BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

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 >> The Secretary of State for the Home Department v Raytheon Systems Ltd [2015] EWHC 311 (TCC) (17 February 2015)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2015/311.html
Cite as: 159 Con LR 168, [2015] EWHC 311 (TCC), [2015] Bus LR 626, [2015] 1 Lloyd's Rep 493

[New search] [Context] [View without highlighting] [Printable RTF version] [Help]


Neutral Citation Number: [2015] EWHC 311 (TCC)
Case No: HT-2014-00056

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

Royal Courts of Justice
Strand, London, WC2A 2LL
17th February 2015

B e f o r e :

MR JUSTICE AKENHEAD
____________________

Between:
THE SECRETARY OF STATE FOR THE HOME DEPARTMENT
Claimant
- and -

RAYTHEON SYSTEMS LIMITED
Defendant

____________________

Roger Stewart QC, Leigh-Ann Mulcahy QC, Malcolm Sheehan and Katie Powell (instructed by Pinsent Masons LLP) for the Claimant
Joe Smouha QC and Emily Wood (instructed by Clifford Chance LLP) for the Defendant
Hearing date: 16 January 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©


     

    Mr Justice Akenhead:

  1. I handed down judgment in this matter on December 2014 ([2014] EWHC 4375 (TCC)); Due to concerns about confidentiality and to the fact that the challenge was to an arbitral decision which arose out of a confidential process, the names of the parties were initially anonymised. The parties now agree that both this and the earlier judgments can be handed down publicly. I will still below refer to the Claimant as "Y" and the Defendant as "Z". That judgment related to the substance of the Claimant's application under Section 68(2)(d) of the Arbitration Act 1996. Having found that there were two respects in which there was a serious irregularity causing substantial injustice, I left over the issues as to whether the award should be remitted or set aside, in whole or in part, hearing argument on those issues over some 2 hours on 16 January 2015. Both parties sought permission to appeal on issues on which they had "lost"; I indicated that, given the importance of the case and the utility of the Court of Appeal addressing a number of the issues raised, I would grant permission not only on the first judgment but also consequentially on this judgment. Costs were also considered and this judgment will address that matter as well.
  2. Remission or Setting Aside – The Law and Practice

  3. Section 68(3) provides for what the Court may do when serious irregularity has been found to have occurred:
  4. "(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, for reconsideration,
    (b) set the award aside in whole or in part, or
    (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."
  5. It is clear that remission is the "default" option and the Court cannot set aside unless it would be "inappropriate" to remit. It cannot be said however that there is in the wording of Section 68 any "weighting" against or for any of the grounds of irregularity set out in Section 68 such that setting aside cannot or only in extraordinary circumstances be ordered for instance where the serious irregularity ground is that set out in Section 68(2)(d). Whilst the burden of establishing that it would be inappropriate to remit must in effect be on the party seeking relief other than remission, what has to be established in respect of any proven serious irregularity is that in the particular case it would be inappropriate to remit to the existing arbitral tribunal. There is no authority which suggests that it will invariably be inappropriate to set aside the award where the serious irregularity ground is the Section 68(2)(d) one. It is properly common ground that there is little or no difference in practice between the setting aside and declaration of no effect remedies (see Hussman v Ahmed Pharaon [2013] I All ER (Comm) 879 at Paragraph 81).
  6. What the Court needs to do in deciding whether to remit or set aside is to consider all the circumstances and background facts relating to the dispute, the award, the arbitrators and the overall desirability of remission and setting aside, as well as the ramifications, both in terms of costs, time and justice, of doing either. A review of "appropriateness" encompasses a pragmatic consideration of all the circumstances and relevant facts to determine what it is best to do but it necessarily covers the interests of justice as between the parties.
  7. There is no previous authority which substantially mirrors the facts of the current case and, indeed, there are relatively few reported decisions on Section 68(2)(d). Having referred to the words in Section 68(3), Professor Merkin says in Arbitration Law (Service Issue No. 68 12 August 2014) at Paragraph 20.33:
  8. "In a number of the situations set out in the Arbitration Act 1996, s 68(2), remission of the award to the arbitrators is the obvious remedy, eg, where the award is incomplete (ground (d)) or uncertain or ambiguous (ground (f)), where the award does not comply with statutory or agreed formal requirements (ground (h)) or where there is an admitted error in the award (ground (i)). Setting the award aside, possibly coupled with the removal of the arbitrators, may, however, be the only sensible option in exceptional circumstances whether serious irregularity relates to the conduct of the proceedings and there are further aggravating circumstances which render remission inappropriate. The pre-1996 authorities, particularly those under the 1996 Act, establish that the quashing of the award, with or without the removal of the arbitrators, will be appropriate in the following situations:
    (a) Where there has been a serious miscarriage of justice affecting evidence and the arbitrators cannot reasonably be expected to be able to approach the matter afresh. The mere fact that the arbitrators have decided the case on inadmissible or undisclosed evidence will not necessarily have this result; much depends upon an objective view of what of what might be expected of the arbitrators on remission.
    (b) Where one or both of the parties has justifiably lost confidence in the arbitrators in the light of the manner in which the arbitration has been conducted. The test of this matter, as laid down by the Court of Appeal in Hagop Ardahalian v Unifert International SA, the Elissar, is objective: do there exists grounds on which a reasonable person would think that there was a real likelihood that the arbitrator would not determine the issues according to the evidence? Possibility of lack of impartiality, in that the arbitrator has indicated that he favours one party over the other, is the most common reason for setting aside under this head, and the combined power to set aside the award…

    (c) Where the outcome of remission would require a full hearing or re-hearing.
    (d) Where remission would inevitably lead to the award being reversed.
    (e) Where the conduct of the arbitrator is such as to show that, questions of partiality aside, he is, through lack of talent, experience or diligence, incapable of conducting the reference in a manner which the parties are entitled to expect:[Bremer Handelsgesellschaft GmbH v Ets Soules ey Cie [1985] 1 Lloyd's Rep 160, 164].
    (f) Where the delay between the arbitration hearing and the outcome of the judicial proceedings is such that the parties and the arbitrators cannot reasonably be expected to remember what transpired that the original proceedings, a situation likely to give rise to further dispute in the absence of an entirely fresh hearing.
    …An application to remove the tribunal may be successful if the parties have justifiably lost confidence in its ability to conduct the remitted proceedings fairly, although the mere fact that the tribunal is guilty of serious irregularity does not itself mean that confidence cannot be placed in it, particularly where the arbitrators are experienced and of high repute."
    There are numerous authorities cross referred to in the above quotation, other than the Bremer case, some 20 relating to the period prior to the coming into effect of the Arbitration Act 1996 and only 6 relating to the period afterwards. Professor Merkel (rightly) does not suggest that the above is in some way an exclusive list. One may have to be somewhat cautious in relation to some cases from the pre-1996 Act period because it was not then a statutory prerequisite in the establishment of misconduct on the part of arbitrators that substantial injustice should have been caused, unlike the 1996 Act regime for serious irregularity.

  9. Pacol Ltd v Joint Stock Co. Rossakhar [2000] 1 Lloyd's Rep 109 was a Commercial Court decision of Colman J in which, in an arbitration relating to contracts for the sale of sugar and non-payment, liability was admitted but the arbitrators on a documents only basis dismissed the claimant's claim on the basis that the respondent was not in breach, having failed to give the claimant the opportunity to address the point. There could be little doubt, given those findings, that serious irregularity this had been established. At Page 115, the judge said this:
  10. "The matter has been debated whether this is a case where the Court should exercise its jurisdiction to set the award aside or merely to remit the award to the tribunal in whole for reconsideration.
    I have come to the conclusion, however, that notwithstanding the provisions of s. 68(3), this is a place where it would be inappropriate to remit the matters in question to the tribunal for reconsideration. In practice, the whole arbitration is going to have to be reopened and probably re-pleaded. There is probably going to have to be further evidence of a whole new series of submissions and orders made for the purpose of arriving at a conclusion on the question of liability.
    In those circumstances, it seems to me that it would be quite wrong for the arbitrators to build anything on the structure of the award which they have already made and I have no doubt whatever that this is the paradigm of a case where the award ought to be set aside."
    It is reasonably clear that this was not a case based on Section 68(2)(d), albeit that the judge did not specifically identify which ground of serious irregularity was relied upon.
  11. Mr Justice Toulson (as he then was) in Ascot Commodities NV v Olam International Ltd [2002] CLC 277 set aside an arbitration award made by the GAFTA Board of Appeal, dismissing an appeal from a GAFTA first tier tribunal which had awarded damages to Olam for breach by Ascot of the contract by which the latter agreed to sell to Olam rice. He found, amongst other things that the Board had not addressed a "central point raised by Ascot on its appeal…that if the bills of lading were pledged as security, as appears on the face of the…contract, Olam's loss was not to be approached in the same way as if they were beneficial owners of the target" (Page 284D). This was a serious irregularity recognised in Section 68(2)(d) and there was a serious injustice. He went on to address issues as to the relief to be awarded. At Page 286 he said:
  12. "The question arises whether the award should be remitted or set aside. I make it plain that this is not a case where there has been any personal impropriety on the part of the board in any possible sense. It sometimes happens that a court may take the view that an essential matter has not been addressed and therefore there is in law a serious irregularity without imputing anything in any way personally censorious of the arbitrators concerned. I see no reason at all why the people who heard this appeal should not continue to deal with the matter.
    But the question is whether, in the state of affairs the case has now reached, it is appropriate that there should be a fresh start or a reconsideration. I do think there are serious problems about a reconsideration. Reconsideration implies working upon the earlier material plus such supplementary submissions as may be allowed. The problem here is that, 12 months on from the appeal, I doubt whether anybody has a clear or reliable recollection of exactly how things were argued. The fact that there are now differences of recollection between those who represented the parties demonstrates that only too clearly.
    This is not a case where there has been an award only part of which is under challenge. The challenge successfully has been to the whole of the award because of a failure to address the central point in the way which was required.
    I think that in those circumstances justice requires that there should now be a clean start. For that reason, and not because of any suggestion of any personal impropriety on the part of the arbitrators, I think that the appropriate course is to set the award aside. [Counsel for Ascot] has indicated that Ascot will not seek to widen the points which it took on this appeal. If anybody is not content with that being publicly recorded, it could be put into the form of an undertaking. I doubt that that will be necessary."

  13. In Lovell Partnerships (Northern) Ltd v AW Construction plc (1996) 81 BLR 83, Mance J (as he then was) allowed an application under Section 23 of the Arbitration Act 1950 set aside an arbitrator's award and removed the arbitrator. He said, starting at Page 99E:
  14. "The arbitrator's misconduct of the proceedings in these respects mean that the award must, therefore, either be set aside or remitted for consideration in whole or in part. Consideration of the appropriate course in this regard is also linked with a further question of whether the arbitrators should be removed.…
    The legal test is whether a reasonable person would no longer have confidence in the present arbitrator's ability to come to a fair and balanced conclusion on the issues if remitted. The arbitrator has, in the instant case, drawn conclusions from and about documentation and reached decisions on a number of factual issues which would, in my judgement, make it invidious and embarrassing for him to be required to try to free himself of all previous ideas and to redetermine the same issues on for the evidence.
    As [Counsel] acknowledged, the present arbitrator is evidently conscientious and would, no doubt, apply every conscious effort to complete redetermination. But that exercise would, itself, in the circumstances, create its own undesirable tensions and pressures. Some costs will be wasted, although the respective statements of case will probably be capable of reuse.
    I have come to the conclusion, (1) that what has gone wrong in this case is of a seriousness and nature that does require the whole interim award to be set aside - it is not possible to pick and choose aspects that might appear objectionable - and (2) that the appropriate course is to order the removal of the arbitrator with a view to appointment of a fresh arbitrator. I repeat that this is no reflection on his general competence and arises because it would, in the circumstances, be inappropriate to require him to try to redetermine what he has already once determined on a wrong basis."

  15. In James Moore Earthmoving v Miller Construction Ltd [2001] BLR 322, the appeal against the TCC judge's decision to set aside the award and remove the arbitrator from this conduct was compromised during the hearing of the appeal after argument. However, Clarke LJ (as he then was) did give a brief judgment of the Court. Although he accepted that it was "not appropriate for us to express a final conclusion…without hearing full argument" he went on to state "conclusions on the basis of the material and submissions which were put before us before it was agreed that the appeal should be allowed", and he went on to say at Paragraph 7(4):
  16. "The question whether an arbitrator should be removed or the matter remitted to an arbitrator in the case of misconduct may well depend upon the answer to the objective question formulated by [Mance J] in Lovell Partnerships Northern…[at Page 99 quoted above]".
    Although this case and the Lovell case were misconduct cases, I see no reason to believe that, where the Court forms the view, following a finding of serious irregularity under Section 68(2), that a reasonable person would no longer have confidence in the arbitrators' ability to come to a fair and balanced conclusion on the issues if remitted, that view may well underpin a conclusion that it would not be appropriate to remit.

  17. Reference was made by Counsel for Y to employment cases. For instance Mr Justice Burton considered in Sinclair Roche & Temperley v Heard [2004] IRLR 763 the issue of impartiality and in considering whether or not to remit a matter back to the same tribunal. At Paragraph 46, the judge set out various factors which were relevant in determining whether the case should be remitted back to the same tribunal. He listed "Proportionality" (Paragraph 46.1), citing the relative costs of the matter being dealt with by the original or a new tribunal, albeit that, given that there was "sufficient money…at stake" in that case, said that this "was not a decisive, or even an important, factor". The "Passage of time" was identified as a factor with the judge saying that the "appellate tribunal must be careful not to send a matter back to the same tribunal if there is a real risk that it will have forgotten about the case." At Paragraph 46.3 under the heading "Bias or partiality", he said this:
  18. "It would not be appropriate to send the matter back to the same tribunal where there was a question of bias or the risk of pre-judgment or partiality. This would obviously be so where the basis of the appeal had depended upon bias or misconduct, but is not limited to such case."
    Having considered the impact of a "Totally flawed decision" he went on to consider what he called a "Second bite":
    "There must be a very careful consideration of what Lord Phillips in English [English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409] called 'A second bite of the cherry'. If the tribunal has already made up its mind, on the face of it, in relation to all the matters before it, it may well be a difficult if not impossible task to change it: and in any event there must be a very real risk of the appearance of pre-judgment or bias if that is what a tribunal if asked to do. There must be a very real and very human desire to attempt to reach the same result, if only on the basis of the natural wish to say 'I told you so'. Once again the appellate tribunal would only send a matter back if it had confidence that, with guidance, the tribunal, because there were matters which it had not, or had not yet, considered at the time it apparently reached a conclusion, would be prepared to look fully at such further matters, and thus be willing or able to come to a different conclusion is so advised."
    This guidance was quoted with apparent approval by Morris Kay LJ in Boardman v Nugent Care Society [2013] ICR 927 at Paragraph 29.
  19. It is rightly pointed out that employment law decisions, particularly relating to tribunals, are dealing with statutorily established tribunals as opposed to arbitration tribunals which generally arise out of the parties' agreement, the latter being subject to the Arbitration Act 1996. It seems to me however that there is some basic sense in weighing in the balance of whether it is appropriate to remit or set aside an arbitrator's award comparable factors. Thus, one needs to consider whether there is a real risk, judged objectively, that even a competent and respectable arbitral tribunal, whose acts or omissions have been held to amount to serious irregularity causing substantial injustice may sub-consciously be tempted to achieve the same result as before. The costs of remission compared with the costs of a new tribunal looking at the case in the context of the overall amounts in issue must also be a factor which may go towards establishing the appropriateness of the one course of the other. The passage of time may also be a factor, because if a sufficiently long time has passed since the tribunal heard the evidence, it may, in relative terms, matter not much whether the tribunal is a new one because the old tribunal would in any event have to spend considerable time, effort and indeed cost in researching the evidence again.
  20. There have been few cases under the 1996 Act in which a successful application under Section 68(2)(d) has led to anything other than remission. In the Ascot Commodities case, the award was set aside but there was a direction that it could be re-heard by the same tribunal, in effect by way of a complete re-hearing. In Van der Giessen-de-Noord Shipbuilding Division NV v Imtech Marine & Offshore BV [2009] 1 Lloyd's Rep 273, Christopher Clarke J (as he then was) found that there were four respects in which the two arbitrators had failed to address important issues and, on the understanding that the Claimant would undertake not to widen points taken on the application or reduce new evidence save in limited respects, he set aside four parts of the award; he required the parties however to proceed with an umpire being appointed. I do not however consider it appropriate to decide this case on the basis of case statistics. The statute requires that the Court should not set aside an arbitral award unless it would be inappropriate to remit. The question therefore revolves around the inappropriateness of remission.
  21. Material Factors

  22. In the judgment of 19 December 2014, I set out the two Liability and three Quantum "Grounds of Challenge":
  23. "3.1 the legal consequences of the fact that [Z] did not comply with the contract provisions, as it was required by the [Agreement] to do, in order to be entitled to contend that failure to achieve contractual Milestones was other than the sole responsibility of [Z]…and
    3.2 although it is common ground that the Tribunal had to judge the reasonableness and proportionality of the termination for cause pursuant to Clause 69.1.2(i) the tribunal failed to make any assessment of the nature and seriousness of any relevant Default(s) on the part of [Z] which prima facie entitled a termination for cause, in order to consider whether, in light of the same, it was objectively reasonable proportion to terminate the Agreement."
    4.1 that the calculation of compensation should follow the method agreed by the parties in the category in accordance with express provisions;
    4.2 that the assessment of compensation should not exceed the amount that would have been recoverable had the agreement been performed according to its terms.
    4.3 that [Z] should not be permitted to recover sums on a global basis without any consideration of its own actual or possible breaches of contract."
  24. I decided that Liability Ground 3.2 and Quantum Ground 4.3 were established. In relation to Liability Ground 3.2, I held that:
  25. "46…It was Y's case that all or substantially all the delay was the actual fault and responsibility of Z; to that, as a matter of evidence, reliance was placed on the absence of effective notices under Clauses 23 and 25 to support this actually fundamental case. In essence, the arbitrators never grappled with this point, preferring in effect to say that because the Process Requirements are just that, namely a process, HS in this case for Y had to be seen to go through the process, even if the result was such as to lay the real fault and responsibility for the delays entirely at the door of Z. Because the arbitrators found that in a number of what they believed were important respects HS, either on the basis of inadequate or incomplete briefing or otherwise, did not consider whether, and if so to what extent, Y had caused or contributed to any of the Defaults and relied upon and referred to the MPRG recommendation, although the process which led to that recommendation was non-compliant with Clause 69.1.2(i), it never got around to considering what might have been considered to be a basic point, which was Y's case that substantially all the delay was down to Z. There was a concentration on what HS did or did not do in relation to the possible responsibility of Y in fact for the delays but the tribunal did not consider the scenario that Z may have been responsible for all the delay.
    47. I would be more understanding of the tribunal's position if it had actually addressed that scenario…
    48. At first blush, Z's argument (that the tribunal was there making it clear that this was an important failure of the process and therefore in effect leading to non-compliance with the condition precedent Process Requirements) is not unattractive. However, the tribunal makes much of the fact that Z was alleging significant contributions to the delays by Y (see for instance Paragraph 410 of the award) but also of the fact that reports on submissions to HS consistently avoided any suggestion of Y either causing or contributing to the delays (see for instance Paragraph 412). The tribunal does not however consider whether it was factually justified for those making submissions to HS not suggesting that Y caused or contributed to delays. Put another way, the tribunal attributes a failure to comply with the conditions precedent to a failure to address possible (and one presumes something more than fanciful) contributions to causing delay by Y, primarily by employees or other agencies, but it does not consider what might be considered to be a very obvious material issue, which was Y's case that Z was wholly or substantially responsible for all the delay. Put yet a third way but rhetorically: could HS or those advising HS be criticised as not complying with the Process Requirements if all the delay was in fact caused and contributed to only by Z?"
  26. In relation to Quantum Ground 3, having found that there was an issue before the arbitrators as to whether on an actual cost evaluation of the unjust enrichment claim (Claim A4), I held that the arbitrators:
  27. "overlooked the need to address the issue of Claim A4 being a global claim and therefore to address the fault and responsibility of Z (if any) in relation to the delay, disruption and inefficiencies which it seems to have been common ground had occurred to a significant extent before the termination."
  28. It cannot be said that these were anything other than important and indeed critical issues. If Y had succeeded on the Liability Issue (in effect arguably leading to a finding that there was no breach of the Process Requirements), it would or could well have established that Z had been in material breach of contract and that the termination was therefore justified; it would therefore have won on liability. In relation to the Quantum Issue, the arbitrators' finding was that £126,013,801 was due for Claim A4, this representing just more than two thirds of the whole award; it was thus the major part of the quantum award. Whilst there is no authority that suggests one way or the other that the relative importance or seriousness of the established irregularities is a factor to be taken into account on the decision to remit or set aside, I do consider that the more serious the irregularity the more likely it is that setting aside may be the appropriate remedy. There are shades of serious irregularity. For instance, in Norbrook Laboratories Ltd v Tank [2006] EWHC 1055 (Comm), there was the making of direct unilateral telephone contacts by the arbitrator, his failure to record what was said or to disclose that record to the parties and the display of overt antagonism; setting aside followed.
  29. There is largely unchallenged evidence from Mr McIlwaine of Y's solicitors to the effect that the large majority of the evidence and time spent in the proceedings related to the programming issues, which inevitably must have included the extensive criticisms made by Y of Z's performance and the impact of the criticised matters on the programme. For instance, there was extensive expert evidence relating to matters of liability for the delays.
  30. The evidence was heard in four 10 day tranches between late October 2012 and mid-February 2013 with the final speeches on 16 and 17 April 2013. The relevant award was issued on 4 August 2014. Although there is no criticism made of the nearly 16 month period which it took the arbitrators to produce this award, the fact remains that, if this matter was to be remitted to the arbitrators now, over two years will have elapsed since the evidence was given. Given the logistics involved with busy international arbitrators, there is, at least, a very real risk that it could not re-convene substantive hearings or otherwise move to a stage at which they could produce an award taking into account the judgments of this court for as much as a further 12 months if not more. If that is right, it will be closer to 3 years since the evidence was given.
  31. Counsel for Z have highlighted the fact that many of the legal and indeed factual findings made by the arbitrators were not challenged on the application. This is not altogether surprising because there was no right of appeal in relation to law or fact. It is therefore argued that these are findings which are and should continue to be binding on the parties; following on from that point it is argued that there should be remission of the issues affected by the first judgment in this case rather than setting aside the whole award because it would be better for the original arbitrators to be engaged in those circumstances. For instance, the arbitrators found that the Process Requirements (as I have called them) in Clause 69.1.2 were conditions precedent; why, it is asserted, should that be set aside.
  32. A major criterion in the consideration of what it is appropriate to do must be whether justice can not only be done but can be seen to be done. One can readily perceive a situation in which an arbitrator has behaved particularly badly, albeit only in relation to one issue in the case. A primary question must be whether the Court or either party, judging and judged objectively, is satisfied that that arbitrator can be trusted to and to be seen to deliver justice for the parties if the matter is remitted to him or her. The fact that the serious irregularity in question does not go to every issue in the case or that it goes only to a number of issues does not and should not mean that it is never appropriate in those circumstances to set aside the whole award.
  33. It is accepted by Y through its Counsel that it was not suggesting that the tribunal had "acted other than impartially in reaching its award or that it would seek to be other than conscientious and professional if the matter were remitted to them" (Transcript Day 1 Page 119 Lines 4-9). What is said on behalf of Y is that a "fair minded and informed observer would not have confidence in the arbitrators' ability to come to a fair and balanced conclusion on the issues if remitted because of their lack of detachment from the subject matter of the dispute" (Claimant's Skeleton Argument for Hearing on 16 January 2015); Counsel goes on to say:
  34. "The Tribunal would be being asked to carry out an impossible task: assessing fairly whether or not termination was valid by reference to responsibility for delay in circumstances where:
    1. They had previously found it to be invalid;
    2. They wrongly failed to consider responsibility for delay despite being presented with copious material and submissions on the matter; and
    3. They have structured their whole approach in a way in which the Court had found serious irregularities which had caused one party substantial injustice." [Skeleton Paragraph 6.2 iii]

  35. Mr Justice Field in Brockton Capital LLP v Atlantic-Pacific Capital Inc [2014] 2 Lloyd's Rep 275 applied in effect the test suggested in the James Moore Earthmoving case, albeit he decided (at Paragraph 34) that he could "see no grounds supporting an objective conclusion that confidence cannot be placed in the tribunal's ability to reach a fair and balanced conclusion on the outstanding issues in the reference following this judgment"; he therefore remitted the case to the existing tribunal.
  36. I have formed the view that this is a case in which the award should be set aside in total and the matter resolved by a different arbitral tribunal. My reasons, some of which are covered in part above, are as follows:
  37. (a) Both grounds under Section 68(2)(d) were towards the more serious end of the spectrum of seriousness in terms of irregularity. It is not for the Court to speculate why the tribunal felt that it did not need to address the issues concerned. However, the fact that the tribunal took some 16 months after final oral submissions to produce their award might lead a fair minded and informed observer to wonder (rightly or wrongly) at least whether (sub-consciously) the tribunal was seeking some sort of shortcut. This is more apparent in relation to the Quantum Ground where in the reasoning, whilst arguably unobjectionable in the view formed by the tribunal that the unjust enrichment claim could properly be based on cost, there is no hint or suggestion that the tribunal applied its mind to the very large amount of evidence placed before it to the effect that much or indeed all of the delay to the project was the responsibility of Z and therefore that the cost associated with that delay should come out of the cost equation. This was particularly so in the context of a finding by the tribunal (Paragraph 724 of the award) to the effect that there was "considerable uncertainty as to the sums which had already been paid in relation to the Transferred Assets" and of the reasoning process by which the tribunal thereafter arrived at the figure of £126,013,801 as the cost which could, not unfairly, be described as somewhat "thin".
    (b) Like Mance J on the Lovell case, I can see that it would be "invidious and embarrassing [for the tribunal] to be required to try to free [itself] of all previous ideas and to re-determine the same issues" and that even for a conscientious tribunal seeking to re-determine such issues the exercise could well "create its own undesirable tensions and pressures". Of course, it is not possible to predict what this tribunal would do if matters were remitted to them. If however, albeit conscientiously and competently, the tribunal in effect reached exactly the same conclusions as before, that might well lead to a strong belief objectively that justice had not been or not been seen to have been done.
    (c) I do not see that it is likely that there will be any significant re-drawing of the issues in the arbitration. Indeed, I would anticipate that, on many of the individual issues on which each party lost, the losing party would not seek to re-argue them; the sanction will be costs so that, if a party which lost on a given factual or legal issue before the current tribunal argues it again and loses it before the new tribunal, it should not be surprised when it faces an indemnity cost sanction, whatever the overall result. I am of course conscious that in setting aside the whole award for re-hearing by a different tribunal that a number of findings, both legal and factual, which were outside the parts of the award which were successfully challenged on the application, may be re-opened before the new tribunal but I anticipate that it will be a foolhardy party who, without obviously good reason, seeks to do so. Much of the arbitration will however have to be reopened given the scope of the issues not addressed, in any event.
    (d) I would anticipate that much of the factual and expert evidence, adduced before the current tribunal, would re-deployed before the new tribunal; if anything, it would be rationalised to reflect concessions made by witnesses in cross-examination before the current tribunal. The experts, who are likely to have produced joint statements, are, I suspect, unlikely to change their views materially. There has already been substantial disclosure and one suspects that little if any further disclosure would be required. Although, undoubtedly there will be substantial costs in pursuing the arbitration before another tribunal, the "extra over" cost compared with a remission to the current tribunal will be relatively insubstantial in the context of claims and cross claims which run to nine-figure sums. I would very much doubt for instance that there would need to be another hearing running to anything like 42 days before the new tribunal albeit that I can see that there would be more hearing time required with the new tribunal compared with the old tribunal being re-deployed.
    (e) I would also very much doubt that the current tribunal, having probably not considered in any detail the evidence relating to the delays on the project and the responsibility for such delays for two years or more (to date), will have any significant recall of that evidence. Given the probability that any re-hearing and re-consideration of the evidence will not happen for some months yet, the eventual time lapse after the giving of the evidence will be closer to 3 years. If, of course, appeals are pursued, depending on the timing of the appeal, that time lapse may edge closer to 4 years delay. As the parties know, I have given permission to appeal to both sides both in respect of the first and this judgment.
  38. Although I have not named the arbitrators, these judgments are not intended to be a reflection on their general competence or integrity.
  39. Costs

  40. The position of Y in relation to costs is that it has succeeded in successfully challenging the award and secured the setting aside which it argued was the appropriate remedy. Z's position is that it succeeded on 4 of the 6 Grounds originally advanced (one Quantum Ground was abandoned by Y) and that, although this might be a case for an issues based order, the most appropriate order is no order as to costs.
  41. There can be no doubt that Y has overall been successful on this application. The general rule (CPR Part 44.2) is that the unsuccessful party will be ordered to pay the costs of the successful party.
  42. An issues based cost order would create substantial difficulties for a Costs Judge. Leaving aside the Quantum Ground which was abandoned well before skeleton arguments were exchanged, there was a clear overlap between the Liability Grounds and between the Quantum Grounds. In relation to the Liability Grounds, even if the only ground pursued had been Liability Ground 2, the parties would still need to have addressed the Court, at least as a matter of background, about the argument raised in Liability Ground 1. Similarly, the points which were the subject matter of Quantum Grounds 1 and 2 would need to have been explained to the Court at the very least to explain the tribunal's reasoning in getting to a cost basis for the unjust enrichment claim.
  43. In my judgment, it would be impractical to make an issues based disposition and it would be wholly inappropriate and unfair to make no order as to costs in the alternative because that simply does not begin to reflect the overall outcome.
  44. However, within the submissions of Counsel for Z, there is a legitimate kernel of a good point which is, essentially, that at least some time and cost must have been incurred by Z in dealing exclusively with issues which Y either lost or abandoned. I cannot see that a fair allowance for this could reasonably exceed 20% to allow for Y not recovering its costs and for Z's costs of and relating to such issues. I therefore propose to order that Z should pay 80% of Y's costs of these proceedings. Assessment will have to be by way of a detailed assessment, as is common ground.
  45. Y seeks payment of an amount of costs, based on its (very summary) bill of costs submitted to the Court. This totals £364,977.78. Although in purely monetary terms, this represents a small proportion of the amount in issue (some £185m) and is not in that sense disproportionate, it still seems to be a very large sum for what was involved. 756 hours of solicitors' time were deployed, including 152 hours of trainee and paralegal time. 4 Counsel (2 QCs and 2 juniors) were deployed. One needs to bear in mind that all (or almost all) Counsel and solicitors for Y were, so far as I am aware, involved with the arbitration and would have had a very detailed working knowledge of the case and the arguments, albeit that such knowledge was possibly dampened by the lapse of time between the closing submissions and the award. In considering an interim payment on account, CPR Part 44.2(8) now requires the Court where a detailed assessment is ordered to order the paying party "to pay a reasonable sum on account of costs unless there is a good reason not to do so". There is no good reason in this case. In fixing an amount, the Court has to identify a figure which broadly might be the lowest reasonable amount which might be recoverable on the detailed assessment. That is necessarily going to be an approximation and, indeed, it may turn out to be substantially lower than the Costs Judge, having heard all the arguments and justifications advanced on the detailed assessment, may ultimately fix. The object of an interim payment on account is obviously to compensate the payee party for its costs and at least to make a substantial contribution towards what its final costs entitlement may prove to be.
  46. Doing the best that I can (and with a vestigial bill of costs it is difficult), I start with the figure of £364,977.78; if Y was entitled to 100% of its costs on a standard basis, allowing for both proportionality (based on the exercise upon which Y embarked) and the likely detailed assessment which could well reduce the costs by anything up to 1/3, I would have allowed 50% of that total. However, as I have reduced Y's entitlement to 80%, the net entitlement to an interim payment on account will be 40% of the total, namely £146,000 (which is a rounded figure).
  47. Decision
  48. The award will be set aside for resolution by a different arbitral tribunal. Z will pay 80% of Y's costs of the proceedings, to be assessed on the standard basis. Z shall pay Y by way of an interim payment on account of costs £146,000.


  49.  


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2015/311.html