SA Breweries Limited v Shoprite Holdings Limited

On 31 October 1997, SAB sold to Shoprite the entire issued share capital in OK Bazaars (1929) Ltd and an associate company. The sale agreement provided for the preparation of closing date accounts (CDAs) as at 31 October 1997, which would determine whether SAB was obliged to fund any shortfall by way of a cash loan. The agreement contained provisions that any disputes regarding the CDAs were to be referred to accountants Arthur Anderson (later represented by Mr Edwin Oblowitz), who would determine disputes acting as an expert and not as an arbitrator. The expert's decision was to be final and binding save for any manifest error in calculation. Disputes arose between the parties regarding adjustments and provisions in the CDAs, particularly concerning: (1) the provision for trade creditors calculated according to a formula in clause 4.4, and (2) adjustments for fixed assets. The parties jointly referred these disputes to the expert by way of a referral letter dated 14 December 1998. The expert delivered his determination on 28 February 2000. Shoprite was disappointed with the outcome and disagreements arose regarding the interpretation and implementation of the determination. Shoprite applied to the Cape High Court for an order declaring the expert had failed to properly determine certain disputes and directing redetermination. Davis J granted the order sought by Shoprite. SAB appealed with leave.

• Whether the expert's determination regarding trade creditors was valid, certain, and capable of implementation
• Whether the expert's determination regarding fixed assets was valid, certain, and capable of implementation
• The requirements for a valid expert determination under South African law
• Whether the 'call-back provision' in the referral letter precluded Shoprite from challenging the determination regarding trade creditors
• The proper interpretation of the expert's determination in the context of the referral letter and the sale agreement

The appeal was upheld with costs, including costs for two counsel. The order of the Cape High Court was set aside and substituted with an order dismissing Shoprite's application with costs.

The binding legal principles established are: (1) Expert determinations are subject to the same substantive requirements as arbitral awards - all issues submitted must be resolved in a manner that achieves finality and certainty, the determination must be capable of implementation, and it must not reserve decision on an issue for another to resolve. (2) Determinations must be construed liberally and in accordance with common sense, not with a meticulous legal eye seeking to find faults. (3) Where parties have agreed to a mechanism for resolving further disputes arising from an expert determination (such as a 'call-back provision'), they must utilize that mechanism before challenging the determination in court for uncertainty or failure to determine. (4) A 'call-back provision' for further areas of dispute 'dependent on the outcome of the determination' applies to disputes that flow from the determination itself, not merely to wholly additional matters. (5) An expert determination addressed to experienced professionals in a specialized field should be interpreted according to how such professionals would understand it. (6) A determination does not fail for uncertainty merely because it makes a task more onerous or does not provide detailed procedural steps, where the substance of what must be determined is clear to the relevant professionals.

Scott JA made several non-binding observations: (1) He characterized SAB's stance in post-determination correspondence as 'opportunistic' and 'obstructive', though this was not determinative of the legal issues. (2) The court observed that common sense would indicate that for identifying timing differences, 'what was intended... was that transactions before and after the closing date were to be investigated to the extent that it was reasonable and practical to do so.' (3) The court noted that where uncertainty in meaning emerges in a determination, regard may be had to extrinsic circumstances surrounding or leading up to the determination, analogous to contract interpretation principles (citing Firestone South Africa (Pty) Ltd v Gentiruco AG). (4) The court observed that the expert in this case was chosen because Arthur Anderson were known to be auditors of Pick 'n Pay with particular expertise in retail auditing, emphasizing the specialized nature of the determination. (5) Scott JA noted that the various criticisms levelled at the determination concerning the correctness of the expert's findings on fact were not matters for the court to review, as these went to the merits rather than the validity of the determination.

This case establishes important principles regarding expert determinations in South African commercial law. It clarifies the requirements for valid expert determinations, confirming that the same requirements applicable to arbitral awards generally apply. The judgment emphasizes that courts will construe determinations liberally and not be astute to find defects, particularly where questions lack precision. The case is significant for its treatment of 'call-back' or follow-up provisions in expert determination agreements, holding that parties must utilize such mechanisms where provided before challenging a determination in court. It reinforces the principle of finality in expert determinations and the limited grounds on which they may be challenged. The decision provides guidance on when a determination may be considered uncertain or incapable of implementation, setting a relatively high threshold. The case is important for commercial parties who regularly employ expert determination as an alternative dispute resolution mechanism.