Lexpert Magazine

September 2019

Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.

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LEXPERT MAGAZINE | Q3 2019 31 dismissal of the Application, three issues the Court considered were whether an expert appointed under an expert determination clause in a share purchase agreement can decide questions of mixed fact and law, how the expert's decision should be reviewed and whether the expert in this case commit- ted a manifest error. Mixed Fact and Law e Court recognized that the SPA pro- vided the Vendors' representative an abil- ity to object to "any item or aspect" of the Closing Balance Sheet or the Combined Target April 2014 Net Profits. e Court noted that the plain meaning of the phrase "any item or aspect" went far beyond calcu- lations, compilations and accounting prin- ciples as argued by the Purchaser. Additionally, the Court recognized that these were sophisticated parties en- gaging in a transaction worth more than $200,000,000, and that any reasonable party in the same position with legal ad- vice would know that expert determination clauses oen refer to compilations, calcula- tions, appraisals or valuations rather than "any item or aspect" and that an aspect is even wider than an item. As such, the Court found that the parties must have known and should be presumed to have known there were issues of mixed law and fact that could arise in ascertaining the information or methods used in the Closing Balance Sheet that was provided. Ultimately, considering the plain words of the contract and the contextual matters, the parties provided flexibility to design a suit- able process to accommodate any specific matter in dispute, giving the expert broad discretion to determine the rules and proce- dures to be followed in the proceedings. Standard of Review Any time a court is reviewing the decision of another body, the review is expected to be performed in accordance with a recognized standard. Sometimes, that review known as the "correctness standard" enables a court to replace the other body's decision if the law was applied incorrectly. On other occasions, a court will apply a "deferential standard" NADIA CAMPION LAX O'SULLIVAN LISUS GOTTLIEB LLP "Litigation could be streamlined with more rigid adherence to case management timetables and the application of cost or other conse- quences to those parties who fail to comply with court-ordered or consensual timetables." and defer to the findings and conclusions exercised by the other body. Here the Court acknowledged that an expert determination is binding unless the expert departed from the contractual instructions in a material respect or the contract otherwise provides. However, that may not always be the case. e Court noted that parties can install a safety valve in the contract clauses to chal- lenge the contractually binding nature of the expert's determination, if one is concerned that the expert's determination were to con- tain a "manifest error." Since the SPA contained a "manifest er- ror" clause, the Court concluded it could conduct a review that should be performed on a deferential standard for a variety of rea- sons. First, the review involved contractual interpretation, which is a question of mixed fact and law. If the same issue arose from the decision of a trial judge, that decision could only be interfered with in the case of a pal- pable and overriding error or the decision was unreasonable. Likewise, in Canadian appellate courts, the term manifest error has been equated with conclusions that are clearly wrong or palpable errors. Palpable errors are those that are so obvious that they can easily been seen or known; read- ily or plainly seen. Secondly, if the same is- sue arose out of an arbitration, the appeal would be limited to questions of law, and the standard of review, except in limited circumstances, is one of deference if the arbiter's decision was reasonable. irdly, even in administrative law cases, a reviewing court must consider multiple criteria, as set out in Dunsmuir v New Brunswick, [2008] 1 SCR 190, to avoid imposing a correctness standard and undercutting the integrity of the process to be used. In this case, the court found by its inter- pretation of the SPA that the parties' words did not simply except an "error." e parties chose to except only a "manifest error." e word "manifest" must have been intended to express a higher standard than simply looking to see whether some error is appar- ent from the papers. e parties' choice to include words of limitation implies defer- ence to the expert's determination, espe- cially as they did not insert a clause to bifur- LITIGATION FEATURES cate the review standard. Additionally, the Court concluded that in taking the plain language of the contract in its context, the parties' choice of the words "manifest error" indicates the parties wanted the opinion of a financial expert, not the Court, and a speedy process with some degree of finality. No Manifest Error is column does not leave room for ex- plaining multiple reasons why the Court did not find that the expert committed a manifest error in arriving at its decision, but the analysis used reflected the Court's concern that deferential standards are critical for protecting the integrity of the decision-making process, respecting the expertise of the decision-maker, and rec- ognizing that, in many questions, reason- able minds can differ over the outcome. e Court found that an error is manifest or obvious where it is unreasonable: e conclusion is outside the range in which experts could reasonably differ. If the con- clusion is within the range and sufficiently intelligible in the context of any contrac- tually required reasons, as it was here, an error is not "obvious" or manifest. Richard Wong and Peter Major Q.C. practise at McLennan Ross LLP, in Edmonton.

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