Daniel Spendlove, Alasdair Glass and Simon Fitzpatrick examine expert determination clauses, in Thomson Reuters Practical Law

Expert determination clauses commonly feature in contracts where disputes are likely to be technical in nature and would benefit from being resolved confidentially by an independent specialist in the relevant field. Helpfully, the expert determination process can be tailored to the dispute in question, reflecting its technical, rather than legal, nature, and avoiding the need for detailed factual evidence and legal submissions. Compared to arbitration or court proceedings, the process offers a relatively quick, streamlined and cost-efficient means to resolve technical disputes, such as the value of a company in a share purchase agreement (SPA) with an earn-out or deferred consideration element.

Expert determination clauses almost always specify that the outcome of the determination is final and binding on the parties, with some very limited exceptions. This can give rise to satellite disputes, as shown in two recent English decisions: WH Holding Ltd v London Stadium LLP and Nawaz-Khan and others v UAP Ltd ([2026] EWCA Civ 153; [2026] EWHC 641 (Comm)). These cases offer a number of lessons for both transactional lawyers who draft expert determination clauses and litigators who are often required to unpick the drafting and resolve any resulting disputes.

The manifest error issue

Most expert determination clauses specify that the outcome of the determination will be final and binding unless there is a manifest error. A key issue that arises in disputes over expert determinations is whether an alleged error is "manifest" so that the determination needs to be revisited or even overruled (see "Court guidance on manifest error").

WH Holding and the high bar 

The dispute in WH Holding arose from an expert determination under a concession agreement between WH Holding Ltd, the owner of West Ham United Football Club, and London Stadium LLP, the head leaseholder of the London Stadium, which was originally built for the 2012 Olympics.

Scope of overage provision. After the Olympics, London Stadium granted WH Holding rights under a 99-year concession agreement to use the stadium as its home ground. The agreement included an overage, or "anti-embarrassment", provision that entitled London Stadium to a portion of the profits if certain named shareholders disposed of their interests in WH Holding through a "qualifying transaction" exceeding a £125 million threshold. The agreement also contained an expert determination clause, which provided for the determination to be final and binding, absent manifest error, and with no right to appeal.

In November 2021, a third party acquired a stake in WH Holding through a structured transaction that involved a direct share purchase, subscription agreements and a call option. One of WH Holding's named shareholders, Mr Sullivan, granted the call option in exchange for a premium of £18 million. The call option was never exercised but Mr Sullivan retained the premium. The dispute concerned whether the call option fell within the scope of the overage provision as part of the same qualifying transaction as the share purchase. This mattered because, if assessed separately, the call option premium fell below the £125 million threshold and no additional payment would be due. If it was treated as part of the same qualifying transaction, WH Holding would need to pay an additional £3.6 million.

Expert determination. The expert construed the overage provision broadly, finding that the share purchase and the call option formed part of one arrangement and therefore the same qualifying transaction, so WH Holding was liable to pay the additional £3.6 million. WH Holding challenged the expert's determination on the basis that it contained manifest errors.

High Court decision. The High Court held that the expert's determination was non-binding on the ground of manifest error. Applying the words of the agreement and "doing the mathematics" rather than "exercising fine judgment", it concluded that the expert had misread the contractual formula in treating the share sales and the call option as a single transaction. The errors were obvious and could admit no difference of opinion. London Stadium appealed.

Court of Appeal's approach. The Court of Appeal allowed the appeal and reinstated the expert's determination. It confirmed the established principle that an expert's determination is normally final and binding unless the expert has materially departed from their instructions, engaged in fraud or the contract provides another basis for challenge, such as manifest error. It affirmed the definition of manifest error from Veba Oil Supply & Trading GmbH v Petrotrade Inc, as confirmed by the Supreme Court in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd ([2001] EWCA Civ 1832; [2023] UKSC 2). It also confirmed that the test involves two stages: the court must first identify an error and then ask whether that error was so obvious as to admit no difference of opinion. In clarifying the second stage, the court held that an interpretation will not be obviously wrong if there is a viable argument by which a court could be persuaded that it is correct, even if the court would otherwise prefer a different interpretation.

The court accepted the force of WH Holding's arguments on the proper interpretation of the concession agreement and acknowledged that, if it had been determining that question for itself, it might have arrived at the same conclusion as the High Court. Nevertheless, the definition of qualifying transaction was wide enough to encompass the whole transaction. The expert was therefore entitled to interpret the clause in the way that he did, and any error was not manifest. As there were viable arguments in support of the expert's conclusions, the determination stood.

Nawaz-Khan and the limits of finality 

In Nawaz-Khan, the High Court considered whether an expert determination arising out of an SPA contained manifest errors.

Dispute over SPA formula. The underlying transaction involved the sale of a group of companies that provided services for pension schemes. The claimants were shareholders in the holding company, Alltrust Holdings Limited (whose trading subsidiary was Alltrust Services Limited), and the defendant, UAP Ltd, was the buyer under the SPA. The SPA provided for the purchase price to be calculated by reference to a formula that included various adjustments, including additional payments for cash reserves, and amounts "held" by Alltrust in relation to a claims provision and deferred fee income.

The claims provision was a self-insurance cash reserve that was created after Alltrust had stopped maintaining its professional indemnity insurance. UAP argued that this reserve was already reflected within Alltrust's cash reserves so was double counted by the SPA formula. Deferred fee income is an accounting device whereby the portion of an invoice that is as yet unearned is shown as a liability on a company's balance sheet. UAP argued that it was therefore not a separate asset of Alltrust. UAP's case was that neither item should be treated as an additional amount to be paid under the formula as this would result in double counting and require it to pay for assets that did not exist. UAP invoked the expert determination procedure under the SPA, under which the expert's determination was final and binding, subject only to manifest error or fraud. 

Expert's reasoning. The expert determined that both the claims provision and deferred fee income should be added to the final purchase price. His reasoning was that "held" is a commonly used accounting term with reference to amounts recognised on a balance sheet, and that the SPA did not expressly require amounts to be held as cash.

Court decision. The court disagreed with the expert's reasoning and held that the plain and commercial meaning of the formula was that additions represented assets that increased the value of the acquisition, while deductions represented liabilities or items that reduced it. The court also found that the term "held" bore its ordinary meaning of holding an asset rather than any technical accounting sense. In light of this, it held that the expert's determination was manifestly wrong and was therefore not binding on the parties.

Lessons for practitioners

The Court of Appeal's decision in WH Holding was handed down after the trial in Nawaz-Khan but before judgment was given, yet it is not referred to in the Nawaz-Khan judgment. Accordingly, there is a question as to whether Nawaz-Khan was correctly decided in light of the Court of Appeal authority. There is certainly an argument that the expert's determination in Nawaz-Khan was not so obviously wrong that the alleged error was manifest.

In any case, these decisions are a timely reminder of the potential for expert determination clauses to produce the very thing that they are designed to avoid: costly, public and sometimes protracted litigation. These cases are, however, the exception rather than the norm. For every litigated expert determination clause case, there will be countless more cases where the parties did not seek to challenge the determination and the clause served its purpose. Expert determination clauses will therefore retain their place in commercial contracts where there is a potential for technical disputes, and rightly so.

When drafting expert determination clauses, practitioners should remind their clients of the high bar posed by the manifest error test. The working assumption should be that the determination will be final and binding. If parties are uncomfortable with that outcome, they should consider other dispute resolution mechanisms that do not impose a final, binding decision on the parties, such as mediation or more traditional clauses that require the parties to resolve disputes in good faith within a set time period. 

Court guidance on manifest error

The Supreme Court addressed what amounts to a manifest error in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2. The court emphasised that the question is fundamentally one of contractual interpretation, as the court is ultimately seeking to ascertain the parties' intentions when they decided to include a manifest error carve-out. Therefore, its precise meaning will depend on the particular contract and context in which it is used.

However, the courts have provided guidance on the issue, stating that a manifest error is essentially an error that is obvious or easily demonstrable without extensive investigation (IIG Capital LLC v Van Der Merwe [2007] EWHC 2631 (Ch)). "Obvious or easily demonstrable" means an oversight or mistake that is "so obvious and obviously capable of affecting the determination as to admit of no difference of opinion" (Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832). What is meant by "without extensive investigation" is necessarily a fact-sensitive issue. However, the authorities suggest that the error need not be immediately apparent, and may be established by reference to extrinsic evidence unless the contract provides otherwise, but it must nevertheless be capable of being demonstrated readily, by an investigation limited in time and scope, rather than by a full trial (Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264; ABN Amro Commercial Finance plc v McGinn and others [2014] EWHC 1674 (Comm)).

The concept of manifest error is therefore narrow in that "an arguable error will not suffice, however well founded the allegation of error may ultimately prove to be" (Sara & Hossein).