Expert Determination
Chris Makin performs expert determination (“ED”) by private appointment, and from the President of the Institute of Chartered Accountants in England & Wales.
What is ED?
It is a procedure where a dispute, usually of a technical nature, is resolved by an expert whose decision is final and binding. He is appointed under contract, either by a procedure set out in a previous legal agreement (the dispute resolution clause in a shareholder agreement, for example) or by agreement at the time of the dispute between the parties and the expert.
It is not arbitration or litigation, so their rules and precedents need not be followed; the expert must act under the terms of the contract with the parties in dispute, so the three – or more – of them can agree those terms to suit the situation.
Is ED a form of ADR?
Yes and no!
It is an alternative to going to court but, unlike mediation, the parties are not in charge throughout the process. They can agree the details of the expert's appointment, they can choose the expert best suited to the dispute, and to an extent they can have an influence on the procedure which the expert will follow. But, in contrast to mediation, once the process starts it cannot be stopped, and the decision is in the hands of the expert.
Thus what the parties want should be achieved: a quick, relatively cheap and final end to their dispute.
What are its main advantages?
| Privacy: | The dispute is resolved between the parties without anyone else even being aware of its existence. |
| Speed: | The dispute could be resolved in as little as 30 days. |
| Choice: | The parties can choose an expert who understands the problem, thus often avoiding the need to appoint separate experts. |
| Final & binding: | The dispute will be resolved, without appeal. The appointed expert's determination forms a binding contract, and the courts are very reluctant to interfere with the expert's decision, under the contract he and the parties entered into. Fraud and manifest error are exceptions. |
| Impartial: | The expert is required to act fairly and to give each party the opportunity to make representations to the expert, and to respond to representations made by the other side. |
| Relationships: | After a long and hard-fought court case, the parties are unlikely to want to do business together, ever again. ED is a technical process which is far less likely to destroy business relationships. |
So why should I appoint Chris Makin as expert determiner?
You should appoint Chris Makin only on matters within his technical expertise as a chartered accountant: share valuations, remuneration packages, damages under commercial contracts, professional negligence, tax advice etc.
Chris Makin has had vast experience in business – see his CV – and he regularly performs EDs, being on the specialist panel of Determiners maintained by the President of the Institute of Chartered Accountants. So if you apply to the Institute he may well be appointed; but you can instead agree with your opponent to appoint him directly.
Chris Makin performs EDs most often in relation to share valuations, earn-outs and other areas of dispute arising after a change in ownership, or from a Section 994 (unfair prejudice) petition.
As well as being very experienced, Chris Makin s unlikely to have any conflicts of interest. After a long career in national firms, he now works as an independent specialist.
There is an important point to watch with dispute resolution clauses in shareholder agreements. It is commonplace for this clause to require the company’s auditor to determine share values when a dispute arises, but one should be aware of the following:
Auditing Practices Board Standard 5
Non-Audit Services Provided to Audit Clients
VALUATION SERVICES
54 The audit firm should not undertake an engagement to provide a valuation to an audit client where the valuation would both:
a involve a significant degree of subjective judgment; and
b have a material effect on the financial statements.
To resolve this dilemma, one should appoint Chris Makin, or some other expert from the ICAEW President's panel, to perform a totally independent expert determination.
