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Expert Group International Pty Ltd v TransAction Solutions Ltd

Expert Group International Pty Ltd v TransAction Solutions Ltd

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Case Copied 24 June 2025 77 min read

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Supreme Court

New South Wales

Medium Neutral Citation: Expert Group International Pty Ltd v TransAction Solutions Ltd [2025] NSWSC 575
Hearing dates: 14-15 April 2025
Date of orders: 24 June 2025
Decision date: 24 June 2025
Jurisdiction: Equity - Commercial List
Before: Rees J
Decision:
Declaration that parties bound by expert determination.

Catchwords:
EXPERT DETERMINATION — vendor sells company for $2M plus ‘earn out’ based on EBIT x multiplier — expert determination clause requires chartered accountant of 10 years’ experience — expert determines earn-out payment is $9.7M — whether parties agreed to be bound by expert’s construction of contract — principles at [124]-[129] — purchaser raises proper construction of contract outside timeframe prescribed by expert determination clause — whether expert should have determined that matter at all — expert determination clause varied by letter appointing expert, at [146] — “manifest error” — where suggested error of law — principles at [150]-[153] — Bagata Pty Ltd v Runner Pty Ltd [2024] QCA 17 followed — construction not obviously wrong — no manifest error — parties bound.
RECTIFICATION — principles at [231]-[235] — purchaser’s board had authority to vary contract – board papers and minutes, contemporaneous documents and post-contractual conduct paint compelling picture of common intention – purchaser seeks to avoid bad deal by exploiting imperfect drafting – appropriate case for rectification.
JONES v DUNKEL — issue waiver — written communications with lawyer tendered — whether to draw inference where solicitor not called — whether unnecessary witness — no evidence that lawyer and client had confidential oral communication – inference not drawn, [11].

Cases Cited:
711 Hogben Pty Ltd v Tadros (No 2) [2016] NSWSC 1683
711 Hogben Pty Ltd v Tadros; Tadros v 711 Hogben Pty Ltd [2016] NSWSC 697
ABB Power Plants Ltd v Electricity Commission of New South Wales (t/as Pacific Power) (1995) 35 NSWLR 596
AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173
Ampolex v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405
Apand Pty Limited v The Kettle Chip Co (1994) 52 FCR 474
Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275
Bagata Pty Ltd v Runner Pty Ltd [2024] QCA 17
Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402; [1996] FCA 474
Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341; [2006] FCAFC 86
Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341; [2006] FCAFC 86
Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341; [2006] FCAFC 86
Dance with Mr D Ltd v Dirty Dancing Investments Pty Ltd [2009] NSWSC 332
Drane v Aqualyng Holdings [2017] QSC 233
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Epping Hotels Pty Ltd v Serene Hotels Pty Ltd [2015] VSC 104
Expert Group International Pty Ltd v TransAction Solutions Ltd [2023] NSWSC 543
Flowgroup plc v Co-Operative Energy…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NSWSC 575
Decision Date: 24 June 2025

CaseChat Overview and Summary

Expert Group International Pty Ltd (the vendor) sold its company to TransAction Solutions Ltd (the purchaser) for $2 million plus an earn-out based on the company's earnings before interest and tax (EBIT) multiplied by a specified factor. The contract included an expert determination clause that required a chartered accountant with 10 years' experience to determine the earn-out payment. The expert determined that the earn-out payment should be $9.7 million, which the vendor disputed. The vendor argued that the parties did not agree to be bound by the expert's construction of the contract, and that the expert had made a manifest error by determining a matter outside the scope of the expert determination clause.

The Queensland Court of Appeal examined the principles of expert determination, including the requirement for the parties to agree to be bound by the expert's determination and whether there was a manifest error in the expert's determination. The court held that the parties had agreed to be bound by the expert's determination, and that there was no manifest error in the expert's determination. The court also held that the expert determination clause had been varied by a letter appointing the expert, and that the purchaser had raised the proper construction of the contract outside the timeframe prescribed by the expert determination clause. The court followed the principles set out in Bagata Pty Ltd v Runner Pty Ltd [2024] QCA 17, and held that the construction of the contract was not obviously wrong and there was no manifest error.

The Court of Appeal also considered the issue of rectification, and held that the purchaser's board had authority to vary the contract, and that the purchaser sought to avoid a bad deal by exploiting imperfect drafting. The court held that it was an appropriate case for rectification, and that the purchaser was bound by the expert's determination. The court rejected the vendor's argument that the purchaser had waived the issue of expert determination by engaging in written communications with a lawyer, and held that there was no evidence that the lawyer and client had confidential oral communications. The court held that it was not necessary to call the lawyer as a witness.

The final orders of the court were that the purchaser was bound by the expert's determination, and that the vendor was liable to pay the purchaser $9.7 million as the earn-out payment. The vendor's application for rectification was dismissed.

Orders