9th September 1997

Dennis James, Roderick O’Driscoll, Francis Miller, Duncan Shaw, John Timmons and John Stockley.

In this first session, Roderick O’Driscoll took the role of prospective arbitrator, with Francis Miller and Duncan Shaw as advocate and Managing Director on the Claimant Sub-contractor’s side, and John Timmons and John Stockley performing the same roles for the Respondent Main Contractor.

Roderick O’Driscoll outlined the aim of the first part of the Mock Arbitration as being to explore, in the light of the new provisions of the Arbitration Act 1996, what powers and procedures the parties and the arbitrator needed to agree about even before the arbitrator accepted the appointment. There were optional and default powers for the arbitrator in the Act (i.e. if agreed by the parties or ‘unless otherwise agreed’) and an arbitrator could be faced by unexpected difficulties if the parties came to an agreement about these after the start of the arbitration without consulting him - indeed his position could become quite untenable to the point of wanting to resign, with all the problems which that would open up.

The arbitrator-to-be began the ‘pre-preliminary’ meeting by stating that there were a number of items he wanted to agree formally with the parties before accepting the appointment: under the Arbitration Act 1966 s33, he had a duty to act fairly and impartially between the parties, to adopt procedures appropriate to the dispute, and to avoid unnecessary delay and expense. His ability to discharge these duties might be prejudiced if the parties agreed later to vary his powers (as they could do under the Act for non-mandatory provisions), and so he was asking them to agree them now where possible, and to agree not to vary them without his consent.

At this point, the Claimant’s advocate queried whether it was appropriate to consider the arbitrator’s powers at this stage, as they had already been set out in the arbitration procedures attached to the Contract between the parties; he would also just like to point out, with the greatest respect, that the edition of the procedures on the table had been superseded in the last two months. The arbitrator-to-be replied that he considered a clear agreement on his powers was essential in the light of the new Act.

The prospective arbitrator then clarified his qualifications, as a lawyer with limited technical knowledge; he therefore proposed to appoint a full-time expert to assist him.

After confirming that the dispute had been properly referred to arbitration, the arbitrator-to-be asked the parties’ representatives to give a brief outline of the items in dispute. This proved not to be as straightforward as might have been expected, and in the audience we wondered if the Claimant’s representative was playing for time when he expressed concern about being asked questions before the arbitrator had accepted the appointment. After details of the main contract, sub-contract and sub-sub-contract had been recited, all agreed, after some proactive guidance from the (still prospective) arbitrator, that the Claim centred on the causes of delay and whether this had resulted in losses to the Claimant, not on whether delay and disruption had occurred. There was a Counterclaim from the Respondent Main Contractor, for losses equalling the LADs deducted by the Employer.

Three-quarters of the time allotted for the whole meeting had already passed and less than half the pre-appointment issues had been dealt with (which reassured the audience about the realism of the mock arbitration).

With his new s33 and s34 powers and duties, the arbitrator-to-be took control of the proceedings and hurried on to deal with matters which he wished to see included in a pre-appointment agreement between the parties, viz.:

On the last item, the Claimant proposed a limit of £5000, which was unexpectedly low for a claim of £1 million. Why so low, we in the audience wondered - did this show a lack of confidence in the strength of the claim? The Respondent took a different view as there were substantial sums involved and possibly a long hearing, and so there was no agreement on this point and it had to be left to a later day (remember that the arbitrator had still not been appointed, and so did not yet have any powers).

The pre-meeting looked as though it might just be coming to an end when the Sub-sub-contractor (Bestbuild Piling Ltd. - no relation to the Main Contractor Respondent, allegedly!) entered and demanded justice for their claim which they considered the Claimant Sub-contractor had rejected. The arbitrator set out the joining procedure, that they had no entitlement to do so, but if they started a separate arbitration with the same arbitrator, the parties could later agree to consolidation of the two disputes into one reference (s35).

By now time was up and the meeting was brought to an end. The first session of the mock arbitration had proved only too realistic, with time overrunning, little agreement between the parties, their representatives looking for every wrinkle and ploy to exploit on their clients’ behalf, and the arbitrator faced with immediate decisions to make on everything.

14th October 1997

Dennis James, Peter Horne, Francis Miller, Peter Long and John Stockley.

Dennis James started the second session of the Mock Arbitration by explaining why there was a new arbitrator. The first appointee, Rod O’Driscoll, had resigned shortly after the preliminary meeting: there had been concern about whether, as a lawyer, he was suitably qualified to decide complex technical issues (in reality, his wife had been ill and he had increasing work commitments). For the first time, the parties had come to an agreement, had accepted the resignation, and had appointed Peter Horne as a replacement.

Francis Miller represented the Claimant as before, but he was on his own this time as the Company’s Managing Director had gone on holiday to the Bahamas (of course no one, least of all the arbitrator, inferred that this indicated affluence). For the Respondent, Peter Long was the new representative, with John Stockley continuing as Managing Director.

The arbitrator began by reporting on the outcome of a matter raised at the preliminary meeting - a request for consolidation from the Sub-Sub-Contractor, who was not a party to the reference. All had gone well with the Claimant agreeing, providing the Employer was also brought in, and the Respondent agreeing, providing the Engineer also joined. The Engineer was amenable, providing his insurers supported him, which they would not, and in the meantime the Employer was found to have gone into liquidation. So the Respondent would not agree, and the Claimant would not agree, and after many weeks and twice as many letters, the Sub-Sub-Contractor was back where he started - nowhere.

The arbitrator moved on to the matters listed in his agenda for the meeting. He would hear representations from the parties on the first four items, about which, as he was somewhat indecisive, he would invite the audience to help him make up his mind. There were then two remaining items about which he had already decided what directions he would be giving to the parties.

The Respondent’s representative applied for an order from the arbitrator directing the Claimant to provide security for their costs. He alleged that the Claimant company had made losses for the last three years and would not be able to pay the Respondent’s costs, should the Claim fail, and he suggested that security for £100,000 was appropriate.

The Claimant replied that the claim was genuine, and that the Respondent was merely trying to frustrate their efforts to recover what was due. The Respondent had quite happily entered into contract with them a year earlier, without requiring security, and nothing had changed since then.

Comments from the audience indicated a reluctance to grant the application: the difficulty of paying had been established, but this was the first hurdle only, and the applicant had to show that there was something special in the situation to merit the arbitrator exercising what was a discretionary power rather than a duty. As to the amount of security requested, this was felt to be larger than appropriate at the current stage of the arbitration, although costs might quickly mount up when the hearing started.

The Claimant applied for recoverable costs to be capped at £5000 (on a claim of £1 million), on the grounds that virtually all their work had been done before going to arbitration, with the result that they faced only limited further costs.

At this point, the Respondent’s Managing Director interjected a sharp comment on the Claimant’s behaviour and the strength of their case. The arbitrator looked to the audience for advice, and was fortunate to find a learned judge who was obviously used to dealing with such a situation: be polite but firm, she said, and point out that they have a representative, through whom they should speak.

The Respondent opposed the Claimant’s application, as the reason for the Claimant wanting to limit recoverable costs was his inability to pay if he lost. The parties’ costs would be far greater than the limit proposed, particularly when it came to inspection and discovery, and capping recoverable costs would prejudice the Respondent if he won.

Comments from the audience indicated that the arbitrator must consider capping recoverable costs as part of the s33(b) duty to avoid unnecessary expense, but this must be done at the appropriate point in the Arbitration when the procedures to be adopted were known. Capping would also be more appropriate where the arbitrator was taking an inquisitorial role rather than adopting court-style procedures.

The Claimant’s representative proposed that the arbitrator should take an inquisitorial approach, as allowed for in s34 of the 1996 Act. He hoped that the arbitrator would take the lead in asking questions and finding out the truth, thereby cutting down the parties’ work and reducing their costs. This was opposed by the Respondent, as being contrary to the rules of natural justice, for instance leading to questions being asked outside the scope of pleadings and to the arbitrator making findings in conflict with experts’ opinions.

One member of the audience queried whether a power set out in the Arbitration Act could realistically be viewed as contrary to natural justice. Another resolved this by pointing out that, even if the power was in the Act, the arbitrator had to use it with discretion: there was an overriding duty to be impartial and to adopt appropriate and expeditious procedures. The final comment related to the use of ‘inquisitorial’, with its historical connotations of injustice; this was not the wording in the Act, and ‘investigative’ would sound more positive and contemporary.

The Respondent’s representative alleged that many files, which must exist, were not included in the Claimant’s list, especially invoices. He applied for an order for specific discovery, for the Claimant to disclose the documents. He also questioned the authenticity of certain other documents and requested supporting affidavits. The Claimant offered full co-operation, after all theirs was a genuine case, and they were quite happy with full discovery, whereas the Respondent, who had not yet submitted their list, knew it would damage their cause.

From the audience, the request for supporting affidavits was rejected out of hand, and further details were asked for in relation to the application for specific discovery - what documents were sought and why were they relevant? The onus was on the Respondent to give the arbitrator as much information as possible, to enable him to make a decision and give an order. It was also noted that it was unusual for the Respondent to be seeking specific discovery: normally the Claimant was after disclosure of documents for which the Respondent claimed privilege. In the case of claims of privilege, it was felt that a Court would usually look at the documents before deciding whether to order disclosure.

The arbitrator went on to announce a number of decisions he had taken about the hearing. In view of the inquisitorial approach he was adopting, he had decided to restrict its length to one-and-a-half hours. Witness statements would be taken as evidence-in-chief, and each side would have thirty minutes in total for all cross-examination and re-examination. The final half-hour would be allocated for the arbitrator to report on issues he had dealt with inquisitorially. A written closing statement would be required from the Claimant within three working days, with the Respondent’s to follow within a further three days. With respect to witness statements, these must be signed and exchanged twenty-one days before the Hearing, and the arbitrator would then inform any witness who was not required to attend. Written opening statements and bundles of documents must be submitted seven days before the Hearing.

Whilst the Claimant’s representative accepted the arbitrator’s proposals, the Respondent’s representative objected to the continued proposal for an inquisitorial procedure, as he wished to call expert witnesses and he considered that he should be able to call the witnesses he wanted. In reply, the Claimant pointed out that, with the parties not agreeing on the procedure for the hearing, it was up to the arbitrator to decide, as allowed for in s34 of the Act. The arbitrator, ever quick in decision-making, said his order would follow after the meeting.

The arbitrator told the parties that he was not prepared to let the programme drift, unless there were extremely good reasons. If any submissions were not on time, he would issue an automatic peremptory order; a delay of three days or more would lead to that submission being ignored.

To one member of the audience, this seemed like a refusal to hear relevant evidence. For another, there was only a duty to hear sufficient relevant evidence - a party had to be allowed a reasonable, but not unlimited, opportunity to present their case; the Act would support a draconian procedure providing the time allowed was adequate.

The arbitrator went on to sum up his decisions (based on the audience’s reaction, in the best Roman tradition):

11th November 1997

Peter Horne, Peter Long, Francis Miller, James Mumford, and John Stockley.

For the third session of the Mock Arbitration, the arbitrator and the representatives remained as before (Peter Horne, Peter Long and Francis Miller). Whilst the Claimant had a new Managing Director (James Mumford), the Respondent’s (John Stockley) had not changed, nor had his manner of contributing to the proceedings, as was to become apparent later.

Peter Horne, as arbitrator, again asked for the audience’s help: he would be faced by situations requiring decisions. Some of these might be of his own making, perhaps through not having given the right orders earlier in the proceedings. But he could not put the clock back, and, as arbitrator, he would have to give a decision.

The arbitrator began the Hearing by confirming that he had received all the witness statements, the Hearing Bundle, and the parties’ opening statements. Witness statements would be taken as evidence-in-chief once they had been sworn. He invited the Claimant’s representative to call his first witness, the Claimant’s Managing Director, and he then asked the witness to take the oath. The witness declined, and also refused to affirm, as he considered both to be inappropriate for informal proceedings such as arbitration. He offered instead his word as an honourable man, at which point the Respondent’s representative objected and asked the arbitrator not to admit the witness’s evidence.

For the audience, the arbitrator’s dilemma centred on whether to admit evidence from a witness who was, at best, uncooperative, and who would perhaps give evidence knowing it to be untrue. The alternative was to refuse to admit the evidence, with the possibility of a later application to the Court for the award to be remitted or set aside (s68) or even for the removal of the arbitrator (s24(1)d). If the evidence was admitted, should the witness’s behaviour affect the weight placed upon it by the arbitrator? Eventually the arbitrator, guided by the audience, decided to admonish the witness, admit his evidence, and then to assess in the usual way what weight to give to it.

At this point, it all proved too much for the Respondent’s Managing Director. He stated, with some feeling, that they had made a good offer months ago which the Claimant should have accepted; it should never have come to a Hearing, and the other side should pay all the costs. The arbitrator, for his part, said that he was not prepared to continue the Hearing with such interruptions, and he asked the Respondent’s representative to remove his client. The representative objected, on the grounds that he needed his client present as a witness, and said that he would ask him to keep quiet in future. The Claimant’s representative added his contribution, asking that there be no further compromise of their position by earlier offers being revealed.

The arbitrator turned to the audience: he wanted to avoid further interruptions and to remove the Respondent’s Managing Director - did he have the power to do so, and if so, should he and how? The view was that the witness should be allowed to stay: the arbitrator had a duty under s33 to act impartially, and this would normally include allowing the Respondent to hear the Claimant’s evidence. At the same time, the parties had a clear duty under s40 to co-operate; this should be pointed out, with a warning of the implications for the award of costs if the arbitration proved abortive due to the behaviour of the Respondent’s witness.

On the question of one side revealing previous offers, one member of the audience wondered whether this might just be a fiendishly clever trick by the Respondent and his representative to delay proceedings unjustifiably. But making offers to settle was thought to be quite normal - indeed it would be unusual if there had been none at all. It was also pointed out that, while it was quite in order for the Respondent to reveal his own offer, it would not have been acceptable for the Claimant to have revealed it if made without prejudice.

For the audience, the revelation of an offer was not evidence or relevant, and the arbitrator should put these matters out of his mind and proceed. If he was concerned about a later application to the Court for removal on the grounds that he was biased, he should straightaway ask the parties whether they believed that this was the case; and, if they did, he should call their bluff by suggesting that they go to the Court immediately rather than face the loss, under s73(1), of their right to object.

The arbitrator moved on quickly: all the Claimant’s evidence had been given and the Respondent’s Managing Director had been sworn in and his witness statement had been given as evidence-in-chief. The Claimant’s representative stood up to say that he did not propose to cross-examine as the Managing Director as his evidence was just hearsay and he was sure that the arbitrator would dismiss it as rubbish, a proposition which he asked him to agree with there and then. The Respondent’s representative objected strongly and invited the arbitrator to accept his Client’s evidence. In reply to this, the Claimant’s representative asked for the tribunal’s consideration as they were only lay people on his side whilst the Respondent was represented by a lawyer who knew how to exploit arbitration law and procedure to his client’s advantage.

The arbitrator stated that he had not given earlier directions about applying the rules of evidence, and asked the audience for guidance as to whether, using his power under s34(2)(f), he should decide to reject the Managing Director’s evidence. The arbitrator was concerned that there would be a free-for-all if he did not apply any rules, and that hidden hearsay could easily creep in with witnesses giving apparently direct evidence which was in fact second-hand, e.g. based on site diaries. For the audience, any concern was lessened by the previous exchange of witness statements giving the other side ample notice of the evidence to be given. It was best to admit the evidence, even if it was hearsay (this was now allowed in Court under the Civil Evidence Act 1995 if the proper procedures were followed). The status of the evidence would become clear in cross- examination, and the arbitrator could later weigh all the evidence together. A final comment recommended healthy scepticism of laymen’s claims of legal naivety? - plenty of surveyors were very expert at the niceties of arbitration law and procedure.

The Respondent’s witnesses of fact had now all been heard, and the Respondent’s expert had been called and had given his evidence. The Claimant’s representative had been cross-examining him at length, but had so far only got as far as to denigrate his credentials and to call his expertise into question. At this point, the Claimant’s representative asked to make a submission: it was quite clear to him that the expert was partial, and he requested an indication from the arbitrator as to whether he agreed. Not surprisingly, perhaps, the Respondent’s representative objected, as in his view the arbitrator should listen to and weigh up all the evidence put before him.

For the audience, this raised the general question of whether the arbitrator should indicate the direction in which his mind was going. Judges had at times criticised arbitrators for being too reticent and allowing evidence and argument to continue much too long, with inevitable implications for the length of hearings and for the parties’ costs. It was felt that an expert’s partiality mattered more where the tribunal did not have expertise, and that anyway this was the wrong time to ask the arbitrator to make such a decision. There was also some questioning of why the Claimant’s representative was effectively asking the arbitrator whether he should be cross- examining the witness; that was a decision for him to make, not one on which he should be seeking guidance from the arbitrator.

The arbitrator then brought the Hearing to a close: the Respondent was to submit a written closing statement within three days, and the Claimant likewise within a further three days. The arbitrator was going on holiday in six weeks, and he would publish his final award before then. The Claimant’s representative was concerned about the effect this holiday was having on the arbitrator, as he wanted to address him on costs (unless, of course, he was going to find in their favour); alternatively, the award could be interim. The arbitrator said that he had already directed at the Interlocutory Hearing that his award would be final except as to costs.

This brief exchange raised many issues, of which the audience concentrated on how to deal with costs when the timetable gave little or no time for the parties to make representations. Suggestions included inviting written submissions, and making a provisional award on costs, allowing the parties the option of a later hearing devoted to costs alone. The discussion ended on the topics that are always raised in this context, previous offers to settle and why an arbitrator might use his discretion to order that costs should not, in whole or in part, follow the event.

The Mock Arbitration had ended. The major new features of the 1996 Act had been illustrated and discussed, with the help of judges, experienced arbitrators and a past president of the Institute. The audience had identified with the arbitrator, constantly keeping at the forefront of their minds his two over-riding duties: to decide the dispute and to be impartial in the manner in which he did so. At times, when the parties thought it suited their interest, they had co-operated, and when they thought it did not, they had tried to exploit any opportunity to their advantage. It was now time to go and the audience left, feeling that in three sessions they had covered the essentials of the arbitration process from preliminary meeting to final hearing.