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Opinion - Puzzles for
Arbitrators
Here is Puzzle 11 in a series of puzzles for arbitrators and aspiring arbitrators developed by Peter Horne. It deals with the Arbitrator's powers to deal with costs, especially in the situation where an adjudication on the disputes has previously occurred.
Answers or comments would be most welcome from everybody, but especially those more senior members who have had experience of awarding costs in arbitrations.
Tight Developers and Worst Builders are in a contract that contains an arbitration clause. It also contains an adjudication clause, which, inter alia, provides that the decision of the adjudicator must be complied with but is only a temporary measure until the matter has been re-heard in arbitration. Note that the arbitration is not an appeal; it examines the case anew.
Worst Builders are unhappy at the amount they have been paid and claim £100,000. Tight Developers say that they have paid all that is due. Worst Builders refer the dispute to adjudication. The Adjudicator decides that Tight Developers should pay Worst Builders £50,000, which they do. Worst Builders are not satisfied, think that the proper sum is much nearer £100,000, and therefore commence arbitration. You have been appointed Arbitrator and find that the sum due was actually £40,000, which requires Worst to repay Tight £10,000. In their pleadings, Worst Builders have asked for their legal costs of the adjudication in any event. In addition both parties have included the usual paragraphs for reimbursement of costs in the arbitration. The parties have asked that you deal with all matters other than the quantification of costs in this Award.
How would you deal with the matter of liability for the costs, both of the arbitration and of the previous adjudication?
Now try something a little more difficult. Tight Developers enter a counterclaim in the arbitration, which they had not done in the adjudication, and which the Parties agree you should hear. You find that Worst Builders are due £80,000 on their claim and Tight Developers are due £40,000 on their counterclaim. The outcome is the same as before, i.e. you have awarded a net £40,000 to Worst, which has, because of the previous adjudication, resulted in an actual £10,000 repayment by Worst to Tight. However you have done so for different reasons.
Again how would you deal with the matter of liability for costs in this case?
Peter Horne