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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Home of Homes Ltd v London Borough of Hammersmith & Fulham & Anor [2003] EWHC 807 (TCC) (10 April 2003)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2003/807.html
Cite as: [2003] EWHC 807 (TCC), 92 Con LR 48
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QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| HOME OF HOMES LIMITED |
Applicant |
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- and - |
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LONDON BOROUGH OF HAMMERSMITH & FULHAM -and- Mr ALAN TURNER |
First Respondent Second Respondent |
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Mr Alan Steynor (instructed by The Legal Services Department of the London Borough of Hammersmith & Fulham) for the First Respondent
Mr Gideon Scott Holland (instructed by Park Nelson) for the Second Respondent
Hearing dates: 3rd and 4th October 2002, 18th, 19th and 28th November 2002
(the latter by way of detailed written submissions submitted by consent to the Court on that date)
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Crown Copyright ©
- Introduction. Home of Homes Limited (hereafter "HoH"), the Applicant in these proceedings, is a building contracting company and is the Claimant in the Arbitration (hereafter "the Arbitration") with which these applications are concerned. The First Respondent (hereafter "LBHF") is the Respondent in the Arbitration and the Second Respondent, Mr Alan Turner, is the Arbitrator (hereafter "the Arbitrator").
- HoH makes the following two applications, namely:
- The General Background. The following is a brief and non-contentious outline of the general factual background to these applications.
- The Statutory Framework. So far as material, the relevant sections of the 1996 Act provide as follows:
- The procedural position with regard to HoH's section 57 application. As indicated above (see paragraphs 3(xi) to 3(xiii)), the Arbitrator has not yet responded to HoH's section 57 application, because at the hearing on 30th July 2001 it was agreed that the Arbitrator should deal with it in his award. However, the arbitral proceedings were adjourned shortly before that stage was reached, in order to await the outcome of these proceedings.
- Section 70 (2) of the 1996 Act (see above) requires that (inter alia) any available recourse under section 57 should be exhausted, before an application to challenge an award pursuant to section 68 can be made to the Court.
- On behalf of LBHF, Mr Steynor conceded that, in the circumstances of this case and having regard to the stage in the Arbitration at which HoH chose to make its applications, it would not be appropriate to insist upon a response to the section 57 application being given by the Arbitrator before the section 68 challenge to the ASA can be considered by the Court: see paragraph 25A of Mr Steynor's written skeleton argument.
- In my view, Mr Steynor was entirely right to make that concession in the terms and for the reasons that he did. It is common ground, therefore, that there is no section 70(2) obstacle to HoH's section 68 challenge to the ASA.
- The general nature of the case. On behalf of HoH, Ms Gough summarised the general nature of the case with regard to both applications in the following terms. She said that HoH was desperate to have its disputes with LBHF resolved fairly and in accordance with the overriding objectives and principles of the arbitral process as set out in sections 1 and 33 of the 1996 Act. She submitted that the facts and circumstances relating to the Arbitrator's conduct of the Arbitration showed clearly that this had not happened, with the result that HoH has suffered and continues to suffer substantial prejudice.
- It was Ms Gough's submission that Arbitrator's conduct of the proceedings (i) has resulted in a partial award (the ASA), which is susceptible to challenge on the grounds of serious irregularity, and (ii) has caused substantial injustice to HoH, which will continue if he is allowed to remain as the appointed Arbitrator in this case. On any view, these are serious allegations.
- At the outset of her submissions, Ms Gough referred to the two letters that had been written by HoH on 2nd December 1997, once it had decided to refer its disputes with LBHF to arbitration. The first was the letter dated 2nd December 1997, from HoH to Mr Stroud, the Contract Administrator, notifying him of the dispute. So far as material, it was in the following terms (inter alia):
- Enclosed with the letter to Mr Stroud was a copy of the second of the two letters to which Ms Gough referred, namely a copy of HoH's written notice of arbitration under Clause 9.1 of the contract, also dated 2nd December 1997, which stated (inter alia) as follows:
- Ms Gough contended that HoH's two letters of 2nd December 1997 had identified (inter alia) the various disputes that had been referred to arbitration by HoH. One of the central submissions by Ms Gough in her criticism of the Arbitrator's conduct of the Arbitration was to the effect that LBHF had made every effort from January/February 1999 "to derail" the Arbitration by use of (in particular) jurisdictional arguments, purportedly based on the wording of HoH's notice of arbitration. In this regard, LBHF's basic point was that the notice of arbitration had limited the referred dispute (and thus the Arbitrator's jurisdiction) to a claim for "disruption" only (see the terms of the second letter of 2nd December, quoted above).
- Accordingly, it appears that from about January 1999 onwards LBHF consistently took the position that the Arbitrator did not have jurisdiction to deal with much of the content of an A3 Scott-style schedule ("the A3 Schedule"), that HoH had prepared at the beginning of January 1999 and that it proposed to use at the substantive hearing, then scheduled for March 1999. The genesis of the A3 Schedule, the document that principally engendered these jurisdictional issues, is described by Mr Moorhead in paragraphs 23 to 25 of his first witness statement, as follows:
- Ms Gough submitted that the Arbitrator had been no match for LBHF's tactics, although she made it clear that there was no suggestion of any deliberate act of misconduct on the part of the Arbitrator. As I have already indicated, it was her case that the inordinate delay to and excessive cost of the arbitration had been largely and directly due to the Arbitrator's inability and/or failure to understand and carry out his arbitral duties in accordance with sections 1 and 33 of the 1996 Act.
- In effect, it was Ms Gough's submission that the conspicuous and continued failure by the Arbitrator to conduct the arbitral process in accordance with the principles of sections 1 and 33 of the 1996 Act, in the face of LBHF's intransigent and unreasonable tactics (in particular, in pursuing its jurisdictional arguments), has resulted in an award (the ASA) that is subject to serious irregularities and an overall arbitral process that has become unacceptably delayed, excessively expensive and conducted in a manner that has forfeited HoH's entire confidence in the ability of the Arbitrator to conduct the proceedings in an appropriate fashion, as a consequence of which HoH has suffered substantial prejudice. As I have already observed, these are serious allegations.
- As the foundation for her submissions, Ms Gough referred to and relied upon the following principles that, it is common ground, are applicable to the present applications, as described in the Departmental Advisory Committee on the Arbitration Bill (the "DAC" reports), in particular paragraphs 106 and 280 of the February 1996 DAC report, which are in the following terms:
- Ms Gough then summarised the various matters of complaint concerning the Arbitrator's conduct of the Arbitration and submitted that, whether considered individually or in aggregate, these matters conclusively demonstrate that the Arbitrator has so conducted the arbitral process that it can fairly be said that he has been, in effect, frustrating the object of arbitration, as follows (see paragraph 26 of Ms Gough's written skeleton argument):
- I now turn to give separate consideration to each of these eight complaints. Whilst dealing with each complaint, I will include such further details of the relevant factual circumstances as may be both necessary and appropriate.
- (1) The Directions Complaint. Ms Gough submitted that, from the earliest stage of the Arbitration, the Arbitrator had demonstrated an inability to comprehend, accurately record or decide interlocutory matters, with the result that the parties had been obliged to correspond at length with the Arbitrator and to seek further directions in order to correct his errors. It was Ms Gough's submission that, in respect of the Arbitrator's most substantial Orders for Directions, the parties had needed to spend much time and resources in correcting the Arbitrator's mistakes and in making additions and alterations to his proposed form of order. Ms Gough submitted that the Arbitrator had continued to make errors of this sort even after transcripts of the proceedings became available. According to the evidence of Mr Martin Moorhead (HoH's claims representative in the Arbitration proceedings):
- In the course of her submissions, Ms Gough referred me to the useful summary of the various criticisms of this aspect of the Arbitrator's conduct of the Arbitration that was prepared by Mr Moorhead and produced as Table 2 to his second witness statement dated 17th April 2002. Ms Gough also referred me to the full text of a number of the documents to which reference is made in that Table.
- Having carefully considered these various documents and Ms Gough's arguments, I am satisfied that there is absolutely no substance in this particular criticism of the Arbitrator's conduct of the proceedings. I agree with Mr Steynor's submission that there is no sensible example of any "inability to make decisions" on the part of the Arbitrator. I also agree that none of the various requests by the parties for clarification or amendment of various aspects of the Arbitrator's proposed forms of order can possibly be said to give rise to any reasonable cause for concern with regard to his competence, comprehension, fairness or diligence. In my view, the complaint is greatly exaggerated and overstated. Moreover, given the tone of some of the correspondence (e.g. Mr Moorhead's letter dated 29th January 1999), it seems to me that the Arbitrator dealt with this aspect of the matter with commendable patience and courtesy throughout.
- (2) The Costs Cap Complaint. The essential thrust of this complaint is that the Arbitrator purported to issue various orders capping the parties' costs, without considering and/or understanding properly or at all the requirements of section 65 of the 1996 Act, which empowers an Arbitrator to make a direction limiting the recoverable costs of all or part of the arbitration, as follows:
- The Arbitrator's proposal to cap each party's recoverable costs was first raised at the interlocutory meeting held on 24th November 1998. The matter was recorded by the Arbitrator in the following notes to his Order for Directions Number 3:
- On 15th December 1998, Mr Moorhead wrote to the Arbitrator to the effect that in its breakdown of costs LBHF had not given serious consideration to its likely future costs. Mr Moorhead went on to describe LBHF's estimate of future costs as "superficial and totally unhelpful" and, after commenting on various specific aspects of LBHF's estimate, indicated that HoH's own projected costs were currently estimated at £135,000.00. Mr Moorhead then concluded his letter by stating HoH's opposition to the making of any costs-capping order, as follows:
- At the next interlocutory meeting on 21st December 1998, there was a further discussion about the matter, which the Arbitrator noted as follows:
- The Arbitrator's proposed order is to be found in paragraph 3 of his Order for Directions No. 4, dated 31st December 1998, and is in the following terms:
- On 8th January, 1999, Mr Moorhead wrote a detailed submission to the Arbitrator concerning the proposed costs-capping order, in which (inter alia) he objected to the proposed order, made a barely veiled threat of court proceedings and criticised the order on the facts, as follows:
- On 11th January, 1999, LBHF wrote to the Arbitrator and contended that there was no requirement upon an Arbitrator to give reasons for his pre-award rulings, that the future level of costs had been discussed at length at the 21st December meeting and invited the arbitrator to confirm the proposed order.
- On 14th January 1999, the Arbitrator wrote a detailed letter to the parties in which he listed the recent relevant correspondence and endeavoured to deal with various outstanding matters relating to the Arbitration. The Arbitrator concluded his letter by dealing with the proposed costs-capping order, as follows:
- Mr Steynor submitted that, up to this stage in the proceedings, there could be no criticism of the way in which the Arbitrator dealt with this particular issue. He also submitted that there had been no irregularity in the making of the decision with regard to capping the parties' costs, which Mr Steynor pointed out did not apply to the parties' total costs, but was restricted to those costs that were incurred from 21st December 1998 until the end of the hearing in March 1999. It was Mr Steynor's submission that the Arbitrator's initiative in proposing a cap on costs was to be commended, that the Arbitrator had taken suitable steps to ensure that the parties had had adequate opportunity to make representations about the matter and that he had given due consideration to those representations before coming to an appropriate decision. I entirely agree with those submissions.
- However, HoH was not content to leave the matter there. On 20th January 1999, Mr Moorhead wrote to the Arbitrator again, as follows:
- On 29th January 1999, Mr Moorhead wrote a further detailed letter on the subject, and invited the Arbitrator to reconsider both his decision to cap the costs and his decision to refuse to give reasons. As was the case in much of his correspondence with the Arbitrator, it seems to me that Mr Moorhead adopted a somewhat and, in the circumstances of this case, unnecessarily aggressive and confrontational manner, as follows:
- In response to Mr Moorhead's strongly worded request, the Arbitrator did reconsider the matter although, as Mr Steynor pointed out, he was not obliged to do so. Having given the matter further thought, the Arbitrator decided to rescind his earlier order and, in Order for Directions Number 6, dated 5th February 1999, the Arbitrator made the following order:
- Mr Steynor submitted that HoH could have no complaint about this particular decision on the part of the Arbitrator, because HoH had achieved exactly what it had set out to achieve. I agree with that submission and I also agree with Mr Steynor's further submission that it is very doubtful whether any challenge to the Arbitrator's decision to cap costs would have succeeded in any event. As Mr Steynor pointed out, it is much more likely that the Arbitrator's wish to cap costs in this Arbitration and the way that he had approached the matter generally would have been endorsed by the court, rather than criticised.
- However, in a letter dated 10th February 1999, for its part LBHF asked the Arbitrator to reinstate Order No. 5 and to re-impose the costs cap. Mr Moorhead responded on 12th February 1999 and opposed that application. The Arbitrator therefore convened an interlocutory meeting on 19th February 1999, in order to consider the matter yet again. At this particular meeting, LBHF was represented by leading Counsel. Having heard the submissions of the parties, the Arbitrator was persuaded to reinstate his earlier decision. However, he increased the limit of the recoverable costs to £110,000, to allow for additional costs incurred by the parties in dealing with issues of jurisdiction and to allow for the cost of the production of the hearing bundle: see the Order for Directions No. 8, in which he provided as follows:
- On the 23rd February, Mr Moorhead wrote to the Arbitrator a typically strongly worded protest about the decision to re-impose the costs-capping order, as follows: -
- On the 24th February 1999, Mr Moorhead wrote a further letter to the Arbitrator in which he requested reasons for Order No. 8 and suggested that the issue should be revisited at the commencement of the hearing that was scheduled for 3rd March. However, by this time the jurisdictional issue (as to which see later) had become the predominant matter for consideration and, on 2nd March 1999, HoH requested that the substantive hearing should be adjourned.
- The parties then sensibly agreed that they should prepare written submissions upon the costs-capping issue as well as upon the issue of jurisdiction. In paragraphs 34 to 38 of its written submissions dated 3rd March 1999, HoH took the point (inter alia) that Order No.8 was largely retrospective and thus did not comply with section 65, as follows:-
- For its part, LBHF submitted that the Arbitrator did not have jurisdiction to revoke his earlier costs-capping order, as he had purported to do in Order No. 6, but that he had been entitled to increase the limit to £110,000 as he had done in Order No.8: see paragraph 36 to 40 of LBHF's written response to HoH's written submissions, which were in the following terms:
- Given the uncompromising approach of the parties to the issue of cost capping, it is hardly surprising that the Arbitrator decided that he should obtain legal advice on that matter, as well as in relation to the jurisdictional issue. Accordingly, the Arbitrator consulted Robert Akenhead QC, who then duly confirmed his advice in writing on 12th March 1999. So far as concerns the costs-capping issue, Mr Akenhead's advice was as follows: -
- So it was that, in his first partial award dated 15th March 1999 ("the AFA"), the Arbitrator accepted Mr Akenhead's advice (see paragraph 3.1. of the preamble to the AFA) and indicated that he had decided to rescind Order No. 8 (see paragraph 3.6. of the preamble to the AFA). Although the Arbitrator does not appear to have made any formal order to that effect, I accept that his decision is clear, not only from the terms of paragraphs 3.1 and 3.6 of the preamble to the AFA, but also from paragraph 4 of the actual award itself, which is in the following terms:-
- It was Ms Gough's submission that, in making the costs-capping orders that he did, the Arbitrator did not appear to have grasped the principles governing the proper exercise of his powers under section 65 or of his duties under section 33 of the 1996 Act. According to Ms Gough, such was the "chaos" engendered by the Arbitrator's efforts at making an order to cap the parties' costs, that the parties had been obliged to incur significant unnecessary expense and to waste much time in preparing and making submissions in their efforts to persuade the Arbitrator that, if he wished to make a costs-capping order, he should do so within the requirements of section 65: see paragraph 33 of the grounds of the application ("the Grounds"). She submitted that the overall delay, expense and disruption to the Arbitration, that had been caused by the Arbitrator's pre-occupation with the issue of costs-capping, was such that the purpose of section 65 and the general principles relating to the arbitral process and the duties of the arbitrator, as set out in sections 1 and 33 of the 1996 Act, had been completely undermined and thus amounted to a serious irregularity: see paragraph 33 of the Grounds. She also submitted that, by re-imposing the costs-cap by Order No. 8, an order that purported to be retrospective in effect and (in any event) made far too late, the Arbitrator had fallen so seriously into error that the order itself amounted to a serious irregularity. On any view, these are serious criticisms of the Arbitrator's competence.
- Mr Steynor suggested that HoH could have no reasonable complaint about the outcome of the costs-capping issue or of the Arbitrator's handling of it. He submitted (correctly, in my view) that the Arbitrator's proposal to cap the recoverable costs of each party had been right in principle and that the original limit of £90,000 imposed by the Arbitrator had been a perfectly reasonable amount for a claim of this size and complexity. Mr Steynor suggested that, regrettably, it had been HoH's position throughout that the Arbitrator should not limit the recoverable costs and that, eventually, the Arbitrator had been persuaded by HoH not to do so. Mr Steynor submitted that, in effect, the time and expense that was expended on the costs-capping exercise had largely resulted from the strenuous efforts made by HoH to thwart this commendable initiative on the part of the Arbitrator. He submitted that, far from displaying the suggested incompetence, the Arbitrator had gone to great lengths to deal with the matter in an appropriate fashion.
- Mr Steynor submitted (again correctly, in my view) that the Arbitrator had been put under considerable pressure by HoH not to cap the costs. He suggested that the only criticism of the Arbitrator that could possibly be made on the facts of this case might be that he had yielded too readily to pressure from HoH to rescind his original order. However, Mr Steynor readily accepted that, faced with HoH's strongly expressed assertion that the costs-cap would prevent HoH from presenting its case fairly, it was not surprising that the Arbitrator had changed his mind. I agree and I also agree that, in the circumstances of this case, the Arbitrator's various changes of mind with regard to this matter did not indicate any lack of decisiveness on his part, rather it showed that he was willing to and did reconsider an earlier decision in the light of the parties' further detailed representations.
- It should be noted that both parties considered that the costs-capping issue had become sufficiently serious and complex to justify engaging leading Counsel. Mr Steynor pointed out that, on each occasion the matter was raised, the Arbitrator was presented with yet further cogent submissions and compelling new points. He submitted that, in those circumstances, the Arbitrator had been manifestly correct to seek independent legal advice and, having done so, had very properly accepted it and acted accordingly.
- I am satisfied that Mr Steynor's submissions are correct. The Arbitrator's original attempt to cap costs was entirely commendable and the amount that he originally proposed appears to have been reasonable, having regard to the scale and complexity of the dispute. Thereafter, the Arbitrator was faced with strongly expressed submissions from both parties (in particular, from HoH), which he dealt with fairly, patiently and (as it seems to me) with considerable courtesy and tact. I completely reject the suggestion that any aspect of his conduct of this particular issue amounted to an irregularity, far less that it could possibly be characterised as a serious irregularity, and/or was "such as to go so beyond anything that could reasonably be defended" and/or could sensibly be said to amount to conduct "in effect frustrating" the object of arbitration (see paragraph 106 of the DAC report of February 1996, quoted above). In my view, the evidence clearly shows that there is nothing in this particular complaint.
- (3) The Jurisdictional Issues Complaint. The issue with regard to the Arbitrator's jurisdiction was first raised by LBHF in late 1998/early 1999. As already indicated, it was HoH's case that in dealing with this aspect of the matter, the Arbitrator had demonstrated a failure to grasp the issues before him. It was Ms Gough's submission that:
- According to Ms Gough, the effect of the Arbitrator's order of 19th February 1999 had been:
- Ms Gough submitted that, as a result, it had been impossible for HoH to prepare for the hearing on the basis of the exclusion of elements of its claim in the way directed by the Arbitrator. It was her submission that the parties' preparation for the hearing and their ability to commence and continue the substantive hearing that was then scheduled to start on 3rd March 1999 had become, to all intents, impossible. She submitted that substantial costs were incurred and largely wasted as a result of these matters and that the 1999 hearing had had to be adjourned, with resulting further delay to the proper resolution of HoH's claims: see paragraphs 35 and 36 of the Grounds.
- In the original Statement of Case (see file 3 of the Court Bundle), the claims made by HoH were for costs associated with extensions of time (section 8), for costs associated with disruption (section 9) and for disruption to the heating and plumbing works that had been carried out by a sub-contractor ("the Higgins' claim"). At that stage, there was no claim for the cost of measured works, although discussions had been taking place at the time between HoH's representatives and the Quantity Surveyor appointed by LBHF.
- However, on 18th January 1999, Mr Moorhead wrote to the Arbitrator (inter alia) as follows:
- On 4th February 1999, Mr Moorhead wrote to the Arbitrator in the following terms:
- The schedule , to which Mr Moorhead referred in his letter of 4th February, was a schedule of items in dispute that had been sent to the Arbitrator and LBHF on 27th January 1999. This was followed on 9th February 1999 by a substantial draft document in A3 format entitled "Schedule of Instructions requiring a Variation to be Valued under the full provisions of Clause 3.7 of the Contract" (hereafter "the A3 Schedule"). It is to be noted that Clause 3.7 of the Contract provides for the valuation of duly authorised variations to the contract works and of provisional sum work and expressly provides in Clause 3.7.7 that:
- Clause 4.11 of the Contract provides for the valuation and reimbursement of the Contractor's direct loss and/or expense caused by disruption of the contract works and for which the Contractor would not otherwise be reimbursed under any other provision of the Contract. The provisions of Clause 4.11 are expressly stated to be without prejudice to any other rights or remedies the Contractor may possess (e.g. at common law).
- On 12th February 1999, LBFH wrote to the Arbitrator to the effect that the A3 Schedule contained items that had not been pleaded, as well as a large number of items that had, by that time, already been agreed as part of the ongoing process of discussing and agreeing the Final Account, and complaining that HoH was attempting to widen the scope of the pleaded case, as follows;
- Enclosed with LBHF's letter of 12th February was its own "Schedule of all items in dispute between the parties, as pleaded in the Arbitration" ("the LBHF Schedule"). Unlike the A3 Schedule, the LBHF Schedule did not include (a) any Final Account items that had already been agreed or (b) any Clause 3.7 measured work items.
- At the pre-hearing meeting that took place on 19th February 1999, leading Counsel for LBHF made it clear that there was a significant jurisdictional challenge to the A3 Schedule (as summarised in paragraphs 13 and 14 above). As a result, the Arbitrator gave appropriate directions for the exchange of the parties' written submissions as to whether the claims on the A3 Schedule were within his jurisdiction (see paragraphs 1 and 2 of Order for Directions No. 7) and also directed that "the matters alleged in the A3 Scott-type schedule shall not form part of the matters set down for hearing during March 1999"; see paragraph 3 of Order No. 7. In the notes to his order, the Arbitrator went on to state that he had given the latter direction for "practical reasons"; see Note D to Order No. 7, which is as follows: -
- Given the stage at and the way in which the jurisdictional issue had emerged, I agree with Mr Steynor's submission that the Arbitrator was plainly right to deal with the matter as he did: see paragraph C7 of Mr Steynor's written skeleton argument.
- However, in paragraph 29 of his first witness statement, Mr Moorhead described the Arbitrator's perception of his own jurisdiction as "completely confused". In my view, there is no possible basis for such an assertion. The jurisdictional issue had been raised by LBHF as soon as the A3 Schedule had made its appearance. LBHF's jurisdictional challenge was plainly not a frivolous one and had to be taken seriously. As Mr Moorhead himself accepts (see paragraph 28 of his first witness statement), "the jurisdictional disputes had to be resolved before the hearing could continue". The jurisdictional issue was far from straight forward. As it seems to me, the Arbitrator's approach to the problem was manifestly correct. There is nothing to suggest that he was confused and, in my view, his suggestion that the jurisdictional issue might be dealt with on the first day of the substantive hearing was both sensible and helpful.
- Furthermore, in my opinion, there can be no real justification for Mr Moorhead's assertion that "the parties were so taken up with these cost capping and jurisdiction issues, that sensible and proper preparation for the hearing was impossible". In any event, to the extent that either of these matters can be said to have consumed valuable time and interfered with preparation for the substantive hearing, this seems to me to have been almost entirely due to the parties' own conduct of these matters rather than to anything that had been done or not done by the Arbitrator.
- In the event, on 2nd March 1999 HoH wrote to the Arbitrator and applied for an adjournment of the substantive hearing, as follows:
- At the Hearing on 3rd March 1999, HoH presented written submissions to the Arbitrator, which included (inter alia) the following passages relating to the jurisdictional issue:
- At the hearing on 3rd March, the Arbitrator told the parties that he intended to seek advice on the jurisdictional issue from Mr Akenhead. On 9th March 1999, LBHF presented its written "Response to Submissions dated 3rd March 1999." This particular written submission was prepared by leading and junior Counsel. Paragraphs 7 to 43 contained a detailed and closely reasoned argument in support of LBHF's jurisdictional challenge to the A3 Schedule and in rebuttal of HoH's submissions, as follows (inter alia): -
- On the 11th March 1999, HoH sent to the Arbitrator detailed written submissions in response, also prepared by leading and junior Counsel. All the various written submissions were sent to Mr Akenhead, with whom the Arbitrator had a consultation on 11th March 1999. As I have already indicated, Mr Akenhead then confirmed this advice in writing on 12th March 1999. On the jurisdictional issue, Mr Akenhead's opinion is to be found in paragraphs 3 to 10 of his written advice, as follows:-
- Having obtained Mr Akenhead's advice, the Arbitrator then proceeded to issue the AFA promptly on 15th March 1999. In my view, he had handled the jurisdiction issue very sensibly and with commendable courtesy and patience. For the reasons given in the next part of this judgment, I am satisfied that the AFA was perfectly adequate and dealt satisfactorily with the issues addressed. I am entirely satisfied, therefore, that there is no substance whatsoever in this third ground of complaint.
- (4) The AFA Complaint. The nature of HoH's case on this aspect of the matter is set out in paragraphs 38 to 40 of the Grounds and paragraphs 35 and 36 of Mr Moorhead's first witness statement, which is in the following terms:-
- I am satisfied that these strongly worded criticisms are not justified. I agree with Mr Steynor's submission (see paragraph D2 of his written skeleton) that there is nothing ambiguous or confused about the AFA. As Mr Steynor pointed out, the Arbitrator clearly stated his decisions in paragraphs 3.2 to 3.6 of the award, as follows:-
- I also agree with Mr Steynor that the Arbitrator did not fail "to issue an award setting out his reasons on matters put before him for decision". Having decided to accept and adopt the advice of Mr Akenhead, the Arbitrator sensibly decided to and did attach Mr Akenhead's advice to the award: see paragraph 3.1 of the AFA. I accept Mr Steynor's submission that this was a perfectly legitimate and sensible approach. There was nothing confusing, incomplete or unsatisfactory in dealing with the matter in that way and I have no hesitation in rejecting Ms Gough's submission to the contrary effect.
- Furthermore, I entirely accept Mr Steynor's submission that there is no basis for the criticisms that "the issue of cost capping was dealt with alongside and indeed mixed in with the jurisdiction issue" or that the Arbitrator engaged in further inappropriate "efforts to continue the cost-capping saga": see paragraphs D4 and D5 of Mr Steynor's written skeleton. As to the first of these criticisms, I am satisfied it is clear that the Arbitrator was asked to rule on both issues and did so, in separate paragraphs of the AFA. Read sensibly, there is no confusion of issues in the award. As to the second of these criticisms, the matter was merely discussed at the arbitration meeting on 22nd March 2001, and the position noted by the Arbitrator in note 7 to Order for Directions No. 9, as follows: -
- In my view, the Arbitrator's "efforts" with regard to cost-capping, as recorded in that note, cannot possibly be stigmatised as "inappropriate" in any way.
- As for the suggestion that the AFA had engendered "chaos", this seems to me to me an allegation so lacking in substance as to verge on the irresponsible. According to Mr Moorhead's evidence: "at this juncture, the parties effectively abandoned attempts to have matters dealt with by the Arbitrator and tried to settle the cases through their experts". Whatever may have been HoH's own view of the competence of the Arbitrator, it is clear that LBHF had no reservations about him continuing as Arbitrator. Mr Steynor accepted that the Arbitration had been adjourned for a lengthy period of time after the AFA, whilst the parties tried to negotiate a settlement of the dispute. However, he emphatically rejected any suggestion that this was due to any dissatisfaction with or loss of confidence in the Arbitrator, so far as LBHF was concerned. As he pointed out, when the Arbitrator wrote to the parties in November 2000 to suggest that he might be released by the parties, because he was considering retirement, LBHF's response was to say "we wish you to remain as Arbitrator and for the arbitration to proceed without further delay": see LBHF's letter to the Arbitrator dated 3rd January 2001.
- Accordingly, I have come to the firm conclusion that there is no substance in this particular ground of complaint. HoH's various criticisms of the Arbitrator under this heading are, in my view, both exaggerated and unjustified.
- (5) The March 2001 Directions Complaint. Unfortunately, the parties were unable to settle the dispute by agreement and so it became necessary to resume the Arbitration in 2001. Accordingly, the Arbitrator convened a further directions hearing on 22nd March 2001, at which each party was represented by Counsel. Following the meeting, the Arbitrator produced a detailed and annotated "Order for Directions No. 9", dated 24th March 2001, as follows:-
- However, on 29th March 2001, Mr Moorhead wrote to the Arbitrator and suggested a number of clarifications and/or amendments to the Arbitrator's order, as follows: -
- As it seems to me, the substance of Mr Moorhead's suggested clarification and/or amendments was already clearly and sufficiently covered in the wording of the Arbitrator's Order No. 9, as annotated, although I accept that it would have been more appropriate for the Arbitrator to have dealt with the costs consequences, to which reference is made in Note 5, in the actual body of the order itself.
- On 2nd April 2001 LBHF wrote to the Arbitrator and also suggested some refinements to Order No. 9, as follows:-
- Again, as it seems to me, the main substance of LBHF's various suggested revisions was already present in the Arbitrator's existing wording of Order No. 9, as annotated.
- Be that as it may, the Arbitrator's reaction to the parties' requests that he make various revisions to the wording of Order No. 9 was to incorporate the various suggestions willingly into a fresh "Order for Directions 9A", which he issued on 17th April 2001.
- In paragraph 43 of his first witness statement, Mr Moorhead described the Arbitrator's written Order No. 9 as a "shambles". I regard that criticism as wholly unjustified and expressed in unnecessarily offensive terms. For her part, Ms Gough also criticised the Arbitrator and Order No. 9 in terms that, in my view, were wholly unjustified and expressed in language that was both exaggerated and manifestly unfair. The thrust of Ms Gough's submissions are to be found summarised in paragraph 41 of the Grounds, as follows:
- I agree with Mr Steynor's submission that there is absolutely no justification for this particular complaint. I would, however, go even further. In my view, it is a matter for considerable regret that both Counsel and the Claims Consultant acting for HoH should have seen fit to try and lend substance to this particular complaint by expressing it in such tendentious and exaggerated terms.
- (6) The ASA Complaint. Although the Arbitration had been adjourned for nearly two years, whilst the parties tried to negotiate a settlement of the dispute, the question of the precise scope of the Arbitrator's jurisdiction had still not been resolved. The principles relating to the Arbitrator's jurisdiction had been set out in Mr Akenhead's written advice and in the AFA (see above). However, there was still an important question as to whether certain of the items claimed by HoH were items of measured works, to be valued under Clause 3.7 of the Contract (and, therefore, outside the Arbitrator's jurisdiction), or whether any of the items were items of loss and expense to be evaluated under Clause 4.11 of the Contract (and, thus, within the Arbitrator's jurisdiction). It is convenient to refer to this question as "the outstanding jurisdictional issue".
- Once the Arbitration resumed in March 2001, the parties took appropriate steps to deal with the outstanding jurisdictional issue: see HoH's written "Note for Preliminary Hearing on 22nd March 2001", which was in the following terms (inter alia):
- In the event, the parties agreed that the Arbitrator should give directions for written submissions to be made on the outstanding jurisdictional issue, as provided in paragraph 1 of the Order for Directions No. 9A, as follows (see above, but repeated for convenience):-
- HoH presented its detailed written "Submissions on the issues in dispute in the Arbitration" on 8th April 2001, contending that LBHF's counterclaim (which related to the time for completion of the Contract) was outside the Arbitrator's jurisdiction and that the other matters that the parties had identified (the landfill tax on additional skip hire claim, the Higgins' claim for loss and expense and the claim for extended bond charges) were within his jurisdiction.
- On 25th April 2001, LBHF responded with its detailed written "Respondent's Submissions in response on Jurisdiction", in which it put forward the opposite case, namely that the Counterclaim was within the Arbitrator's jurisdiction and that the other items (including HoH's claim for additional supervision) were outside his jurisdiction. On 9th May 2001, HoH presented yet further written submissions entitled "Claimant's Reply to the Respondent's Submissions on the issues in dispute in the Arbitration". On the 22nd May 2001, the Arbitrator sent a fax to the parties in which he asked LBHF to "confirm that there is no further response that it wishes to make on jurisdiction". However, this initiative by the Arbitrator prompted the following response from Mr Moorhead on 23rd May 2001;
- On 28th May 2001, the Arbitrator published his "Second Award on jurisdiction on issues in dispute between the parties" the ASA. This award is severely criticised by HoH and is the subject of the section 68 application. The various criticisms that are made of the ASA are stated in paragraphs 46 to 49 of Mr Moorhead's first witness statement, paragraphs 43 to 44 of the Grounds and paragraphs 4 to 11.4 of HoH's section 57 Application dated 25th June 2001. Having regard to the nature and extent of the section 68 application, it is necessary, in my view, to quote the relevant paragraphs from those three documents as follows:-
- The ASA is a lengthy and detailed 19 page document. It has obviously been prepared carefully. The first 15 pages set out the issues and the Arbitrator's appreciation of the parties' submissions in considerable detail. In paragraph 3 of the award, starting on page 15, the Arbitrator set out his various findings, dealing with each disputed issue in a separate sub-paragraph.
- In paragraphs 3.1(1) to (7), the Arbitrator set out his conclusions with regard to his jurisdiction to deal with LBHF's counterclaim in the light of the parties' respective contentions, which are summarised in subparagraphs (1) and (2). Subparagraphs (3) to (7) set out the Arbitrator's reasoning in support of his decision, expressed in sub paragraph (8), that the counterclaim was within his jurisdiction. I agree with Mr Steynor's submission that the Arbitrator gave clear and sufficient reasons for his decision, the key one being his conclusion that, at the first preliminary meeting in December 1998, the parties had agreed to extend his jurisdiction to include matters of extensions of time (see subparagraph 3.1(3)(iii) of the ASA), and I reject Ms Gough's submissions to the contrary effect.
- The Arbitrator then dealt succinctly with each of the remaining matters in dispute in the paragraphs that followed. In each case the Arbitrator stated his conclusion and his reasons for it.
- So far as concerns the issue relating to Landfill tax, the Arbitrator decided that it was outside his jurisdiction. He decided that it was a matter that should be dealt with under Clause 4.9 of the Contract (Fluctuations) and that it was therefore outside his jurisdiction (see paragraph 3.2(3) of the ASA). The Arbitrator stated his reasons for reaching that conclusion in sub paragraphs 3.2(1) and (2). In my view his reasons are clear and unambiguous.
- On the issue of the Higgins' claim for loss and expense, the Arbitrator decided that a final decision could only be made, once he had heard oral evidence. This decision was plainly based on paragraphs 8 to 10 of the advice in writing that he had been given by Mr Akenhead (see above) and was in my opinion, a perfectly reasonable decision for him to make in the circumstances. As Mr Steynor observed (see paragraph F6 of his written skeleton), those particular paragraphs of Mr Akenhead's advice fully support the proposition that the final decision with regard to the Arbitrator's jurisdiction in relation to some matters could best be decided after evidence of the parties has been given, since certain specific claims might be categorised either as items of measured works or as claims for loss and expense, depending on how the evidence falls out. In my view, the Arbitrator cannot possibly be criticised for deciding that the Higgins' claim was such a matter. Having done so, it was manifestly reasonable to defer the final decision on jurisdiction until he had heard the evidence relating to this particular matter.
- So far as concerns the issue of extended bond charges, the Arbitrator decided as follows (see paragraph 3.4 of the ASA):
- As Mr Steynor pointed out (see paragraph F7 of his written skeleton), paragraphs 50 to 51 of LBHF's written submission had made it clear that its jurisdictional objection was to the claim advanced by Mr Webb, HoH's quantum expert, that LBHF should have sanctioned the release of the bond at an earlier date. LBHF had then gone on to point out that this particular claim, as formulated by Mr Webb, did not form part of HoH's pleaded case, that there was no current application to amend to include it and that: "If such an application is made, (LBHF) will deal with this issue at this stage". It is clear that this position was accepted as appropriate by HoH, because in its written submission of 9th May 2001, it stated as follows:-
- Mr Steynor therefore submitted that the Arbitrator's decision with regard to the extended bond charges issue had been entirely appropriate in the light of the parties' own expressed approach to the matter. I agree with that submission.
- So far as concerns the issue of additional supervision, the Arbitrator expressed his decision as follows (see paragraph 3.5 of the ASA):
- As in the case of the Higgins' claim for loss and expense (see above), the outcome of the jurisdictional issue in relation to the cost of additional supervision depends on whether it is a Clause 3.7 or a Clause 4.11 matter. I agree with Mr Steynor that, for the same reasons as those that apply in the case of the Higgins' claim for loss and expense, the Arbitrator's decision to defer the matter until such time as he had heard any relevant oral evidence was entirely reasonable.
- It follows from my conclusions, as expressed in the preceding paragraphs, that I am satisfied that there is absolutely no substance in this particular complaint either. I therefore agree with Mr Steynor's submission that HoH's contention that the ASA is defective on grounds of serious irregularity is simply not made out. In my view, there is no justification whatsoever for the criticism made in paragraph 50 of Mr Moorhead's first witness statement (as amplified in the Grounds and by Ms Gough in her oral submissions and in the section 57 Application) to the effect that:-
- As it seems to me, when the ASA is read fairly as a whole, nothing could be further from the truth. In my judgment, no aspect of the ASA or of the Arbitrator's conduct of the proceedings relating thereto is capable of being stigmatised as irregular in any way, far less as constituting a serious irregularity within the meaning of section 68(2) of the 1996 Act. In my view, it is almost impossible to think of a case more far-removed from the type of case to which section 68 is intended to apply, namely "an extreme case where the (arbitrator) has gone so wrong in (his/her) conduct of the arbitration that justice calls out for it to be corrected": see paragraph 280 of the February 1996 DAC report, quoted in paragraph 17 above. Accordingly, the section 68 application fails and is dismissed.
- (7) The section 57 Complaint. As I have already indicated, HoH made its section 57 application with regard to the ASA on 25th June 2001 (see above for the terms of the application). On 10th July 2001, LBHF produced its written response to the Section 57 application, as follows: -
- In the event, as I have already indicated, at the conclusion of the hearing on the 30th July 2001, it was agreed that the Arbitrator should deal with the Section 57 Application in his award, but the Arbitrator has not been able to do so because the Arbitration has been adjourned pending the resolution of these two applications.
- However, the Arbitrator's conduct of the Section 57 application is the subject of the following typically strongly-worded criticism by Mr Moorhead in paragraphs 50 to 56 of his first Witness Statement, of which the following are the principal passages: -
- In Paragraphs 45 to 47 of the Grounds and in the course of her oral submissions, Ms Gough put the complaint somewhat more succinctly, as follows:-
- In the course of his submissions on this aspect of the matter, Mr Steynor developed LBHF's written response dated 12 July 2001 (see above and see paragraphs 92 to 99 of his written skeleton argument). As it seems to me, the basic position adopted by LBHF with regard to the section 57 application was both reasonable and correct, namely:
- As I have already indicated, for the reasons given in paragraphs 87 to 98 of this judgment, I am satisfied that there is nothing in the form or content of the ASA which justifies the various criticisms made of it or the suggestion that it served to create doubts about the Arbitrator's jurisdiction. In my view, by a parity of reasoning, there was actually no justification for HoH making the application in the first place. In any event, given the unnecessary nature of the application, the proximity of the substantive hearing and the subsequent agreement that he should deal with the application in his award, I am completely satisfied that there is no justifiable basis for criticising the Arbitrator for not having responded to the section 57 application in the particular circumstances of this case. In my view, there is therefore, no substance in this particular complaint either.
- (viii) The Arbitrator's Request for Clarification Complaint. On 1st August 2001, the Arbitrator sent his Request for Clarification to the parties. It is a 4 page document, consisting of 32 numbered paragraphs, as follows: -
- On 2nd August 2001 Mr Moorhead wrote a strongly worded response to the Request for Clarification, headed "NOTICE UNDER SECTION 73 OF THE ARBITRATION ACT 1996". Mr Moorhead's letter was highly critical of the Arbitrator's Request for Clarification, as follows:-
- As can be seen from the contents of his letter of 2nd August, Mr Moorhead expressed his criticisms of the Arbitrator's Request for Clarification in very strong and, as it seems to me, unnecessarily aggressive terms. By contrast, the Arbitrator's letter dated 31st October 2001, in which (inter alia) he explained why he did not reply initially to the letter of 2nd August, is a model of courtesy and restraint, as follows:-
- In paragraph 72 of his first witness statement, Mr Moorhead stated that, given the events of the previous 4 years, in particular those in 2001, "no reasonable person could be expected to have confidence in the ability of this Arbitrator to determine properly and fairly the issues in dispute between the parties". In paragraph 76 of the same witness statement, Mr Moorhead described the Arbitrator's Request for Clarification as "the last straw to break the remaining shreds of confidence that (HoH) had in this Arbitrator". These sentiments were endorsed and repeated by Ms Gough in her oral submissions, when developing HoH's criticisms of the Arbitrator's Request for Clarification that are summarised in paragraph 49 of the Grounds, as follows:-
- In my view, having considered the entire matter at length and with very great care, I am completely satisfied that there is no justification for any of these extravagantly worded criticisms of the Arbitrator's Request for Clarification.
- I agree with Mr Steynor's observation that it must be borne in mind that the document in question (to which I will, from time to time and for convenience, refer as "the Request") was intended by the Arbitrator to contain a number of requests and preliminary observations, inviting the parties to clarify and/or deal with various specific matters in the course of their final submissions as is abundantly clear from the terms of the Request itself and as explained in the Arbitrator's letter of 31st October. I also agree with Mr Steynor' submission that the parties cannot know what the standard of the Arbitrator's award will be until it is produced. In my view, it is premature to conclude that the Arbitrator will not be able to reach a fair and rational decision, particularly with such help as the parties are able to give in their final submissions. I entirely agree with Mr Steynor that it is clear that many of HoH's earlier complaints (all of which I have found to have been both unreasonable and stated in exaggerated terms, see above) have coloured and influenced its reaction to the Arbitrator's Request for Clarification.
- I now turn to consider the various numbered paragraphs of the Request to see whether there is any support for the various criticisms made of it by HoH.
- Paragraphs 1 to 4 of the Request. In my view these paragraphs are entirely unobjectionable. There is absolutely nothing wrong in the Arbitrator indicating, as he does in paragraph 4, his preliminary view as to the meaning and/or the effect of the two clauses in the Contract and then inviting the parties to make submissions about the matter.
- Paragraph 5 of the Request. I agree with Mr Steynor (see page 39 of his written skeleton argument) that in this paragraph the Arbitrator merely asks the parties to clarify the extent to which he is entitled to use his own knowledge of Quantity Surveying. His request to that effect is entirely unobjectionable.
- Paragraph 6 of the Request. In this paragraph the Arbitrator, in effect, merely invites legal submissions from each party on whether each claim falls within Clause 3.7 or within Clause 4.11 of the Contract. Again, there is nothing objectionable in such a request.
- Paragraph 7 of the Request. I agree with Mr Steynor that this request is entirely unexceptionable: see page 40 of his written skeleton argument.
- Paragraph 8 of the Request. I agree with Mr Steynor that, on a fair reading of this paragraph, it is clear that the Arbitrator does no more than indicate some preliminary views on the matter and invites submissions from the parties. To suggest he is developing irrelevant issues and argument (see page 3 of Mr Moorhead's letter of 2nd August) is not, in my view, either a justified or fair criticism.
- Paragraphs 10 to 19 of the Request. These paragraphs consist mainly of a non-contentious summary by the Arbitrator of those items that have been agreed and those that remain in issue. In paragraph 10 he does state a preliminary conclusion, but it is clear from a fair reading of the paragraph that this preliminary view is subject to the parties' further submissions.
- Paragraphs 20 to 21 of the Request. In these two paragraphs the Arbitrator seeks assistance from and/or clarification by the parties of certain matters, in respect of some of which he has indicated a preliminary view. There is nothing objectionable in either paragraph.
- Paragraph 22 of the Request. Again, the Arbitrator invites submissions in respect of a matter in respect of which he has stated a preliminary view. There is nothing objectionable in such an approach.
- Paragraphs 23 to 24 of the Request. These two paragraphs merely record the Arbitrator' understanding that both items have been agreed by the parties.
- Paragraphs 25 of the Request. Again, the Arbitrator has chosen to indicate a preliminary view of the matter, whilst at the same time inviting further submissions from the parties. There is nothing wrong with such an approach. To claim that he has prejudged the issue is neither fair nor justified (see page 3 of Mr Moorhead's letter of 2nd August).
- Paragraph 26 the Request. I can see no reason why the Arbitrator should not make the suggestion that he does in this paragraph. In any event, he also makes it clear that he wishes to hear the parties' submissions about the matter.
- Paragraph 27 of the Request. I accept that it would have been preferable if the Arbitrator had made it clear that the view he expresses is a provisional one and subject to further submissions by the parties. However, in my view, it is clear from a fair reading of the Request as a whole and from the Arbitrator's letter of 31st October that the views expressed by the Arbitrator are all provisional ones and intended to assist the parties in preparing their submissions. I see no reason for approaching this particular paragraph on any different basis or for not believing what the Arbitrator has said about it. In any event, I am satisfied that, although this paragraph could have been expressed more satisfactorily, this particular shortcoming in the Request comes nowhere near providing support or justification for the sort of criticisms that have been levelled against the Arbitrator by HoH.
- Paragraphs 28 to 30 of the Request. These paragraphs are entirely unobjectionable and require no further elaboration.
- Paragraph 31 of the Request. This particular paragraph was the focus of much of Ms Gough's submissions to the effect that the Arbitrator has raised issues as to jurisdiction in the Request that had not previously been in issue between the parties at the hearing. She submitted that the Arbitrator had thereby:
- In my view, this criticism demonstrates an extravagant and excessive over-reaction to the terms in which this particular paragraph in the Request has been expressed. Even if the Arbitrator was in error in raising the matter in this way, it could not enlarge the pleaded case against HoH and the Arbitrator could easily be put right by the parties when making their final submissions, if not before. To suggest that it demonstrates the level of incompetence argued for by HoH is simply wrong-headed and wholly unreasonable and I have no hesitation in rejecting Ms Gough's submissions to that effect.
- In any event, this particular paragraph has to be considered against the background of Mr Akenhead's advice (see above and see also the summary in paragraphs 10 to 12 of Mr Steynor's supplementary written skeleton, entitled "LBHF's Response to HoH Submissions") and the way in which Mr Steynor dealt with the jurisdictional issue in the course of the hearing in July 2001 (see paragraph 18 and 19 of Mr Steynor's supplementary skeleton). In my view, having regard to those matters, it is hardly surprising that the Arbitrator raised the query that he did. However, be that as it may, I am completely satisfied that this particular matter does not provide any sort of justification for the type of criticisms that are made of the Arbitrator by HoH in this case.
- Paragraph 32 of the Request. In this paragraph the Arbitrator is seeking confirmation of the parties' requirements with regard to the outstanding Section 57 application. In my view there is nothing objectionable in this paragraph.
- Despite the already existing length of this judgment, I have taken the trouble to go through every paragraph in the Request for Clarification to demonstrate that, on analysis, there is no justification for any of the serious criticisms that have been levelled against it by HoH in these proceedings. There is therefore no substance in this particular complaint.
- Having regard to that conclusion, it follows that HoH's case for removal of this Arbitrator pursuant to section 24 of the 1996 Act has not been made out and the section 24 application must, therefore, fail for that reason.
- Moreover, having regard to the wide-ranging and serious allegations that HoH has seen fit to make against this Arbitrator, I am of the opinion that I should make it clear that I am entirely satisfied that HoH's various criticisms are wholly unjustified and have been expressed (to a very large extent) in extravagant, exaggerated and inappropriate terms. These Applications have made it necessary for me to give very careful and detailed consideration to nearly every aspect of the way this Arbitration has been conducted to date. In my view, this detailed consideration by me has served to show very clearly that the Arbitrator has progressed this Arbitration with complete fairness, exemplary patience, commendable courtesy and reasonable competence throughout. There is absolutely no justification whatsoever for either of these applications which, in my view, should never have been made in the first place.
- Conclusion. For the reasons given above, I have come to the firm conclusion that both these applications must be and are hereby dismissed.
Mr Justice Forbes:
(1) an application pursuant to section 68 of the Arbitration Act 1996 ("the 1996 Act") to challenge the Arbitrator's second [partial] award (the "ASA"), published on 28th May 2001, on the ground of serious irregularity ("the section 68 application"); and
(2) an application pursuant to section 24(1)(d) of the 1996 Act to remove the Arbitrator on the grounds that he has failed or refused (i) properly to conduct the proceedings and/or (ii) to use all reasonable despatch in conducting the proceedings or making an award and that substantial injustice has been or will be caused to the applicant as a result ("the section 24 application").
(i) The Arbitration commenced in December 1997. The parties' dispute arose in connection with a building contract to carry out certain refurbishment works to a school known as Munster Road Primary School, London, SW 6. LBHF was the employer under the contract and HoH was the contractor. The works of refurbishment were carried out in 1996/1997.
(ii) The building contract ("the Contract") was in the JCT Intermediate Form of Building Contract for works of simple content, 1984 edition (with amendments up to and including 1994), and contained the usual provision for reference to arbitration of any dispute or difference between the parties (Clause 9). The "Contract Administrator" was defined in Article 3 of the Contract as Mr C Stroud, LBHF's Head of Building Technical Services ("Mr Stroud").
(iii) The contract sum was £795,323.24, including some £167,000 worth of work as undefined provisional sums and works to the value of £191,913.19 as provisional quantities. The period of time provided for the completion of the contract works was 26 weeks and Practical Completion was scheduled for 18th October 1996.
(iv) In the event, the contract works did not proceed as planned and Practical Completion was not achieved until 7th February 1997, a contract overrun of 16 weeks.
(v) The Contract Administrator, Mr Stroud, awarded HoH an extension of time of 14 weeks for completion of the contract works. HoH was also paid some extra amounts for additional and varied works.
(vi) However, it is HoH's contention that it has been paid "virtually nothing" by way of additional payments to which it claims to be entitled for delay and disruption to the contract works. By two letters dated 2nd December 1997 (as to which, see below), HoH respectively notified Mr Stroud that it was in dispute with LBHF and gave LBHF notice of arbitration pursuant to Clause 9.1 of the Contract. The Arbitrator was appointed by agreement of the parties in December 1997 and accepted the appointment by letter dated 20th December 1997.
(vii) In the Arbitration HoH's money claims against LBHF are for payment of additional sums totalling £264,405.68, together with repayment of the sum of £5,750 that has been deducted by LBHF as liquidated and ascertained damages ("LADs"). HoH also claims a further two weeks' extension of time.
(viii) For its part, LBHF seeks to reduce HoH's extension of time to 8 weeks and to claim a further sum of £17,220 LADs, the Arbitrator having given leave to amend the statement of defence and counterclaim to that effect in December 1998.
(ix) On 15th March 1999 and 28th May 2001 respectively, the Arbitrator published two partial awards on issues relating to his jurisdiction. The second of those two partial awards is the ASA and is the subject of challenge in the section 68 application.
(x) Between April 1999 and March 2001, the Arbitration was adjourned by consent whilst the parties endeavoured unsuccessfully to settle the dispute by agreement.
(xi) On 25th June 2001, HoH applied to the Arbitrator pursuant to section 57 of the 1996 Act ("the section 57 application") for clarification of various issues and alleged ambiguities with regard to the ASA.
(xii) On 11th July 2001, LBHF served a response to the section 57 application. However, as explained in the following sub-paragraphs, the Arbitrator has not yet responded and the section 57 application, therefore, remains unresolved.
(xiii) From 16th to 30th July 2001, a hearing took place before the Arbitrator in which he heard the evidence on all issues of liability and quantum. At the end of the hearing, the Arbitration was adjourned for the parties to prepare their written closing submissions. At the same time, the parties agreed that all matters raised in the section 57 application should be dealt with in due course by the Arbitrator in his award.
(xiv) At the conclusion of the hearing on 30th July, it was also agreed that the Arbitrator should:
" let us have a note, Sir, of particular matters that concern you and your approach to some of these quantity surveying issues. Either on Wednesday, if you follow Ms Gough's guidance or Friday if you follow mine": per Mr Alan Steynor, Counsel for LBHF, at page 192 of the Transcript for 30th July 2001.
To which Ms Karen Gough, Counsel for HoH, added:
"If it is a long list send it sooner (than Friday) if you want the answers by Monday."
Accordingly, the Arbitrator agreed to provide the parties with an appropriate request for clarification.
(xv) On 1 August 2001, the Arbitrator sent a document to the parties by facsimile transmission entitled "Arbitrator's Request for Clarification in the closing submissions following hearing in July 2001 of substantive issues in dispute" ("the Arbitrator's Request for Clarification").
(xvi) Upon receipt of the Arbitrator's Request for Clarification, HoH's advisers took the view that it did not comply with what had been agreed between the parties and the Arbitrator, that it was far more than a simple request for clarification, that it contained opinions of and decisions by the Arbitrator on issues about which the parties had yet to make their submissions and that it raised questions as to jurisdiction in respect of parts of HoH's claims that had not, hitherto, been the subject of any jurisdictional issue between the parties.
(xvii) On 2nd August 1996, HoH gave written notice pursuant to section 73 of the 1996 Act ("the section 73 notice"), setting out its objections to the Request for Clarification and to the various decisions, opinions and proposals of the Arbitrator that it is said to contain.
(xviii) On 2nd August 2001, following service of HoH's section 73 notice, Counsel for the parties agreed that the hearing scheduled for 7th August 2001 would not provide sufficient time to deal with the parties' closing submissions and the jurisdictional questions raised by the Arbitrator. It was therefore agreed that the hearing should be vacated whilst HoH considered its position in relation to the Arbitrator's Request for Clarification and its section 73 notice.
(xix) In the event, the Arbitration was adjourned generally until mid-September. Thereafter, the parties tried to negotiate and agree a solution to HoH's perceived difficulties relating to the Arbitrator's Request for Clarification, but were unable to do so.
(xx) On 17th December 2001, HoH gave notice of its intention to make these applications to the Court. On 30th January 2002, HoH duly issued these proceedings to challenge the ASA and to seek the removal of the Arbitrator pursuant to section 24. In the meantime, no further steps have been taken in the Arbitration, which remains adjourned generally pending the outcome of these proceedings. As indicated above, the Arbitrator has heard all the evidence, but Counsel have yet to make their closing submissions.
(xxi) It is said by HoH that its costs of seeking to have its disputes resolved by arbitration before this particular Arbitrator are now in excess of £500,000.
Section 1 General principles
"The provisions of this Part are founded on the following principles, and shall be construed accordingly -
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay and expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part"
Section 24 Power of court to remove arbitrator
"(1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds
(d) that he has refused or failed
(i) properly to conduct the proceedings
(ii) to use all reasonable despatch in conducting the proceedings or making an award;
and that substantial injustice has been or will be caused to the applicant."
Section 33 General duty of the tribunal
"(1) The tribunal shall
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
(2) The Tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred upon it."
Section 57 Correction of award or additional award
"(3) The tribunal may on its own initiative or on the application of a party
(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award.
These powers shall not be exercised without first affording the other parties a reasonable opportunity to make representations to the tribunal
(4) Any application for the exercise of those powers must be made within 28 days of the date of the award or such longer period as the parties may agree.
(5) Any correction of an award shall be made within 28 days of the date the application was received by the tribunal or, where the correction is made by the tribunal on its own initiative, within 28 days of the award or, in either case, such longer period as the parties may agree.
(6) Any additional award shall be made within 56 days of the date of the original award or such longer period as the parties may agree. "
Section 68 Challenging the award: serious irregularity
"(1) A party to arbitral proceedings may (upon notice to the other parties, and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award..
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(d) failure by the tribunal to deal with all the issues put to it;
(f) uncertainty or ambiguity as to the effect of the award;
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may
(a) remit the award to the tribunal, in whole or in part;
(b) set the award aside in whole or in part;
(c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this section."
Section 70 Challenge or appeal: supplementary provisions
"(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted
(a) any available arbitral process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional award).
(3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process."
Section 73 Loss of right to object
"(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings,
he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection."
" during this meeting both the status of the final measurement and the financial aspects of our claim were reviewed by yourself. Of our fifteen heads of claim, two were not considered as part of the claim. These were No1 Items Not Agreed in the Final Account, which remains the subject of discussions with the Quantity Surveyors, and No 5 Additional Insurances, which we have included in our overhead calculations. Of the remaining thirteen heads of claim, you rejected four as inadmissible. These were:
No 7 Extended Scaffold Hire
No 8 Under-recovery of Head Office overhead
No 9 Loss of Profit
No 15 Claim preparation
You also stated that you considered that no money was due under a further two headings. These were:
No 6 Additional preliminaries
No 12 Additional Labour
You agreed that, subject to our providing you with further unspecified information, you would consider the following six heads of claim:
No 2 Additional Finance Charges
No 4 Additional Bond Charges
No 10 Additional Site Cleaning
No 11 Additional Safety Visits
No 13 Additional Supervision
No 14 Escalation of Costs
You considered that Item No 3 Extended Defects Liability would, in the event that you gave it consideration, represent an insignificant sum.
We now consider that there is little possibility of your making a realistic assessment of our claim and therefore, with regret, must inform you that we consider that a dispute or difference has arisen between us. In order to resolve this, we require that the dispute or difference be referred to arbitration and have notified the Employer accordingly. A copy of our letter to the Employer is enclosed for your information."
"Further to our Agreement dated 25 June 1996, a dispute or difference has arisen between ourselves and the Contract administrator regarding the valuation of the amount due to us for disruption. Please accept this letter as formal notification under Clause 9.1 of our Contract that we require this dispute or difference to be referred to arbitration under Article 5 of our Agreement. "
"23. In late 1998 and early 1999 it also became clear to Home of Homes that outstanding issues concerning the measured works element of the final account were unlikely to be resolved by negotiation with the Quantity Surveyor, Consul.
24. To this end, Home of Homes sought to schedule the entirety of the items which remained in dispute between the parties concerning the final account. At the same time, the split of responsibility between the quantity surveyors, Consul, and LBHF's own contract administrator, Mr C. Stroud, who had assumed responsibility for the evaluation of Home of Home's claims for disruption, made it impossible for Home of Homes to progress any negotiation of those matters. Home of Homes therefore thought it might be helpful if it sought to provide an alternative basis of evaluation of its claims and to re-evaluate its disruption claims, particularly the labour element of the disruption which formed a substantial element of its claims in the arbitration, under the provisions of clause 3.7 of the Conditions of Contract.
25. This effort manifested itself in the provision of a substantial A3 Schedule Scott Schedule style document included in which were the outstanding final account items still unresolved by the parties."
(1) "Clause 23 Revocation of arbitrator's authority
106. We have every confidence that the Courts will carry through the intent of this part of the Bill, which is that it should only be available where the conduct of the Arbitrator is such as to go so beyond anything that could reasonably be defended that substantial injustice has resulted or will result. The provision is not intended to allow the Court to substitute its own view as to how the arbitral proceedings should be conducted
In short this ground only exists to cover what we hope will be the very rare case where an arbitrator so conducts the proceedings that it can fairly be said that instead of carrying through the object of arbitration as stated in the Bill, he is in effect frustrating that object "
(2) "Clause 68 Challenging the Award: Serious Irregularity
280. Here we consider that it is appropriate, indeed essential, that these have to pass the test of causing "substantial injustice" before the Court can act. The court does not have a general supervisory jurisdiction over arbitrations. The test of "substantial injustice" is intended to be applied by way of support for the arbitral process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action. The test is not what would have happened had the matter been litigated. In short, Clause 68 is really designed as a long stop, available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected."
(i) the Arbitrator's "inability to make decisions and his inaccurate orders for directions" ("the Directions Complaint");
(ii) the Arbitrator's "abortive and very expensive initiative to seek to cap the costs" of the Arbitration ("the Costs Cap Complaint);
(iii) the Arbitrator's handling of issues concerning jurisdiction ("the Jurisdictional Issues Complaint");
(iv) the "chaos" engendered by the Arbitrator's First award of 15th March 1999 and the Arbitrator's "efforts to continue the cost-capping saga" ("the AFA Complaint");
(v) the "confusion and expense" that resulted from the Arbitrator's March 2001 directions, given on the resumption of the Arbitration ("the March 2001 Directions Complaint");
(vi) the "continuing confusion and argument over jurisdiction in 2001 and delivery of the Arbitrator's Second Award" ("the ASA Complaint");
(vii) the Arbitrator's failure to respond to the section 57 application and "doubts about the Arbitrator's jurisdiction" ("the section 57 Complaint"); and
(viii) the Arbitrator's "Request for Clarification" document of 1 August 2001, "prejudging issues, demonstrating a failure to understand the jurisdiction arguments and opening up new jurisdiction points not raised by LBHF" ("the Arbitrator's Request for Clarification Complaint".
"It is a sad feature of this arbitration that on each and every occasion that the Arbitrator has sought to issue directions, even where matters have been agreed by the parties, he has failed correctly to record the matters agreed or decided at those meetings. Examples of the parties' efforts to correct his errors are littered throughout the correspondence passing between the Arbitrator and the parties ": see paragraph 14 of Mr Moorhead's first witness statement dated 22nd January 2002.
"65 Power to limit recoverable costs
(1) Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs of the arbitration, or any part of the arbitral proceedings, shall be limited to a specified amount.
(2) Any direction may be made or varied at any stage, but this must be done sufficiently in advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings which may be affected by it, for the limit to be taken into account."
"E. Costs of the parties was discussed. The Arbitrator agreed to send a copy to each party of the other's submission to the Arbitrator on costs, both spent and forecast (this is enclosed with this Order). The Respondent had suggested, in its note to the Arbitrator of 23rd November 1998, that a limitation of £60,000 be put on recoverable costs in clarification the Arbitrator established at the meeting that this was suggested as applicable to each party. The parties agreed to comment to the Arbitrator on these submissions within seven days in order for the Arbitrator to take the parties' views into account in any limitation of recoverable costs of the parties. The Arbitrator stated he would review parties' costs once he had received witness statements on or before 11th December 1998. It may then be appropriate to review costs at or before the meeting provisionally reserved for 21st December 1998.
F. Mr Moorhead agreed to supply further information on his consultancy costs that have been included as part of the Claimant's loss and expense claim."
"Home of Homes concludes its comment by noting that it would be inappropriate to apply any cap on future costs, given the directions which have been issued for the future conduct of the Arbitration and the uncertainty, certainly in so far as the Borough's future costs are concerned, of the actual costs which are likely to be incurred. In addition, the stage of the Arbitration has been reached where the costs on each side are unequal, the greater burden being on Home of Homes to prepare for the forthcoming hearing. A calculation of a fair allowance would therefore be very difficult and highly likely to prejudice Home of Homes. Accordingly, on the basis of the information before you, a cap on costs would be inappropriate at this stage."
"G. Agenda Item 7 Costs of the Arbitration. The Arbitrator referred to (HoH's) letter of 15th December 1998 on costs.
(LBHF) re-stated its concern that costs were out of control on a dispute with a claim of around £300,000. (HoH) stated that it may potentially be prejudiced by limitation of costs at this stage.
The Arbitrator gave an indication that he will order a limit of £90,000 to each party's legal and other costs that would be recoverable from 21st December 1998 until the completion of the hearing.
(HoH) asked if the Arbitrator would give reasons for his decision. The Arbitrator asked for (HoH) to give authority that required reasons to be given on an Order for Directions. The parties agreed that the Arbitrator had indicated his intention to limit costs of each party to £90,000, with effect from 21st December 1998 until completion of the Hearing but that this would not be ordered until 18th January 1999. (HoH) may make a submission requesting reasons for the Order by 8th January 1999, any response by (LBHF) will be by 12th January 1999 and the Arbitrator will give an Order, with reasons if appropriate, after 18th January 1999."
"3. The Arbitrator indicated that it was his intention to order that recoverable costs falling within s.59(1)(c) of the Arbitration Act 1996, that is the legal and other costs of the parties arising out of or in connection with the determination of the issues in dispute between the parties, for the period from 21st December 1998 up to the end of the hearing on 17th March 1999, shall be limited to £90,000 for each party. As recorded in the notes below the parties may make submissions on the Claimant's request for reasons for the intended Order such that it would be confirmed by 18th January 1999, with effect from 21st December 1998 ".
"The Claimant's submissions are as follows:
1. The power vested in the Arbitrator to make an order under section 65 is essentially there to support the arbitrator's general duty under section 33 of the 1996 Act to adopt fair and cost-effective procedures. At this stage of the proceedings, your order cannot do this, and therefore, since its effect will be unfair - in particular to the disadvantage of the Claimant - it is a matter which might well have to be subjected to scrutiny elsewhere.
2. The circumstances in which you came to make this order are important and should be explained by you to the parties. You clearly decided to make this order, and also the amount of the limit you intended to place on the parties' recoverable costs, in advance of the meeting on 21st December 1998. Your confirmation of this point would be appreciated.
3. At the meeting on 21st December 1998 you made a number of orders which had an immediate and significant impact on costs:
(i) You admitted the Respondent's Amended Statement of Defence, thus opening up for examination the whole of the 14 weeks extension of time previously awarded and admitted as due from the Respondent. What was therefore a simple issue as to whether a further 2 weeks extension of time could be substantiated on the evidence presented to you by the Claimant in the Arbitration, has become a detailed retrospective analysis of the entire extension of time. In turn, this has resulted in your order for further extensive discovery of documentation, and possibly given rise to the need for further evidence from the witnesses.
(ii) The Claimant made clear, in advance of your admission of the Amended Statement of Defence that its calculation of its costs and its work schedule, excluded the admission of the Respondent's Amended Statement of Defence. The Respondent's own submissions, as noted in our submission to you of 15 December 1998 was in respect of a different set of circumstances to those which currently obtain.
4. Under the circumstances, the Claimant submits that it is incumbent upon you to give an explanation as to why you have decided, particularly at this stage of the Arbitration, to make an order capping the parties' costs, and in addition, what factors you took into account when so doing and how you have calculated the limit you were seeking to impose.
5. Furthermore, the effect of this order is prejudicial to the substantive rights of the Claimant in its ability to prepare the case for hearing:
(i) you have determined that both parties' costs should be capped equally at £90,000. Clearly, the Claimant has to prepare the case for the hearing - this is a substantial cost, yet it is one which the Respondent, prima facie, has not to bear and therefore the cap on its recoverable costs is not affected by this liability. The converse is true for the Claimant.
(ii) the Respondent has submitted an Amended Defence, the costs for the preparation of which, in principle, were incurred and are recoverable outside the cap on costs. You will recall that the Respondent's planning expert has incurred substantial fees in this respect already. Doubtless other costs, particularly legal, were incurred before 21 December 1998 in respect of this Amended Statement of Defence. The Claimant however, has now to deal with the Amended Defence within the limitation you have placed on its recoverable costs.
6. The cap on the costs which you have imposed, therefore represents a serious handicap on the Claimant's ability to advance its case and its defence to the Amended Statement of Defence. The latter, you will recall, now advances a significant counterclaim on behalf of the Respondent in the form of a claim for liquidated and ascertained damages.
7. it is anticipated by the Claimant that further directions, and possibly a meeting, will be necessary. Having to accommodate such further work within the financial limit now set is prejudicial to the Claimant.
8. The parties' financial positions are not equal and this affects the fairness of the order you have made. The Respondent has a considerably greater financial strength than the Claimant and a greater ability to absorb costs within its organisation than the claimant could possibly accommodate. The Respondent has both in house legal and surveying services on which it can call and if necessary, write off the costs which cannot be recovered in the Arbitration. The claimant is not able to "save" or "absorb" costs in this way.
9. Lastly the timing of this order is prejudicial. The parties are both now being told to restrict their costs in face of an extensive, pre-agreed procedure for the conduct of the case to the hearing, of which you have notice - at least from the Claimant - cannot be accommodated within the limit you have set. This was true before 21 December 1998 and, as noted above, costs have risen since then. It seems to the Claimant therefore that you have not paid any or any sufficient regard to costs that have been reasonably and irretrievably committed by the parties.
The Claimant acknowledges that you have power to vary your direction and increase the limit on costs but, this close to the hearing, that is a procedure which is as fraught with difficulty as the making of an order in the first place.
In view of the foregoing, and the potential effect of your order on the rights of the Claimant and its ability to advance properly its case in the Arbitration in accordance with the directions already made, the Claimant invites you to provide reasons for your decision in order that it can be challenged, if the claimant is so minded, by application to the Court".
"(3) Order to limit costs of the parties
I have considered the letters and submissions from the Claimant of 8 January 1999 and from Respondent of 11 January 1999. I further note that the Claimant has referred to a number of actions it may feel are necessary. I do not consider that I have to give reasons for any Order that costs will be restricted to £90,000 for each party."
"You say in the final sentence : "I do not consider that I have to give reasons for any Order that costs will be restricted to £90,000 each party." We should point out that in our submission we did not imply that you were obliged to give reasons. Our position was, and is, that given the situation in which the Order was being made fairness dictated that reasons should be given."
"It is only with great regret that our clients have instructed us to write this letter. However, your recent decisions leave no other option open to our clients.
The sum of our client's complaints is that there have been serious irregularities which affect the proceedings in train before you and which will affect the award. The most prominent of these is your decision to make a direction capping the parties' costs in this arbitration.
This letter is principally directed to that matter, which has been exacerbated by your refusal to give reasons for such a serious decision. The purpose of this letter is to invite you to reconsider both the decision to cap the costs and the decision to refuse to give reasons. Most unfortunately, given the importance of the matter and the proximity of the hearing, it is not possible to give you a long time to respond. If you continue with an approach which, in our client's view, is so objectionable, it will be necessary to seek relief from the court, and to do so urgently. Accordingly, it will only be possible to afford you until the close of business on Friday 5 February to consider the points made in this letter including any comments by the Respondent. We have copied this letter to the Respondent by facsimile and it will be able to let you have the benefit of its thinking on the matter without delay. On the credit side, the points are short and should not cause you any difficulty.
Had such an order been made much earlier in the proceedings, say in October, but in respect of the period mentioned in your order, it might have been acceptable. However, by the time that you made the order, the costs position had changed substantially from the time when the parties had provided you with their costs information, not least by reason of the amendment that you had decided to allow. The situation was made worse by your insistence upon further meetings with experts and by the fact that you did not have any current (as at the end of December) estimate of the costs likely to be incurred by our clients. In addition you have never had and have not pressed for an adequate estimate of the costs likely to be incurred by the Respondent. In the premises, it is respectfully submitted that you did not have the necessary material for an order under s.65. What is more, it was not done sufficiently in advance of the commitment to incur the costs for either side to take it into account.
In the premises, it is respectfully submitted that you have exceeded your jurisdiction and/or that a serious irregularity affecting the proceedings and/or the award has occurred and/or that there is an important question of law which needs to be determined urgently."
"1. On application from the Claimant I have considered my Order for Directions No. 5 and after hearing further submission I amend my Direction. The legal and other costs of each party that shall be recoverable shall be costs such as are reasonable and have been recently incurred by a party during the period from 21 December 1998 until completion of the hearing on 17 March 1999 and shall not be limited to £90,000 for each party in accordance with my order for directions No. 5.
2. Liberty is given to either party to apply to me for an amending Direction."
"1. The legal and other costs of each party that shall be recoverable by that party shall be costs that are reasonable and have been reasonably incurred by a party to take account of matters of jurisdiction raised at the pre-Hearing review and to allow for production of the bundle as now required and in any event limited to £110,000 for each party for the period from 21December 1998 until completion of the hearing on 17 March 1999.
2. Liberty is given to either party to apply to me for an amending Direction".
"We are astonished by the terms of this Order which appears to have been made on an ad hoc basis and without due consideration of the circumstances which might justify the re- imposition of a cap on costs. We are very disappointed to note that, again, you have not provided any reasons for this new Order. Equally, you have not sought the benefit of up to date information from the parties as to the current position regarding costs expended to date and anticipated future costs.
We have serious doubts as to whether or not the Order made is within your jurisdiction. We must inform you that we reserve our position on this matter and we are seeking advice. We will be writing to you further once we have received and considered this."
"34. HoH respectfully submits that all the above orders are outwith the jurisdiction given to the Arbitrator. However it is only necessary to address the "live" order, namely Order for Directions No. 8.
35. The key wording of the Section, which expressly imposes a limit on the power of the Arbitrator under this section, and which has not been observed by the Arbitrator, is as follows:
Any directions may be made or varied at any stage, but this must be done sufficiently in advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings which may be affected by it, for the limit to be taken into account. (Emphasis added.)
36. It is respectfully submitted that Order for Directions No.8 is largely retrospective. It follows that it does not comply with the requirement, which is mandatory ("must"), requiring the order to be made in advance of the incurring of costs, or the taking of relevant steps.
37. The order is also in breach of the more difficult requirement that it would have to be made at such a time as to enable it to be taken into account.
38. HoH invites the Arbitrator
a. to confirm either that he will not seek to enforce the order; or
b. that HoH may have until 21 days after the issue of his substantive award on the merits to challenge his direction No. 8 so far as costs are concerned."
"CAPPING COSTS
36. The Respondent is frankly amazed that this issue has once more been raised. The Respondent's position is that enough is enough.
37. The Claimant does not like the idea of a costs capping order. However, one was made. Implicit and explicit threats were made by the Claimant that it would seek redress from the Courts in relation to that Order. Had its bluff been called, the Respondent has little doubt that no application to the Court would have been made.
38. The only Order which the Arbitrator, with respect, was not entitled to make was its Order No. 6. That was outside his jurisdiction for 2 reasons:
(i) He had no jurisdiction under section 65(2) to revoke his previous order in the absence of any new circumstances affecting the level or fact of the cap. A true construction of section 65(2) inevitably leads to that conclusion.
(ii) The direction of a cap of costs which were "reasonable" and "reasonably incurred" does not fall within the ambit of Section 65 which refers only to Orders for a "specified amount". Reasonable costs cannot constitute costs in a specified amount.
39. The Respondent remains concerned that re-argument of points which have been sufficiently argued (e.g. jurisdiction) and/or concluded (e.g. costs capping) does not fall within the requirements of Sections 1 and/or 33 of the Act. Both the purpose of arbitration and the Arbitrator's duty is to avoid unnecessary delay and expense. Re-opening old arguments, with the greatest of respect to the Claimant, avoids neither.
40. There is no justification for the Claimant to re-open the Arbitrator's Order No.8 which increased the costs cap from £90,000 - £110.000 per party. "
"15. Accordingly, it was within the Arbitrator's jurisdiction and powers to make the Order which he made pursuant to Order No. 5. Although published on 29 January 1999, that was, I understand, done by agreement between the parties; the basic indication had been given at the Interlocutory Meeting on 21 December 1998 that the costs cap of £90,000 was or was likely to be applied.
16. It is my view that Order No. 6 was made within the powers identified in Section 65(2). My reasoning is as follows. The Arbitrator had a power to vary Order No. 5. The words used in the Act are that the earlier direction "may be varied at any stage". There is no qualification in the statute that new grounds must exist for varying an earlier Order. Accordingly a genuine reconsideration of the position leading to a variation of the first Order must be considered as legitimate or certainly within the Arbitrator's proper powers. The qualification on Section 65(2) is that the variation must be made "sufficiently in advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings which may be affected by it for the limit to be taken into account."
17. However the effect of the Arbitrator's varying Order (Order No. 6) was to remove the earlier cap completely. No evidence or argument has been advanced to show that this has in any way affected either party either in the conduct of the proceedings or in the incurring of costs up to that point or indeed thereafter. In logic, the removal of the cap is unlikely to have had any or significant effect in that context. Accordingly, in my view, the Arbitrator was entitled to issue Order No. 6.
18. However, Order No. 8 which sought to re-impose a cap (albeit at the somewhat higher level than that contained in Order No. 5) was made less than 10 working days before the commencement of the substantive hearing. In my view, that direction or order was made at too late a stage. It is difficult to say that this direction was made "sufficiently in advance of the incurring of costs to which it relates", particularly in the context of Order No. 6. Accordingly, it is my view that the Arbitrator was not justified on the particular facts in issuing that direction at that late stage.
19. The position therefore should be that the Arbitrator should confirm that Order No. 6 stands namely that there is currently no cap for the period up to 17th March 1999. In context, this may make little difference given that the substantive hearing during early March for 10 working days cannot now go ahead. I assume that there will have to be a re-fixed date for the Hearing. It will of course be open to either party to apply to the Arbitrator to impose a cap for the future costs to be incurred. Conversely, if either party wishes to apply to the Arbitrator for costs of and occasioned by the jurisdiction, cost capping or adjournment issues, the Arbitrator will be able to exercise his discretion without the constraint of any cap".
"I THEREFORE AWARD AND DIRECT THAT:
4. This First Award is final on the issue of my jurisdiction to determine issues in dispute between the parties and on capping the costs of the parties up to and including 17 March 1999, save only for costs of and occasioned by determination of the issue of jurisdiction and cost capping."
"In an extraordinary order made on 19th February 1999, as a result of a failure on his part to understand the genesis of a substantial number of Home of Homes' itemised disruption items, which had been recast in the A3 Scott Schedule served on 9th February 1999, he ordered and purported to exclude the claims in that schedule from the impending hearing scheduled to commence on 3 March 1999". See paragraph 34 of the Grounds.
"to throw the parties into further disarray, since Home of Homes could not excise those claims from its pleadings and evidence of fact and opinion in the time available, or indeed at all ": see paragraph 34 of the Grounds.
"For your information, we are currently preparing a schedule which will list all of the items in dispute between the parties. We have discussed this with the Respondent and it is our intention first to agree that the list is complete, and then to agree how each item is to be dealt with. In the event that we are unable to reach agreement on the method for certain items, we will seek your ruling. Ultimately we hope to have an agreed list of disputed items to put before you for your decision. We hope that this will be of assistance."
"Quantum Matters:
This is referred to in our letter ref: 0010 of 18 January 1999 and we later sent the Respondent a schedule showing all items in dispute. It was our intention that, once the Respondent had considered this, we would produce an agreed schedule to put before you. Unfortunately this has not happened. The Respondent has disputed the Schedule and, without reverting to ourselves, has put it before in this manner (sic). You will note that the schedule shows both claim items and final account items. Notwithstanding the remarks in the Respondent's letter of 15 January 1999 and in the third paragraph of section 5 of their letter of 3 February 199(9), it is our position that the final account is not agreed and all items in dispute must be included in the arbitration for your consideration and decision. As you are aware, our expert has found it necessary to consider the valuation of final account and it is this that has, unfortunately, led to a delay in the exchange of reports on quantum.
"No allowance shall be made in the valuation for any effect upon the regular progress of the Works or for any other direct loss and/or expense for which the Contractor would be reimbursed by payment under any other provision in the Conditions;"
"We are in receipt of Mr Moorhead's letter dated 9 February 1999 enclosing the Claimant's "Schedule of Instructions requiring a Variation to be valued under the full provisions of Clause 3.7 of the Contract". We are very surprised that the Claimant has produced page after page of items from the Final Account, that are not only not pleaded, but, in addition, the vast majority of which have already been agreed between Consul and Mr. Corley.
The Claimant has clearly taken no account whatsoever of the Borough's letter dated 3 February 1999, and is attempting to widen the scope of the pleaded case. We are not aware that the Claimant has requested leave to a further amendment to the Statement of Case. In the event that such an application were to be made at this very late stage by the Claimant, we would advise that it will be strongly opposed by the Borough.
This would be on the basis that the timetable now available prior to the Hearing does not allow for a response by the Borough to the 52 pages (A3) as presented. In addition, there would be no opportunity for the Quantum Experts to address this schedule in their reports.
We have spoken to the Claimant regarding their new schedule and failed to reach any agreement with them. We have, therefore, enclosed the Borough's "Schedule of all items in dispute between the parties, as pleaded in the Arbitration". This identifies the pleading in which each item appears. All items shown on the Claimant's schedules that do not appear on the Borough's Schedule, as enclosed, are not pleaded and are beyond the scope of the Arbitration.
Finally we would draw you attention to Mr Moorhead's letter dated 11 February 1999 (0045) in which the Claimant proposes to include the Final Account within the bundle. We have advised the Claimant that we do not agree with this as the Final Account, whilst not yet fully resolved between the parties, is not an issue before this Arbitration."
"D The Arbitrator ruled as directed above that submissions on jurisdiction will be made but that, in any event for practical reasons, the substance of the Claimant's "A3 Scott-type schedule" will not form part of the Hearing set down for March 1999"
"We consider firstly the format for Wednesday. As we anticipate matters, the first topic to which the parties will return is how you approach the issues in this case. We would respectfully suggest that the most convenient course would be for the parties to put forward any further remarks that either may have on the matter of jurisdiction and then leave it to you to issue a formal decision, with reasons please for such an important matter, in due course. Until such time as you are in a position to provide your decision, save as set out below, the hearings should be adjourned.
Secondly, the unfortunate event is that the Claimant, in view of the degree of criticism that has been levelled at its quantum expert, has had to take a second opinion on the issues of quantum in the case and may well be seeking leave to call a replacement expert. While this is undoubtedly most inconvenient, fortunately, in view of the more pressing issue of jurisdiction and the need to take time to issue a formal reasoned decision on that matter, there should be no additional disruption to the progress of the hearing.
We therefore with reluctance propose the following timetable for the Hearing:-
Wednesday 3 March 1999
Submissions of the parties on jurisdiction; outstanding issues of costs.
Site visit 4.00 pm as arranged if possible.
Adjournment of hearing.
Monday 8 March 1999
Parties' submissions on issue of whether "time at large". 1 day.
Hearing adjourned to be refixed after formal decision of the arbitrator on costs.
In the light of the difficulties over jurisdiction and expert evidence, you will appreciate the difficulties we have had in settling an opening for the case which you are scheduled to hear. We will address you further on this matter tomorrow. "
"AMBIT OF THE ARBITRATION
2. The ambit of the arbitration has been the subject of some debate in recent days. However, no decision has yet been promulgated on this important topic; and this may be due, in no small part, to the somewhat hurried way in which the matter has come before the Arbitrator.
6. Clearly it is essential to resolve this matter before embarking on the hearing proper - hence this submission. It is anticipated that, apart from other interlocutory matters, and perhaps a site visit, (that) continuation of the hearing will await determination of this issue.
A TACTICAL AMBUSH? .
25. It is not at present suggested that LBH has engaged in a deliberate and cynical attempt to derail the present arbitration. However, there are justified grounds for suspicion. Certainly, since the middle of 1998, it has begun to look as though LBH had decided to adopt the narrow view that it has been arguing recently, possibly as a result of the Arbitrator's Clarification No.1 and the responses thereto of the HoH.
SUBMISSION
28. It is respectfully submitted that it is clear that the obligation of the arbitrator is to ascertain the true financial entitlement of HoH. If that involves determining aspects of the Adjusted Contract Sum, which should, if LBH had properly carried out its responsibilities under the Contract already be agreed, then that is what the Arbitrator must do.
29. Furthermore it is clear that LBH did not think of the objection that is now put forward until the arbitration was under way; and if LBH had had any entitlement to contend as it now contends, that entitlement has been waived."
"7. The Claimant has sought to give the impression that the Respondent has in some way been responsible for the late stage at which this issue has come before the Arbitrator. Nothing could be further from the truth.
8. This arbitration concerns and has always concerned loss and expense for disruption and extensions of time
9. However, at the beginning of February 1999, one month before the hearing, the Claimant began to serve Schedules relating to the alleged measurement and valuation disputes. The parties and the Arbitrator have referred to these Schedules as the A3 Scott-type Schedule. The Schedule is entitled "Schedule of Instructions requiring to be valued under the full provisions of Clause 3. 7". It was an attempt to open up the (almost entirely) agreed Final Account and to include in the arbitration Final Account matters which had not been referred to in the arbitration and did not fall within the Arbitrator's jurisdiction.
10. The Respondent did not know to what use, if any, the Claimant intended to put the A3 Schedule. In order to ensure that the Claimant did not seek to change its case by the back door by reliance on this Schedule, the Respondent registered its objection to the Schedu1e forming part of the arbitration. This objection was set out in the Respondent's Note for the PTR on 19.2.99 and was voiced orally on 19.2.99.
11. The oral argument on 19.2.99 centred on 2 issues:
(i) Whether the Arbitrator had jurisdiction to deal with the A3 Schedule at all.
(ii) Whether the Schedule should form part of me hearing due to start on 3.3.99.
The Arbitrator's Jurisdiction
15. The Arbitrator's jurisdiction arises from the Notice to Refer and the subsequent agreement to widen it to extensions of time. These matters have been ful1y canvassed in the Respondent's Submissions of 26.2.99.
16. The Claimant appears, however to seek to rely on the Contract and the Arbitration Act to allege that the Arbitrator's jurisdiction is wider than the jurisdiction conferred by the Notice and Agreement. The Respondent respectfully submits that this is (at best) a confusion of "jurisdiction" with "powers".
17. It is clear from the wording, inter alia, of section 9.1 of the Contract and sections 14 and 30 of the Act that the Arbitrator's jurisdiction derives from the Notice to Refer:
18. To argue that powers given to the Arbitrator to deal with matters which have been referred to him can somehow expand the matters which have been referred is (with respect) a nonsense. The powers e.g. to direct measurements in Section 9.3 of the Contract and to decide on procedural and evidential matters in Section 34 of the Act are powers to determine matters already within the Arbitrator's remit. They cannot widen the scope of his jurisdiction.
19. The Claimant further seeks to rely on what it terms the "financial interaction" between the provisions of the Contract. It appears to be alleged that since an Arbitrator can take account in determining a dispute under Clause 4.11 of any potential overlap with valuations made under Clause 3.7 so as to ensure that the Claimant does not recover twice, this can somehow bring the determination of the entire measurement and valuation process of the Final Account within his jurisdiction without there being any need to refer the Final Account to arbitration. This is, with respect, an attempt to muddy waters which should remain clear. If an Arbitrator is seized of loss and expense, his efforts to avoid overlap with a matter with which he is not seized, cannot seize him of that matter.
20. The Claimant also refers to the Arbitrator's "obligation to ascertain the true financial entitlement of HoH" (paragraph 28 of the written Submissions). It appears thereby to be alleged that once a dispute under the Contract is referred to the Arbitrator, his obligation is to determine all financial disputes. The reason why this is incorrect is due to a lack of precision in the Claimant's drafting of the Arbitrator's obligation. In fact, the Arbitrator's obligation is "to ascertain HoH's true entitlement in relation to the matters referred" and not otherwise.
Alleged pre-existing Clause 3.7 claims
30. As to claims under Clause 3.7 having been maintained since the Statement of Case, that is simply not correct. The claims in the Statement of Case were put as delay and disruption claims. They were not put as valuation claims. This emerges very clearly from the quantum sections of the Statement of Case which refer to 2 types of claims:
(i) Section 8 - Costs associated with the Extension of Time.
(ii) Section 9 - Costs associated with the disruption resulting from the various events referred to previously; and Section 10 - claim for disruption to heating and plumbing works.
Clause 3.7, on the other hand, is the c1ause relating to valuation of variations and preliminary items. Clause 3.7.7 specifically provides that:
"no allowance shall be made in the valuation for any effect upon the regular progress of the Works or for any other direct loss and/or expense for which the Contractor would be reimbursed by payment under any other provision in the Conditions."
"3. The Claimant's claim in Arbitration is and was to be seen in the context of Clause 3.7 of the IFC Conditions which confirms in Clause 3.7.7 as follows:-
"No allowance should be made in the valuation for any effect upon the regular progress of the Works or for any other direct loss or expense to which the Contractor would be reimbursed by payment under any other provision in the Conditions".
Therefore, to evaluate disruption, whether occasioned by variation or other events, the Claimant must look primarily to Clause 4.11 or any common law remedy available.
4. Accordingly the dispute or difference referred to arbitration before Mr Turner was the Claimant's claim for loss, expense and damages arising out of and in connection with delay and disruption said to have been caused to the Works. It did not include, in my opinion, any claim under Clause 3.7 that is for the contractual evaluation of variations.
5. Clause 9.3, relied on by the Claimant, does not assist. The Arbitrator is given wide powers to "direct measurements and/or valuations... (etc.)"; however that is and must be in relation to the matters which are within his jurisdiction. Clause 9.3 does not create a jurisdiction which is not there pursuant to the reference; put another way, the Clause 9.3 powers are to be exercised in respect of the referred disputes.
6. Reference has been made to Section 34 of the Arbitration Act 1996. This gives the Arbitrator substantial and wide-ranging powers. However it does not give the Arbitrator jurisdiction over disputes which have not been referred to him. Again these powers relate to the referred disputes. Similarly, any power to permit amendments cannot extend to allowing an amendment to bring in a cause of action, which is not within the Arbitrator's basic jurisdiction.
7. Accordingly, my view is that the Arbitrator does not have jurisdiction to entertain the Claimant's claim for sums due pursuant to Clause 3.7 by way of valuation of any variations themselves.
8. Much has been made by the Claimant of the "financial interaction" between the claims as formulated within the Arbitration and the A3 Scott Schedule items. There is to some extent a financial interaction which has been "pleaded" or relied upon by LBH in their Statement of Defence. For instance at pages C/3, 18, 19, 21, 24, 31, 36, 44 and 48, they rely upon assertions that the Claimant is not entitled to certain heads of disruption loss claimed because it has recovered elements of such loss within the actual or 'projected' Final Account. Similarly, if one examines the Claimant's A3 Scott Schedule, elements of few of the items might conceivably be recoverable, if proved, as disruption losses under Clause 4.11 or as damages for breach of contract; for instance Item No. 37 identifies, rightly or wrongly as a matter of fact, that there was "out of sequence working of two labourers for half a day"; subject to proof and to argument, it is possible that that element might be recoverable as loss and expense or as damages relating to delay or disruption.
9. Although there is in that sense an element of "financial interaction", that is or may be a matter of evidence. If the respondent seeks to establish as a matter of evidence that no loss has been incurred because there has been appropriate compensation within the Final Account as finalised to date, the Respondent should be permitted to seek to establish that, subject to any arguments about admissibility or relevance and the like. Similarly, subject to the same qualification, it may be permissible for the Claimant as a matter of evidence to show that specific disruption was caused as a result of specific variations.
10. This distinction however must be maintained which is that the Claimant cannot as a matter of jurisdiction claim, and the Arbitrator could not award, any sum for the valuation of variations under Clause 3.7. As a matter of evidence, it may be permissible for some evidence and argument to be adduced relating to the Final Account along the lines indicated above."
"The AFA of 15 March 1999
35. In the AFA, the Arbitrator abandoned cost capping by rescinding his order for directions no. 8 of 21 February 1999 . In relation to the issue of jurisdiction he stated:
"The opinion of Mr. Robert Akenhead, with which I concur, is attached to this Award. Reasons are given in that opinion for the decision on the crucial matter of jurisdiction on the issues that the Claimant sought to introduce... ."[Emphasis supplied)
Apart from the adoption in whole or in part of the opinion and reasoning of Mr. Akenhead, the Arbitrator had failed to issue an award setting out his reasons on the matters put before him for decision. Matters of fact were confused with statements of decision and the issue of cost capping was dealt with alongside and indeed mixed in with the jurisdiction issue concerning the A3 Scott Schedule and final account items.
36. All in all the Award was ambiguous and confused and left the Claimant with the strong view that the Arbitrator had little or no understanding of the task which he had been empowered to do or the basic requirements of the 1996 Act in connection with the writing of an award. Moreover, having made a complete mess and having incurred vast expense to the parties, attempting to put a cap on costs in wholly inappropriate circumstances, the Arbitrator included directions to seek to begin that whole process anew."
"3.2 The notice of arbitration of 12th December 1997 as amended by my Order for Directions No.1 set my jurisdiction for matters to be decided between the parties. The Claimant has sought to have items of valuation pursuant to Clause 3.7 of the IFC84 contract, as identified in "the A3 Scott-Schedule", introduced into the hearing and I find and hold that I have no jurisdiction to deal with these items. I have no jurisdiction under Clause 9.3 of the Contract to use powers available to me in any area that is outside the jurisdiction given to me by the parties. I note that the Claimant has issued on 12th March 1999, before my determination of the issue of jurisdiction in this Award, a further notice of arbitration to the Respondent.
3.3 I may consider evidence and argument to the extent that I consider relevant which may impinge upon the Final Account in determining matters of disturbance and delay.
3.4 The plea of estoppel does not go to the Arbitrator's jurisdiction and is not properly founded, for the reasons given in Mr. Akenhead's opinion, at point 11, on page 5 of that opinion.
3.5 Waiver is not relevant in the circumstances and facts of the arbitration, as given in the opinion of Mr. Akenhead, at point 12, on pages 5 and 6 of that opinion.
3.6 My Order for Directions No. 5 and 6 were correctly issued. I shall issue a further Order to rescind my Order for Directions No. 8 such that there is no cost cap in place until the 17th March 1999 ".
"7. Costs of the Arbitration were discussed. The Claimant submitted that no limitation of parties' costs should be imposed. The Respondent stated that it was 'neutral' on any limitation, whilst stating that it was concerned at the amount of costs reported as having been incurred by the Claimant. The Arbitrator stated that he noted the statements of the parties. He had already considered the parties' costs and that he had decided that no limitation should be imposed on resumption of the proceedings."
"ORDER FOR DIRECTIONS NUMBER 9
Following a preliminary meeting held on 22 March 2001 at the Arbitration Rooms, 37 Essex Street, London WC2R 3AT at 17.00 to review the resumption of proceedings in the arbitration leading to resolution of matters in dispute between the parties, where the Claimant was represented by Ms Karen Gough, Counsel and Messrs. Moorhead of Martin Moorhead Consulting and Mr S H Pittam, director of the Claimant company and the Respondent by Ms S Hannaford and Messrs Stroud, Blurton and Messenger and to an agenda prepared and circulated by the Arbitrator on 17 March 2001 and taking into account the Claimant's note, dated 22 March 2001 to the Respondent and the Arbitrator, I hereby give my Order for Directions No.9 for the continuing conduct of this Arbitration.
1. The parties are to make submissions on what the jurisdiction of the Arbitrator (is), following the Arbitrator's First Award in 1999.
(i) The Claimant shall submit its contentions in writing by 6 April 2001.
(ii) The Respondent shall submit its contentions by 20 April 2001.
(iii) If the Claimant wishes to reply to the Respondent's submission it shall do so by 27 April 2001.
(iv) If either party wishes to have a Hearing following submissions it has the right to notify the Arbitrator and a date shall be fixed for this.
(v) If the Arbitrator considers that he requires to obtain legal advice following submission and/or a Hearing on jurisdiction he shall inform the parties before such advice is obtained.
2. The Claimant will adduce expert evidence by a report from Mr Webb by 6 April 2001.
3. The Claimant will serve amendments to its Statement of Claim by 27 April 2001 in 'draft' for the Respondent to consider and agree.
4. The Respondent shall serve amendments to its Defence by 18 May 2001.
5. The Claimant shall serve amendments to its Reply to the Defence by 1 June 2001.
6. The parties' experts shall review their reports by no later than the end of April 2001 and meet with the Arbitrator before 5 June 2001 in order that supplemental joint statements are submitted before the end June 2001.
7. Any amendments to existing witness of fact statements (and) the production of witness statements from new witnesses shall be submitted before the end of May 2001, by serving copies (on) the other party, before agreement to submit these to the Arbitrator.
8. Revisions to the agreed bundle of documents shall be submitted by the end of June 2001.
9. A pre-Hearing review shall be held at the beginning of July 2001.
10. A ten-day Hearing, at a venue to be agreed, shall be held from 16 to 27 July 2001.
11. Costs of the preliminary meeting shall be cost in the Arbitration.
12. Liberty is given to either party to apply to me for an amending Direction.
The following are notes of matters discussed at the meeting
1 The parties agreed to have the meeting recorded by a transcription company and a copy of the transcript of this is to be provided to the parties and the Arbitrator. At the date of issuing this Direction a copy of the transcript had not been provided to the Arbitrator.
2 A "Claimant's Note for the Preliminary Hearing on 22 March 2001" was referred to throughout the preliminary meeting and the dates stated in that 'Note' were amended as set out above. The parties' representatives discussed procedure and dates before the preliminary meeting started. This resulted in dates being amended from those in the 'Note'.
3 The Claimant notified that is does not agree that the Respondent's counterclaim is within the jurisdiction of the Arbitrator.
4 There is no agreement to extend the Arbitrator's jurisdiction to final account items, non-payment of the retention fund and the possible incidence of landfill tax relating to the hire of skips.
5 The Claimant wishes to adduce formally the expert evidence of Mr John Webb in lieu of the report submitted by Mr Wren. Mr Webb's reports were served on the Respondent in 1999 and 2000 and copies of his revised report were submitted at the meeting. The Claimant stated that it would pay the costs of and occasioned by this substitution and any costs of the Respondent thrown away.
6 The Claimant wishes to adduce formally the expert evidence of Mr R Bayfield submitted in 1999. Mr Webb will confirm his acceptance of this by 6 April 2001.
7 Costs of the Arbitration were discussed. The Claimant submitted that no limitation of parties' cost should be imposed. The Respondent stated that it was 'neutral' on any limitation, whilst stating that it was concerned at the amount of costs reported as having been incurred by the Claimant. The Arbitrator stated that he noted the statements of the parties. He had already considered the parties' costs and that he had decided that no limitation should be imposed on resumption of the proceedings.
8 The parties wished to consider apportionment of time between them at the Hearing and would make their proposals before the Hearing.
9 The Claimant tabled at the meeting (i) a 'Chronology of the Arbitration' and (ii) a 'Claim History' of the submissions from the Claimant. "
"We acknowledge with thanks your Order for Directions No.9 and accompanying Notes. In some respects, as explained below, we consider that the directions need clarification to avoid later confusion or argument and, in addition, there are matters included within your notes which ought plainly to form part of the substantive directions. We have redrafted the relevant directions to include these matters and we are copying this letter to the Respondent with a request that they consider the proposed changes and agree them. Assuming that these matters are agreed, we would then invite you to re-issue your Order for Directions No. 9.
Order for Directions No. 9
1. [Agreed as drafted].
2. By consent the Claimant is given leave to adduce expert evidence on quantum by a report prepared by Mr. John Webb, FRICS, FCIArb., in substitution for the report and evidence of its former expert on quantum, Mr. R. J. Wren. The costs of and occasioned by the substitution, and any costs thrown away thereby, shall be paid by the Claimant to the Respondent in any event.
2.A By consent the Claimant is given leave to substitute Mr. John Webb FRICS, FCIArb., as its planning/extension of time expert. Leave is given on condition that by 6 April 2001 Mr. Webb files a statement confirming his adoption of the Expert Report of Mr. Richard Bayfield, already adduced and served by the Claimant on 24 February 1999. The costs of and occasioned by the substitution and thrown away thereby, if any, to be paid by the Claimant to the Respondent in any event.
3.-12. [agreed as drafted].
Comments on the Notes of matters discussed at the meeting:
1. At the date of this letter, the Claimant has received copies of a transcript from the transcribers and expects that the Arbitrator and the Respondent will likewise have received a copy of the transcript of the meeting. Should that not have occurred, please advise.
2. [Agreed]
3. [Agreed. See the Claimant's note for the hearing, submissions to follow as ordered.]
4. [Agreed]
5. See Direction 2 above. The Claimant believes that this issue should be dealt with in the formal directions. If desired, reference may also be made to the fact that Mr. Webb prepared two reports in 1999 and 2000 which were served on the Respondent for use as a basis for ongoing discussions. Those reports have now been combined and updated to form the report served on 22 March 2001.
6. This is unnecessary on the basis of direction 2A. Given the Respondent's consent on terms as to costs, it should be included in the formal directions.
7. The Claimant would wish it noted that it similarly has concerns about the Respondent's costs. Its request that costs should not be capped was based on a desire to limit the issues for decision from the Arbitrator and avoid the unnecessary consideration of issues which might deflect the parties from the preparation for the forthcoming hearing. The Claimant suggested that costs issues should be left over now for argument on taxation, section/paragraph 11 of the Claimant's note for the 22 March 2001 hearing refers.
8. The Claimant suggested that time management issues relating to the hearing should be dealt with at the time of the pre-hearing review meeting in early July 2001 when the numbers of witnesses and the extent of the issues in dispute would be clearer.
9. [correct as drafted].
We trust that the foregoing is of assistance and subject to the agreement of the Respondent, we look forward to receiving the amended directions."
"We acknowledge receipt of your letter dated 24 March 2001 and Order for Directions No 9 for the continuing conduct of this arbitration.
The Borough have (sic) not yet had time to fully analyse Mr Webb's revised report as submitted at the meeting but we do not agree to the inclusion of any new items mentioned in the report within the Arbitrator's jurisdiction. In addition, we have picked up a number of points from the transcript of the meeting, which we note you did not have at the time the Order was drawn up. Under the circumstances, we would apply for amending Directions as follows:
Item 1
The parties are to make submissions on whether certain items are within the Arbitrator's jurisdiction (the counterclaim, landfill tax in relation to skip hire, non-payment of retention fund, extended bond charges after July 1998, £12,073.84 of the Higgins' claim: see item 25 on the Schedule attached to the Borough's letter of 13 March 2001 and any other items identified within Mr Webb's report dated March 2001) THEN CONTINUE AS ORDER (i) to (v).
Item 2
Amend to read:
2.1 The Claimant has leave to call expert quantity surveying evidence from Mr Webb in substitution for Mr Wren.
2.2 The Claimant will pay the Respondent's costs of and occasioned and thrown away by the substitution of Mr Webb and his report for Mr Wren.
2.3 The Claimant has leave to call expert evidence on delay from Mr Webb instead of Mr Bayfield on condition that Mr Webb adopts Mr Bayfield's report formally by producing a signature page adopting the report by 6 April 2001.
2.4 The Claimant will pay the Respondent's costs of and occasioned and thrown away by the substitution of Mr Webb for Mr Bayfield.
Item 3
Amend to read:
3.1 The Claimant will serve draft amendments to the Statement of Claim by 27 Apri1 2001 to take account of Mr Webb's views on quantum. If the Respondent does not consent to such amendments, the Claimant will seek leave from the Arbitrator to make such amendments.
3.2 If the Respondent consents to the draft amendments, the Respondent will serve amendments to the Defence by 18 May 2001 and the Claimant, if so advised, will serve amendments to its Reply to the Defence by 1 June 2001.
Item 6
Amend to read:
6.1 The parties' experts shall meet to narrow issues as soon as possible, shall review their reports by the end of April 2001 and meet with the Arbitrator before 5 June 2001 in order that supplemental joint statements are submitted by 29 June 2001.
6.2 The Respondent has leave to serve a supplemental report from Mr Tunbridge, its quantity surveying expert, by 31 May 2001.
6.3 Both parties have leave to serve supplemental planning expert reports by 31 May 2001.
Item 7
Amend to read:
If either party wishes to make further disclosure or to provide further witness statements, they are to apply to the Arbitrator by 31 May 2001. A copy of any witness statement for which leave is to be sought is to be served on the other party but not the Arbitrator."
"41. Unfortunately, 2001 did not see a smooth path to a contested hearing and the resolution of the disputes before the Arbitrator. Following a hearing on 22 March 2001, at which the Arbitrator had the benefit of a transcript; a note from Counsel, and agreed directions, he managed to make such a mess of his Directions Order No 9 that both Counsel settled extensive letters to him to correct the errors manifest in his Order, at considerable extra cost to the parties. The Arbitrator issued an amended order. Once again, on the part of the Arbitrator this demonstrated:
41.1 a lack of attention to what had taken place during the hearing; and/or
41.2 a failure to understand the issues he was being asked to record by consent in his directions order; and/or
41.3 a complete lack of care in the preparation of his order."
"4. Following the hearing on 3 March 1999, the parties exchanged submissions as to the extent of the Arbitrator's jurisdiction and he thereafter took leading Counsel's opinion and issued his First Award on 16 March 1999 dealing with his jurisdiction and also issues concerning the capping of the parties' costs in the arbitration.
2. Review of Parties' positions on items in dispute
2.1 The pivotal documents are the First Award and the Akenhead Opinion. As far as the Respondent's list of issues in dispute is concerned, the Counterclaim is not agreed to be within the Arbitrator's jurisdiction following his First Award. The Claimants enclose a table showing the genesis of the claims included in the reference to Arbitration and the Arbitrator's jurisdiction.
2.2 The Counterclaim is an issue about which the Claimant disagrees over jurisdiction.
2.3 The final account items I not yet resolved are outside the arbitrator's jurisdiction, also the non-payment of the retention fund; poss landfill tax in relation to skip hire.
There is no agreement either to extend the arbitrator's jurisdiction to include these items within the present arbitration. (this is what the dispute was about in 1999.)
3. Agreement of Jurisdiction
None see above
"
"1. The parties are to make submissions on whether or not certain items are within the Arbitrator's jurisdiction, (the counterclaim, landfill tax in relation to skip hire, non-payment of retention fund, extended bond charges after July 1998, £12,073.84 of the Higgins' claim: see item 25 on the Schedule attached to the Borough's letter of 13 March 2001 and any other items identified within Mr Webb's report dated March 2001) following the Arbitrator's First Award in March 1999.
(i) The Claimant shall submit its contentions in writing by 6 April 2001.
(ii) The Respondent shall submit its contentions by 20 April 2001.
(iii) If the Claimant wishes to reply to the Respondent's submission it shall do so by 27 April 2001.
(iv) If either party wishes to have a Hearing following submissions it has the right to notify the Arbitrator and a date shall be fixed for this.
(v) If the Arbitrator considers that he requires to obtain legal advice following submission and/or a Hearing on jurisdiction he shall inform the parties before such advice is obtained.
"
"In the penultimate paragraph of your fax of 22nd May you ask that the Respondent confirm that " there is no further response that it wishes to make on jurisdiction." We consider that, in the light of your Order, any further response would be wholly inappropriate. Additionally, and in any event, we do not consider that there is space in the timetable for such a response, bearing in mind that the hearing is scheduled to take place in under two months.
We would respectfully request that you now proceed to make your Award on jurisdiction, with reasons, without any further delay. "
(i) Paragraphs 46, to 49 of Mr Moorhead's first witness statement are in the following terms:
"46. Finally, the Arbitrator issued his Second Award on 28 May 2001 The Award runs to some 19 pages and contains many ambiguities and errors. In particular, Home of Homes was appalled to see that the Arbitrator had completely misstated its arguments in the body of his award.
47. Of the 19 pages of the award, the first 15 contain introductory statements and the alleged submissions of the parties. On page 15 at 3.0 the Arbitrator purports to begin to lay out his findings and reasons and immediately seeks to reiterate what he understands to be the parties contentions and then gives, with little or no reasoning, his decision. In relation to the bulk of the matters referred to him for a decision on jurisdiction, he deferred any decision.
48. Following receipt of the ASA Home of Homes considered how best to deal with the award and the issues arising from it. The Arbitrator had, after an expensive and lengthy process, failed to resolve most of the issues put to him for decision or even to indicate to the parties what he required in order for him to do so. This remained the position up to and including the hearing which took place in July 2001 notwithstanding Home of Homes requests that he deal with matters.
49. In the event, Home of Homes decided that the best course to try and keep things moving along towards a final resolution of the issues on the merits of the case and so made an application under section 57 of the 1996 Act for clarification and correction of the various matters addressed in the ASA so that they would at least have a reasonable understanding of what the Arbitrator had decided and the basis of those decisions."
(2) Paragraphs 43 to 44 of The Grounds are as follows:-
"43. The parties having produced their submissions on jurisdiction, the Arbitrator then published on 28 May 2001, his Second Award, "the ASA".
Unfortunately, the problems demonstrated in his AFA, were again manifest in the ASA. The ASA:
43.1 Contains errors and ambiguities;
43.2 Misstates in a material manner, arguments put by Home of Homes;
43.3 fails to give any, or any proper reasons for his decisions;
43.4 mixes submissions, decisions and statement of facts so as to render the Award virtually incomprehensible, save that he -
43.5 fails to deal with the majority of the issues which had been put to him for decision in any event;
43.6 fails to indicate to the parties that he had insufficient information or that he required further information in order to make any decisions on the outstanding issues; and
43.7 misconstrues Home of Homes submissions concerning the construction of the AFA, to the opposite of that contended for by Home of Homes and misstated the effect of the AFA and the opinion of leading Counsel adopted thereby; and,.
43.8 on any view, the Arbitrator took insufficient care to seek to decide the issues that had been put before him for decision and, in the event, failed to decide the majority; and,
43.9 as with the AFA, fails to observe the requirement to state the seat of the arbitration.
44. In the event therefore, the parties spent a further substantial amount of time and money on an exercise which failed to advance the resolution of the disputes in the arbitration, due almost entirely to the Arbitrator's inability to understand the issues put to him for decision, and in accordance with his duties under the 1996 Act, make clear and sensible decisions based on a proper understanding of the evidence and arguments put to him for that purpose."
(3) Paragraphs 4 to 11.4 of the Section 57 Application are in the following terms:
"4. The Claimant's application is advanced primarily to obtain clarification and/or to remove certain ambiguities from the ASA. The Claimant relies primarily on section 57(3)(a) as the basis of its application and does not itself request a further award under s57 (3)(b) save or unless the Arbitrator considers it necessary to deal with the Claimant's application in that manner. The Arbitrator is reminded that under section 57(7), any correction or clarification of the award forms a part of the ASA in any event.
THE CLAIMANT'S APPLICATION
5. Page 2: I NOW... FIND AND HOLD THAT I HAVE JURISDICTION TO PROCEED AS THE ARBITRATOR... in relation to some of the five issues of jurisdiction as raised in the submissions of the parties and referred to hereunder
5.1 The Claimant seeks clarification of this statement since on any reading of the ASA, it would seem that the Arbitrator has accepted jurisdiction in relation to the single issue of the counterclaim but has not accepted jurisdiction in relation to any of the other issues referred to him, but rather either deferred a decision or decided to proceed "without prejudice" to jurisdiction on a number of issues, namely:
5.1.1 The Higgins claim: as to the part challenged:
See 3.3(2) "My decision on jurisdiction on the Higgins' claim for loss and expense will be deferred until, if necessary, oral evidence can be heard."
5 .1.2 Extended Bond Charges:
See 3.4(2) "I make no decision now on my jurisdiction"
5.1.3 Additional supervision:
See 3.5(2): "I will defer a decision on jurisdiction until, if necessary, further evidence is submitted on this item at the hearing".
5.2 In the circumstances, would the Arbitrator please clarify his position and make any necessary correction to his award.
6. In paragraph 2(ix) of ASA, pp. 4/5 the Arbitrator has summarised the Claimant's submissions thus: "The Counterclaim is no different from the other "clause 3.7" items that the Claimant sought to introduce via its "Scott Schedule type" document and which have been ruled to be beyond the Arbitrator's jurisdiction in the AFA. Therefore, the Claimant submits that, in the same way as the Claimant's 3. 7 claims the Respondent's Counterclaim must be excluded from Jurisdiction." [emphasis supplied]
6.1 The Arbitrator has failed to give references for the quotes/summaries that he has included in the ASA therefore the Claimant has to seek to locate the submissions under consideration. Please confirm that the contention which is the subject of the emphasis in paragraph 2(ix) is intended to be an extract from paragraph 9 of the Claimant's reply of 9 May 2001?
6.2 On the assumption that the Claimant has correctly located the argument which the Arbitrator has sought to summarise, the Claimant draws attention to the fact that the argument has been wrongly summarised by the Arbitrator and in fact, the omission of a word from the quotation, fundamentally alters the Claimant's argument.
6.3 The Claimant's contention correctly quoted was: "This Counterclaim is no different in its character than the other "clause 3.7" items which Home of Homes sought to introduce via its A3 Scott Schedule type document and which has been ruled beyond the Arbitrator' jurisdiction in his First Award... Therefore in the same way as Home of Homes' NEW clause 3.7 claims were excluded by the First Award so too must the Hammersmith Counterclaim."
6.4 The Claimant has emphasised the word "NEW" which was and is pivotal to its contention, which point has clearly been lost on the Arbitrator. Would the Arbitrator please therefore correct his award and make such other clarifications or corrections to the award so as to ensure that that it reflects an accurate understanding of the Claimant's submissions and his conclusions thereon.
7. In paragraph 3.1(1)(i) on page 15 it is stated:
"3.0 I FIND AND HOLD THAT:
3.1 I have noted the Claimant's contentions as set out above, namely that:
The same contention is repeated in paragraph 12 of the Claimant's Reply.
(i) Whatever the intentions concerning the scope of the AFA, the fact is that the AFA defined my jurisdiction. Therefore my jurisdiction is restricted to matters arising for determination under contract clause 4.11." [emphasis supplied]
7.1 Would the Arbitrator please clarify if this is intended to be a quotation or a summary from the Claimant's arguments, if a quotation, please identify the paragraph references in the Claimant's submissions?
7.2 The Claimant believes that this is supposed to represent a summary of the Claimant's arguments, if this is correct, it is inaccurate in so far as it describes the limits of the Arbitrator's jurisdiction. Paragraphs 18, 19 and 20 of the Claimant's reply could not, it is submitted, be clearer and the Arbitrator appears to have both misunderstood and misstated the Claimant's arguments. See too paragraphs 6-12 of the Claimant's first submission.
7.3 However, since the paragraph begins "I find and hold that:..." it may also have been the intention of the Arbitrator to make a statement as to his construction of the AFA when he says "Therefore, my jurisdiction is restricted to matters arising for determination under contract clause 4.11."
7 .4 With respect to the Arbitrator, the matter is completely confused and unclear and the Claimant requires clarification and/or the removal of the obvious ambiguity in this sub-paragraph of the Arbitrator's award. Clearly, if the Arbitrator is construing the AFA in this way, and certainly if such construction purports to be on the basis of his erroneous understanding of the Claimant's submissions, the Claimant may well appeal the ASA
7.5 It is one thing, to take up pages and pages of an award to paraphrase the parties' arguments, it is another to misstate them in important respects. The Arbitrator is invited to review his award and make any necessary clarifications and corrections.
8. In paragraph 3.1(3)(ii) on page 16, the Arbitrator quoted from Note F of his Directions No.1 order: "...Accordingly this note confirms that the Arbitrator's jurisdiction under the JCT Arbitration Rules shall include matters arising in the dispute as already referred to him together with. ..."
And
In paragraph 3.1(4) on page 17, the Arbitrator stated: "It does not, of itself, follow that because I have found that the Claimant's claims under contract clause 3.7 were excluded from my jurisdiction, which I confirmed in the AFA..."
And
In paragraph 3.1(7) on page 17, he also stated: "I consider that my ruling on jurisdiction given in my First Award, namely that I could deal with matters arising under contract clause 4.11 as within my jurisdiction, whereas I could not deal with matters arising under contract clause 3.7..."
8.1 While it is appreciated that the Arbitrator's statements are directed to the admissibility or otherwise of the Respondent's Counterclaim to reduce the extension of time previously granted by the Contract Administrator, this paragraph raises an important issue of principle concerning the construction to be given to the AFA and should therefore be precise and clear as to that part of the AFA on which the Arbitrator's construction is placed. Please would the Arbitrator therefore identify in his ASA, which clause in the AFA confirms the proposition advanced or otherwise how he has reached the construction of the AFA which he appears to have reached?
8.2 By way of explanation of the Claimant's concerns: see the extract from the Note F to Directions No.1, issued on 16 January 1998 where the Arbitrator confirms his jurisdiction as to matters generally to those matters arising in the dispute already referred to him but appears now to say, and construe his AFA as meaning, that some of those original items of claim may be excluded because they arise or could be construed to arise under clause 3.7 of the contract.
8.3 It is therefore imperative that if the Arbitrator is construing his AFA so as to potentially exclude some of the original items of claim from his jurisdiction, that he does so in the clearest terms, so that the Claimant can challenge that decision in the appropriate forum.
8.4 The Arbitrator is referred to the AFA clause 3 where his decision is recorded and where he decided that he has no jurisdiction to consider matters which the Claimant had sought to "introduce" into the hearing via the A3 Scott-Schedule.
8.5 Furthermore, the need for clarification becomes even more urgent in circumstances where the Arbitrator has patently misunderstood the Claimant's submissions on that issue, and may have proceeded to his own conclusion without thinking properly about the matter on the mistaken belief that he was simply making a proposition which was not in contention between the parties. If so, he was wrong in his belief, and the Claimant's contentions are quite different from those summarised and attributed to it by the Arbitrator in the ASA.
9. In paragraph 3.3 on page 18 of the ASA the Arbitrator has considered the Higgins' claim and appears, while deferring any decision in the ASA, to be considering his jurisdiction towards an original item of claim in the context of his construction of the AFA dealt with in paragraph 8 above. However, the Arbitrator's reasoning is extremely limited and unclear.
9.1 In paragraph 3.3(1), the Arbitrator mentions the possibility of an overlap between clauses 3.7 and 4.11 but is unclear about whether his concern is one which is founded in his jurisdiction to determine an original element of the Claimant's claims or whether any overlap issue arises in the context of items of claim which may have already been reimbursed under clause 3.7 in the measured works element of the final account and should not therefore be recoverable a second time under clause 4.11.
9.2 In particular, the ASA at 3.3(2) states: "My decision on jurisdiction on the Higgins claim for loss and expense will be deferred until, if necessary, oral evidence can be heard."
9.3 However, the Arbitrator does not state in his award, whether he considers oral evidence to be necessary and, if it is, what the nature of that evidence should be in order to help him reach a decision as to his jurisdiction.
10. In paragraph 3.4 on page 18: on the issue of extended bond charges, the Arbitrator determined: "My preliminary indication to the parties is that this claim does not fall within the ambit of this arbitration."
10.1 The Arbitrator's preliminary indication is not motivated in any way and the Claimant cannot therefore understand the basis of the indication given.
10.2 While, short of challenging the award before the Court and persuading the Court to order the Arbitrator to give reasons, the Claimant cannot force the Arbitrator to give reasons for his indication, it seems wholly inequitable for the Arbitrator to give such an indication without giving any explanation for the basis of his statement. The parties have expended time and effort seeking rulings on particular issues, and while they may be content with a decision to have one or more of them dealt with at the hearing, if and where the Arbitrator expresses any view as to the merits of a point, reasons are required and they assist the parties to marshal their arguments to address those points at the hearing.
11. In paragraph 3.5 on pages 18/19 the Arbitrator stated at 3.5(2) in relation to the claim for additional supervision: "I conclude that this is an original item in the Claimant's claim but that it has also appeared in matters contended under contract clause 3.7 submissions. I do not consider that I have sufficient information on which to decide this matter now and I will defer a decision on jurisdiction until, if necessary, further evidence is submitted on this item at the hearing.
11.1 This was an issue on which the parties sought a decision, which the Arbitrator failed to give in the ASA.
11.2 The Claimant refers to paragraph 8 above, it is inferred but is not clear what the Arbitrator's attitude is to original items of claim per se.
11.3 The Arbitrator stated at 3.5(2) that he did not make any decision because he did not have sufficient information on which to decide the matter. He did not however, before issuing his award, invite the parties to provide him with the necessary information, and has failed in his award, or since the publication of his award, to give any indication as to what the necessary information might be.
11.4 The award is a "speaking award" but is wrongly silent both as to the information required and the nature and extent of any necessary further evidence which the arbitrator requires to help him decide this issue of jurisdiction. Would the Arbitrator please therefore clarify his award so that the parties know what is required and may understand the basis of his refusal to give an award on this issue of jurisdiction".
"(1) I note that the Respondent agrees that the Claimant's original claim, though disputed on its merits, does lie within my jurisdiction in the arbitration. However, the parties are not agreed that a claim that the Respondent should have released the bond by a specified date is within this arbitration. My preliminary indication to the parties is that this claim does not fall within the ambit of this arbitration.
(2) However, I note that the Claimant is content for the matter to be dealt with on the merits of proposed amendments to the Claimant's Statement of Case, if they were to be made. Therefore, I make no decision now on my jurisdiction ".
"HoH notes LBHF's submission in relation to extended bond charges and is content for the matter to be dealt with on the merits of the proposed amendments to the Statement of Case".
"(1) The parties do not agree that this is a claim within the ambit of the arbitration. Although in the Claimant's Statement of Case, it is not clear that it is a matter of loss and expense or one of valuation. It was not referred to at the interlocutory meeting on 22nd March 2001, or, apparently, in subsequent discussion between parties' Counsel. The Claimant did not raise it as an issue but the Respondent has done so.
(2) I conclude that this is an original item in the Claimant's claim but that it has also appeared in matters contended under contract Clause 3.7 submissions. I do not consider that I have sufficient information on which to decide this matter now and I will defer a decision on jurisdiction until, if necessary, further evidence is submitted on this item at the hearing ".
" the award was riddled with ambiguities and uncertainty both as to the Arbitrator's reasoning, his decisions and even as to his basic understanding of the issues put before him by the parties".
"1. This Response on behalf of the Respondent is made in respect of the Claimant's Application dated 25th June 2001 relating to the Arbitrator's Second Award dated 28th May 2001. The Respondent does not agree that the Arbitrator should make an additional award in respect of the matters which he has already considered, and therefore the Arbitrator is reminded that his jurisdiction is confined to the matters set out in Section 57(3) of the Act namely:
(a) to correct an award so as to remove any clerical error from an accidental slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim which was presented to the tribunal but was not dealt with in the award.
2. It appears to the Respondent that at most the Arbitrator may wish to consider whether he needs to clarify his Second Award in certain respects. The Respondent takes the view that the Arbitrator has already dealt with all the issues which were presented to him before he made his Award, but if the Arbitrator feels that he might profitably expand upon his comments, then the Respondent would have no objection.
Page 2: I now... find and held that I have jurisdiction to proceed as Arbitrator in relation to some of the five issues of jurisdiction as raised in the submissions of the parties and referred to hereunder.
3. The Respondent understands that the Arbitrator considers that he should hear evidence and argument on these five disputed issues during the course of the arbitration hearing and final submissions, but wishes to defer a decision as to whether they have been correctly referred to him until his final award. This applies to the Higgins' claim for loss and expense, the extended bond charges and the cost of additional supervision. So far as the Counterclaim is concerned, the Arbitrator has reached a final decision that it is included in the scope of the arbitration.
4. As to the Claimant's paragraph 6 of their submissions, in effect the Claimant is asking the Arbitrator to change his previous decision and to rule that the Respondent's Counterclaim is excluded from his jurisdiction. The Arbitrator however has no power to alter his decision under Section 57(3) or to entertain an appeal against it, and should not do so.
5. With regard to the Claimant's contentions in paragraphs 6.1 to 6.4 the Claimant is suggesting that the Arbitrator has misunderstood their (sic) earlier submissions. It does not appear to the Respondent that the Arbitrator has done so, but if the object of the exercise is to persuade the Arbitrator to change his decision on his jurisdiction to deal with the Counterclaim, it should not be entertained.
6. With regard to the Claimant's contentions in paragraph 7, the Claimant suggests once more that the Arbitrator has misunderstood their submissions, and is therefore inaccurate in his summary of that contention. The Respondent considers it would be helpful for the Arbitrator to look at the Claimant's submissions again, and to amplify his comments in his Second Award, so that the parties can appreciate the points which the Arbitrator has accepted and which he has rejected.
7. With regard to the Claimant's contentions in paragraph 8, since it appears that the Claimant is seeking clarification of the Arbitrator's decision in order to consider whether to appeal against it (Claimant's paragraph 8.3) the Arbitrator may prefer to direct that these issues should be given further consideration within the arbitration hearing itself. The Respondent considers that the Arbitrator should not be constrained by having to deal with these complex issues without the benefit of oral argument. It may well be that discussion between Counsel and the Arbitrator will resolve the matters which presently concern the Claimant
8. In relation to the Higgins' claim (paragraph 9 of Claimant's submission) it is not clear to the Respondent that further clarification is necessary at this stage, since the Arbitrator proposes to deal with it during the course of the hearing.
9. In relation to the extended bond charges (paragraph 10 of Claimant's submission) again it appears that the Arbitrator is prepared to deal with this matter further during the course of the hearing and the Respondent is content to follow this proposal.
10. Finally, in relation to the claim for additional supervision (paragraph 11 of the Claimant's submission) the Respondent agrees with the Arbitrator's proposal to dea1 with this matter during the course of the hearing, when evidence can be adduced."
"Section 57 application of 25 June 2001
50. I refer the Court to the section 57 application. It would not be helpful for me to repeat the detail of the matters set out there which are of course dealt with in the application to the Court. The fact is that the award was riddled with ambiguities and uncertainty both as to the Arbitrator's reasoning, his decisions and even as to his basic understanding of the issues put before him by the parties. It was and remains a completely unsatisfactory document and not the product which a Claimant is reasonably entitled to expect from a reasonably competent Tribunal.
51. In its Opening Statement for the July Hearing, Home of Homes asked that (if) these matters could be addressed promptly, so that, for example, on those issues where the Arbitrator felt that he needed further guidance or to hear specific evidence [if available] before reaching a decision on any of the outstanding matters on jurisdiction, which he had declined to answer in the ASA, the parties could direct their cases to address those matters.
53. all the while the issues in the section 57 application remained unanswered. Although Homes of Homes right to appeal the ASA was preserved, there remained considerable uncertainty as to the Arbitrator's understanding of the jurisdictional issues between the parties.
54. All this was completely unsatisfactory and extremely worrying for Home of Homes There must come a point however, when the Arbitrator's failure to respond to such an application, and in this case perhaps, especially when viewed in conjunction with later events, that a party must become entitled to challenge the original award and/or the competence of the Arbitrator to deal with the issues before him in any event."
"Home of Homes section 57 App1ication
45. Clearly the issues raised in Home of Homes section 57 application required attention at the soonest possible moment in order not to waste entirely the parties' efforts to resolve them before the July hearing. This did not happen and therefore the parties' efforts and resources were wasted because it was then necessary to canvass all the evidence and arguments on the premise that all the unanswered issues were still "live" in the hearing.
46. The parties' efforts in making and funding extensive submissions and rendering extraordinary assistance to the Arbitrator failed, once again, to produce any tangible result for the parties. Indeed, the ASA raised more issues than it solved and the cost of resolving them now would be disproportionate to any value that the parties may have once gained from the ASA.
47. It is for this reason that Homes of Homes, at this late stage, seeks to have the ASA set aside in the hope that a new arbitrator can take the claims and the submissions on jurisdiction and simply write the award. "
" at most the Arbitrator may wish to consider whether he needs to clarify his Second Award in certain respects. The Respondent takes the view that the Arbitrator has already dealt with all the issues which were presented to him before he made his Award, but if the Arbitrator feels that he might profitably expand upon his comments, then (LBHF) would have no objection." See paragraph 2 of LBHF's response, quoted above and repeated for convenience.
"ARBITRATOR'S request for clarification in the closing submissions following hearing in July 2001 of substantive issues in dispute
1 The following is the clarification sought by the Arbitrator, following close of Hearing, in the parties' closing submissions.
2 Agreed wording of the issues I think I know the issues but I shall be pleased if the parties will agree the wording and number of each matter in dispute.
3 Agreed statement of facts This will hopefully be available shortly.
4 At the root of the quantum is jurisdiction and each party will presumably make clear its submissions on this. I refer to my preliminary indications below.
(1) In IFC84 clause 3.7.7 states ..."no allowance shall be made for which the Contractor would be reimbursed by payment under any other provisions..." It does not say is reimbursed or has been reimbursed.
(2) In IFC84 clause 4.11 states " is of the opinion that the Contract(or) has incurred or is likely to incur direct loss and/or expense, for which he would not be reimbursed under any other provision of the contract, due to..."
I find these ambiguous and "circular" in effect "would be" is not is or has been. Please discuss and submit
5 Authority for me to use my judgement/experience in determining loss and expense I mentioned during the hearing that I could look at the evidence on quantum and decide in the amount contended by each party on each of the 21 items in the Scott Schedule and the 90 in Mr Webb's Appendix G (subject to any finding that this is (1) proved disruption and (20 that the quantum is correct as 'loss and expense' - 4.11 v 3.7. The parties are asked to be clear in the authority they give me, with precedents, if appropriate. I do not want to produce an Award that leaves a party or the parties with just reason to consider appeal on my jurisdiction and/or authority. Fox/Wellfair is presumably still pertinent. If I am given authority to determine each of the items rather than decide on the facts of each of 21 and the 90 in Appendix G (if the Respondent does not make a case that these fall without my jurisdiction), I do not propose to give reasons for what would be findings of fact on each item. I will, of course, give findings of legal entitlement where applicable.
I ask the parties to be clear on this. "Flip/f1op" did not seem to meet either party's wishes.
6 Legal contentions I am assuming that on each point in the Scott Schedule the parties will set down (1) the legal entitlement on which it relies and (2) how the facts support the application of the legal to the facts, if it is not obvious or has been agreed by the parties (even if they have agreed on a basis on which I would not have decided the parties' experts have agreed. I note the Claimant has referred to common law but there has been no other submission from the parties on this.
Presumably, standard of proof will be advised in each party's closing, with precedents.
Difference if any between "paid" and "liability to pay" will presumably be covered. Is there "loss and expense" with Higgins?
7 Extension of time This has been raked over well and I do not see any problem but the parties will perhaps address me on anything that they feel is not obvious. It is a finding of fact by me from the facts given to me. There is not, relative to other matters, a great deal turning on the period I decide. Perhaps the Claimant will consider, again, the Section 57 point on my jurisdiction.
8 Loss and expense I have used the shorthand "loss and expense" for the contract term "loss and/or expense". In this I consider there are two distinct claims for quantum.
(1) Value/cost related to prolongation is relatively simple. I consider that much of the items toiled over should have been 'valued' under fair valuation rules not slavish adherence or necessarily pro rata to contract amounts. But generally it wasn't.
(2) Disruption for items contained in Mr Webb's Appendix G the alternative to 2 other methods put forward. This is contended to be loss and expense but is not directly shown to be supported by contemporaneous records of even notices, although now it has been analysed into 90 items or 'events' for specific disruption
(3) What is in the final account for any of the above under (1) and (2)?
9 I now deal with the 21 items in the Scott Schedule
10 Item 1 Bond please clarify the parties' point on this vis a vis jurisdiction. My conclusion is that £15.29 for any extension of time period lies within my jurisdiction but for the period beyond this does not. The parties will submit on this.
11 Item 2 Site Supervision The parties agree quantum and that this will be applied to any extension of time in weeks. It is not what I would have done but the parties' experts have agreed.
12 Item 3 Site labour This has quantum differences. The parties will authorise either "flip/flop" or my determination, with no reasons on my findings of an amount from the facts.
13 Item 4 Plant Ditto.
14 Item 5 Telephone This has been agreed, subject to time period.
15 Item 6 Electricity costs "flip/flop" or my determination.
16 Item 7 Gas This has been agreed by the parties.
17 Item 8 Skips "flip/flop" or my determination.
18 Item 9 Consumables This has been agreed as a weekly cost by the parties.
19 Item 10 Scaffolding "flip/flop" or my determination.
20 Item 11 Overhead under-recovery I have not understood the amount that it is alleged is/has/will be recovered in the final account under "valuation". Please clarify. "Flip/flop" or my determination may be appropriate, once I have decided liability/legal submissions.
21 Item 12 Loss of profit I do not currently see a case for this, applicable to loss and expense unless there is an authority/precedent that is contended to be appropriate to this case.
22 Item 13 price escalation I have already said that if (1) loss and expense is allowed, QED it is just that and there is no price escalation, because the costs are the costs/expense. (2) If there is any other matter that has been covered by valuation under the final account it has either (i) been agreed at the valuation applicable at the date the fair valuation was made for the date the work was carried out. (I understand that much has been done using sub-contract prices) (3) If there is anything after this, it should be dealt with under rules applicable to price escalation. The parties will address me on this. There does not appear to be a large difference between the parties.
23 Item 14 Cleaning -- This has been agreed by the parties.
24 Item 15 Safety Ditto
25 Item 16 Additional supervision Subject to any further submission on jurisdiction I consider this is a clause 3.7 valuation, the amount of which the parties have agreed .
26 Item 17 Credit for items in final account This was not examined in the hearing. Submissions please. I have no knowledge of the detail of the final account and I propose the parties settle this in a less costly way than by using me.
27 Item 18 Higgins I consider this is valuation. Mr Higgins stated why he produced any loss and expense claim. I consider the valuation rules are appropriate for this. It was in the Claimant's submission in 1998 but that is not relevant to consideration of whether or not it is loss and expense or valuation.
28 Item 19 Martin Moorhead Consulting fees Submissions are due on this legal and factual.
29 Item 20 In-house claim preparation costs Ditto.
30 Item 21 Additional finance charges Ditto. Presumably the parties will submit on the period when the arbitration was suspended. 1 do not, presently consider that this requires to be in the Award on other substantive issues.
31 Disruption costs The £75,000 contention. This was not examined extensively at the Hearing and I invite closing submissions on jurisdiction and quantum.
32 Section 57 application by the Claimant.
I shall be pleased if the parties will confirm their requirements on this
(1) On the Respondent's counterclaim much has been heard in the Hearing. There is a relatively small difference in extension of time and I will determine this in the forthcoming Award. What else do the parties want to have covered in the Award?
(2) Landfill tax I have ruled is outside my jurisdiction. Do the parties wish me to state anything further in the Award?
(3) Higgins claim for extra items. I consider this to be a valuation submission, having heard oral evidence from Mr Higgins.
(4) Bond charges. For the period from contract completion until any extension of time the parties have agreed a weekly amount. I do not consider I have jurisdiction for contentions for why the bond has not been released.
(5) Additional supervision. The parties have agreed this in quantum. It could be either loss and expense or, more correctly, valuation. I will, although I do not consider it to be loss and expense, include it in my Award"
"We acknowledge receipt of your faxed letter last evening [sent at 11.18 pm] which awaited my arrival in the office here this morning and which enclosed the above mentioned request for clarification, I have now had a chance to consider the document brief1y with both Counsel, my client and Mr Webb, I am instructed to write to you in the following terms.
1. The Claimant is dismayed at a number of these items about which you request clarification which, putting it shortly, would indicate that you have prejudged a number of issues in the arbitration without first:
1.1 providing the indications of the evidential issues/further information you require as noted by you in your second award of 28 May 200 I (ASA) and upon which you required to be addressed at the hearing before being in a position to decide those points left undecided in the ASA; and to enable you to conclude your consideration of the Claimant's section 57 application concerning your ASA, as requested in that application and in paragraphs 43 and 44 of the Claimant's opening submissions to you at the hearing on 16 July 2001..
2.1 receiving the written closing submissions of the parties, or hearing Counsel for either side, on the law and conclusions of fact which the respective parties would invite you to draw in your award concerning the issues of liability and quantum placed before you for determination in the arbitration.
2. The Claimant is very concerned at your apparent misunderstanding of the issues of jurisdiction which you are required to deal with in your award. The Claimant is concerned that you appear to be opening up issues of jurisdiction which are not, and have not been since the inception of the arbitration, in dispute between the parties. These will be addressed under the individual paragraphs of your letter but by way of general comment we would make the following points:
2.1 You have issued two awards on Jurisdiction and you have adopted the opinion of Robert Akenhead QC in the first award.
2.2 As a result of those exercises, which have been completed at considerable expense for the parties, there are three issues concerning jurisdiction outstanding between the parties and upon which you are now to rule in your award. These are:
Additional supervision;
Extended Bond Charges the new amended claim only;
Part of the Higgins claim, said by the Respondent to be clause 3.7 and therefore, the Respondent contends, outside your jurisdiction;
2.3 All these points were addressed by the parties in their respective submissions to you in April and May 2001 and comprise now the undecided issues in your second award and part of the section 57 application referred to in 1 above.
2.4 The parties have no other disputes concerning your jurisdiction. Therefore all other matters before you are for your determination in your award on liability and quantum.
2.5 Your invitation to the parties to address you on new issues as to jurisdiction is frankly viewed with alarm by the Claimant.
3. My instructions are that the Claimant is not inviting you to be your own expert in this case. Your qualification as a quantity surveyor gives you the understanding of the technical issues in dispute on quantum matters, and possibly also on the delay issues concerning the Claimant's claim for an extension of time and the Respondent's counterclaim. However, you are asked to decide the case on the evidence and arguments adduced by the parties and put before you. Obviously, where, as intended in the parties encouragement of you to submit a list of queries concerning issues you would wish to see covered in final closing submissions, the parties are keen to assist you wherever possible.
4. This does not however, for the Claimant's part, extend to inviting you to be a third expert. You must decide the case on the evidence and arguments adduced by the parties. The case of Fox v Wellfair is indeed pertinent.
5. By way of example, you refer to Mr. Webb's alternative labour disruption claim. Jurisdiction is not in issue between the parties here and you should not raise it now. For you to do so would clearly invite a challenge to any award issued. Moreover, it is of course the case, that the Respondent has not adduced any expert evidence on this subject at all. The Claimant's closing submissions will address these issues in detail including the determination/flip-flop points.
6. Generally, under no circumstances does the Claimant agree to you deciding issues in your award without giving reasons. The Claimant, and the Claimant believes the Respondent also, has been clear from the outset that the parties require a reasoned award.
7. Plainly, in so far as the counterclaim is concerned, if any award is to dismiss the counterclaim anyway, that part of the substantive section 57 application, which addresses the arbitrator's jurisdiction on the subject, will fall away. Costs will remain an issue(s) but the Claimant envisages that the parties will agree to stand over all issues of costs for the time being, for later determination.
8. The Claimant is concerned about your paragraph 8 in the sense that you may be developing issues and argument, which are not of concern [prior to receipt of your request for clarification] between the parties. What should have been done, at this stage, becomes something of an irrelevance. This is especially the case under items 1 and 2. No doubt both sides will address you further on this, it is certainly the Claimant's intention to do so.
9. In your paragraph 10, you appear to have decided the issue of bond charges see paragraph 1 for the Claimant's concerns.
10. You(r) own view of what is correct in paragraph 11, becomes irrelevant where the parties have no issue on jurisdiction and/or reach agreement on any issue.
11. In your paragraph 12 and in other paragraphs you appear to be dictating that the parties must either agree to flip-flop or agree to a determination without reasons. With respect, if this is what you intend to convey, the Claimant cannot see how this is a proper discharge of your duty to produced a reasoned award.
12. You appear to have prejudged paragraph 25 additional supervision, and to be declining jurisdiction without dealing with the matters outlined in the section 57 application or the Claimant's opening submissions or hearing the closing arguments on the matter. The same is true of your paragraph 27 Higgins which is disputed as to part only by the Respondent but which you appear to be declining to consider in total.
13. Your paragraph 30 deals with finance charges, unless agreed by the parties, you are required to render an award on this claim. It is not for you to hive off issues, which the parties expect you to consider in your final award. .
14. Your paragraph 31, additional labour charges/disruption costs this is not a matter of jurisdiction and if you seek to make it so, the Claimant will immediately apply to the Court for redress.
15. Your paragraph 32, the Claimant repeats its concerns regarding (3), (4). As to (5), in respect of any claim which is capable of determination "either way", the Claimant will be addressing you further in closing. Suffice to say here, it is an original claim and part of the original submission to arbitration and therefore it should not have even been raised as an issue by the Respondent in April of this year.
Sir, doubtless this letter will not be well received by you, but it is intended to be helpful in the sense of forewarning you of the Claimant's concerns in a number of respects where it seems to the Claimant that you are in serious danger of misconducting yourself and the proceedings.
I very much regret the need to write to you in these terms but for the reasons given above, the Claimant is gravely concerned that you are misconducting yourself and/or the proceedings and is required, by section 73 of the Arbitration Act, to put you on notice of its concerns at the earliest possible opportunity to prevent any question arising at a later stage, that it has continued to take part in the arbitration without having made known its objections.
This letter is being sent both by facsimile transmission and by recorded delivery and has been copied to the Respondent for information. "
"The Claimant's letter of 2 August 2001, with notice under section 73 of the Arbitration Act 1996, did not invite me to reply to it. I do not consider that it is appropriate that I comment in detail on it.
However, I record here that I do not consider that my request for clarification dated 1 August 2001 need be interpreted as has been suggested in the Claimant's letter of 2 August 2001. I sought clarification from the parties, as had been agreed with them before the close of the Hearing, before they submitted written closing submissions after close of the Hearing. I consider that my request for clarification was drafted in order that the parties knew the matters that appeared to be unclear, so that these would be clarified along with other matters, which either party may have chosen to address when writing its closing submission. I do not accept that my request for clarification indicates that I have prejudged a number of issues, as stated by the Claimant's letter of 2 August 2001. I have not reached any conclusion until I consider the evidence and the parties' closing submissions I have set down a request for clarification."
"49. Unfairly, and in breach of his express obligations in relation to the conduct of the proceedings under section 33 of the Act, the Arbitrator produced a document demonstrated that he had:
49.1 prejudged a number of issues;
49.2 demonstrated clearly that he did not understand the jurisdiction issues which were before him; and,
49.3 more importantly, demonstrated that he did not understand the extent to which jurisdiction issues were not before him in respect of certain parts of Home of Homes claims;
49.4 sought to open up for debate issues or disputes on jurisdiction which had not previously been raised by the parties -especially in relation to Home of Homes labour disruption claim;
49.5 suggested that it would be appropriate for him to be his own expert;
49.6 Stated that he proposed to determine issues and claims in his final award without giving reasons;"
(i) demonstrated a lack of understanding as to an essential issue in the Arbitration and
(ii) afforded an opportunity to LBHF to make assertions as to jurisdiction which had not previously been made, thus giving LBHF an unfair advantage.
It was also Ms Gough's submission that this particular paragraph was compelling evidence of the Arbitrator's failure to conduct the proceedings properly and of the substantial injustice that has been or will be caused to HoH as a result.