Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 130
P1128/09	OPINION OF LORD HODGE in the Petition of MACDONALD ESTATES PLC Petitioner; For review of a decision of Gordon Murray, architect dated 27th August 2009 ­­­­­­­­­­­­­­­­­________________

Petitioner: Lake QC; Brodies LLP

Interested Party: Clark QC et Davies; Harper McLeod LLP

15 September 2009

[1] In this application Macdonald Estates Plc ("Macdonald") seek Judicial Review of a decision of Gordon Murray, architect, in his capacity as Independent Expert under a contract between Macdonald and National Car Parks Limited ("NCP"). The contract was contained in detailed legal missives dating between 21 March and 12 December 2008 ("the missives") as averred in statement 5 of the petition. NCP are the interested party.

[2] As I discuss more fully below, Mr Murray was appointed as Independent Expert to determine whether or not a suspensive condition in the missives had been purified. The missives contained a relatively tight timetable for the purification of the suspensive condition and provided that on the expiry of the time allowed, either party could resile from the contract. The date at which parties are allowed to resile from the contract, if the suspensive conditions have not been purified, is 26 September 2009. The essence of the dispute between the parties is whether Mr Murray, when acting as Independent Expert, was acting as an arbiter and could be required to state a case for the opinion of the Court of Session under section 3 of the Administration of Justice (Scotland) Act 1972 ("the 1972 Act"). If Mr Murray was acting as an arbiter and did state a case for the opinion of the court, it is likely that NCP would take the opportunity to resile from the missives. Accordingly Macdonald has sought an urgent decision of the court in this application.

[3] The full text of the operative part of Mr Murray's decision was:

"(a) That in determining the dispute between the parties the Independent Expert is acting as an arbiter;

(b) That as a result as Independent Expert I may be required to state a case for the opinion of the Court of Session in accordance with section 3 (1) of the 1972 Act;

(c) That as the Independent Expert I will not take any further action regarding the issuing of any further determination, at least for a period of seven days from the date of this opinion.

(d) That as the Independent Expert I invite parties to make written representations as soon as possible as to the procedure to be adopted in accordance with Part II of Chapter 41 of the RCS in connection with the request received from the Tenant (Appendix 2) to state a case for the opinion of the Court of Session."

[4] Macdonald seek (a) declarator that the Independent Expert is required to determine the issue referred to him as an expert and not as an arbiter, (b) reduction of the decision mentioned in the previous paragraph, and (c) decree ordaining Mr Murray to issue a determination in terms of his draft findings dated 6 August 2009 on the business day following that on which judgment is given prior to 10am.

[5] Macdonald initially sought an interim order under section 47 (2) of the Court of Session Act 1988 but did not need to make that application as I was able to hear the submissions of the parties at a First Hearing between 8 and 10 September 2009.

Background

[6] The missives comprised among other things an agreement to lease ground as a multi-storey car park. Attached to the missives were several documents including a draft lease and a draft car parking agreement, both of which were to last for 35 years. Under the lease NCP would be obliged to pay a substantial annual rent for the car park. The conditions in the principal missives were concerned with the steps which Macdonald and NCP required to take in order to develop the site and equip the car park before entering into the lease and car parking agreement. While I consider the principal relevant conditions in more detail below, it may be useful to summarise the sequence of events which the missives envisaged. First, the suspensive conditions required to be purified (condition 2) and Macdonald required to obtain the necessary consents (condition 3). Secondly and thereafter, Macdonald required to carry out the Developer's Works by preparing detailed drawings and commencing those works within three months after the purification of the suspensive conditions (conditions 1.1.83 and 4). Thirdly, when the Developer's Works were sufficiently completed as to allow NCP access to the development in order to proceed with the tenant's works, the missives provided for the issuance of an Access Certificate and thereafter a Certificate of Practical Completion (condition 8). Fourthly, NCP were required to commence the tenant's works as soon as practicable after the completion date (conditions 1.1.20 and 13). NCP were entitled but not obliged to take access earlier at any time after an Access Certificate had been issued (condition 13.2). Fifthly, condition 14 provided a mechanism for the calculation of the rent payable under the lease. One of the components in this calculation was the number of car spaces in the car park. Sixthly, the lease (Schedule Part IV) and the Car Parking Agreement (Schedule Part XIV)) were to commence on the date of entry which was defined by reference to the issuance of the Certificate of Practical Completion (conditions 1.1.23, 1.1.20 and 15). Thereafter the lease and the car parking agreement were to endure for 35 years.

[7] The missives contained several provisions for the resolution of disputes. Some involved the Independent Expert and others, such as condition 18 which concerned the identification of all rights reasonably necessary for the operation and use of the let subjects, involved an independent surveyor. Condition 24 provided:

"Expert Determination

Without prejudice to any specific provisions in the Missives concerning resolution of any disputes which may arise between the Developer and the Tenant, in the event of any dispute or disagreement arising as to the interpretation of the Missives or as to any matter as to be agreed between the Developer and Tenant hereunder, the same shall be referred at the instance of either party to the decision of an independent surveyor (acting as an expert) to be mutually agreed between the Developer and the Tenant for that purpose or failing such agreement to be appointed at the request of either party by the Chairman or senior officeholder for the time being of the Scottish branch of the Royal Institution of Chartered Surveyors, and the independent surveyor shall issue his proposed determination in draft at least fourteen days before giving his final decision, but whose eventual decision shall be final and binding on the Developer and the Tenant, in respect of all matters referred to him hereunder (save in the case of manifest error). The fees of such independent surveyor shall be payable by the Developer and Tenant in such proportions as the independent surveyor shall determine or in default of such determination, equally between the Developer and the Tenant. If any person appointed as an independent surveyor shall relinquish his appointment or die or if it shall become apparent that for any reason he will be unable to complete his duties hereunder or if the person appointed as an independent surveyor fails to reach a decision within three months of the date of his appointment, the Developer or the Tenant may apply to the aforesaid Chairman or other senior office holder for a substitute to be appointed in his place, which procedure may be repeated as many times as necessary. If the dispute relates to the legal interpretation of the Missives or as to any matter as to be agreed between the Developer and Tenant hereunder, the said independent surveyor will take appropriate independent legal advice before issuing their [sic] determination."

The role of the Independent Expert

[8] The first role which the missives gave the Independent Expert, and which is the one at issue in this application, was of determining whether Macdonald had obtained a "Satisfactory Planning Permission" for the Developer's Works.

[9] Condition 2 of the missives so far as relevant provided:

"2.1 The Missives shall be are [sic] essentially and suspensively conditional upon:-

2.1.1 The Developer obtaining a Satisfactory Planning Permission for the Developer's Works.

2.1.2 The Developer entering into a contract or contracts for the purchase of the Let Subjects and any such land as may be required for the purposes of the Developer's Works and any suspensive conditions therein being purified or waived or otherwise satisfied in full.

2.2 The Developer shall use all reasonable endeavours to purify the Suspensive Conditions by the Longstop Date (Conditions).

2.3 The condition contained in Condition 2.1.1 is conceived for the benefit of both the Developer and the Tenant.

.......

2.5 Condition 2.1.1 shall only be purified when either (i) both the Developer and Tenant notify each other that a Planning Permission is a Satisfactory Planning Permission under conditions 2.11.1 and 2.11.2 or 2.14.1 and 2.14.2 (or are deemed to have done so) (ii) the Independent Expert determines that the Planning Permission is a Satisfactory Planning Permission under condition 2.11.3 or 2.14.3.

.........

2.7 In the event that the Suspensive Conditions have not been purified in full prior to the Longstop Date (Conditions) then subject to Condition 2.8 the Developer or the Tenant may at any time thereafter (but prior to purification of the last of the Suspensive Conditions) resile from the Missives and that by written notice to the other party to that effect and that without any costs or damages being due to or by either party save in respect of any antecedent breach of the terms of the Missives.

2.8 Notwithstanding any other provision of the Missives, if a decision is awaited on an application for Planning Permission or the Developer or a third party institutes Appeal Proceedings, the Longstop Date (Conditions) shall be deemed to be extended so that the same shall be the earlier of (1) the date occurring 4 weeks after the decision of the Scottish Ministers or the relevant court has been issued and (2) the Final Longstop Date (Conditions)."

[10] The Longstop Date (Conditions) was defined in condition 1.1.48 as the date occurring 18 months after the date of conclusion of the missives, namely 26 September 2009.

[11] Satisfactory Planning Permission was defined in condition 1.1.65 as a planning permission (which term shall include any requisite planning agreement) which is free from Onerous Conditions. They in turn are defined in condition 1.1.54 as "a condition or conditions as set out in Part IX of the Schedule contained in a planning permission or planning agreement relative thereto." I attach as an appendix to this opinion the terms of Part IX of the Schedule.

[12] The missives defined "the Independent Expert" as follows:

"1.1.42 "the Independent Expert" shall mean any person appointed in terms of the Missives to act in any determination of any dispute to be referred to the Independent Expert hereunder, such person to be a partner or director of a Scottish based architectural practice and experienced in works similar insofar as practicable to the Developer's Works, such person to be agreed upon by the parties or in the event of their failing so to agree within 2 Working Days of the requirement for the Independent Expert arising, then to be appointed on the application of either the Developer or the Tenant by the President or other senior official for the time being of The Royal Institute of British Architects"

[13] The Independent Expert's task in relation to the suspensive condition in condition 2.1.1 was set out in condition 2.11 of the missives which was in the following terms:

"2.11.1 Within 10 Working Days of a Planning Decision in relation to the Planning Application the Developer shall send a copy to the Tenant notifying the Tenant in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Developer is concerned and if it is not the reasons why.

2.11.2 Within 10 Working Days of receipt of such written confirmation from the Developer the Tenant shall intimate to the Developer in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Tenant is concerned and if it is not the reasons why. The Tenant shall be deemed to accept the Planning Permission is a Satisfactory Planning Permission if such notification is not given to the Landlord within the said timeframe.

2.11.3 In the event of a dispute or disagreement arising as to whether or not a Planning Decision is a Satisfactory Planning Permission the issue shall be referred to the Independent Expert to be determined in accordance with Condition 24."

Thus the mechanism was that each party had an opportunity to say whether the planning permission was a Satisfactory Planning Permission and to state their reasons if not so satisfied. If they disagreed on that matter the issue became one for the Independent Expert to determine in accordance with condition 24 which I have set out in paragraph [7] above.

[14] The missives also provided a timetable for Macdonald to appeal against a planning permission and for the parties to agree, which failing for the Independent Expert to determine, whether the result was a Satisfactory Planning Permission. Condition 2.14 provided:

"2.14 If such appeal is refused, then the Developer and the Tenant shall each be entitled to rescind the Missives at any time thereafter by serving written notice on the other party to such effect without claim or penalty or liability but without prejudice to any claim in respect of any antecedent breach of the Missives.

2.14.1 If detailed planning consent is granted following such appeal the Developer shall forward a copy of such detailed planning consent to the Tenant within 5 Working Days following receipt thereof together with written confirmation as to whether or not they are satisfied with such detailed planning consent such that the same constitutes a Satisfactory Planning Permission so far as the Developer is concerned and if it is not the reasons why.

2.14.2 Within 10 Working Days of receipt of such detailed planning consent and written confirmation from the Developer the Tenant shall intimate to the Developer in writing of whether or not any Planning Decision is a Satisfactory Planning Permission so far as the Tenant is concerned and if it is not the reasons why.

2.14.3 In the event of a dispute or disagreement arising as to whether or not such detailed planning consent is a Satisfactory Planning Permission the issue shall be referred to the Independent Expert to be determined in accordance with Condition 24."

Condition 2.8 extended the Longstop Date (Conditions) by only four weeks after the relevant planning decision; there was therefore very little time for implementing the condition 2.14 procedure. As Mr Clark QC pointed out, by the time the parties had spent three weeks under condition 2.14 reaching their views on the planning permission and then agreeing on the appointment of the Independent Expert in terms of condition 1.1.42, there were only three days left for the Independent Expert to carry out his work. In such circumstances the Independent Expert would not be able to issue a draft determination fourteen days before giving his final determination as condition 24 envisaged.

[15] The contract also put a time limit on the quest for a Satisfactory Planning Permission by the pursuit of a planning appeal. The Final Longstop Date (Conditions) was defined in condition 1.1.35 as the date occurring 42 months after the date of conclusion of the missives and condition 2.15 provided that either party might resile from the missives if the suspensive conditions had not been purified by that date.

The other tasks of the Independent Expert

[16] The Independent Expert was also given two tasks if there were disputes between Macdonald and NCP concerning the completion of the Developer's Works. First, condition 8.6 provided that if there were a dispute as to whether the Access Certificate might be issued, NCP could within five working days of an inspection request a reference of the dispute to the Independent Expert. In that event condition 8.7 applied. It was in the following terms:

"If the Tenant requests reference to the Independent Expert, as provided for in Clause 8.6, then the dispute shall be referred on the application of the Developer or the Tenant to the Independent Expert. The remit to the Independent Expert will require him to inspect the Developer's Works and issue his written determination within five Working Days of written request to do so by the Developer or the Tenant. The Independent Expert shall determine the matter in dispute as an expert and not as an arbiter, and in particular shall give reasons for his decision and shall determine either (a) whether, at the date of his inspection, it was appropriate (having regard to the terms of the Missives and the Building Contract) for the Access Certificate to be issued; or (b) what outstanding matters should be attended to before the Access Certificate may be issued. The Independent Expert shall attend a joint site inspection with the parties at such time as he shall specify (within said 5 Working Days timescale) and hear the representations of each party (if they attend) in the presence of the others. The Independent Expert's decision shall be final and binding on the Developer and the Tenant and his expenses shall be borne as directed by him, or which failing, equally between the parties."

[17] Condition 8.8 provided that if the Independent Expert decided that it was appropriate for the Access Certificate to be issued it would be issued. Condition 8.9 provided that if the Independent Expert determined that the works were not sufficiently completed he should specify in his written determination the needed additional or remedial works which the Developer would carry out forthwith. Thereafter the Independent Expert was obliged to hold a further joint inspection at the request of the Developer and to issue his further written deliberation within two working days.

[18] Secondly, if there were a dispute as to whether the Certificate of Practical Completion had been properly issued NCP could again request reference of the dispute to the Independent Expert. In that event condition 8.1.7 applied. It was in the following terms:

"If the Tenant requests reference to the Independent Expert, as provided for in Condition 8.16, then the dispute shall be referred on the application of the Developer or the Tenant to the Independent Expert. The remit to the Independent Expert will require him to inspect the Developer's Works and issue his written determination within five Working Days of written request to do so by the Developer or the Tenant. The Independent Expert shall determine the matter in dispute as an expert and not as an arbiter, and in particular shall give reasons for his decision and shall determine either (a) whether, at the date of his inspection, it was appropriate (having regard to the terms of the Missives and the Building Contract) for the Certificate of Practical Completion to have been issued; or (b) what outstanding matters should be attended to before the Certificate of Practical Completion should (having regard as aforesaid) be issued. The Independent Expert shall attend a joint site inspection with the parties at such time as he shall specify (within said 5 Working Days timescale) and hear the representations of each party (if they attend) in the presence of the others. The Independent Expert's decision shall be final and binding on the Developer and the Tenant and his expenses shall be borne as directed by him, or which failing, equally between the parties."

Conditions 8.18 and 8.19 provided the corresponding procedures for the certificate of practical completion as conditions 8.8 and 8.9 provided for the access certificate, including the same tight timescale of two working days for the issuance of a further written deliberation after a further joint inspection.

What happened after the agreement

[19] Macdonald applied for planning permission and negotiated a section 75 agreement. The planning authority granted an outline planning permission and concluded the section 75 agreement with Macdonald on 18 April 2008. Thereafter Macdonald worked on a reserved matters application which they submitted on 17 December 2008. The planning authority granted that application on 26 May 2009. That left four months for the purification of the suspensive conditions. On 28 May 2009 Brodies LLP intimated that Macdonald considered the planning permission to be a Satisfactory Planning Permission. On 11 June 2009 Harper Macleod LLP intimated that NCP did not and gave their reasons for so saying.

[20] Macdonald applied on 19 June 2009 to the Professional Services Department of the Royal Institute of British Architects ("RIBA") for the appointment of a suitably experienced architect as the Independent Expert to carry out an expert determination. On 1 July 2009 the President of the RIBA appointed Mr Murray to be the Independent Expert to determine the dispute or disagreement which had arisen under condition 2.11.3. That appointment bore to be the appointment of an expert. Macdonald and NCP corresponded with Mr Murray. NCP raised certain preliminary objections to his appointment and his jurisdiction. Mr Murray took legal advice on those objections and rejected them. Both parties presented Mr Murray with detailed submissions on the issue which he had to determine and Mr Murray held an oral hearing. As condition 24 required, Mr Murray engaged senior counsel to advise him.

[21] On 6 August 2009 Mr Murray issued a draft determination in which he expressed the view that the planning permission was a Satisfactory Planning Permission because the conditions were not Onerous Conditions as defined in Part IX of the Schedule. NCP asked him to state a case for the opinion of the Court of Session under section 3 of the 1972 Act; but Macdonald challenged his ability to do so, asserting that he was not an arbiter. Mr Murray took the advice of senior counsel who in a careful opinion concluded that he was an arbiter and that he could be asked to state an opinion. Relying on senior counsel's advice, Mr Murray made the decision which Macdonald now challenge.

The parties' submissions

[22] Mr Lake QC for Macdonald submitted that section 3 of the 1972 Act did not apply as, on a proper construction of the missives, there was not an agreement to refer to arbitration and there was not an arbiter. One had to look to the parties' agreement to see what they intended. In this case the Independent Expert was called upon to make quick decisions in the course of the parties' implementation of the missives. In condition 2.11 his task was to determine whether the suspensive condition in condition 2.1.1 was purified. That was a decision which had to be reached promptly as parties had allowed only eighteen months for Macdonald to apply for and obtain detailed planning permission and for parties to agree or the Independent Expert to determine whether it was a Satisfactory Planning Permission. With those tight timescales in mind, the parties had stipulated that he was to act as an expert and not as an arbiter. He was a man with experience in similar works (condition 1.1.42). He was entitled to proceed by considering the planning permission and NCP's reasons for dissatisfaction under condition 2.11.2 and by using his experience to determine whether or not the planning conditions were Onerous Conditions in terms of Part IX of the Schedule.

[23] While in this case parties had prepared detailed submissions for his consideration the contract did not require there to be a "formulated dispute" in the sense in which the House of Lords used the term in Arenson v Casson Beckman Rutley & Co [1977] AC 405. Whatever the parties did after the contract had been made did not alter the meaning of the missives unless the missives were amended thereby. RIBA's letter of appointment did not innovate on the contract but appointed Mr Murray as an expert and not as an arbiter.

[24] The terminology which the parties used in the Missives was deliberately chosen. Mr Murray was an Independent Expert. Where particular provisions required him to reach a decision in a specific way, as in condition 8.7 and 8.17, the parties expressly stated that he was to act as an expert and not as an arbiter. In condition 2.11.3 the parties required him to determine the issue in accordance with condition 24. That provision was headed "Expert Determination" and provided a mechanism for determination of disputes or disagreements or matters to be agreed by a person acting as an expert. One had to give content to the language that the parties had used and it was clear that parties wished to have speedy decisions and to avoid the necessity of the detailed submissions and counter-submissions which are often needed in an arbitration. They also wished to avoid any delay which the stating of a case to the Court of Session under section 3 of the 1972 Act would entail. By providing that decisions by either the Independent Expert or the independent surveyor were to be expert determinations by persons acting as experts the parties sought to exclude the formalities and consequences of an arbitration which could delay or prevent the implementation of the missives.

[25] Mr Lake criticised senior counsel's opinion to Mr Murray for failing to focus on the intention of the parties which was to be ascertained by the language they used in the context of the contract as a whole and for giving too much weight to whether there was a formulated dispute. He also commented on other issues which NCP raised in their Answers; but as Mr Clark did not raise those issues in his reply I do not need to discuss them further. He explained that the undertaking which NCP offered did not protect Macdonald as there were other contracts which were relevant to the proposed development which would be adversely affected if the suspensive conditions in condition 2.1 were not purified by 26 September 2009.

[26] Mr Clark QC for NCP submitted that the parties had, on a proper construction of the missives, appointed the Independent Expert to resolve disputes which arose in the course of its implementation. The definition of Independent Expert in condition 1.1.42 did not define the capacity in which he was to act nor was there such a definition in condition 2.11.3, in contrast with the express provisions in conditions 8.7 and 8.17 which stated that he was to act as an expert and not as an arbiter. The latter provisions gave him a task to perform within a short timetable which involved attending a joint site inspection and hearing representations from the parties if they attended. By contrast the judging of the planning permission against the criteria in Part IX of the Schedule involved considering complex issues such as the materiality of any detriment to the economic viability of the development. The suitability of the planning permission was a critical gateway to the implementation of the missives which imposed long term obligations on NCP. It was not commercially sensible to construe the missives as allowing the Independent Expert to consider the planning permission against the criteria of Part IX of the Schedule without the assistance of detailed submissions from the parties: too much was at stake.

[27] Condition 2.11.3 in requiring the Independent Expert to determine the issue "in accordance with Condition 24" did not seek to have him act as an expert. It only incorporated the procedures in that condition so that the text of that condition applied only from the obligation to issue a draft determination onwards. Thus, properly construed, condition 24 required only the independent surveyor to act as an expert and to make an expert determination.

[28] The way in which the parties had pursued their interests before the Independent Expert, which involved the presentation of detailed submissions and the consideration of many documents, placed him, as the missives envisaged, in an adjudicative role. The Independent Expert had to determine a dispute between the parties. That made him an arbiter. As such he was obliged to state a case to the Court of Session if ordered to do so. There was no express provision to the contrary in the missives, which were an agreement to refer to arbitration in terms of section 3 of the 1972 Act.

[29] The role which the missives gave the Independent Expert had all the indicia of arbitration as set out in the case law. It was not necessary for the agreement to appoint an arbiter to set out the procedures which he would follow, such as the receipt of submissions and counter-submissions and giving the parties a hearing. Arbitration clauses rarely did so. In some cases an arbiter could determine a dispute promptly. In this case the proceedings before the Independent Expert took only five weeks. He questioned Mr Lake's assumption that the stating of a case would cause significant delay; it might be possible for the Inner House of the Court of Session to fix an expedited hearing. The parties envisaged a relatively tight timescale for the obtaining of planning permission and the satisfaction of the suspensive conditions; but that did not militate against the use of arbitration, including the stating of a case. Even if one or other of the parties had intended to exclude the requirement to state a case, they had not done so.

[30] Mr Clark submitted that senior counsel who had advised the Independent Expert had correctly construed the missives. He was correct in his analysis that the the presence in this case of the well-established indicia of arbitration pointed to him acting as an arbiter.

[31] In the course of their submissions counsel analysed in some detail two House of Lords cases in which their Lordships set out the indicia of arbitration (or, more strictly, the judicial function), namely Sutcliffe v Thackrah and Others [1974] AC 727 and Arenson v Casson Beckman Rutley & Co [1977] AC 405. They also referred to two Scottish authorities in which the court discussed those cases, namely Lord Hardie's decision in A.G.E Ltd v Kwik Save Stores Ltd 2001 SC 144, and that of the First Division in Holland House Property Investments Ltd v Crabbe and Edment 2008 SC 619. I discuss those cases below. Mr Clark also referred me to Forbes v Underwood (1886) 13 R 465 in which Lord Shand at p.471 referred to the importance of the existence of a lis or dispute, and Stewart v Williamson 1909 SC 1254, Lord Kinnear at p.1258. He also referred to Mediterranean and Eastern Export Co Ltd v Fortress Fabrics (Manchester) Ltd [1948] 2 All ER 186, in which the King's Bench Division held that an arbitrator who had been appointed for his experience of the textile trade was entitled to fix the damages payable for breach of contract without hearing expert evidence on that matter. Finally, he referred to Fairlie Yacht Slip Ltd v Lumsden 1977 SLT (Notes) 41 in which the First Division held that a party to an arbitration had to apply for a stated case before the arbiter issued his final judgment as thereafter the arbiter was functus officii.

Discussion

[32] When Mr Murray considered the submissions and counter-submissions of the parties and thereafter reached his determination on whether the planning permission was a Satisfactory Planning Permission he carried out an adjudicative function. When he considered the parties' contentions they were in dispute. It was a dispute or disagreement about the planning permission which the Independent Expert had then to determine. I accept on the authority of Sutcliffe v Thackrah and Arenson that what Mr Murray did in performance of his task could be seen as a judicial function which might afford him the immunity with which those cases were principally concerned. I qualify that acceptance by saying "might" as, should the issue arise, the court might have to determine whether the immunity was available where the parties caused the decision maker to carry out an adjudicative process although their contract did not require such a procedure. The existence of that immunity would be a question between the parties on the one hand and the Independent Expert on the other and I can see no reason of public policy why the Independent Expert should not be so protected. But the issue in this case is a different one. It concerns the effect as between the parties of their agreement in the missives. Where I respectfully differ from senior counsel who advised Mr Murray and also Mr Clark is that I do not construe the missives as containing a reference to arbitration. In any event I construe the stipulation that the Independent Expert should act as an expert in making an expert determination as an express exclusion of a power to state a case. I set out my reasoning below.

[33] I recognise that Scots law adopts a wide definition of arbitration. In Stewart v

Williamson Lord Kinnear (at p.1258) stated:

"There is a dispute which must be settled in one way or another, and if the parties agree that it is to be settled not by the ordinary Courts of law but by a private tribunal of their own selection, that is an agreement for arbitration."

In Forbes v Underwood Lord Shand (at p.471) distinguished between a case in which there was a proper lis or dispute between the parties where arbiters were called upon to exercise their functions and one where parties had agreed to purchase a property at a price to be fixed by a third party. The former was in his view a proper arbitration.

[34] In English law the House of Lords, when considering the scope of the immunity from liability in negligence which public policy confers on people exercising a judicial function, has discussed the adjudicative roles which a private person may perform. In Sutcliffe v Thackrah the House of Lords addressed the question whether an architect, acting under the then RIBA standard form of contract, was, in issuing interim certificates to a contractor, entitled to immunity from claims for damages for negligence because he was acting as an arbitrator. Their Lordships held that he was not. Lord Reid (with whom Lord Hodson concurred) explained the reason for immunity in these terms (at p.735G):

"The reason must, I think, be derived at least in part from the peculiar nature of duties of a judicial character. In this country judicial duties do not involve investigation. They do not arise until there is a dispute. The parties to a dispute agree to submit the dispute for decision. Each party to it submits his evidence and contention in one form or another. It is the function of the arbitrator to form a judgment and reach a decision."

In the same case Lord Morris of Borth-y-Gest emphasised in his speech that each case would depend upon its own facts and circumstances and upon the particular provisions of the relevant contract (pp.747E-F and 752G). But he limited a professional person's immunity to circumstances in which he had "by agreement been appointed to act as an arbitrator." He continued (at p.752H):

"There may be circumstances in which what is in effect an arbitration is not one within the provisions of the Arbitration Act. The expression "quasi-arbitrator" should only be used in that connection. A person will only be an arbitrator or quasi-arbitrator if there is a submission to him either of a specific dispute or of present points of difference or of defined differences that may in future arise and if there is agreement that his decision will be binding. The circumstance that an architect in valuing work must act fairly and impartially does not constitute him either an arbitrator or a quasi-arbitrator."

Lord Salmon drew the boundary of judicial immunity in these terms (at p.759F-G):

"Judges and arbitrators have disputes submitted to them for decision. The evidence and the contentions of the parties are put before them for their examination and consideration. They then give their decision. None of this is true about the valuer or the architect who were merely carrying out their ordinary business activities."

[35] The House of Lords again ruled on the scope of judicial immunity in Arenson and their Lordships, when considering the liability of auditors who were appointed to value shares "acting as experts and not as arbitrators," expressed differing views on the appropriate boundary of judicial immunity. In the debate in this case, counsel concentrated their analyses on the speeches of Lord Simon of Glaisdale and Lord Wheatley. The former took the view that the immunity arose from the performance of a judicial function. He cited Lord Salmon in Sutcliffe v Thackrah (at p.759F): "judges and arbitrators have disputes submitted to them for decision." He continued (at 424E-F):

"There may well be other indicia that a valuer is acting in a judicial role, such as the reception of rival contentions or of evidence, or the giving of a reasoned judgment. But in my view the essential prerequisite for him to claim immunity as an arbitrator is that, by the time the matter is submitted to him for decision, there should be a formulated dispute between at least two parties which his decision is required to resolve. It is not enough that the parties who may be affected by the decision have opposed interests - still less that the decision is on a matter which is not agreed between them."

[36] Lord Wheatley took a similar approach. He began his analysis (at p.425H) by considering (i) what the auditors were called upon to do, (ii) what were their legal obligations in that regard and (iii) whether if they failed to perform those obligations they were protected from a legal claim for damages by immunity. He considered the speeches in Sutcliffe v Thackrah and then, recognising that there was no all-embracing formula which could be used to decide on the existence of immunity in every case, enunciated indicia to serve as guidelines in addressing that question. He stated (at p.428E-F):

"The indicia are as follows: (a) there is a dispute or a difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to a person to resolve in such a manner that he is called upon to exercise a judicial function; (c) where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and (d) the parties have agreed to accept his decision."

[37] In A.G.E. Ltd v Kwik Save Stores Ltd Lord Hardie relied on the indicia which Lord Simon of Glaisdale and Lord Wheatley discussed in determining that a valuer was not an arbiter. That case concerned a rent review clause in a lease in which the parties provided that if they were unable to agree the revised rent an independent surveyor would determine the market rent acting "as an expert and not an arbiter" and that his decision would be final and binding on the parties. Lord Hardie held that the surveyor was not acting in a judicial capacity and that neither the terms of his letter of appointment or his subsequent conduct in inviting and receiving written submissions had the effect of altering his status from that of an expert to that of an arbiter.

[38] In Holland House Property Investments Ltd the First Division considered another rent review clause which provided that, if the parties could not agree the market rental value at the review date, an independent surveyor would fix it at the fair market rent and that his certificate would be final and binding on the parties. The rent review clause did not otherwise stipulate the capacity in which the surveyor was to act. The appellants argued that although there was not a formulated dispute at the time when the matter was submitted to the surveyor, that was not essential. This was because the circumstances in which the surveyor performed his job could make him someone who was carrying out a judicial or quasi-judicial function. The procedure which the valuer had adopted in that case had transformed him from being a non-judicial valuer into a valuer performing a judicial role.

[39] The First Division rejected this submission and held that in deciding in a particular case whether a valuer was acting as an independent expert or in a quasi-judicial role the court should look to what the parties who appointed him intended his function to be. That intention was to be ascertained from the agreement which the parties had entered into by which he assumed his task. If the parties used clear language in their agreement to appoint him as an independent expert, the later acts of the parties and the valuer were relevant to the way in which his role was to be categorised only if there was a subsequent agreement between the parties to convert his role from that of an independent expert into a quasi-judicial role. Lord Clarke, who delivered the opinion of the court, stated (at para [22]):

"The essence of the matter, in our judgment, is that in the present case, the parties were not inviting the surveyor, at the time the matter was referred to him, to adjudicate as between their rival contentions and to decide which side he preferred, having regard solely to the material which parties chose to put before him, which characteristics define the nature of adversarial judicial and arbitral procedures in our system. Rather they were inviting him, using his expertise and experience, to fix the consideration which was appropriate, at the relevant time, under their agreement, the lease." (My emphasis)

[40] It appears to me that, on this authority, my starting point should be to ascertain the meaning of the missives. Neither party suggested that they had altered the agreement contained in the missives; their subsequent behaviour cannot determine the issue.

[41] I therefore start with condition 2.11 (see paragraph [13] above). It requires only the party who asserts that the planning permission is not a Satisfactory Planning Permission to state the reasons why. The party who accepts the planning permission does not have to state its reasons. There is then a dispute or disagreement, as condition 2.11.3 states, and the issue which is referred to the Independent Expert is whether or not the planning decision is a Satisfactory Planning Permission.

[42] I turn then to what the missives say about the status of the decision maker to whom the parties referred the issue. First, in condition 1.1.42 (see paragraph [12] above) he is described as an Independent Expert. That of itself might not be very significant and I note that his role is stated to be the "determination of any dispute" which is referred to him under the missives. It is nonetheless a pointer towards the parties' intentions. Further, the condition requires that the person is to be experienced in works similar to the works envisaged in the missives. Again that points to the parties' wish to have expert input.

[43] It is also significant in my opinion that nowhere in the missives is the Independent Expert described as acting other than as an expert. In carrying out his task under condition 2.11 he is required to determine the issue in accordance with condition 24. That condition (see paragraph [7] above) is headed "Expert Determination". It then provides that, without prejudice to any specific provisions in the missives concerning the resolution of disputes, certain matters are to be referred to the decision of "an independent surveyor (acting as an expert)."

[44] Mr Lake submitted that the requirement that the Independent Expert determine the issue in accordance with condition 24 confirmed that he was to do so acting as an expert. Mr Clark submitted that the reference to condition 24 was not to an expert determination but only to the procedural provisions which started with the obligation to produce a proposed determination in draft at least fourteen days before giving his final decision. I do not accept that contention and consider that Mr Lake is correct: the reference in condition 2.11.3 to determining the issue in accordance with condition 24 falls to be construed as an instruction of an expert determination.

[45] I recognise that the requirement in condition 24 to issue a draft determination could be consistent with an arbitration as it is a well known device to protect the right to seek a stated case. But it is equally consistent with the parties seeking an opportunity to make representations on the draft determination of an expert before it becomes final and binding on them. I am not persuaded that the task of interpreting the missives which condition 24 gives the independent surveyor is a pointer to there being an intention to arbitrate with the protection of the stated case procedure: the parties provided that the independent surveyor and the Independent Expert were obliged to take appropriate legal advice before issuing their determinations. That unusual provision addresses the appointed professionals' lack of legal training.

[46] It is true that conditions 8.7 and 8.17 are more emphatic than condition 24 in the exclusion of the status of arbiter. Each of those conditions (see paragraphs [16] and [18] above) states explicitly that the Independent Expert shall determine the matter "as an expert and not as an arbiter" and lays down very tight timetables for his determination. His obligation to hear representations of each party at a joint site inspection, if they attend, and the binding nature of his decision in each case, does not, in my opinion, alter the clear instruction to act as an expert and not as an arbiter. The omission in condition 24 of the words "and not as an arbiter" is in my view of no consequence. The difference between the role of an expert and that of an arbiter is one, which, although perhaps fuzzy at the boundaries, is well recognised: Holland House Property Investments Ltd at para 19. In providing that the Independent Expert make an expert determination the parties were making a clear statement.

[47] That stipulation for an expert determination is very different from the clause which the parties included in the draft lease attached to the missives. In clause 18 of that draft they included an arbitration clause referring differences or disputes to a single arbiter and providing that section 3 of the 1972 Act would not apply to such a submission.

[48] In ascertaining parties' intentions from the terms of their missives I also give weight to the context in which the Independent Expert was to perform his task and the tight time-limits which parties included in the missives. The task under condition 2.11 was to be performed in a context of the Longstop Date (Conditions), in terms of which Macdonald had eighteen months to apply for, obtain and have approved the needed planning permission and thereafter either party could resile without penalty (see paragraphs [9] and [10] above). It would have been readily foreseeable to the parties that, by the time Macdonald had obtained the required detailed planning permission, there might be only a relatively short time for the parties to consider its terms against the criteria in Part IX of the Schedule and, if necessary, to obtain the determination of the Independent Expert. Condition 2.11 imposed tight time-limits on the parties to reach a view on the issue (ten working days each) and deemed NCP to accept the planning permission if they did not give notification within that time. Condition 1.1.42 required the parties to agree to the appointment of the Independent Expert within two working days. The Independent Expert was not subjected to time limits in condition 24 except that he could be removed if he did not issue his determination within three months of the date of his appointment.

[49] While it is possible for an arbiter to reach a prompt determination and it is possible for the Court of Session to hear a stated case urgently, those possibilities would not in my opinion outweigh the concern of reasonable persons in the position of Macdonald and NCP to achieve a speedy determination of the issues which they referred to the Independent Expert. One way of facilitating that result was to appoint him to act as an expert and not as an arbiter. I have observed that the timetable under condition 2.14 for consideration of a planning permission granted on appeal would be impossible to operate if the Independent Expert had to give a draft decision fourteen days before issuing his final decision, but that does not militate against giving the missives a commercially sensible interpretation.

[50] The indicia which the courts have identified for the purpose of determining the boundaries of immunity from suit are a useful guide when parties do not make clear the capacity in which a third party professional is to act. Where their intention is clear I consider that regard should be had to that intention unless it is established that the parties were creating a sham. In the missives, the parties agreed to refer specific disputes or disagreements, including that in condition 2.11.3, to the Independent Expert. This instruction in my view meets the requirement of a formulated dispute in the case law. The fourth indicium which Lord Wheatley identified is also present as the parties agreed to accept the decision of the Independent Expert. But that indicium of itself tells us little as people often agree that an expert determination, for example of rent, is to be binding.

[51] I agree with Mr Clark that the third indicium, namely that, where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions, may be met without the dispute resolution clause referring to such procedures; arbitration clauses often do not so refer. It is often implicit in the appointment as arbiter that the adjudication will involve such procedures. Therefore the fact that the missives did not state that both parties should have an opportunity to make submissions to the Independent Expert before he made his determination under condition 2.11.3 does not of itself carry much weight.

[52] Where I respectfully disagree with senior counsel who advised Mr Murray and Mr Clark is in relation to the third indicium, namely whether the parties remitted the dispute or disagreement to the Independent Expert in such a manner that he was called upon to exercise a judicial function. In my opinion, consistently with the parties' wish for a speedy determination of disputes, condition 2.11 allowed the Independent Expert to use his expertise to consider the planning permission against the criteria in Part IX of the Schedule and NCP's reasons for dissatisfaction in order to reach a determination. It did not require both Macdonald and NCP to make competing submissions. I do not doubt that the Independent Expert would have required sight of relevant documents, for example to compare the approved design or layout against that in the planning application. But the Independent Expert could have made his decision without further submissions from the parties, informed as he would have been of NCP's reasons for their dissatisfaction. While the parties in the missives spoke of disputes as well as disagreements, the issue in condition 2.11 may just as properly be described as a disagreement as the issue which the valuer addressed in Holland House Property Investments Ltd. In that case the issue was the market rental value to be paid under the lease. The landlord and tenant were unable to agree it and so the surveyor had the task of fixing it. In this case the issue was whether the planning permission was a Satisfactory Planning Permission having regard to the criteria in Part IX of the Schedule; Macdonald and NCP were unable to agree and the Independent Expert was given the task of determination.

[53] In any event, in my opinion it is appropriate to use the indicia of judicial function with caution in the present context. They were formulated to identify the boundaries of immunity and not to determine whether a dispute resolution clause was a submission to arbitration. In the context of the former exercise a stipulation that a person was to act as an expert may not be sufficient to exclude his claim to immunity but it is still a significant factor to be addressed. In the context of deciding whether the parties intended to refer a dispute to arbitration or to seek a speedier expert determination, the words "expert determination" and "acting as an expert" are powerful indicators of intention. Thus while the absence of a "formulated dispute" will in most circumstances be fatal to the assertion that the professional man was acting in a judicial capacity and had immunity from suit, the presence of a formulated dispute does not exclude expert determination.

[54] In my view, it is not greatly significant that there may be an overlap between the functions of an arbiter and an expert. An arbiter who is appointed for his special knowledge of the subject matter of the dispute may in appropriate circumstances rely on his own expertise in the place of evidence as in Mediterranean and Eastern Export Co Ltd. See Lord Goddard CJ in that case at pp.187H-188C. An expert may in appropriate cases choose, without exceeding his remit, to consider representations from the parties before reaching his determination.

[55] What is significant in my opinion is that Macdonald and NCP in the missives instructed the Independent Expert to make an expert determination and in condition 2.11 they established a procedure which would allow him to do so without receiving detailed submissions from them. In the context of the contract as a whole, and in particular having regard to the time constraints under which the parties required to purify the suspensive conditions, I consider that reasonable businessmen would have wanted to achieve speedy resolution of disputes and disagreements. The time limits imposed in condition 2.11 and 2.14 support that view. The other tasks which the Independent Expert could be given in the missives, in deciding the appropriateness of an access certificate and a certificate of practical completion in conditions 8.7-8.9 and 8.17-8.19 respectively and in determining the number of car spaces under condition 14.2, also needed to be performed speedily in order to allow the missives to operate effectively.

[56] I do not attach any significance to the fact that after his appointment the Independent Expert received written submissions from Macdonald and NCP and held an oral hearing. When ascertaining the procedures which the appointed professional must follow it is clear from the decision of the First Division in Holland House Property Investments Ltd that the court must look to the contract between the appointing parties and not to the subsequent acts of the appointee. Nor should the court look to the subsequent acts of the appointing parties unless they establish an alteration of their earlier agreement.

[57] It may be, as I have suggested, that Mr Murray would enjoy immunity from suit because of the way in which the parties conducted the proceedings. He may indeed have found himself acting in a quasi-judicial role. But the question is whether the parties in the missives referred their disputes or disagreements to arbitration. In my opinion the answer to that question is no. Even if what Mr Murray did after his appointment means that he may properly be described as an arbiter, I consider that the parties' agreement of an expert determination was an express provision contracting out of arbitration.

[58] If, contrary to my view, an arbitration has resulted, I consider that the reference to expert determination falls to be construed as an express provision excluding section 3 of the 1972 Act. In that circumstance the parties in their stipulation that the Independent Expert is to act as an expert and not an arbiter have agreed that the procedures which govern arbitration should not apply. It would be contrary to that stipulation for either party to apply for the statement of a case for the opinion of the Court. Otherwise the reference to expert determination and to the Independent Expert acting as an expert would have no content.

[59] I regret the length of this opinion. In order to preserve the possibility of a reclaiming motion to review my decision this week before the expiry of the Longstop Date (Conditions) I have produced this opinion urgently and have not had time to write a shorter one.

Conclusion

[60] Macdonald succeed in their application for judicial review. I therefore sustain their first, second and third pleas in law (as amended) and pronounce the orders sought in paragraphs (a), (b) and (c) (as amended) of Statement 3 of the petition.

Appendix

Part IX

Onerous Conditions

1. Any condition which for the Developer and/or the Tenant has any one or more of the following effects (which for the avoidance of doubt may be waived by either party at their discretion):-

1.1 makes the planning permission personal;

1.2 limits the life of the planning permission after initiation for the purposes of Section 27 of the Town and Country Planning (Scotland) Act 1997 (other than requirements to commence the development thereby permitted within 5 years of the grant thereof);

1.3 prevents the initiation, commencement or use of the development before a specified date or event where same is not within the reasonable control or influence of the Developer;

1.4 purports to materially alter the design or layout of the development as shown on the planning application;

1.5 In relation to the Let Subjects:

1.5.1 imposes any restrictions on the operating hours of the Let Subjects as a car park (which are to be 24 hours a day 365 days a year);

1.5.2 imposes any specified tariffs or car parking charges;

1.5.3 materially restricts in any other way its use or operation;

1.6 imposes limits on the generation of noise from the development which will either adversely affect or restrict the occupation or operation of them or will unreasonably add to the cost of maintenance thereof or will otherwise impose an unreasonable burden on the ownership, use or occupation of them;

1.7 prevents the completion of the development without the agreement or co-operation of a third party where such agreement or co operation is not within the reasonable control of the Developer;

1.8 is otherwise materially detrimental to the use, operation or economic viability of the development;

1.9 fails to comply with the guidance contained in The Scottish Office Development Department Circular 4/1998 entitled "The Use of Conditions in Planning Permission" or the legal restrictions imposed on the use of planning conditions.

2 In addition it is declared that an Onerous Condition for Developer shall include any condition which has any one or more of the following effects (which for the avoidance of doubt may be waived by the Developer only at their discretion)

2.1 would increase the construction cost of the Developer's Works (excluding professional fees, preliminaries, statutory fees and costs of statutory services) by more than £1,000 for parking space; [PRICING TO BE CLARIFIED]

2.2 imposes a positive obligation (and in particular one requiring the construction of highway or drainage works) or the payment or expenditure of money or other consideration in each case by way of planning gain or for the acquisition of land or rights outside the land required for the Developer's Works or on works outside the said land requiring the agreement of a competent authority or services undertaker or third party which either (i) would result in increases in the cost of the Developer's Works of the level set out in paragraph 2.1 above or (ii) is not reasonably likely to be not [sic] obtained on reasonable terms within a period of 12 months or [sic] from the date on which the condition is imposed, the Developer to use all reasonable endeavours to obtain such consent as soon as reasonably practicable;

2.3 Imposes time limits within which the development contemplated by the Planning Application must be commenced or applications for approval of reserved matters require to be made to an extend [sic]which is different from standard planning or other permission conditions.

3 It is acknowledged that the draft Section 75 Agreement and minded to grant consent both annexed and docquetted as relative hereto do not contain any Onerous Conditions.