AP LEGAL DIRECT PUBLIC ACCESS BARRISTER to Senate Consulting
Recently a building contractor client of mine successfully defended a claim in a construction Arbitration in which I represented them throughout as their sole lawyer. The building employer Claimant was represented by a construction partner and team of lawyers of a London city law firm with the aid of Counsel.
Victory was achieved with the unstinting support, able assistance and contribution of John Walsh of Senate Consulting, who helped me to manage the expectations of the client, identify an appropriate expert with the appropriate capabilities and understanding, without which it would not have been possible to achieve success.
This is my second victory for a building contractor in a domestic construction Arbitration in successive years. The winning medals are the Arbitration Award on the merits of the case and the award of agreed costs made in my client’s favour. This was a long distance run in a case that lasted more than a year. Arbitration is unlike Adjudication in which the firing of the starting gun of the Adjudication Notice signals a burst to the finishing line within a short period of 28 days. Arbitration is not a sprint and a dash to the line at the lightning speed of an athlete. Arbitration requires the parties to have the stamina and endurance of the marathon runner.
This is my experience of a recent Arbitration in which I represented a building contractor in the defence of a claim containing allegations of defective workmanship in the building that was the subject of the dispute and the Claimant employer claimed that the alleged defects were the responsibility of my client.
Construction Arbitration is like court litigation in that the Arbitrator acts as the judge, decides the rights and obligations of the parties under the contract by hearing written and oral submissions and takes account of the evidence of witnesses of fact and expert evidence. The general rule is that he who asserts must prove their case, produce evidence to prove all aspects of the Statement of Claim and the Claimant must show that it has proved its case on the balance of probabilities.
Confidentiality
I am not permitted to reveal the names of the parties in the Arbitration because of the protection of confidentiality that is a pre-requisite to the bringing of Arbitration proceedings in England. An agreement to Arbitrate ensures that all participation in it, the decision of the Arbitrator on the merits of the claim and on the award of costs are to kept private and confidential by the parties. This confidentiality in Arbitration is attractive to the parties in that it ensures there can be no reputational damage suffered by them after the Arbitrator’s award is published.
Unlike in Arbitration publicity of the facts and outcome of proceedings is always a possibility in both civil and criminal court proceedings. We see this across the world when the most powerful members of society are summoned to court to face criminal charges or are required to give evidence in civil disputes, all of which can be discussed in the public glare of the media. In commercial contracts the parties instead can maintain the confidentiality of their disputes by agreeing in their contracts that they be resolved by way of Arbitration and not by the courts.
I am therefore prevented from publicising the outcome of an Arbitration that was “won” by my building contractor client who had been served with an Arbitration Notice under the terms of the contract. Expert evidence was vital to the outcome of the case in that upon service of my client’s expert’s report and Defence the Claimant building employer decided to withdraw the claim.
Some of the important procedures and limitations of Arbitration to be aware of are set out below.
Case management
On being appointed the Arbitrator will usually hold a preliminary meeting when a directions timetable will be fixed and include issues of what documents will be disclosed and whether expert witnesses will be appointed, how the bundles of documents are to be prepared, whether recoverable costs should be limited to a specified amount. The Arbitrator has control over how he or she wants the Arbitration to be run and of how to case manage the proceedings, after considering representations made by the parties in preliminary meetings and during the Arbitration. In the first Arbitration in which I represented a house builder in a claim for money owed to him under the contract, the Arbitrator adopted a procedure that was akin to civil court proceedings. He case managed the Arbitration in video hearings and after listening to submissions from representatives of the parties, he gave written directions that had to be complied with within strict time limits. As the case continued towards conclusion, the Arbitrator ordered cross examination of factual witnesses to take place in a video hearing, in which both parties were represented by Counsel. I appeared for my house builder client in this video hearing and a barrister from construction chambers appeared for the employer. A separate video hearing was arranged for examination of expert witnesses. The Arbitrator questioned each of the experts without any input from Counsel. It occurred to me that this might be what examination of witnesses by “hot tubbing” might look like.
In the second and most recent construction Arbitration the Arbitrator adopted an entirely different approach, in that all directions were issued without hearing any oral submissions or argument from the parties. The whole process was conducted in writing, without in person hearings, except for one hearing on site when the alleged defects were inspected by the experts of both sides and the Arbitrator.
Conduct of the Arbitration
Written witness statements may be exchanged after the statements of case and defence and before the hearing. Witnesses may be cross examined by the opposing party’s advocate. If the Arbitration is to be decided upon the documents only it may be more difficult for the Arbitrator to deal with controversial issues.
What if the parties are not happy with the way in which the Arbitrator is conducting the proceedings? What can they do about it? They might consider the procedures for removal, challenges to the Arbitrator and appeal. However, the reality is that they are not going to get very far with any of these routes to oppose the conduct of the Arbitration. The truth is that once the parties have agreed to having an Arbitration clause in their contract, instead dispute resolution by court proceedings, they are stuck with the Arbitration, and they will have to get on with Arbitrating the dispute as their chosen method of dispute resolution. That is unless of course they decide to Adjudicate instead. If the parties want to have their disputes determined by court proceedings, they should strike out the Arbitration clause during contract negotiation.
Removal, challenges to the Arbitrator and Appeal
Once the Arbitrator accepts the appointment it becomes very difficult to challenge the continued conduct of the Arbitration by the Arbitrator and the right to appeal is very limited. It is possible to make an application to the court under Section 24 of the Arbitration Act 1996 for removal of an Arbitrator for misconduct on the grounds that he or she may have acted unfairly, displayed actual bias that has destroyed the confidence of his ability to conduct the Arbitration judicially or competently, that the Arbitrator does not have the qualifications required by the Arbitration agreement or that the Arbitrator is not fit to conduct the Arbitration. It must be shown that substantial injustice will occur if the Arbitrator is not removed.
The remedy of removal will not be exercised lightly and even in the face of serious errors the Arbitrator may be allowed to continue to conclusion. If the application for removal fails, the challenging party will be left with the awkwardness of having to face and to persuade an Arbitrator to find for them, after they have said that he or she is not physically or mentally able or to fit to arbitrate or that the arbitrator has refused or failed to conduct the proceedings or with due dispatch or acted unfairly in conducting the proceedings or in issuing an award.
Losing the right to object
If a party is not satisfied with the way in the Arbitration is being conducted it must be raised immediately. This is because Section 73 of the Arbitration Act 1996 provides that if a party takes part or continues to take part in the proceedings without raising objection to the Arbitrator’s jurisdiction, that the proceedings have not been properly conducted , that there has been failure to comply with the arbitration agreement or there has been any other irregularity affecting the proceedings he may not raise that objection later, unless at the time he did not know or could not have discovered the grounds for the objection. This also applies to an application for removal of an Arbitrator.
Challenges against awards under Section 68 of the Arbitration Act 1996 on the grounds of serious irregularity is extremely rare. A party may lose the right to challenge if they do not object to a serious irregularity at the time that it is alleged to have occurred. Section 73 provides that if a party continues to take part in the Arbitration without any objection to substantive jurisdiction, that the proceedings have not been properly conducted, there has been a failure to comply with the arbitration agreement of there has been any other irregularity he may not raise that objection later before the Arbitrator or before the court. The right to apply for a challenge under Section 73 is subject to the restrictions in Section 70 (2) and (3).
It must be shown that something has gone so wrong in the proceedings that justice calls out for it to be corrected. This is only where the serious irregularity of what has occurred is “so far removed from what could reasonably be expected of the arbitral process that the court would be expected to take action” (Bandwidth Shipping Corporation v Intaari The Magdalena Oldendorff [2007] EWCA Civ 998 at para (46]. This is a very high threshold.
Appeal
The Arbitrator’s award is final and conclusive. An appeal against the Arbitrator’s Award may be made under Section 69 of the Arbitration Act 1996 on a point of law. An appeal can only be made with permission of the court (an application for leave to appeal) or with the agreement of the other parties to the Arbitration proceedings. The latter can be achieved by adopting the JCT Form of contract in which the parties agree in the standard form that an appeal can be made to the court on a point of law. This also means that the parties can exclude the right to appeal in their terms of contract.
It is not possible for a party to appeal a finding of fact by the Arbitrator, however wrong that that finding may appear to be.
Section 69 (3) requires that the question of law to be appealed has a substantial impact on the rights of the parties at issue in the Arbitration and it is not good enough for the applicant simply to say that that the issue in question must affect their rights in the Arbitration. The rights in question must be rights engaged by the dispute. It is not appropriate to rely on circumstances that are not connected to the dispute.
Costs
Section 61 (2) of the Arbitration Act 1996 requires the Arbitrator to allocate costs of the Arbitration on the general principle that the unsuccessful party will be required to bear its own costs and shall be liable for the costs incurred by the successful party, except where it appears to the Arbitrator that it is not appropriate in relation to all or part of the costs. An application for Security for Costs may be made by the defending party if there is concern over the claiming party’s ability to meet an adverse costs order.
The Arbitrator can depart from the rule that costs follow the event, where an offer to settle has been made which exceeds the amount awarded, where a party has behaved obstructively, un-cooperatively and where submissions are too long and having limited bearing on the matter. The costs in the Arbitration may well be in a sum more than the sum in dispute. Its is therefore wise for a Respondent to make a without prejudice save as to costs offer at an early stage if there is any perceived risk of losing the Arbitration.
Arbitration can be as expensive as court proceedings. Confidence in victory is necessary for a Claimant. A Respondent building contractor that is served with an Arbitration notice must either defend to the end of the Arbitration, agree to settle, or as happened in this case, hope that the other side withdraws their claim on sight of the Respondent’s expert evidence. In these variables, they will have to display the endurance and resilience of an athlete before they can hope to reach the finishing line as victor.
