High Court: Company should not have issued ‘wasteful’ application in advance of expert determination process

About this case:

• Citation:
  [2025] IEHC 296
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Michael Twomey

Delivering judgment for the High Court, Mr Justice Michael Twomey stated: “In this Court’s view, Sunward has done exactly what the Supreme Court wants parties to avoid doing, when that Court issued its clear statement of the law, namely Sunward has engaged in what the Supreme Court has described as ‘wasteful and premature’ litigation.”

Background

In 2022, the defendant acquired the entire share capital in a mobile catering company (RCL) from the plaintiff pursuant to a share purchase agreement. The plaintiff received a purchase price of €5.2 million and was to receive an “earn-out” consisting of three further payments.

A dispute arose in relation to the calculation of the second earn-out amount, which the defendant had adjusted on the basis that six invoices were treated by it as falling within a different “earn-out period”. Accordingly, the defendant claimed that the second earn-out amount due to the plaintiff was €222,754, rather than €2,186,942.40.

Notwithstanding the terms of the share purchase agreement in which the parties agreed to refer disputes to an expert accountant and prior to the commencement of the expert determination process, the plaintiff issued proceedings by special summons in February 2025 seeking a declaration concerning the correct approach to any adjustments which might be made by the expert. 

The High Court

Mr Justice Twomey considered that an issue of “considerable practical significance” to every person seeking to avoid prohibitive litigation costs arose — whether the court should refuse to interfere in alternative dispute resolution where the parties agreed to resolve their disputes without court interference where such interference would result in prohibitive litigation costs being imposed by “the backdoor”.

The judge considered the matter before it by reference to the leading case of Dunnes Stores v McCann [2020] 3 I.R. 1, noting the Supreme Court’s statement to the effect that a party seeking to litigate matters which were agreed to be determined by an expert, prior to the making of a decision by that expert, is engaging in a wasteful pursuit sacrificing both expense and the court’s time.

Finding that the plaintiff had issued proceedings to have a court determine an issue which was prima facie a matter for the expert under the terms of the share purchase agreement, Mr Justice Twomey considered the general rule pronounced by the Supreme Court in Dunnes that the courts should only intervene in this context where exceptional circumstances exist.

Applying Dunnes to the plaintiff’s application, the court found that it was wasteful and premature to litigate the case prior to the making of a decision by the expert.

Mr Justice Twomey also considered that having regard to Dunnes, the courts should respect the parties’ agreement to refer their dispute to expert determination, particularly  where the parties had chosen an expert in the field in which the dispute arose.

The court emphasised that if a judge were required to determine an accounting issue, it would mean that instead of one person being involved in the decision-making process, there would be three people involved — a judge and one expert accountant from each side.

Finding that it would “defy all logic if one of those parties was entitled to get a judge to tell that accounting expert how to determine that accounting issue”, the High Court highlighted a third reason for refusing the plaintiff’s application, that there was no reason to believe that the expert would not make a lawful decision.

In this regard, Mr Justice Twomey considered that even if the expert were to go outside her remit, the plaintiff would have a remedy in challenging the legality of the decision before the courts.

The judge further considered the public policy reasons outlined in, inter alia, Dunnes for abstaining from interfering with the expert determination process, including the interests of resolving disputes in cheaper and more efficient ways than litigating through the courts.

The court explained that judges see, on a daily basis, the negative effects of the enormous cost of High Court litigation and “can do nothing about those costs” save for encouraging the cheaper and more efficient resolution of disputes without recourse to the courts.

Noting that the plaintiff, by agreeing to the expert determination process, had agreed not to inflict prohibitive litigation costs on the defendant and had “now decided to force” the defendant to incur such costs, Mr Justice Twomey stated that “this Court does not believe that it should facilitate or encourage such an approach”.

The High Court also observed that in line with Dunnes, it would be illogical for the expert to be given the broad discretion that she had been given by the terms of the share purchase agreement to determine the adjustment to be made, while at the same time it being necessary to go to court to determine what is meant by terms of the share purchase agreement.

Mr Justice Twomey reasoned:

As to the plaintiff’s allegation that the grant of a declaration would be justified as it was merely seeking to set out the parameters of the expert’s decision-making, the judge pointed out that there were no reasons to suspect that the expert would not have regard to the correct manner in which to carry out her function or to the terms of the share purchase agreement.

Noting the plaintiff’s reliance on the fact that the parties were in disagreement as to whether the expert was bound by the definition of “gross profit” as contended for by the plaintiff, Mr Justice Twomey considered that this did not warrant interference as “experts are appointed to resolve a dispute and it logically follows that the parties are invariably in disagreement, and usually on an important issue, since otherwise there would be no need to embark on an expert determination process”.

As to the plaintiff’s argument that it was not trying to delay the making of a decision by the expert and wanted to have the matter dealt with as soon as possible, the court confirmed that the fact that a party “wants the process slowed down or speeded up” is irrelevant.

The court also rejected the plaintiff’s reasoning that it was in the interests of efficiency and cost-effectiveness to deal with the dispute between the parties concerning the adjustment on the basis that this would avoid the possibility that the expert would err and that her decision would be challenged successfully, resulting in the making of a second decision by the expert.

In response to the plaintiff’s reliance upon the hearing having come before the Commercial Court only 10 weeks following the issuing of the proceedings, Mr Justice Twomey opined that the potential for the court’s interpretation of a term in the share purchase agreement to benefit the parties was not a basis for interfering in the expert determination process and that the plaintiff’s argument was based on an assumption that litigation could provide a “neat and a speedy resolution” to a discreet issue.

In this regard, the court emphasised that “litigation rarely, if ever, provides a ‘speedy resolution’ of a dispute” as “once a party decides to get on the runaway train that is litigation, it can be difficult to get off”.

The judge remarked that the 10-week period from issuing proceedings to the initial hearing “could well be only the tip of the iceberg. There is always the possibility of an appeal, of this Court’s decision, to the Court of Appeal, which could add to 12-18 months to the resolution of the parties’ dispute, and indeed a further appeal to the Supreme Court, which might add an additional 12-18 months to the process.”

Conclusion

Accordingly, the High Court found that the plaintiff had breached the general rule in Dunnes and rejected its application, indicating a preliminary view that the plaintiff should be liable for the defendant’s legal costs.

Sunward Holdings Ltd v Teqnion AB [2025] IEHC 296