| Date | 14 December 2005 |
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| Judgment | City & General (Holborn) Ltd v AYH plc, TCC 29 September 2005 |
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| The Issue | Resolving multi party disputes in arbitration. |
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| Implication |
The
court will give a purposeful interpretation to joinder provisions
which allow for the same arbitrator to be appointed in related disputes
to avoid a multiplicity of proceedings which might lead to excessive
costs and inconsistent judgments. |
printConstruction and engineering projects can occasionally give rise to complex multi party disputes. Where separate dispute resolution proceedings have to be conducted between individual parties to a project, this can give rise to excessive costs and inconsistent findings. It is for this reason that many of the standard forms of construction contract attempt to allow joint arbitration proceedings where the disputed issues between three or more parties have a measure of commonality. Typically however, these arrangements are very difficult to operate in practice. Indeed the attempts of the civil engineering industry to bring employer, main contractor and sub-contractor disputes together was examined by the House of Lords in 2000 in the case of Lafarge Redlands Aggregates v Shepherd Hill Civil Engineering. It was held that, despite the wording of the contracts, a sub-contractor would be free to commence its own separate arbitration with the main contractor, without being forced to join the employer into the proceedings, if the main contractor did not progress with reasonable speed the dispute resolution mechanisms under the main contract. A rather different situation was examined more recently in the case of City & General (Holborn) v AYH where the court had to consider the appointment of a single arbitrator to deal with related disputes arising both under the main contract and arising under the professional appointments of the project manager and quantity surveyor. City & General had contracted with Kier to carry out refurbishment works at the site of the former Patent Office Library in London. The contract was in the JCT Standard Form with some contractor design for a contract sum of approximately £12 million. City & General had also engaged AYH to act both as project manager and quantity surveyor for the development under two separate deeds of appointment. Unfortunately the project did not proceed smoothly. Completion was not achieved until 80 weeks after the due date. Kier was granted substantial extensions of time and the cost of the works escalated to the extent that Kier had been paid some £18.5 million but was claiming a further £11 million. These matters became the subject of disputes between the parties. Some of these disputes had been addressed in three adjudications between Kier and City & General. In due course, however, City & General issued a notice of arbitration against Kier encompassing the entire range of disputes between the parties under the contract, including the value of the works, entitlement to extensions of time, loss and expense and delay damages. An arbitrator was duly appointed to decide those matters. Prior to commencing arbitration with Kier, City & General had also written to AYH setting out its view that AYH had failed to exercise all the reasonable skill, care and diligence to be expected of a qualified quantity surveyor and project manager. Referring to clause 17.2 of AYH's deed of appointment, City & General notified AYH that the disputes between them should be referred to the same arbitrator as had been appointed in the arbitration with Kier. Clause 17.2 provided that "if the dispute to be referred to arbitration under this deed raises issues which are substantially the same as, or are connected with issues raised in related disputes . . . the dispute under this deed shall be referred to the arbitrator appointed to determine the related dispute". This provision was based upon clause 41 of the JCT 1980 standard form. AYH challenged City & General's rights to bring about an arbitration in this manner, and the matter came before Mr Justice Jackson in the Technology and Construction Court. AYH contended that certain of the complaints raised by City & General were not caught within the arbitration clause of their deeds of appointment and more significantly, that there was an insufficient convergence of issues in the two arbitrations to allow clause 17.2 to be triggered. Justice Jackson concluded that it would not be necessary for every single issue in dispute with AYH to be substantially the same or connected with an issue in the dispute with Kier. The real question was what proportion of the issues in the two arbitrations must converge in order to trigger clause 17.2. To answer this it was proper to have regard to the commercial purpose of the contract clause. This was to avoid a multiplicity of proceedings which would generate excessive costs and carry the risk of inconsistent findings. With this in mind the threshold of clause 17.2 should not be set too high. It was not necessary that the majority of issues in dispute with AYH should be the same or connected with the issues in dispute with Kier. It would be sufficient if a material portion of the issues were the same. Since it was clear that a material portion of the issues in the arbitration against AYH were substantially the same as or connected with the issues in the arbitration with Kier, clause 17.2 was triggered. In consequence the court appointed the arbitrator who was already engaged to deal with the Kier dispute as arbitrator in the proceedings between City & General and AYH.
CJ-0549
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