The court confirmed that an expert determination clause in a contract binds parties unless vitiating factors like fraud or collusion are proven.

JUDGMENT

Zaleha Yusof FCJ:

Background Facts

[1] This appeal arose from an assessment of damages proceeding, the decision of which entails a question as to whether a court may lawfully depart from what has been agreed by the parties in their contract to have a mutually appointed expert to determine expenses or damages as a means of independent valuation.

[2] The appellant is a company operating a flight academy which conducts flight training, flight simulator training and aircraft rental.

[3] At the request of the respondents, the appellant and the 1st respondent entered into two agreements which inter alia, required the appellant to provide and carry out flight training courses for the respondents' trainees and the respondents were to send a certain number of trainees to attend the appellant's training courses by batches. The respondents failed to send the required number of trainees as agreed. As a result, the appellant was forced to end the training courses early as it could not afford to bear the cost due to the insufficient numbers.

[4] Subsequently, the appellant sued the respondents at the High court for breach of contract. The High court found for the appellant and allowed the appellant's claim for special damages in part. On appeal, the court of Appeal on 12 May 2015 found that the High court was correct in finding the respondents liable for breach of contract. However, the court of Appeal set aside the amount of damages and remitted the matter to the High court for assessment of damages before the Registrar in accordance with cl 27.4 of the contract. The exact wordings of the relevant paragraph of the said Order dated 12 May 2015 (2015 Order) inter alia are as follows:

"(c) Berkenaan item (1) dalam Penyataan Tuntutan Plaintiff; perintah mahkamah atas kuantum diketepikan dan digantikan dengan Perintah bahawa kes diremit ke Mahkamah Tinggi untuk taksiran ganti rugi di hadapan Pendaftar Mahkamah Tinggi selaras dengan Klausa 27.4 Kontrak; ..."

[Emphasis Added]

[5] Pursuant to the Order, parties agreed for a Chartered Accountant Messrs Salihin to be appointed as an Independent Auditor. A report was prepared by Messrs Salihin and produced before the Deputy Registrar of the High court wherein damages was assessed in the sum of RM21,735,613.50. The Deputy Registrar accepted the report and awarded damages to be paid to the appellant in that sum.

[6] Aggrieved, the respondents appealed to the Judge In Chambers, the learned Judicial Commissioner (JC), and the learned JC allowed their appeal and directed that parties appoint a new auditor to assess the damages payable in accordance with cl 27.4. The learned JC was of the view that the said cl 27.4 did not state that the report of the expert must be accepted as final and conclusive. The learned JC opined that it was important for the expert to give clear explanation in open court as the respondents did not agree with the report.

[7] Dissatisfied with the learned JC's decision, the appellant appealed to the court of Appeal. The court of Appeal on 13 March 2018 affirmed the decision of the High court and dismissed the appellant's appeal (2018 Order). The court of Appeal was of the view that s 74 of the Contracts Act requires the expert to justify its report to ensure that it was fair and transparent.

[8] On 15 September 2002, this court granted the appellant's application for leave to appeal on the following questions of law:

[8.1] Whether s 74, Contracts Act 1950 applies to where parties to a contract have agreed to be bound by the determination of a mutually appointed expert as to the amount due and payable under a contract by reason of a breach or other specified event ("Question 1").

[8.2] Whether in the absence of any vitiating factors recognised in law, a report of the said mutually appointed expert determining such amount would be sufficient basis in law and fact for an award of damages in proceedings for the assessment of such amount ("Question 2").

[8.3] Whether such a report is only to