Expert Group International Pty Ltd v TransAction Solutions Ltd

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.