GSY Hospitality Ltd v Gladstone Court Developments Ltd

[2025] EWHC 3231 (TCC)

GSY sought summary judgment in proceedings arising out of an expert determination in relation to the development of a luxury hotel.

During the project, a dispute arose between the parties concerning certain terms of the Sale and Purchase Agreement as amended (the “SPA”) and payments which had been certified. This was referred to expert determination in accordance with the relevant provisions of the SPA. Amongst other things, the expert found that the parties had agreed a variation that GCDL’s liability was capped at £800k.

GSY said that this aspect of the determination was arrived at in error of law or was based on a manifest error and therefore was incorrect and did not bind the parties.

Clause 14.4 of the SPA included an “entire agreement” clause and Clause 14.5 included a “No Oral Modification” clause:

“This Agreement may only be varied or modified by a supplemental agreement which is made in writing by the parties or their solicitors and in such a form that complies with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989.”

Clause 18.1(e) of the SPA provided that:

“(e) Decisions of the Specialist will be final and binding on the Parties except in the case of manifest error or in relation to questions of law.”

The expert’s determination included discussion of whether or not there was a variation The expert noted that the £800k cap figure had not been challenged, which was consistent with GCDL's case that an agreement was made. This absence of a challenge was: “very stark”. The expert also noted the absence of documentation recording the agreement. However, on balance, the expert determined that, in particular due to the absence of any challenge, such an agreement did come into existence and was binding on the parties.

Deputy Judge Ter Haar KC discussed the effect of a no oral modification clause in English Law referring to the decision in Rock Advertising Ltd v MWB Business Exchange Centres Ltd (Dispatch, Issue 216) where the Supreme Court upheld the efficacy of these clauses in excluding later informal or non-complying variations. Lord Sumption said:

“What the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing to an oral variation is not therefore a contravention of the clause.”

GSY said that the variation, as found by the expert, was not evidenced in the manner required by the no oral modification clauses. Therefore, the expert’s conclusion was wrong in law.

In Premier Telecommunications Group Ltd v Webb [2014] EWCA Civ 994, Moore-Bick LJ said:

“(1) Where the parties have chosen to resolve an issue by the determination of an expert rather than by litigation or arbitration, the expert's determination is final and binding unless it can be shown that he acted outside his remit …

(8) Where the expert has made an error on a point of law which is not delegated to him, the error means that the determination will be set aside …”.

The expert did consider the MWB decision. GSY said that, if the expert had done so, they should have concluded that there was no valid variation. GCDL agreed that the expert’s analysis was wrong in law.

However, GCDL also said that, although the reasoning was open to challenge, the expert came to the right decision, albeit for the wrong reasons, and that accordingly this part of the determination should not be set aside. GCDL said that the same factual material as was placed before and relied upon by the expert established an estoppel by convention that GCDL's contribution would be limited to £800k. GSY agreed that this case would have proceeded to trial. If it succeeded, the result would be that the expert’s decision would be correct, even if the reasoning was wrong. Therefore, the application for summary judgment was premature.

The judge accepted GSY's submission that, under the expert’s mandate, they were obliged to reach a decision which (a) contained no manifest error; and (b) contained no error of law. Failing to consider the no oral modifications clause and the MWB decision amounted to an error of law, which led to the legally incorrect decision that there was a valid and binding variation. In Premier Telecommunications, the CA also said this:

“(7) Once it is shown that the expert departed from his instructions in a material respect, the court is not concerned with the effect of that departure on the result. The determination is not binding.”

Therefore, the court is not concerned with the effect of that departure on the result and is obliged to conclude that the determination in relation to the variation is not and was not binding. Given that “firm” conclusion, GSY was entitled to summary judgment reflecting it.

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