LAW COMMENTARY by Derek Jerram

The appellant was engaged as main contractor under a JCT 80 form of contract, Private with Quantities. The defendant subcontracted for mechanical and electrical services under a contract which was substantially the NFBTE Green Form, 1963 edition as revised in 1978. Following completion, there were disputes under both the main contract and the subcontract. Some of the main contract claims included claims made by the subcontractor in its arbitration against the main contractor.

The arbitrator held that itemised claims, which included sums claimed by the subcontractor for measured work and loss and/or expense had been proved. The employer went into liquidation without honouring the award. The subcontractor claimed entitlement to recover the sums at issue from the main contractor in the subcontract arbitration. The Official Referee found for the subcontractor, and the main contractor appealed.

Held, dismissing the appeal:

1. Under the JCT forms of contract and subcontract, an arbitrator's award under the main contract directly affected the rights and liabilities to parties to the subcontract. The contract was not intended to protect the main contractor from the subcontractor in the event of the employer's insolvency.

2. The sums claimed in the subcontract arbitration had been claimed on the basis that they should have been properly ascertained as being due by the architect, and included in his certificates. The arbitrator had reviewed the certificates and the architect's decisions, and had awarded amounts which should have been the subject of certificates. If an arbitrator made an award in a main contract arbitration of amounts which should have been certified for subcontract works, those amounts fell to be treated as sums duly certified, and, in that respect, the award was binding in the subcontract arbitration.

Co-Operative Wholesale Society Ltd (t/a Csw Engineering Group) v Birse Construction Ltd. : CA; 9 July 1997. Bliss 21 July 1997.

An arbitrator who, pursuant to a request made to both parties to the arbitration, obtained payment of interim fees from one party only, failed immediately to repay them and continued to act as arbitrator, had not created an appearance of bias and thereby misconducted himself so as to justify his removal under section 23(1) of the Arbitration Act 1950.

The Court of Appeal dismissed the Plaintiff's appeal against the order of the judge of the Chancery Division (The Times, December 7, 1995) whereby he dismissed Mr Turner's motion against Stevenage Borough Council for an order that the arbitrator appointed in an arbitration between them, be removed on the ground of misconduct pursuant to section 23(1) of the Arbitration Act 1950.

LORD JUSTICE STRAUGHTON said that the arbitrator was appointed on February 15, 1993 to conduct arbitration proceedings in relation to a rent review between Mr Turner, the tenant, and the council, the landlord of a lock-up shop. The total amount in dispute was £7,800 and one might have expected that the arbitration would be concluded within three months with modest expenses and costs.

That was not to be. After five preliminary hearings and much lengthy correspondence the arbitrator wrote to the parties in July 1993 warning them of the consequences of the protracted proceedings.

Eventually, on May 10, 1994 the arbitrator wrote to the parties' solicitors requesting an interim payment of £3,231.25 fees and expenses from each party. The tenant's solicitors objected to the request but the council sent a cheque to the arbitrator for £3,231.25 which he banked. Eventually, on 9 September, 1994 the arbitrator returned a like amount to the council. That episode resulted in the application to remove the arbitrator.

The judge had held that the arbitrator had made a proposal or request for payment and not a demand and declined to hold that that was misconduct. Nor did he find any misconduct in what the arbitrator did in accepting the cheque from one party and banking it.

Turner v Stevenage Borough Council, Times Law Report 27 March 1997