Expert determination – does ‘according to law’ mean free from legal error?

A common form of alternative dispute resolution is to have a dispute decided by an expert. The advantages of this method are that it is usually faster and less expensive than taking your dispute to court. Another advantage is you can appoint an expert with specialist knowledge of the industry that a judge may not have.

One important question regarding this process is how accurate the expert has to be in applying. The general consensus is that unless the expert has legal training, their determination may not be a truly accurate representation of the law. A recent case in the New South Wales Supreme Court does however provide guidance on this issue.

The case of Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576 concerned a challenge to an expert determination of a building contract dispute. A clause in the contract provided that before proceeding to court or arbitration:

(i) Any dispute or difference whatsoever arising out of or in connection with this contract shall be submitted to an expert in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Expert Determination Rules.

A dispute arose and was duly referred to an expert who found in favour of the builder. This determination was then challenged by the landowner on the basis that the expert had made an error of law when making their determination. The landowner argued that under Rule 5.1 of Arbitrators & Mediators Australia Expert Determination Rules, the expert was obliged to reach a decision free from legal error.

Hammerschlag J rejected this argument. His Honour found that in the context of the Expert Determination Rules “… the words ‘according to law’ mean in the manner which the law requires a person in the position of the Expert to go about the mandated task, so as to give it contractual efficacy; for example, honestly, without bias or collusion, and while not intoxicated”.

His Honour further commented that the landowners interpretation place an immense burden on experts and would be commercially inconvenient as “[i]ts acceptance would have the consequence that the Determination is, in effect, subject to appeal on any and every question of law determined or legal precept relied on by the Expert, which, if determined or seen differently, would lead to a different result”.

His Honour concluded by stating that the expert determination process is “… no more than a private contractual mechanism to which parties agree and which, as is dealt with above, does no more than create binding contractual obligations. It has no statutory backing as a process. It is not a process which resolves any dispute by the exercise of judicial, quasi-judicial, administrative, statutory or other power or jurisdiction.”

Ultimately, this decision highlights that the expert determination process is not judicial in nature and will therefore be unlikely to be held to the same standards as a Court or Tribunal. As the process is not deemed to be judicial, participants will generally not have any form of appeal from a determination unless this is provided for in their contract.

VSCA highlights the importance of distinguishing between debt and damages in debt recovery claims

In the matter of Yang v Finder Earth Pty Ltd [2019] VSCA 22, the Victorian Supreme Court of Appeal set aside a default judgement for recovery of an unpaid debt on the basis that the underlying claim was better characterised as one for damages. Ultimately, the case illustrates the importance of properly and clearly pleading a claim when seeking to recover a debt through litigation.

The case ensued after the parties entered into two agreements where the second respondent, Ms Luo, loaned Mr Yang two sums of money totalling $700,000. The terms of the agreements noted that the money was to be applied solely for the purpose of establishing a business. Relevantly, the business was established for the purpose of obtaining an investment-based migrant visa for Ms Luo and her family.

Pursuant to the terms of the agreement, Mr Yang guaranteed and indemnified Ms Luo for the money she lent and for ‘any further loss and damage she sustained’ in connection with the agreement. If the agreement was breached by Mr Yang, all funds lent to the company in advance were to be returned to Ms Luo.

Mr Yang was alleged to have misapplied both the loan money and business revenue for his own benefit, constituting a breach of the agreement. Proceedings were initiated in the County Court where Ms Luo pleaded on the following basis:

By reason of the conduct alleged, Luo has suffered loss and damage being:

(a) a loss of the $700,000; and

(b) exposure to creditors of Finder Earth for which she has provided personal guarantees and has or will need to compensate.

The relief sought by Luo was particularised in the following terms:

$700,000 owing to [Luo] under the Finder Earth Loan Agreement and LL Loan Agreement.

A declaration as to the validity of the Yang/Luo Guarantee and Indemnity and an order for such loss and damage owing pursuant to the Yang/Luo Guarantee and Indemnity.


Mr Yang’s defence was struck out pursuant to rule 21.02 of the County Court Civil Procedure Rules 2008 (Vic). In the absence of a defence, Ms Luo entered default judgment for $700,000 plus interest and costs. Mr Yang applied to set aside the default judgment, arguing the claim was not for recovery of debt under the guarantee and indemnity but rather a claim for damages arising from Mr Yang’s alleged misapplication of the loan. The application was refused on the basis that Ms Luo’s pleading made it sufficiently clear the claim was for a fixed monetary sum. Mr Yang appealed.

The Court of Appeal allowed Mr Yang’s appeal agreeing that while the foundation of Ms Luo’s claim was the guarantee and indemnity, the money sought was the ‘loss and damage’ suffered as a result of misapplication of the loan. On this basis, Ms Luo was not entitled to enter judgment in the manner she did. The Court noted that had the pleadings mentioned a debt arising under the guarantee by reason of default under the loan agreement, their conclusion would have been different. However, this was not the case as ‘loss and damage’ had been sought instead.

Ultimately this case serves as a reminder to creditors that when seeking to recover a debt through the courts, it is crucial that the relief sought is properly and clearly expressed as a fixed sum owing and not as a recovery of damages suffered by reason of non-payment. If the claim is not properly pleaded, a judgement obtained will be open to scrutiny from higher courts.

Perth accountant sentenced to 4 years imprisonment for $250k tax fraud

A Perth accountant has been sentenced to 4 years imprisonment for tax fraud after he was convicted of both obtaining and attempting to obtain over $250,000 from his clients and the ATO.

On 21 February 2019, the Perth District Court heard that during his time as an accountant at Finkelstein Hickmott between May 2016 and July 2017, Shane Read lodged 21 of his client’s tax returns without authorisation and accessed four client’s Activity Statements.

Moreover, Mr Read sought to obtain further funds from the ATO via an unauthorised BAS lodgement containing false information, following which an ATO audit revealed that he had obtained financial advantage committing fraud in the name of unwitting clients. Relevantly, Mr Read was found to have altered bank account details to divert ATO refunds to his personal bank account without his client’s knowledge.

ATO Assistant Commissioner Tim Roach has welcomed the sentence, asserting that the ATO “…will continue to work with tax professionals to ensure the integrity of the system and to protect honest tax professionals and the community from these types of crimes.”