entrusted to the Expert the determination of the five questions as set out in Item 2 of the Schedule to the Expert Determination Deed. In this context, it is stressed that he was simply required to answer those questions that were put to him in order to resolve the Dispute, as so defined, and was not required to determine any “dispute” or matter outside the five matters specifically set out in that Schedule. Clause 2(a) of the Deed, as amended, made it plain, it is said, that the Expert “will not determine any other matter unless agreed in writing by the Parties and the Expert”. Consequently, it is said that it is not permissible for Carlisle to seek now to “reverse engineer” some ambiguity into Item 2 of the Schedule by recourse to supposed background or extrinsic circumstances where the plain, simple and unambiguous language of Item 2 of the Schedule was and is clear and only susceptible of one meaning. Thus it is said that if Carlisle had wished the Expert to determine any other specific matters, such as a notional Scott Schedule of supposed defects or incomplete items, then it was incumbent upon it to include such matters in Item 2 of the Schedule; but it did not do so.
It is observed that in its submissions Carlisle contends that a series of other matters or “Disputes” were supposedly referred to the Expert, as follows:[16]
[16]Plaintiff’s Outline of Submissions on the Preliminary Question (3 November 2023), [10]–[14].
10. The dispute referred to the Expert was the dispute that was the [sic] deemed to exist by operation of clause 28.3 of the AFL and which ‘must be referred for written determination to the Expert’ pursuant to clause 28.3 of the AFL. That dispute was brought into existence by, and comprised of, the Claim made by Carlisle and the rejection of the Claim by Nexus. The Expert was instructed to answer five questions in determining the dispute.
11. In its notices of dispute forming its “Claim” under clause 28.1 of the AFL, Carlisle alleged that:
(a) Practical Completion was not achieved on 29 April 2021, because there were incomplete and defective works which would, inter alia, affect Carlisle’s use or occupation of the Premises;
(b) as Practical Completion was not achieved on 29 April 2021, the Certificate should not have been issued; and
(c) as a result, the Lease did not commence on 14 May 2021.
12. Nexus joined issue in its replies to Carlisle’s notices of dispute.
13. Neither party issued a Claim questioning whether the ‘operational requirements of clause 9 were satisfied’, and no dispute to that effect was referred to the Expert.
14. Similarly, neither party issued a Claim alleging bad faith, unprofessionalism, or bias on the part of the Landlord’s Architect.
These submissions, Nexus contends, impermissibly ignore the plain and unambiguous language of Item 2 of the Schedule. In particular, it is said that the criticism in paragraph 13 of Carlisle’s submissions, as set out above, that the Expert erroneously had regard to the “operational requirements of Clause 9” of the AFL is misconceived. Nexus submits that the principal question in paragraph (a) of Item 2 of the Schedule was whether the Practical Completion was “achieved in accordance with clause 9”. This necessarily required the Expert to engage with the requirements of clause 9, be they “operational” or otherwise. Nexus contends that this is exactly what the Expert correctly then did.
It is submitted further that the construction contended for by Carlisle of the Expert Determination Deed, and clause 9 of the AFL, by which it seeks to go behind the five questions set out in Item 2 of the Schedule, in reality asked of the Expert to determine purely factual matters as to the question of Practical Completion rather than to make a determination of the mixed question of fact and law inherent in and following from the definition of “Practical Completion” in the AFL; provisions upon which the Expert Determination regime provided for as its foundation. In this respect, reference should be made to the definition of “Practical Completion” in the AFL and, further, regard should be had to the way in which question (a) in Item 2 of the Schedule is cast and directed, namely whether: “Nexus achieved Practical Completion on 29 April 2021, in accordance with clause 9 of the AFL”. Thus, Nexus emphasises in its submissions that this is not a purely factual question and that the Expert is not being asked whether as a matter of factual or physical reality — on the ground, so to speak — Practical Completion was achieved; hence the reference in submissions, as set out previously, referring to specific matters that might have been addressed or utilised were this the Experts’ task, such as a notional Scott Schedule.
Attention is now directed, in the Nexus submissions, more specifically, to the four supposed mistakes made by the Expert as contended for by Carlisle.[17]
The Expert did not misconstrue question (a)
[17]See Plaintiff’s Outline of Submissions on the Preliminary Question (3 November 2023), [15].
On 22 December 2021, the Expert issued an Expert Determination addressing questions (a), (b) and (c) in Item 2 of the Schedule. At paragraph 3 of that Determination, the Expert, it is said, correctly identified the questions he was required to determine.
3.As Expert, I am to determine the following which relate to the First Dispute
a)Whether Nexus achieved Practical Completion on 29 April 2021, in accordance with clause 9 of the AFL.
b)Whether the surrender date for the 2 Nexus Premises is 9 July 2021, pursuant to clause 35 of the AFL.
c)Whether the Commencement Date of the lease in respect of the Premises occurred on 14 May 2021, pursuant to clause 16(a) of the AFL.
d)Whether the Certificate of Practical Completion dated 13 May 2021 should have been issued, pursuant to clause 9 of the AFL.
e)If Practical Completion was not achieved on 29 April 2021, has it been achieved? If yes, on what date was it achieved and on what date was the 2 Nexus Court lease surrendered and what is the Commencement Date for the lease of the Premises?
It was stated, at paragraph 5 of the Determination, that he had considered the various submissions made by the parties.
It is submitted by Nexus that in answering question (a), the Expert first referred, correctly, to various clauses of the AFL, including clause 9 and then provided the following summary of his reasoning (at parts H and I):
I, as Expert, have used the following reasoning as the basis of my Determination:
a) I have no reason to doubt that the Landlord’s Architect, in its certification, was ‘acting in good faith, professionally and without bias to either party’.
b) The Certificate of Practical Completion explicitly states it has been issued in accordance with Clause 9.3(b) of the AFL. Therefore, it is reasonably considered that all requirements and conditions of Practical Completion have, in the professional and unbiased view of the Landlord’s Architect acting in good faith, been satisfied.
c) Clause 9.3 requires ‘a certificate stating that Practical Completion has been reached and specifying the date on which Practical Completion was reached…’ is to be issued by the Landlord’s Architect. The Landlord’s Architect has clearly addressed these requirements on the Certificate of Practical Completion.
d) The Certificate of Practical Completion addresses Further Work items listed in the Further Works Notice dated 4 May 2021 issued by the Tenant’s Representative, relating to items within the Premises. Practical Completion, as defined within the AFL, clearly emphasises omissions and defects relating to the Premises.
e) Whilst Clause 9.2 states ‘the Tenant must (acting reasonably) together with the Landlord, inspect the Landlord’s Works and give written notice to the Landlord of any defect in or omission from the Landlord’s Works requiring further work before Practical Completion can be reached’, the definition of Practical Completion specifically and consistently refers to the Premises.
f) Notwithstanding whether the requirements of Practical Completion under the head building contract may or may not be totally consistent with those requirements of the AFL, Practical Completion under the head building contract was achieved on 29 April 2021 as certified by the Superintendent.
My Determination is that Practical Completion was achieved on 29 April 2021 as the Certificate of Practical Completion was issued properly in accordance with Clause 9 of the AFL. This Determination does not address whether a Certificate of Practical Completion should or should not have been issued (to be Determined separately), but rather that a certificate was issued by satisfying the operational requirements of Clause 9.
Nexus further submits that the Expert properly answered question (a) as it was put to him and in so doing resolved the dispute in relation to whether Practical Completion was achieved on 29 April 2021 in accordance with clause 9 of the AFL. He did so having considered the submissions made by the parties, which submissions included the extensive reports in relation to alleged defects referred to at paragraph 26 of Ms Jaffe’s affidavit.[18] The alleged defects were also addressed in detail in the Nexus submissions, which, it is said, relevantly contended that:
(a) none of the matters relied upon by Carlisle gave rise to a failure to substantially complete works or a defect or omission of a nature that prevents Practical Completion having occurred as at 29 April 2021.
(b) in any event, under the AFL, Practical Completion was achieved when the Landlord’s Architect issued the Certificate of Practical Completion to Nexus under clause 9.3(b), noting that there was no allegation that the Architect lacked good faith, or acted unprofessionally or in a biased manner, or that the Certificate of Practical Completion did not otherwise meet the requirements of clause 9. Indeed, as the Expert correctly noted, the Architect’s certificate expressly referred to his compliance with clause 9.3(b).[19] Under the plain and unambiguous language of clause 9, once the Landlord’s Architect issued the Certificate of Practical Completion to Nexus under clause 9.3(b), then absent any of the express vitiating matters of him not “acting in good faith, professionally and without bias to either party”, then clause 9.3 provided that Practical Completion had then occurred. In those circumstances there was no warrant for the Expert to “go behind” the Certificate to reconsider the content of what it certified. This was simply not a task referred to him under Item 2 of the Schedule.
[18]Affidavit of Rebecca Caroline Jaffe (27 July 2023).
[19]Affidavit of Rebecca Caroline Jaffe (27 July 2023), exhibit RCJ‑1.288.
Moreover, it is contended that the complaints advanced by Carlisle in paragraph 15(c) and 21 of its submissions[20] do not demonstrate that the Expert failed to undertake the task he was required to undertake. The claim that the Expert failed to consider the alleged defects should not, Nexus contends, be accepted in circumstances where the Expert has expressly stated that he has considered the Carlisle submissions. Its complaint about the adequacy of the Expert’s reasons in relation to the alleged defects must be assessed in light of the commercial purpose served by the procedure providing for the Expert Determination. Here, it was open to the Expert on the material before him to form the view that none of the alleged defects prevented Practical Completion from occurring on 29 April 2021, as Nexus had submitted. Similarly, it was open to the Expert to form the view that in answering question (a) of Item 2 of the Schedule, it was sufficient for Practical Completion to be achieved in accordance with clause 9 if a Certificate of Practical Completion was issued in good faith, professionally and without bias under clause 9.3(b), that addressed the items in the Further Works Notice and was otherwise issued in accordance with clause 9 of the AFL. The erroneous criticism expressed in the Carlisle submissions that the Expert failed to perform the task he was engaged to perform[21] is quite misplaced — the Expert was, Nexus emphasises, obliged to consider whether the Architect’s Certificate complied with clause 9.3(b), and absent any of the stated vitiating matters, it plainly did. Rather than demonstrating error, it is said that the Expert answered in terms question (a) as set out in Item 2 of the Schedule and his reasons for determination disclosed a logical path of reasoning to a conclusion that was plainly open to him.
[20]Plaintiff’s Outline of Submissions on the Preliminary Question (3 November 2023):
15.The Expert made the following mistakes:
…
(c)because of the aforementioned mistakes, he failed to consider, determine or give reasons in relation to the matters raised in Carlisle’s Claim which (together with Nexus’s rejection of the Claim) comprised the dispute that was deemed to exist under clause 28.3 of the AFL and which had been referred to him for determination, namely:
i.the alleged defects and incomplete works (including the expert reports relied upon by the parties);
ii.whether Practical Completion was in fact achieved on 29 April 2021; and
iii.whether the Certificate should have been issued; and
…
21.In this case, the Expert made no assessment of the alleged defects and incomplete work, he did not consider whether Practical Completion had in fact been achieved, he did not determine whether the Certificate should have been issued, and he gave no reasons in relation to those matters. The Expert simply failed to carry out the task which the contract required he undertake. He undertook a different task, that was not referred to him.
[21]Plaintiff’s Outline of Submissions (3 November 2023), esp. [16].
Further, it is submitted that even were the Court to disagree with the outcome of the Expert’s determination on question (a), contrary to Nexus’s primary case, then that is not enough. Here, the questions referred to the Expert in Item 2 of the Schedule, and in particular question (a), were not mere “mechanical computations” (with no exercise of judgment) but plainly sought the Expert’s “discretionary judgment” as to whether Practical Completion had been achieved under clause 9 of the AFL. As such, it is not enough for Carlisle to point to an error by the Expert in the exercise of that “discretionary judgment” as long as the Expert complied with the Expert Determination Deed, which here he plainly did.
Thus Nexus contends that the parties are bound by the Expert’s determination.
The Expert did not refuse to answer questions (d) and (e)
On 9 February 2022 after receiving further submissions from the parties as to whether, in light of the earlier determination, the Expert was required to answer questions (d) and (e), the Expert provided a further determination. The Expert there:
(a) referred to his determination that Practical Completion had been achieved on 29 April 2021;
(b) referred to clause 2(b) of the Variation Deed, which provided that:
If the Expert determines that Practical Completion has occurred in accordance with the terms of the AFL, Carlisle acknowledge, agrees and undertakes not to rely on any further matter or issue any further dispute notice pursuant to clause 28 of the AFL or otherwise, in relation to the matters listed in Item 2 and/or clause 9 of the AFL.
(c) considered that in light of those matters, questions (d) and (e) were not required to be determined by the Expert.
Notwithstanding this view, the Expert proceeded to address each of questions (d) and (e).
In respect of question (e), the Expert stated in substance that the question was now void, on the basis that it only arose to be answered in the event that he did not determine that Practical Completion was achieved on 29 April 2021. Nexus submits that this is plainly correct and that this conclusion by the Expert is unimpeachable and, with respect to Carlisle, it was implicit from his original answer to question (a) of Item 2 of the Schedule.
In respect of question (d), the Expert stated in substance that this question was not relevant to the Disputes between the parties, noting that Carlisle’s objections to the Certificate of Practical Completion on this basis were properly addressed to the Landlord’s Architect, rather than to Nexus. Again, it is submitted that this conclusion is unimpeachable and is implicit in his original answer to question (a) of Item 2 of the Schedule, which answer effectively rendered any answer to this question otiose.
Moreover, Nexus submits that given the Expert’s findings that the Landlord’s Architect issued the certificate: acting in good faith, professionally and without bias to either party; in accordance with the operational requirements of clause 9; and having addressed the items in the Further Work Notice, it became fanciful to suggest that the Expert would conclude that the Certificate of Practical Completion should not have been issued. This is especially so in circumstances where the reasons why the alleged defects did not prevent Practical Completion from being achieved were dealt with at length by Nexus in its submissions to the Expert.
Additionally, it is submitted that even if the Expert did determine that the Landlord’s Architect should not have issued the Certificate of Practical Completion, this would not provide a basis for Carlisle to reopen the question of whether Practical Completion had been achieved on 29 April 2021 under clause 9 of the AFL. It is said that this is so both by reason of clause 9.4 of the AFL, which permits disputes to be ventilated about whether a certificate should be issued, but does not provide for the resolution of disputes about whether a certificate that has been issued may be set aside, and (even assuming such an issued certificate could otherwise be set aside) by reason of Carlisle’s agreement pursuant to clause 2(b) of the Variation Deed. The Expert’s having determined that Practical Completion was achieved on 29 April 2021, clause 2(b) operates to prevent it from relying on any further matter or issuing any further dispute in relation to the matters listed in Item 2 of the Schedule or clause 9, which matters include whether and when Practical Completion was achieved.
Consequently, it is submitted that the Expert performed the task required of him under the AFL in respect of the determination of questions (d) and (e) but that even if he did not, the further agitation of question (d) will not alter the rights as between Nexus and Carlisle under the AFL regardless of how that question is ultimately resolved as it cannot alter the Expert’s determination that Practical Completion was achieved on 29 April 2021.
The Expert was not mistaken in his answers to questions (b) and (c)
Nexus contends that the Expert, having correctly determined question (a) in accordance with the AFL, made no mistake in answering questions (b) and (c) which are contingent upon the answer to question (a). Accordingly, it is contended that the parties are bound by his determination in relation to questions (b) and (c) also.
Conclusion
For the preceding reasons, I am of the view that, on the bases advanced in the submissions by Nexus, the Expert did properly and appropriately determine each of the Disputes in accordance with the AFL and the Expert Determination Deed as varied by the parties. I do not accept the submissions by Carlisle to the contrary because, as indicated previously, they are, in my view, based on a failure to appreciate that the Expert’s task was not, in effect, to replicate the function of the Architect in reviewing the physical state of the premises. This is to ignore the Expert’s agreed and defined primary task — set out in question (a) of Item 2 of the Schedule to the Expert Determination Deed — which was to determine Practical Completion, in the context of clause 9 of the AFL.[22] Consequently, the parties are bound by that determination.
[22]See above at [31].
Moreover, I accept that even if the Court were to find that the Expert did not determine question (d) in circumstances where he was required to do so, the parties remain bound by the Expert’s determination in respect of questions (a) to (c), and in particular by his determination that Practical Completion was achieved on 29 April 2021.
Orders
The parties are to bring in orders to give effect to these reasons.
I reserve the question of costs and will hear the parties on this issue if necessary.
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