“Manifest error” is a concept that often arises in expert determinations. Many commercial contracts provide for the resolution of a dispute by expert determination, rather than a Court determination. These clauses often contain a carve-out which refers to “manifest error”. That is, unless “manifest error” can be demonstrated”, the expert determination is final and binding on the parties. Establishing manifest error is therefore potentially a way for a party to challenge the determination.[1]
It is, however, generally a high bar to establish manifest error. Not all errors of an expert are “manifest”. Only particular types of errors are likely to be categorised that way.
Understanding “manifest error” can be critically important for contracting parties in dispute to assess risk and strategy.
Expert determination – overview
Expert determination is a form of alternative dispute resolution (often referred to as “ADR”). It is an adjudicative process distinct from litigation, arbitration and mediation. The expert is an independent third party, who generally has specific training, expertise or skill in the field of the dispute. The role of the expert is to make a determination about the dispute between the parties, on the basis of their specialised knowledge, skill and judgment.
Expert determination is an entirely contractual process. It occurs only because a contract provides for it and the parties to that contract agree (or are obliged) to engage in it. Consequently, all questions about the process and the determination itself ultimately turn on the interpretation of the contract.
Expert determination has utility because of its relative informality and cost-effectiveness. It is designed to produce a quick result. Generally, there are few mandated rules of evidence and procedure, and determinations are often made without a hearing.
“Manifest error” – meaning
“Manifest error” is not a term of art with a particular legal meaning. Its precise meaning depends on the context in which it arises. In this context, its meaning depends on the terms of the contract in question, based on established principles of contractual interpretation.
Courts have, however, regularly attempted to define the limits of “manifest error” by describing what the term means.
One such description is that manifest error is an error that is ‘apparent on the face of the determination and reasons’.[2] Another is an ‘oversight [or] blunder so obvious as to admit no difference of opinion’.[3] Another is a ‘clear and obvious’ error.[4]
Courts have also described what is not usually a manifest error. For instance, an error that is:
- obscure or inconsequential;[5]
- arguable, however well founded, but not obvious;[6] or
- not apparent from the face of the determination and reasons.[7]
Consequently, the circumstances in which a party can challenge an expert determination for manifest error are narrowly confined. On any view, the error must be serious.
Courts also tend to emphasise the need for restraint in concluding that there has been a manifest error in an expert’s determination. This is because the “carve out” for manifest error is to be understood in the context of the expert determination process. By employing an expert determination clause, the parties have deliberately chosen to resolve their dispute without immediately going to Court.
The parties have instead agreed to an expedited, non-judicial determination. They have agreed to balance the competing considerations of accuracy, on the one hand, against certainty and finality, on the other hand, by depriving the determination of effect only where there is manifest error.
“Manifest error” – in practice
Whether an expert’s error amounts to a “manifest error” in any given case will be fact-specific and depend on several factors. These include the proper construction of the contract, the subject matter of the dispute referred to the expert, and the context in which the expert has been appointed.
Recent case law does, however, provide helpful guidance.
An example is Expert Group International Pty Ltd v TransAction Solutions Ltd [2025] NSWSC 575. There, an accountant made an expert determination as to calculation of the amount payable under a share sale agreement. The court found that none of the five alleged errors were manifest errors.
One aspect of the decision in TransAction is particularly instructive. The court found that the expert’s interpretation of a clause in the contract was not a manifest error. The court noted that the expert’s interpretation was not necessarily the better or correct interpretation. It was, however, satisfied that the interpretation was arguable and not obviously wrong. This was in circumstances where the expert was not a legal practitioner or legally qualified.
Similarly, in Bagata Pty Ltd v Sunstorm Pty Ltd [2023] QSC 104, an expert was appointed to determine (among others) a question as to the proper interpretation of an agreement for lease. The question was a question of law that permitted only one right answer. However, the court found that an error of law is not, by definition, a manifest error. The error must still be manifest. In any event, the determination was not affected by error, let alone manifest error.
In Yan v Yangdo Pty Ltd [2024] NSWSC 1250, an expert made a determination as to the value of several assets. The court found that the expert did not make a manifest error in adjusting one of the valuations by treating a tax issue a certain way. The tax issue was a matter that the parties entrusted to the expert for the exercise of his professional judgment, and it was an issue that could be addressed in several ways.
Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708 was a case where part of an expert determination was found to involve a manifest error. As in TransAction, the determination was of the amount payable under a share sale agreement, based on the expert’s treatment of accounting items. The Supreme Court of Victoria found that one aspect of the determination was not obviously wrong, as it was based on matters of opinion and professional judgment. However, unlike in TransAction, the Court did find that it was manifestly erroneous for the expert to interpret the agreement a certain way and treat another accounting item accordingly.
What happens if there is manifest error?
This will depend on the terms of the contract in question and the subject matter of the dispute referred to the expert.
Generally, it may be open to a party to apply to a court for a declaration that all or part of the determination is affected by manifest error. If the court grants a declaration, the party may seek orders referring all or part of the dispute:
- back to the expert for re-determination (as in Funtastic);
- to a different expert for determination;
- to a referee appointed under procedural rules of court.
Alternatively, the court may proceed to determine the dispute itself.
We regularly advise clients in relation to expert determinations, including challenging determinations. If you have any questions or require any assistance in relation to expert determinations, please feel free to contact us.
[1] There are myriad other ways that a party might challenge an expert’s determination. These are beyond the scope of this article.
[2] TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 at [20].
[3] 711 Hogben Pty Ltd v Tadros; Tadros v 711 Hogben Pty Ltd [2016] NSWSC 697 at [50].
[4] Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708 at [54].
[5] Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708 at [53].
[6] Expert Group International Pty Ltd v TransAction Solutions Ltd [2025] NSWSC 575 at [151].
[7] Bagata Pty Ltd v Sunstorm Pty Ltd [2023] QSC 104 at [37] (decision affirmed on appeal: [2024] QCA 17).