England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice
		20th February 2009

MR. JUSTICE AKENHEAD:

Introduction

1. In this claim the claimant, Norwich Union Insurance Ltd. ("Norwich Union"), applies to enforce three final arbitration awards made, first of all by Mr. Hayes, who made two arbitration awards, and then one arbitration award made by me sitting as judge-arbitrator appointed under the Arbitration Act 1996 with the approval of the Lord Chief Justice. In addition, Norwich Union seeks certain further costs entitlements, including the costs of and occasioned by this application.

Background

2. I will briefly set out the background to this application. Whealing Horton & Toms Ltd. ("WHT") was, and is, a firm of quantity surveyors; Mr Matthew Whealing is and has been the director in charge at all material stages of the arbitrations and of the earlier litigation. Originally, in about 2000-2001 WHT was retained by a housing association, Riverside Housing Association ("Riverside"), to provide quantity surveying and other services in relation to a project to convert a building in flats. There was a dispute between Riverside and WHT as to whether WHT, amongst other parties, had been negligent and/or in breach of contract with regard to the services provided to Riverside. The Norwich Union, the Lead Insurer, and a number of other insurers were WHT's professional indemnity insurers, in relation to this dispute.
3. Proceedings were commenced by Riverside in September 2004. The insurers accepted in principle that they were liable with regard to this claim against WHT, and they instructed solicitors, who in turn instructed counsel and experts so far as the case was concerned. There came a time, as is not uncommon, that thoughts turned to settlement of the Riverside claim and, based on the advice of counsel and experts and solicitors, the view was taken by that professional team and the insurers that the case should settle if it was possible to do so at a reasonable price.
4. A settlement was negotiated in about April 2006 whereby WHT would contribute £325,000 as part of an overall settlement with Riverside. Mr. Whealing was prepared to settle at a level of about £300,000 but, for reasons which he considered to be good ones, he was not prepared to settle at £325,000. The insurers took the view that, under the terms of their insurance contracts with WHT, they were entitled to settle without the consent of the insured, and that is exactly what happened. There is and remains an issue as to whether the settlement was finally and legally achieved between WHT and Riverside. However, certainly the settlement was achieved at the very least subject to contract. Suffice it to say, Riverside have not pursued the court proceedings as far as the insurers are aware.
5. There then followed over the following two to three years three arbitrations between WHT and the insurers in which, on varying grounds, WHT sought to argue, first of all, that there was a relevant arbitration agreement between them and their insurers and, secondly, that its insurers were not entitled to pay out or to settle with Riverside in respect of the Riverside proceedings. The first arbitration was before a Mr. Jensen, who, after argument, decided that he had no jurisdiction because there was no material arbitration agreement. Costs of and occasioned by that arbitration were ultimately paid by WHT, including the insurers' costs. Mr. Whealing and WHT sought to challenge Mr. Jensen's decision in the TCC in Manchester. His Honour Judge Raynor QC dismissed that challenge on a number of grounds, including that the application was without merit and that there was effectively no arguable case that there was an arbitration agreement. Nothing arises in this enforcement so far as that first arbitration is concerned.
6. So far as the second arbitration is concerned, Mr. Whealing and his company instituted that before another arbitrator, Mr. Hayes. Although Mr. Hayes was ultimately to find that there was no res judicata or issue estoppel arising out of the first arbitration award, nonetheless, he too formed the view that he had no jurisdiction on the basis that there was no arbitration agreement. It is clear from that award itself that the parties accepted that, even if he was to decide that he had no jurisdiction, his award was to be treated as enforceable at least with regard to any decision which he made about costs. I will return to the amounts of costs which he ordered later.
7. Undeterred, Mr. Whealing and WHT instituted a third arbitration before a Mr. Pye. There came a time in June and July 2008 when the insurers understood that he was due to commence a fourth arbitration. They then instituted proceedings in the TCC in London, which were allocated to me as the judge, whereby they sought an injunction to restrain WHT from pursuing further arbitration proceedings at least without the permission of the court.
8. That matter came before me in July last year and a sensible compromise was agreed. This was recorded in the order which I made by consent dated 10 July 2008 and the attached schedule. The agreement was essentially that I was appointed as a judge-arbitrator under Section 93(1) of the Arbitration Act, subject to the approval of the Lord Chief Justice, to resolve the underlying dispute between the parties which was defined in writing as follows:

"…whether, in respect of the claim made by the Insured under the Insurance Contract (the 'Policy') the Insurers were entitled to settle proceedings brought by Riverside Housing Association in the Liverpool District Registry…in the sum of £325,000; or whether the Insurers were obliged under Condition 9 of the Professional Indemnity P15 Certificate, No 00/01/50113 to pay £325,000 to the Insured so that the Insured could defend the proceedings brought by the Riverside Housing Association ; and whether Insurers were in breach of the Policy and the Loss claimed by the Insured (if any)."

9. I am told, and I accept, that at that hearing Mr. Whealing on behalf of WHT undertook in court and agreed that he would pay the reasonable costs of the insurers with regard to the third arbitration before Mr. Pye. The costs of and occasioned by the injunction proceedings were left to my discretion sitting as arbitrator.
10. The fourth arbitration was that held before me. Following an exchange of written contentions and the submission of documentary evidence, there was a hearing before me on 14 November 2008, at which I heard both parties - Mr. Whealing representing WHT, and counsel and solicitors representing the insurers. Prior to that there had been a number of applications by Mr Whealing for further disclosure. I had, in broad terms, turned down all those applications, largely on the grounds that Mr. Whealing had not established that the documents sought were relevant or material to the issues in the case. But I accepted during the course of the oral argument that Mr. Whealing could address me on the relevance of the documents which he had sought, and indeed he did do so.
11. I issued my final award on 18 December 2008, and essentially, and I found in favour of the insurers. I found that there had been no breach of the insurance contracts in the insurers settling or seeking to settle the Riverside proceedings without the consent of WHT. I also addressed serious assertions that had been made by WHT that the insurers had acted in bad faith in various ways; an equally important claim was pursued by Mr Whealing, which I was asked to decide, namely whether in fact the sum of £325,000 which had been provided to the solicitors ultimately to satisfy the settlement agreement had in effect been paid, offered or proffered to WHT or his agents, pursuant to a provision of the insurance contract which enabled the insurers to hand over what they would otherwise have been prepared to settle for to the insured to enable him to conduct the defence. I rejected all those claims. I was asked and required to deal with the question of costs, and I awarded the insurers the sum of £75,000 in terms of costs which WHT was ordered pay within 14 days.
12. In the seven weeks which followed the publication of that award, Mr. Whealing on behalf of WHT made at least nine applications to me as arbitrator, under Section 57 of the Arbitration Act, to correct errors in the award or to make additional awards. There were also several applications in which further documents were sought. In the course of those applications, particularly those in the latter half of January 2009, Mr. Whealing on behalf of WHT made very serious allegations of fraud and other disreputable conduct against the insurers with regard to their conduct in connection with the arbitration in front of me. The bulk of those applications occurred after the issue of the proceedings by the insurers on 14^th January in this case to enforce the various awards and to seek further costs figures, to which I will return.
13. I rejected, with reasons, all those applications. It is unnecessary for me to go into the reasons which I gave. Suffice it to say that if I had thought there was any arguable case that the insurers had acted dishonestly or fraudulently, I would have been much more sympathetic to those applications, but there was no such arguable case put before me as arbitrator.

These proceedings

14. So it is that Norwich Union as the Lead Insurer for the other insurers, as claimant, comes before the court to seek to enforce the various costs awards made by Mr. Hayes and by me, sitting as judge- arbitrator, and various other costs. It applies, under Section 66 of the Arbitration Act 1996, which states:

"(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.

(2) Where leave is so given, judgment may be entered in terms of the award.

(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award."

15. Nothing has been suggested which shows that either Mr. Hayes or I, sitting as judge-arbitrator, did not have substantive jurisdiction to make the awards on costs against WHT which were made. Therefore in principle, unless good grounds are put forward which would justify either that the award be not enforced or that there should be a stay of execution, summary judgment should be given with regard to the enforcement of the costs awards made by Mr. Hayes and by me sitting as judge-arbitrator.
16. These proceedings have been served on WHT and, as far as I am concerned, I am satisfied that they have been served properly. Neither Mr. Whealing nor WHT attend today, although it is clear that there has been some relatively recent communication from him to the insurers' solicitors.
17. Notwithstanding the absence of Mr. Whealing or a representative on behalf of WHT, I thought it appropriate, however, to probe a number of the arguments and contentions put forward by the insurers today.

Discussion and Decisions

18. I will deal with the position so far as Mr. Hayes is concerned. He essentially decided in his award No. 1 that WHT should pay his fees in the sum of £17,323.18. His second award, made on 13 November 2008, awarded the insurers the sum of £43,539.08 to Norwich Union with regard to Norwich Union's costs, and £9,112.13 with regard to his fees in relation to the proceedings that led up to award No. 2. So far as those awards are concerned, I am satisfied that there is no possible ground on which those two awards for costs and fees should not summarily be enforced under Section 66.
19. Next I come to the enforcement sought with regard to the final award made by me as judge-arbitrator on 18 December 2008 in the sum of £75,000. Some weeks ago WHT lodged an application under Section 68 of the Arbitration Act relating to serious irregularity in the TCC in Manchester, which is, I believe, the closest such court to where Mr. Whealing and his company operate. The learned judge who dealt with it, Judge Davies, an experienced TCC judge, immediately spotted that the TCC or the High Court at first instance in effect has no jurisdiction to entertain appeals from or challenges to the award or conduct of a judge arbitrator appointed under the Arbitration Act. The Arbitration Act and the CPR make it clear that any such challenge or appeal must be taken to the Court of Appeal. To the best of my knowledge, WHT did not challenge Judge Davies' ruling on that, and it is clear that no challenge or application has been lodged to date in the Court of Appeal by WHT. It would now be well out of time.
20. So far as I could understand the challenge on serious irregularity grounds, it was not a challenge that the arbitrator (that is I) had misconducted myself or acted unfairly in any material way. The challenge was, and it is at least theoretically arguable, that the proceedings as a whole were, so it was asserted, undermined by what was said to be the serious irregularity on behalf of the insurers with regard to disclosure and other behaviour. I have certainly seen nothing, either in the arbitration proceedings or since, which suggests that any such application would stand any realistic prospect of success. That said, I am not ruling on any such application because none is either before me or, so far as I know, before the Court of Appeal.
21. It did occur to me whether or not it was appropriate for me to hear this application today. I have formed the view that there is nothing under legislation or otherwise which makes it desirable for me to do anything other than to hear the application. It is clear that under the rules and the Arbitration Act it is much more appropriate that the judge-arbitrator deals with enforcement applications. It is highly arguable at least that it is only the judge-arbitrator who can deal with the summary enforcement under Section 66
22. It follows that, since it is appropriate for me to consider the enforcement of the award which I made as judge-arbitrator, there is no reason why it should not be so enforced under Section 66, and it should be.
23. The remaining claims for costs do not arise as such out of the enforcement of the awards. So far as the arbitration costs before Mr. Pye are concerned, the costs which the insurers have said they have incurred are in the sum of £6,229.26 in relation to the arbitration before Mr. Pye. Those costs are in the sum of £5,301.50 plus £927.76 VAT. It seems to me that I have seen nothing in the substantive bill of costs, which suggests that it is in any way unreasonable for the basic sum to be allowed. As (I am told and accept) Norwich Union is not registered for VAT, the VAT claimed is also recoverable. This is not a sum which has been ordered by the arbitrator to be paid but it is a sum in respect of which there was an undertaking, and a contractual undertaking, given by WHT to pay the Insurers their reasonable costs. The sum of £6229.26 is due.
24. There are two further heads of costs which fall into the same category, which I can now deal with. The first is that after mid October 2008, by reason of various contentions and applications made by Mr. Whealing before Mr. Hayes, further costs were incurred by the insurers and their solicitors in the sum of £2,707.20. Those are not the subject of an award by Mr. Hayes because they arose after he issued what was his final and second award. Similarly, since my award as judge-arbitrator, the insurers have incurred a substantial amount of further legal costs in the sum of £16,225.87, dealing with the numerous applications to correct my award and the applications to seek further or additional awards and to seek further disclosure. There was a substantial amount of correspondence. I myself wrote some 11 or 12 letters following those applications. In a number of them, I called upon the insurers and their solicitors to respond to the applications. A number of the applications I dealt with failed and were dismissed without calling upon the insurers' solicitors to respond.
25. Now, these two claims fall into a different category. They are not, in my judgment, as such, enforceable directly under Section 66 of the Arbitration Act 1996, simply because they are not the subject matter of any award by the arbitrator, or arbitrators, in this case. Therefore I need to consider whether there is any other proper basis on which all or part of those sums can be ordered. I have formed the view that so far as the sum of £2,707.20 is concerned, claimed for the post Mr Hayes Awards period, I have no jurisdiction under Section 66 or on any other basis to allow those costs. That is for the very reason that under Section 66 there is no award dealing with them, and it cannot be said that those costs were incidental to or attributable to enforcing Mr. Hayes' awards.
26. It does seem to me, however, that the costs, or at least some of them, incurred in dealing with the applications to me as judge-arbitrator to correct my Award dated 18 December 2008 or for additional awards under Section 57 can properly be dealt with by the court in its discretion in dealing with the application to enforce. The bulk of these costs totalling £16,228.87 has clearly been incurred since 14 January, and it was necessary, in my view, since then, and incidental to the enforcement application which they now make, for the insurers and their solicitors to address those applications.
27. Whilst there is no legal difficulty so far as discretion on the application before me today is concerned, there is a difficulty so far as Section 57 is concerned because Section 57(3) proceeds on the basis that:

"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."

This Section creates a lacuna with regard to the costs of the parties relating to any corrections or to any application to correct.

28. Usually these sorts of corrections will be slip rule type corrections where an arbitrator has got a figure wrong or has identified a party incorrectly and where it is obvious simply from the language or figures that are being used that an accidental error has occurred in drafting by the arbitrator. That would be a fairly short and simple exercise for the arbitrator to put right. There is nothing in Section 57 however which suggests expressly or, in my view, by implication that the arbitrator has a right or a jurisdiction to make a further award on costs of and occasioned by the correction. Many arbitrators, as a matter of practice, will probably themselves not charge any more if they are putting right an error which was their own fault, so to speak; if their contract allows them to recover such charges, they could claim for it from the parties.
29. If, however, an additional award is made following the tribunal's exercise of its powers under Section 57(3), it would be appropriate or at least not wrong in those circumstances if the additional award addressed costs of and incidental to the need for the further additional award. But I decided, as arbitrator, in this case that there was not and did not need to be any additional award; so one is left in the position that there is no actual award which makes provision for these post award costs.
30. The post award costs claimed by Norwich Union in respect of the arbitration before me purport to be, on their face, incurred from 14^th November 2008 to 12 February 2009. An element of that therefore relates to the period between the hearing and the award (14 November to 18 December 2008) in which I assume that the costs of and incidental to the arbitration before me were very low. There was no application to me as arbitrator for costs for this period before I issued my final award for the costs estimate. So therefore the costs incurred between 14 November and the date of my award cannot be the subject matter of the exercise of my discretion as judge today.
31. Similarly, those costs incurred between 18 December 2008 and 14 January, that is between the date of my award and the date that this application to enforce was issued, are similarly not recoverable. There will have been some costs incurred because during that period Mr. Whealing wrote letters to me seeking corrections to the award, which I dealt with summarily in the sense of not calling upon the insurers' solicitors to respond. Thereafter, from 14 January in my judgment it was necessary for the insurers and their solicitors to respond to and deal with the various applications to correct the award and to seek additional awards, because that impacted directly on the application which they were making before this court (and are making today) to enforce the award: if the award was corrected, it would have to be the corrected award which was enforced. If there was an additional award which impacted on what could otherwise be enforced, again that had to be addressed.
32. Again, subject to VAT, the total figure claimed is £14,062.50, and, making the best assessment which I can, I consider that a sum of £12,000 relates to the period after 14 January dealing with the corrections and applications and the like and to the direct costs of pursuing the claim. An appropriate allowance to make is £12,000 plus VAT.
33. So far as interest is concerned, the insurers seek interest at the rate of 8% as it is a judgment sum. Given the drop in interest rates generally over the past few months, I have decided that an appropriate rate is 6%. It might be thought that a judgment rate of 8% would be appropriate. Of course the judgment rate will apply from the date of this judgment but, so far as my discretion is concerned, it seems to me that a rate of 6% taken overall is a reasonable and fair allowance to compensate the insurers for being kept out of money. The calculation should be done, with regard to Mr. Hayes' awards, from the date that the insurers paid Mr. Hayes' fees; so far as Mr. Hayes' award No. 2 for Norwich Union's own costs, that should run from a date 14 days after the date of award number 2; so far as my award as a judge-arbitrator is concerned, the interest should run from ² January 2009; and Mr. Pye's costs should run also from 2 January, given that those costs are said to have been incurred between April and December 2008; so far as the sum of £12,000 plus VAT is concerned, it should run from 31 January 2009.
34. As there is and was no arguable defence to this claim by the insurers, WHT must pay the Norwich Union's costs of this claim which seem reasonable as claimed, £10,967.75, within 14 days.
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