FOREST 360 LTD v PHILIPS CONTRACTING MT. MAUNGANUI LTD [2022] NZHC 3186

FOREST 360 LTD v PHILIPS CONTRACTING MT. MAUNGANUI LTD [2022] NZHC 3186 [30 November2022]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYI TE KŌTI MATUA O AOTEAROATAURANGA MOANA ROHECIV 2020-470-000070[2022] NZHC 3186IN THE MATTER of a breach of contractBETWEEN FOREST 360 LIMITEDPlaintiffAND PHILIPS CONTRACTING MT.MAUNGANUI LIMITEDDefendantHearing: 14 February 2022Appearances: J K Mahuta-Coyle for PlaintiffL Foley for DefendantJudgment: 30 November 2022JUDGMENT OF DUFFY JThis judgment is delivered by me on 30 November 2022 at 4 pmpursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitors/Counsel:Dewhirst Law, WhanganuiLe Pine & Co, TaupoJ K Mahuta-Coyle, Barrister, Wellington[1] The plaintiff, Forest 360 Ltd (Forest 360) manages forestry blocks. Thedefendant, Philips Contracting Mt Maunganui Ltd (Philips) provides forest harvestingservices. Forest 360 and Philips were parties to a written contract for forest harvestingservices (the contract works).1 Clause 16 of this contract provided for disputeresolution, either by mediation or, failing that, expert determination.[2] Some months into the contract the parties were in dispute. Philips gave Forest360 notice it required the parties' dispute to be referred to expert determination,pursuant to cl 16.3. They failed to agree on an expert. Philips referred the appointmentto the Chairperson of the Resolution Institute for that entity to appoint an expert,pursuant to cl 16.3(a).2 It appointed Bruce Cottrill of Wellington as the expert.[3] Forest 360 is now unhappy with part of Mr Cottrill's determination. Hencethis proceeding. The key issue is whether in relation to that part of the determinationhe has breached the mandate given to him by cl 16.[4] The contract does not provide for any right of appeal to this Court.Accordingly, Forest 360 has framed its statement of claim as a series of allegedbreaches of contract that:(a) the expert made manifest errors in his determination, which breach thecontract;(b) the determination includes decisions on questions of law, which issomething that was beyond the expert's jurisdiction and therefore inbreach of the contract;(c) the expert made decisions on non-contractual claims, which is alsosomething that was beyond his jurisdiction and therefore in breach ofthe contract; and1 Forest 360 was previously known as FOMS. The subject contract is recorded as being betweenFOMS and Philips. For convenience I shall refer to the plaintiff at all times as Forest 360,including when referring to documents or actions it may have executed when known as FOMS.Any quoted references which refer to FOMS should read as a reference to Forest 360.2 At the time the Resolution Institute was known as LEADR and is referred as such in the evidence.(d) the expert was not sufficiently qualified to determine the dispute, andtherefore the process of expert determination was not one that theparties had bargained for under their contract, and in breach thereof.[5] Philips denies there has been any such breaches.[6] These claims are against the determination insofar as the expert found thatForest 360 must pay four invoices (2728, 2729, 2730 and 2731) issued by Philips,minus some reduction in set-off for a payment that Philips owed to Forest 360. Theremainder of the determination is not challenged.[7] Clause 16.3(b) made the determination final and binding on the parties exceptin the case of bad faith or manifest error. The parties agree that the scope forchallenging the determination in this Court is narrow.[8] Before addressing the disputed invoices, I consider it is helpful to look at howmatters proceeded before the expert.The dispute resolution process[9] Forest 360 was not happy with the chosen expert (who is not legally qualified)and notified him and Philips of those concerns. Forest 360 thought the disputerequired judicial determination. But ultimately, Forest 360 indicated it wouldparticipate in the expert determination, and then did so.[10] Following his appointment on 4 September 2019, the expert sent the parties'lawyers an email setting out a draft process for their comment. This process was asfollows. The determination was to be made on the papers of the claim and anycounterclaim (if there was one), the response to the claims and supporting evidencefrom the parties. No reasons for the determination would be given.3 The strict rulesof evidence would not apply. If required, a hearing would be held in the event it wasthe expert's opinion that evidential matters of credibility ought to be tested. The experthad authority to ask written questions of the parties and could request further3 However the expert did go on to provide reasons.particulars from them. Any such request and response process ordered by the expertwas to be consistent with the rules of natural justice. The expert could appoint anadvisory expert where there were matters outside of the expert's particular range ofexpertise to be considered and decided upon. Any advice adduced from an appointedadvisory expert that was relied upon by the expert in making his determination was tobe provided to the parties for submissions on the same. The parties at their earliestconvenience and in collaboration with each other were to submit to the expert aproposed time frame for the filing and service of submissions and evidence as betweenone another and to the expert. In the absence of agreement between the parties, in anyprocess matter touching on the expert determination the expert's decision was to befinal. The fee was also set out.[11] The response from the lawyers for Forest 360 on the same date showed thecompany was essentially in agreement with the process the expert suggested. Theyset out a timetable for filing a claim. They noted that the expert's determination, asper the contract, could be appealed in the event of manifest error/bad faith, andindicated that therefore they believed that reasons would ultimately be necessary,although these could be provided on request. Forest 360 further indicated that theexpert should have the discretion to make an award of costs upon submission by theparties or otherwise. Subsequent emails from Philips dated 18 September 2019confirmed the process as set out in the letter dated 4 September 2019 from Forest 360'slawyers. All this is noted in the expert's determination.[12] The determination further noted that the evidential test used was the balanceof probabilities and that in making a decision the expert would have regard to forestharvesting industry custom and practice, and accord it appropriate weight. The reportstated that for the purpose of clarity and context, and as per the reference for expertdetermination as agreed between the parties, he would not be giving reasons for hisdetermination. A timetable was then set for filing submissions. At the relevant timeneither party formally objected to the process the expert said he would follow. Eachparticipated in that process by filing evidence. Copies of affidavits prepared for thedetermination were before me. Copies of affidavits filed in this Court relating to astatutory demand for payment issued by Philips were also before me. It is not clear tome if those affidavits were also before the expert. The expert appears to have receivedsome submissions/memoranda.The claims and counterclaims of the expert determination[13] The claims sought from Forest 360 by Philips were:(a) a determination that Forest 360 owes Philips the sum of $100,690 GSTinclusive for invoices 2728, 2729, 2730, 2731 dated 9 July 2018;(b) damages of $38,206 for failure to give a month's notice;(c) loss of profit for remaining work in the Fryett block and three otherblocks of $208,102.02;(d) interest on any determination pursuant to the Interest on Money ClaimsAct 2016 from 6 August 2018 to date of payment;(e) a determination that Forest 360 is liable for the entire costs of theexpert.[14] The counterclaim by Forest 360 against Philips sought as follows:(a) $11,108.92 (excluding GST) for site damage caused by Philips; and(b) $6,099.00 (excluding GST) for damage caused to the bridge by Philips;and(c) $251.94 (excluding GST) being the cost to have the Forest 360forwarder keys replaced after Philips refused or was unable to providethem.The expert's determinationThe results[15] The expert found the sum of $100,690 (GST inclusive), being made up ofinvoices 2728, 2729, 2730 and 2731 was owed by Forest 360 to Philips. He gavereasons for this, which I address later.[16] The claim of damages for failure to give a month's notice of $38,206 wasdismissed. The expert was satisfied Philips repudiated the contract through its wordsand actions, and that its attempt to resile from the repudiation was inadequate in thecircumstances. Further, he found Forest 360 was justified in cancelling the contractto mitigate foreseeable losses.[17] The claim for loss of profit for remaining work on the Fryett forestry block andthree other blocks of $208,102.02 was dismissed. The expert was satisfied that noenforceable contract or adequate meeting of the minds existed between Philips andForest 360 in regards to further work.[18] Regarding the counterclaim the expert found the counterclaim had not beenmade out and accordingly it was dismissed in its entirety.[19] Regarding a claimed setoff, the expert found that Philips had admitted it owedForest 360 $4102.80 (including GST) by way of legal fees. The expert found this sumwas to be set off against the $100,690 that Forest 360 owed to Philips under thedetermination. This reduced the net liability of Forest 360 to $96,587.20 (includingGST).4[20] Regarding interest, the expert awarded Philips interest on the sum of$96,587.20 (including GST) pursuant to the provisions of the Interest on MoneyClaims Act from 6 August 2018 until the date of full and final settlement.[21] Regarding costs, the expert found the parties ought to be able to settle the costsof the determination and their own costs between them. The dispute resolutionprovisions of the contract anticipated that the parties meet their own costs and sharethe costs of the expert. In the event that the parties did not settle these costs between4 This sum was later adjusted under a slip rule; see [35]—[36] herein.them Mr Cottrill set out a process for him to receive submissions on those matterswithin a specified time frame.Discussion and reasons given in the determination[22] I focus here on the reasons for the expert's finding that Forest 360 must paythe disputed invoices.[23] The expert generally observed that the parties had entered into an agreementwhich specifically provided for their disputes to be determined by referral to an expertrather than arbitration. He described the reference to an expert as a simpler process,further observing that if the parties had intended to resolve disputes by arbitration oreven litigation they could have drafted a contract with appropriate dispute resolutionprovisions. He stated that he would therefore be taking into account forest harvestingcustom and practice, and that normal practice should be given due regard and informhis decisions, along with the evidence and submissions provided. He furthercommented that the dispute resolution provisions in the contract anticipated that"fairness in all of the circumstances be given regard to in the decision by the expert".He concluded his general observations by noting that his discussion, reasons anddecisions looked beyond contractual certainty "the lack of which being the veryessence of this dispute".[24] At paragraph 4.2 of the determination the expert made general findings on thedisputed invoices. First, he found that Philips held a genuine belief there would be atop up over and above the $/m3 rate. The expert considered this belief was reasonablyforeseeable based on the evidence, the representations made to him by Blair Van derMaas (a person engaged by Forest 360) and corroborated by Elias Cole and BenjaminGrice (persons engaged by Philips). Second, he found it was "reasonable for Philipsto believe it would be reimbursed for certain (but never specified) work undertaken by[it] that fell outside the specific terms of the agreements and the $/m3 rate". Heconsidered this had been established through the evidence and noted the case forForest 360 was undermined by the absence of evidence from Blair Van der Maascorroborating the evidence of Daniel Gaddum (the managing director of Forest 360).[25] Also at paragraph 4.2 the expert found that regarding the provision ofinfrastructure:normal industry practice was that work necessary to enable the extraction oflogs will have been completed by the Principal prior to log extraction.Exceptions would be where certain infrastructure work required to beundertaken by the contractor was specifically prescribed and agreed to, or isconsidered as part of the logging rate.The expert found "neither to be the case here". Further, regarding the extra site workundertaken by Philips the expert noted:there is no evidence that Van der Maas instructed Philips on any of his frequentsite visits to stop and desist such work, but did make a series ofundertakings that Philips would be reimbursed.[26] Then at paragraph 4.2.1 the expert specifically addressed invoice 2728. Hefound the amounts noted on the invoice for 14 and 15 June related to the Forest 360provided forwarder, which was $600 plus GST. He found that all other noted detailsreferred to machine hire related to remediation and reinstatement work being $22,775plus GST. The expert was satisfied from the evidence that these costs were reasonable.He recorded that where possible he had reconciled the dates of the evidence againstthe dates of the invoice. He noted there was "very little evidence provided ofcommunication that might relate to instructions or verbal agreements on scope ofworks between the parties during the invoice period when [Mr] Philips was overseas".[27] The expert then turned to the question of what might constitute reasonableremediation costs. He found normal practice is that any remediation (housekeeping)works that might be required to secure the site against weather events, for example,unblocking water tables, clearing culverts, installing water cut-outs which would berequired before leaving the site, were a contractor responsibility and would be coveredin the $/m3 rate. However, in this case he found that work was "a lot more thanexpected". Here it included the removal of a bridge, repairing bridge entrancewaysand reinstating extra work that was necessary due to changes and shortcomings in thelogging plan. He found this work was unknown to Philips at the time of entering theagreement with Forest 360. He found there was no evidence of a clear or finalisedwork plan in place at the commencement date. He noted that "[Mr] Gaddumacknowledges some of these costs as reasonable, however [Mr Gaddum] provides littleevidence that disputes the particulars of those that he disagrees with save for a refusalto pay". The expert concluded that in the absence of such evidence and given theparticulars as outlined he preferred the evidence and case for Philips in regards to thisinvoice.[28] In paragraph 4.2.2 the expert set out reasons for his findings on invoices 2729,2730 and 2731. He found these invoices detailed Philips' daily costs based on chargeout rates for equipment and other resources. He found the quanta reasonable. Theexpert noted the costing of additional machinery recorded as deductions on severalwork sheets. The expert presumed these deductions were "introduced into the systemand without any expectation of cost coverage" by Forest 360. The expert noted"throughout the daily costs, references to work completed on the removal of fencingrelated activities, bridge installation and removal, corduroy installation etc". Theexpert found that:These costs were outside the schedule of services provided for in theagreement and therefore ought to be recognised. Time spent on these activitiesnot only had incurred direct costs but also likely consumed time that wouldotherwise be spent extracting logs.[29] The expert concluded that from the evidence throughout "there was anexpectation of monthly wrap-ups to capture additional costs incurred over and abovelog extraction or production". He found it appeared that the $/m3 costs have beencorrectly netted off these invoices to calculate the cost shortfall. He found "in simpleterms total daily costs/daily production = $/m3, in this case the derivation of the$44.80".Further reasons[30] Later, on 1 July 2020, in response to a request from one of the parties the expertprovided further reasons for the determination. First, however, he stated that followingdelivery of the determination, save for matters regarding costs and correcting any slips,his jurisdiction had finished. However, for the purposes of clarity only, he said hewould provide brief answers to questions. Second, he would not answer questions thatinvolved relitigating matters or enabling the raising of new arguments. He stated thatthe further reasons he gave should be read in conjunction with paragraph 4.1 of thedetermination, which dealt with his findings on Philips' claim.[31] In relation to the further reasons the expert found that "invoices 2729, 2730and 2728 have been generated specifically by Philips for the purpose of reimbursementof extra costs". He found they were not buyer generated invoices.5 In support of thishe stated that "[Mr] Gaddum was clear on the purpose of the invoices" and referred toan email dated 20 July 2018 where Mr Gaddum had stated:Invoices 729, 730, 6731 [sic] will not be paid as there was no agreementbetween FOMS and Philips contracting for day rate work.[32] The expert repeated his finding in the original decision that "where possible hehad reconciled the dates of the evidence against the dates of the [relevant] invoice".He added as further reasons that "on the basis of the evidence provided by Philips",he had "reconciled the handwritten transcript of Philips' on the day sheets in regardsto extra costs and they appeared to be correctly netted off the harvest rate". Further,he was satisfied that on the balance of probabilities "the site was not harvest ready andrequired further and ongoing work outside of the Schedule of Services and that wouldnot ordinarily be expected to be included in a $/m3 rate".[33] Regarding the provision of infrastructure, the expert repeated the reasons hegave at paragraph 4.2 of the determination.6[34] The expert then identified factors that had been persuasive in hisdecision-making. First, Philips's correspondence to Mr Van der Maas in regard to topups was continual and specific and Mr Van der Maas' responses were repeatedlyvague. The expert repeated reasons given in the determination at paragraph 4.2 thatPhilips held a genuine belief that there would be a top up over and above the $/m3 rateas one that was reasonably foreseeable for him to have; based on the evidence, therepresentations made to him by Mr Van der Maas and corroborated by Mr Cole andMr Grice. Second, the expert found that it was "more likely than not that there wassome sort of agreement in regards to top ups arising from the 11 June meeting". But,5 I shall return to this later. Clause 2.2 of the contract provided for payment to be by way of buyercreated tax invoice for volume harvested in the previous month.6 See [24] herein.he then said that his decision in regard to the invoices "had not relied or turned on thisor the date and thus did not require testing".Correction of expert's determination[35] Later on 1 July 2020 the expert acknowledged a slip in his decision regardinginvoice 3649, which had been referred to as 3641 by counsel for Philips. Further, heacknowledged an error regarding the set-off. This led him to correct the determinationby reducing the agreed set off amount to $4,000. The alteration of the set off changedthe sum Forest 360 owed Philips to $96,690 (including GST); this became the figureon which interest was to be calculated.[36] For Philips, its lawyer had also raised concerns about invoice 3649 and a debtowing of $9,872.27. The expert said he accepted the facts, as set out by Philips'lawyer, showed this sum was owed by Forest 360 to Philips. However, the expertrefused to make a decision on liability to pay this sum and he would not alter thedetermination. This was because the unpaid Philips invoice had not formed part of theclaim, and accordingly in his view making orders in relation to it was beyond hisjurisdiction.The contract[37] Clause 1 dealt with the appointment of the contractor and the term ofappointment. The contractor (Philips) was to harvest the volumes and grades of timberas agreed in writing from time to time and from sites agreed with Forest 360. Theservices the contractor was to provide were those listed in sch 1 to the contract. Thecontractor acknowledged the quantity of harvesting may vary and no minimumquantity of harvesting was agreed. Clause 1 also provided for the renewal of thecontract if the parties were agreed on that happening.[38] Clause 2.1 set out a method of payment which provided that the rate was to bepaid in dollars per tonne for wood produced by Philips, as set out in each harvestingprescription. Each such prescription was to detail the area of the forest to be worked,the harvesting operations to be undertaken and the rates to be paid for the workperformed. It seems, therefore, that each demarcated area of the forest to be harvestedwas to have a separately agreed harvesting prescription which provided for the workto be done and the rates to be paid for that work.7[39] Payment was to be made by Forest 360 on the 20th day of each month by wayof a "Buyer-Created Tax Invoice" for volume harvested in the previous month.[40] Thus, the payment clause envisaged that it would be Forest 360 rather thanPhilips that generated a monthly invoice for payment of the work undertaken byPhilips. Presumably that buyer-created tax invoice would be based on the rates of theagreed harvesting prescription for whatever area of a forest was currently beingworked.[41] Philips was to supply all machinery, equipment, personnel and supplies asneeded to perform under the contract.8[42] Clauses 3.2 to 3.4 set out Philips' obligations in terms of compliance withpublic liability insurance requirements, staffing and health and safety requirementsand on-site supervision of the work. Similarly, clause 4 specifically related to healthand safety and set out detailed obligations imposed on Philips in that respect.[43] Clause 5 dealt with Philips' environmental obligations such as compliance withresource consents, obtaining agreement in writing prior to any deviation fromapplicable resource consents, removing rubbish and operational waste from the foreston an at least weekly basis, minimising soil disturbance and tracking, ensuring watercontrols were installed post-harvest and adhering to the New Zealand Forest OwnersAssociation Inc, New Zealand Environmental Code of Practice for Plantation Forestry,ensuring all Philips' employees understood and complied with the environmentalrequirements of the contract.[44] The remaining clauses covered the following. Clause 6 provisions related tothe quality of Philips' harvesting performance. Clause 7 related to stock managementdocumentation and communication. Clause 8 dealt with confidentiality. Clause 97 See cl 2.1.8 See cl 3.1.restricted assignment of the benefit of the contract. Clause 10 dealt with infrastructureand the obligations on Philips to take all reasonable care to prevent any damage toinfrastructure. Clause 11 dealt with drugs and alcohol. Clause 12 dealt with firesecurity and protection. Clause 13 made it clear that the relationship between Forest360 and Philips was that of independent contractor. Clause 14 provided thecircumstances when the contract could be suspended. Clause 15 dealt withtermination.[45] Finally, there was clause 16, which provided as follows:Dispute ResolutionNotice of dispute16.1 If a party considers that a dispute has arisen between the parties inrelation to this Agreement, it will give a notice to the other party,setting out in reasonable detail the dispute (Dispute Notice). Onreceiving a Dispute Notice each party will promptly commencediscussions to attempt in good faith to resolve the dispute.Mediation16.2 If the dispute has not been resolved within 10 working days (or otherperiod agreed by the parties) after the receipt of the Dispute Notice,either party may require that the dispute is referred to the mediationof a single mediator. The mediator will be as agreed and failingagreement chosen by the chairperson for the time being of LEADRNew Zealand Inc (or any successor body) or his or her nominee. Theparties will share equally in the costs of the mediation.Expert determination16.3 If a party considers at any time that a dispute referred to mediationwill not be resolved by that method, either party may by notice inwriting require that the dispute is referred for the determination of anexpert who has experience with the type of dispute at hand.(a) The expert will be agreed by the parties and if they cannot agree, theexpert will be appointed on the application of either of the parties bythe Chairperson for the time being of LEADR New Zealand Inc (orany successor body) or his or her nominee.(b) The expert will determine the dispute acting as an expert and not anarbitrator so as to give effect to the intention of this Agreement. Theexpert's decision will be final and binding on the parties except in thecase of bad faith or manifest error.(c) Each party will meet its own costs in relation to the determination.The parties will meet in equal shares the costs of the expert unless theexpert determines otherwise.(d) Subject to the above provisions, the expert will direct the rules toapply and manner by which he or she will determine the dispute, andhow the determination will be given effect to.Urgent Relief16.4 Nothing in this clause 16 will prevent a party from seeking urgentinterlocutory or injunctive relief in the New Zealand Courts.The contractual work[46] The contract works were set out in sch 1 to the contract. Schedule 1 was partlya proforma document that contained five check boxes with a description describingthe particular services relating to that check box. In addition a handwritten insertionset out additional services.[47] For the subject contract check boxes 1, 3, 4 and 5 were checked. Check box 2was not. This meant the forest harvesting services Philips was to provide to Forest360 under the contract were as follows:Checkbox oneClearfell logging: which will include the felling of standing trees, thedelimbing and the extraction to a skid or landing or other designated work areasof the stems, and the measuring and cutting up of the stems into the logproducts as specified by the Company. Every exotic tree from the harvest areawill be felled even if it is deemed non-merchantable, this includes deadstanding spars.Checkbox threeSorting and stacking: which will include the sorting out of the cut up logs intotheir various product categories and stacking those logs in readiness for theirloading out. This includes branding of the logs as directed by the Company.Checkbox fourLoading out: which will include the loading out of logs onto trucks and theaccurate completion of the Company's Weighbridge Docket for each load; andCheckbox fiveOther services: as specified below.[48] In relation to checkbox five which referred to "other services as specified"there was a handwritten insertion which stated as follows:Managing and operating shuttling equipment provided by FOMS, thisincludes, a purpose built forwarder and a grapple loader.It is understood that Philips Contracting will provide the labour as in anoperator for both machines, also fuel for the machines, labour hours & fuelvolumes will be documented and charged for at agreed rates.[49] The parties by notice of agreed statement of fact dated 18 June 2021 agreedthat the contract works set out in sch 1 constituted the contract works.The disputed invoices[50] The contract obliged Philips to cut and remove logs from specified forestryblocks. Forest 360 was responsible for ensuring everything was in place to allow thecutting and removal of logs to procced. However, with some blocks Forest 360 hadnot done all that was required before Philips could start cutting and removing logs.Instead Philips did preparatory work that should have been done by Forest 360.Without the preparatory work it seems the cutting and removal of logs in those areascould not have proceeded.[51] The contract did not expressly provide for Philips to substitute for Forest 360when it came to the preparatory work. There is no dispute that some preparatory workthat was outside the contract works was done by Philips. However, Forest 360contends that it paid for this work. It further contends that the disputed invoices soughtpayment of contract works for which buyer created invoices had already been issuedand paid for. Thus, there is no basis for Philips seeking further payments via thedisputed invoices.[52] All invoices are dated 9 July 2018. Philips sent these invoices as attachmentsto an email to Forest 360 dated 17 July 2018. By then Philips had indicated (on 4 July2018) that it would be stopping work and by 6 July 2018 Forest 360 had terminatedthe contract with Philips. Accordingly, the disputed invoices were issued some timeafter performance of the subject works for which they were issued, contract works forthose months had already been the subject of buyer created invoices which were paidto Philips, and the parties were entering the early stage of their broader dispute aboutperformance of the contract.Invoice 2728[53] Invoice 2728 itemised the provision of labour provided on 14 and 15 June2018. The names of the workers and their hourly rate of $40 per hour is specified.This invoice also includes hire charges for several machines, all with hireage hoursand hourly rates stated:(a) in relation to the Fryett block clean up – river flat/skid area, hireage ofmachine 325FM in June 2018 and hireage of machine 320C in June2018;(b) hireage of machines for the Payne loadout skid reinstatement in June2018;(c) machine hireage for the Fryett crossing removal in June 2018;(d) hireage of machines in June 2018 for the Fryett crossing and trackreinstatement;(e) hireage of machines for the Payne reinstatement in June and 2–5 July2018; and(f) machine hireage for the Kella track reinstatement on 29 June and 3 and4 July 2018.[54] The sum total of these charges comes to $26,881.25 including GST.[55] Invoice 2728 records no credits for payments of a work-related buyer createdinvoice from Forest 360.Invoice 2729[56] Invoice sets out day rate logging charges as per cost book, excludingearthworks for the Fryett block of the Gasson Lane forest. It provides a series of datesin May 2018, in June 2018 and on 5 and 9 July 2018. The day rate logging charge issimply a monetary sum listed beside each day without any explanation for how thatsum is derived. Also included in this invoice are two deductions to take account ofpayments made under the buyer created invoices, which were issued monthly. ForJune 2018 there is a deduction of $8,364.16 and for July 2018 there is a deduction of$44,164.74. The presence of the two monthly deductions for buyer created invoicessuggests that the dates set out in this invoice and the amounts claimed are being soughtin addition to payments that have already been received in relation to the Fryett blockbased on the buyer created invoices. The total claimed in invoice 2719 is $34,598.74including GST.[57] There are no Forest 360 buyer created invoices in evidence that match thecredits recorded in invoice 2729.Invoice 2730[58] Invoice 2730 relates to the Payne block. It is described as March/April dayrate logging charges as per cost book excluding earthworks. The itemised sumsrelating to this invoice relate to work performed in March 2018 and April 2018. Thereis also a deduction for a May 2018 buyer created invoice in the sum of $59,317.76.Once that deduction is made the balance owing under invoice 2730 is $24,164.15.Again, it appears from this invoice that it relates to work provided on the specifieddates for which payment is sought over and above that already received under thebuyer created invoice for May 2018.[59] The relevant buyer created invoice which resulted in the set-off deduction of$59,317.76 is a Forest 360 invoice dated 30 April 2018, invoice number 3527. Thisinvoice is a logging payment for the period to 30 April 2018. It identifies the logginggang, the forest number being 2132 De Brett, the log grades, the various loads, thevolumes, the tonnage units, all of which were logged at an hourly rate of $44.80. Theinvoice notes the payment is due on 20 May 2018 and identifies the bank account towhich the payment was to be made.Invoice 2731[60] This invoice relates to the Payne block and is a claim for the May day ratelogging charges as per cost book excluding earthworks etc. It is for work done in May2018. Deducted from the sums claimed for those dates is a credit given for a received20 June 2018 payment as per buyer created invoices in the sum of $37,251.20 and$8,288.92. Once those deductions are taken into account the sum sought under invoice2731 is $15,046.05.[61] Invoice 2731 relates to work on the Payne block. In the evidence before me Ican find no buyer created invoice relating to the Payne Block for comparable datesand showing payment of the sum $37,251.20 and $8,288.92.Discussion[62] Where an expert determination clause provides that the expert's determinationshall be final and binding there are limited grounds on which the determination maybe challenged.9 In such circumstances it is still possible to challenge the determinationon the ground the expert has departed from his or her mandate in a material respectand failed to do what he or she was appointed to do.10 Where the determination clauseadditionally provides that the determination may be challenged in the case of bad faithor manifest error, which is the case here, this will provide a further ground ofchallenge.Was there a departure from mandate?[63] For a Court to decide whether an expert has departed from his or her mandateit should decide: (a) whether the expert has done what he or she was appointed to do,which entails analysis of the determination clause; and (b) whether there has been a9 Waterfront Properties (2009) Ltd v Lighter Quay Residents' Society Inc [2015] NZCA 62, [2015]NZAR 492 at [29].10 At [29].material departure from the terms of appointment, which entails analysis of thedetermination. This is helpfully explained in Jones v Sherwood Computer Services:11On principle, the first step must be to see what the parties have agreed to remitto the expert, this being, as Lord Denning MR said in Campbell v Edwards, amatter of contract. The next step must be to see what the nature of the mistakewas, if there is evidence to show that. If the mistake made was that the expertdeparted from his instructions in a material respect, example if he valued thewrong number of shares, or valued shares in the wrong company, or if, as inJones (M) v Jones (RR) the expert had valued machinery himself whereas hisinstructions were to employ an expert valuer of his choice to do that, eitherparty would be able to say that the certificate was not binding because theexpert had not done what he was appointed to do.[64] Another way of putting this limitation is that expressed in Nikko Hotels (UK)Limited v MEPC where it was said of an expert's amenability to challenge:12If he has answered the right question in the wrong way, his decision will bebinding. If he has answered the wrong question, his decision will be a nullity.[65] In Barclays Bank PLC v Nylon Capital LLP Lord Neuberger MR expressed theview, without deciding the point, that where there was solely an issue of law in disputethe expert's determination on that issue may be open to challenge:13[69] Accordingly, it seems to me that, where a contract requires an expertto effect a valuation which is to be binding as between the parties, and thereis an issue of law which divides the parties and needs to be resolved by theexpert, it by no means follows that his resolution of the issue is incapable ofbeing challenged in court by the party whose argument on the issue is rejected.As Hoffman LJ said in the Mercury Communications case [1994] CLC 1125at 1140, 'The parties have agreed to a decision in accordance with thismeaning and no other. Accordingly, if the decision-maker has acted upon whatin the court's view was the wrong meaning, he has gone outside his decision-making authority', and, it seems to me to follow that the court can review, and,if appropriate, set aside or amend his decision. While certainty and clarity arehighly desirable, it is, regrettably, inappropriate to consider that issue furtherin this case.[70] I appreciate that, in cases of this sort, the advantage of leaving allpoints of law to the final determination of the expert is that it results in arelatively quick and cheap process for the parties. However, it must bequestionable whether the parties would have intended an accountant, surveyoror other professional with no legal qualification, to determine a point of law,without any recourse to the courts, even if it has a very substantial effect ontheir rights and obligations. It would, I suggest, be surprising if that were the11 Jones v Sherwood Computer Services [1992] 2 All ER 170, [1992] 1 WLR 277 at 179 (citationsomitted).12 Nikko Hotels (UK) Limited v MEPC [1991] 2 EGLR 103.13 Barclays Bank PLC v Nylon Capital LLP [2011] EWCA CIV 826, [2012] 1 All ER 912.effect of an expert determination agreement when the Arbitration Act 1996gives a right (albeit a limited and prescribed right) to the parties to refer pointsof law to the court. That Act applies where the parties have entered into anarbitration agreement, which gives them a much greater ability, in law and inpractice, to make representations and to involve lawyers in connection withthe arbitration, than parties enjoy in connection with the great majority ofcontractual expert determinations.[66] Forest 360 submits the inclusion and recognition of potential challenge basedon bad faith or manifest error widens the scope for a challenge based on mistakebeyond the circumstances referred to in Jones v Sherwood.14 In Veba Oil Supply &Trading GmbH v Petrotrade Simon Brown LJ outlined the test for manifest error as"oversights and blunders so obvious and obviously capable of affecting thedetermination as to admit of no difference of opinion".15 In Galaxy EnergyInternational Ltd v Eurobunker Spa a manifest error was referred to as a "plain andobvious error".16[67] Accordingly, I consider that here the first step is to decide whether the expertdid what he was appointed to do or whether he strayed outside the bounds of thatmandate. To do so I take note of Lord Neuberger's statement in Barclays Bank v NylonCapital LLP:17 the extent of the expert's mandate in any case must depend on the wordsof the particular contract provision and the documentary, factual andcommercial matrix of that provision.[68] Clause 16.1 of the contract provides for the parties to give notice of a disputewhich they must attempt to resolve, and if they fail there is the prospect of mediationor expert determination. Clause 16.1 refers to a dispute that "has arisen between theparties in relation to this Agreement". Other than this reference, nowhere else in cl 16is the scope of the type of dispute to which cl 16 applies spelt out. It follows that herethe expert's mandate was to determine those disputes that were "in relation to" thecontract.14 Relying on Clive Freedman and James Farrell Kendall on Expert Determination (Sweet andMaxwell, London, 2015).15 Veba Oil Supply & Trading GmbH v Petrotrade [2002] 1 All ER 703 at [33].16 Galaxy Energy International Ltd v Eurobunker Spa [2001] 2 Lloyd's Rep 725.17 Barclays Bank PLC v Nylon Capital LLP [2011] EWCA CIV 826, [2012] 1 All ER 912 at [65].[69] In Sportzone Motorcycles (in liq) v Commerce Commission, the Court ofAppeal found that the required connection imposed by the words "in relation to" wouldturn on the object and purposes of the particular statutory provision.18 The same wouldbe true of a contractual provision. In plain terms the dispute must have somerelationship or connection with the agreement. The relationship, depending on thecontext, may range from being "causal or consequential"19 to more loosely "having todo with".20[70] This wording can be contrasted with language that would clearly narrow thescope of cl 16 to disputes about performance of the contract's written terms. If thelatter expression was intended to define the scope of cl 16 it could be expected that theclause would have used language like: (a) the performance of the contract; (b)performance of the contract works; or (c) performance of the work in sch 1 (thesebeing the specified contract works). The phrase "in relation to" allows for a broaderconsideration of what is in dispute. It allows for the expert to consider matters thatfall outside the written terms of the contract, but which can be seen to be related to thecontract. Thus, any ancillary or additional conduct work/services that were notexpressly provided for in the contract, but which arose by virtue of the parties beingin a contractual relationship for harvesting services of the relevant forestry blocks iscapable of being understood as something related to the contract.[71] Put simply, I consider the mandate cl 16 gave to the expert allowed him to lookat matters of dispute that went beyond the express terms of the written contract, butwhich only came into being because of the parties' contractual relationship. Had theparties wanted to confine cl 16 to a dispute about performance of the express terms ofthe written contract they could easily have done so.[72] This finding is consistent with the finding of Edwards J in Archers Road TrustCo Ltd v JMR Business Ltd.21 In that case the parties' agreement contained a disputeresolution clause that allowed a party to refer to an expert for determination "a dispute18 Sportzone Motorcycles (in liq) v Commerce Commission [2015] NZCA 78, [2015] 3 NZLR 191 at[52], citing Hatfield v Health Insurance Commission (1987) 15 FCR 487 at 491 per Davies J.19 IAG New Zealand Ltd v Jackson [2013] NZCA 302 at [29].20 Re Nanaimo Community Hotel Ltd [1944] 4 DLR 638; applied in Calibre Financial Services Ltdv Mortgage Administration Services (Calibre) Ltd [2013] NZCA 503, [2014] NZAR 483.21 Archers Road Trust Co Ltd v JMR Business Ltd [2016] NZHC 2987 at [40]–[44].in respect of any matter arising out of, or in connection with" the agreement. EdwardsJ held that the words "in connection with" in an expert determination disputeresolution clause required the dispute to have a "subject matter connection" to theagreement. The agreement there was about the sale and purchase of shares; a disputeabout breach of director's duties did not have a "subject matter connection" to theagreement. The case here is factually different because the dispute about the invoicesand set-offs have a clear subject matter connection to the contract for forestryharvesting services.[73] Further, I consider the interpretation that I have given to cl 16.1 is consistentwith other parts of the contract, the way the parties conducted themselves during itslife and the commercial reality of their relationship. First, in other ways the contractrecognised the need for some flexibility, and that parties could not in advance of forestharvesting spell out in precise written terms the obligations each was to assume. Forexample, the method of payment in cl 2.1 set out a process which involved the partiesfurther reaching agreement in the form of a harvesting prescription for each block tobe harvested. This method was clearly adopted to accommodate the individualcharacteristics of each block and the impact this had on the harvesting work requiredto be done. Second, on occasion works that Forest 360 was to perform under thecontract were in fact performed by Philips, and Forest 360 made additional paymentsto Philips for that work. Given the parties seemingly could not anticipate everythingthat would need to be done and by whom before the harvesting work commenced it isunderstandable that they sought to build some flexibility into their contract. The waythe forestry harvesting was actually done also demonstrates that those works did notreadily lend themselves to being outlined in written form in a contract beforehand.The expert was someone with experience in forestry and he would have understoodthis.[74] In addition, cl 16 would be unworkable if it only applied to disputes fallingdirectly under the express terms of the written contract. Because if that were the caseany additional work/services undertaken by Philips would then have been done as avariation to the written contract, under a separate contract or under no contract. Ineither of the last two cases the party raising a dispute about those matters would befree to bring a claim in court; either for breach of the separate contract or in quantummeruit, depending on whether the work/services were performed under a separatecontract or not. In such circumstances it is difficult to see how court litigation couldhave been avoidable. Also, this would have led to a nonsense with some disputesbeing dealt with by expert determination and others by court process. The parties musthave chosen expert determination as a means of resolving disputes between thembecause it is generally acknowledged to be a cheap and quick process. They are notlikely to have intended that some disputes would be dealt with in this way but notothers. Otherwise they would have written cl 16 in a way that limited its effects tomatters specified in the written contract. I am satisfied their intent was for cl 16 toapply to all matters that were connected with the harvesting services to which theirwritten contract applied.[75] It follows that I am satisfied the works for which the disputed invoices wereissued and the claims for payment thereof are disputed matters that are related to thecontract and therefore fall within the expert's mandate. To adopt the language in Jonesv Sherwood Computer Services,22 here the parties' remit to the expert was to determinedisputed issues that went beyond the express words of the contract and included otherissues that were related to that contract.[76] Regarding the disputed invoices I consider these qualified as "other issues"that fell within the expert's mandate. They imposed charges for matters that weresufficiently connected and incidental to the contract works, which makes them qualifyas being "in relation to" the contract. This finding deals with Forest 360's second andthird causes of action. The expert did not make decisions on matters outside hismandate/jurisdiction, therefore, no questions of law of the type identified in the secondand third causes of action arise.[77] The remaining questions are whether the determination on the disputedinvoices is manifestly in error (first cause of action) and whether the expert lacked thenecessary qualification so that the process of determination by this expert was not whatthe parties had bargained for (fourth cause of action).22 Jones v Sherwood Computer Services [1992] 2 All ER 170, [1992] 1 WLR 277.Was there a manifest error in the determination?[78] I am satisfied the determination discloses no manifest error. It is clear fromthe evidence that was before the expert and to which he has referred in the reasons hehas given that he preferred the evidence of Philips on the questions raised by the claimsfor payment of the disputed invoices. There was evidence from the witnesses forPhilips which supported this outcome. The summary of the expert's reasons set outherein makes that clear. There was contrary evidence supporting Forest 360's case,but the expert was entitled to reject that evidence, which is what he did.[79] I acknowledge the expert had reserved the possible option of a hearing andcross-examination, which is one way to determine conflicts of evidence. However, itwas up to the expert whether he followed that process or not. If he considered, as heobviously did, that he could determine the conflicts on the papers he was entitled toproceed to do so. This is not a case like Waterfront Properties (2009) Ltd v LighterQuay Residents' Society Inc (Waterfront Properties) where an oral hearing with cross-examination was possible and the expert had indicated that counsel should appear atthe hearing with their respective witnesses, which they did, but time was taken up withother matters and no cross-examination eventuated.23 Later when he released hisdetermination the expert found he could not resolve the evidential conflicts. Whenlater asked by the parties to reconvene to hear their witnesses' evidence he refused todo that. The Court of Appeal found that by not allowing the cross-examination to takeplace and then finding he could not resolve the evidential conflicts on what werematerial issues the expert had effectively rendered himself unable to discharge hismandate.[80] On the other hand, in the present case, albeit without the assistance of cross-examination the expert resolved the evidential conflicts before him. The reasons hegave explain why he preferred Philips evidence to that of Forest 360. The explanationappears reasonable. It does not disclose any manifest error. By this I mean the reasonsdo not reveal any obvious oversights or blunders capable of affecting thedetermination and which admit of no difference of opinion.23 Waterfront Properties (2009) Ltd v Lighter Quay Residents' Society Inc [2015] NZCA 62, [2015]NZAR 492.[81] Accordingly, there is no breach of contract as alleged in the first cause ofaction.Did the expert lack the necessary qualification?[82] As to the fourth cause of action, Forest 360 initially raised this complaint thenabandoned it and submitted to the determination. The time for complaining the expertwas not sufficiently qualified was at the outset and Forest 360 should then have refusedto participate in the determination. Waterfront Properties shows that parties can go toCourt with complaints about the process followed by an expert. Where one party isessentially contesting the decision of the Chairperson of the Resolution Institute andmaintaining the appointed expert lacks the necessary qualifications, I consider the timeto make that challenge is before the determination happens. Once it has proceededand a determination is issued a party in Forest 360's position is by then estopped fromcomplaining about the expert's qualifications. Moreover, the expert has provided theCourt with evidence of his qualifications. His determination addresses the materialissues correctly. The legal expertise Forest 360 contends was required would onlyarise if the expert were required to determine questions of law or mixed fact and law.No such questions arise here. The questions were factual and addressed in a way thatdoes not reveal manifest error.[83] Accordingly, the fourth cause of action is not established.Conclusion[84] The causes of action Forest 360 brings and the submissions it makes in supportof them largely rest on the expert having made jurisdictional errors which led him tostray beyond his jurisdiction/mandate. I am satisfied no such errors were made.Instead I consider the expert asked himself the right questions and answered themcorrectly. And if he did make any errors they were not the type of error that wouldallow this Court to interfere with the determination.Result[85] The first, second, third and fourth causes of action are dismissed.[86] The parties have leave to file memoranda as to costs.Duffy J