| Date | 27 June 2001 |
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| Judgment | Groundshire -v-VHE Construction TCC 15 February 2001 |
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| The Issue | Consideration of the procedures required to overturn an arbitrator's award. |
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| Implication |
A final decision may be given more quickly in arbitration than would be the case with other forms of dispute resolution including litigation. |
printWhilst adjudication has taken centre stage in the process of resolving construction disputes, arbitration remains important as a means of obtaining a final determination of disputed matters. A policy of the 1996 Arbitration Act was to make it more difficult to question the decisions of arbitrators. There is no power for the court to intervene where the complaint is that the arbitrator has made an error of fact. Challenges based upon errors of law or procedure may only take place if the complaining party has passed through a series of procedural hoops. First of all there is no right of appeal without permission being granted by the court and indeed the Act envisages that the parties may exclude by agreement the right of appeal altogether. In determining whether leave to appeal should be granted, the court will enquire as to whether all available steps for recourse to the arbitrator have first been exhausted. Leave to appeal will then only be granted if the court is satisfied that the determination of the question will substantially affect the rights of one or more of the parties. In addition the application for leave to appeal must be brought within 28 days of the award. If it hears an appeal the court may either confirm the award, vary it, remit the award to the arbitrator for reconsideration or set aside the award in whole or in part. The grounds for taking such courses of action are carefully set down in the 1996 Act and described as "serious irregularity" in Section 68 of the Act. These include a failure by the arbitrator to comply with the requirements of Section 33 of the Act which place a general duty on the arbitrator to follow the rules of natural justice. Other factors which would constitute "serious irregularity" include where the arbitrator has exceeded his powers or failed to conduct the proceedings in accordance with a procedure agreed by the parties. Prior to drafting the 1996 Act the Government's Advisory Committee stated "having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice. In short Section 68 is really designed as a long stop only available in extreme cases where the tribunal (arbitrator) has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected." These matters were examined recently in the case of Groundshire -v-VHE Construction. A dispute had arisen out of a land reformation scheme at a site in Wednesbury, West Midlands. A spine road was to be reconstructed over reclaimed and stabilised land at the site. The site had been the subject of intensive industrial use for over 150 years with the main activities including mining, quarrying, iron and steel manufacture, engineering and indiscriminate waste tipping. The project involved massive earth works including dealing with the instability associated with coal mine seams under the site. Groundshire were sub sub-contractors engaged for the drilling and grouting of mine shafts. The contract documents had identified 74 mine shafts on which work was to be done. In fact, 1137 needed to be worked on. Moreover, it had been intended that works were to be treated from ground level, but by variation treatment was required from the basement of the shaft. These changes led to claims for additional payments and a series of disputes which became the subject of an arbitration. Unhappy with the arbitrator's award, Groundshire sought and obtained leave to appeal. Applying the terms of the 1996 Act, Groundshire set out its shopping list of remedies. The award, it claimed, should either be set aside in whole or in part or alternatively declared to be of no effect on the ground of serious irregularity. Alternatively the arbitrator should be removed. Failing that, the award should be remitted back to the arbitrator for reconsideration. Its primary complaint constituting serious irregularity was that the arbitrator had failed to act fairly and impartially and had failed to give Groundshire a reasonable opportunity of putting its case, in breach of Section 33 of the Act. In considering all the evidence, His Honour Judge Bowsher noted that removal of the arbitrator should only be ordered where there were real reasons for loss of confidence in that arbitrator. Where something had gone seriously wrong the first remedy of choice would be that the award be remitted to the arbitrator for reconsideration rather than it be set aside or declared to be of no effect. Moreover, the court would have to be satisfied that substantial injustice had been or would be caused to the applicant. Judge Bowsher commented that the test of substantial injustice is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Groundshire complained that the arbitrator had failed to give the parties proper notice of the approach he was taking to the disputed matters to enable it to make a full representation. It also argued that the arbitrator had erred in his interpretation of the contract valuation clauses and had used his own expertise in dealing with the valuation without giving the parties the opportunity to consider his approach. Reviewing each of these points Judge Bowsher concluded that the complaints did not give rise to "serious irregularity" within the meaning of the Act. The appeal was accordingly rejected.
CJ-0125
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