Contesting an arbitration award

Here is a glimpse at an arbitration case. Often enough this page talks of teenage adjudication. It’s only 14 years old. But the grandaddy of them all is arbitration. Bigger, wiser, but some of the arbitrators are creaky, grumpy old men. That’s not to say that the arbitrator in this case got it all wrong. Only the loser said so. He went to the High Court to get the match result set aside.

R Russell Brickwork is a building contractor in Newport, Gwent. The work on a residential property for John Lavender was fair size. The dispute focused on the claimed final account of £550,000. The arbitration was a close run affair. Claims and counter claims ran hither and thither. The result was an arbitrator’s award that Mr Lavender was to pay the net sum to the builder of a mere £7,496, plus interest.

Now then, a close outcome like that makes both parties a fraction excited, or rather nervous. Why? Because the arbitrator then goes on, in a second award, to decide which party will bear what burden of legal costs and what portion of the arbitrator’s fees. One of the differences between arbitration and adjudication is that the arbitrator has, ordinarily, the power to decide which party will compensate the other as to the costs of lawyers and experts and the copying machine. So, the worry for Mr Lavender was that he was the net loser, and the basic rule is that “costs follow the event”. Got it?

Mr Lavender therefore would have liked to have a result where it was he who was paid by the builder instead of the other way round, even if the amount was modest. Mr Lavender went on the rummage. He said the arbitrator made three mistakes. If that was true, the money ought to flow to, not from, Mr Lavender.

The worry for Mr Lavender was that he was the net loser, and the basic rule is that ‘costs follow the event’. Got it?

First mistake, it was argued, was that the arbitrator decided that works on a gate were not part of the building contract, but then the award brought in £9,000 for the gate to be paid by Mr Lavender. Second, the arbitrator said the tarmac driveway in the contract was defective but only ordered the builder to forfeit £12,000, or 50%, because Mr Lavender had responsibility. Third, the builder admitted responsibility for remedial work on the sewage pump but the arbitrator said the builder was not responsible. It all sounded very odd on the part of the arbitrator - but only if Mr Lavender was right.

We shall never know whether Mr Lavender was right. He bumped head-on into Father Time. Arbitration procedure is governed by statute: the Arbitration Act 1996, together with the parties’ own rules within specified limits. The act says that if you are in the brave mood to challenge an arbitrator’s award, you have to do so in the High Court within 28 days of the date of the award. But Mr Lavender made the move 45 days late.

And what first caused him to run late is not very unusual. On 17 February, the arbitrator said in an email: “My award is being signed today. Here is my bill. Please pay and then I will release the award.” That approach to getting paid is precisely in accordance with the Arbitration Act. Parliament wrote that in - it’s called a lien - because it knew that some people turn nasty when the arbitrator declares who has lost. Rather, the arbitrator says his award is signed and ready and time immediately starts ticking. No one knows what the result is in the award - it is not the arbitrator’s job to give a nod and a wink to the loser that he is the loser and that he might have grounds for appeal. But not many think of time running from then.

It is not the arbitrator’s job to give a nod and a wink to the loser that he is the loser and that he might have grounds for appeal

It so happens the builder immediately paid up half the arbitrator’s fee. Mr Lavender paused in issuing his £13,000 share, but time didn’t stop running. The 28 days came and went and he had still not paid. So the arbitrator hung on to the award. Mr Lavender nevertheless came to court seeking an extension to the 28 days. I confess, I heard myself mutter, “thin chance”.

The judge, who heard the application, set out all the rules for allowing an extension of time. But it’s a difficult one to drive home. I have seen a case where, just one day late, the court said no extension. In Mr Lavender’s case, the bottom line was that he had difficulty raising the £13,000. That’s not a good excuse. He is taken to know that he has to pay up the arbitrator’s fee in exchange for the award. It’s much the same when buying socks and pants from Marks & Spencer. No money, no socks, no pants.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple