| Date | 3 October 1996 |
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| Judgment | Lovell Partnerships -v- A W Construction. 2 May 1996 |
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| The Issue | Misconduct of arbitrator using JCT rules for 'documents only' arbitration. |
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| Implication |
Arbitrator obliged to determine fairly the issues which may require oral evidence from witnesses as well as general discovery of documents. |
printThe JCT arbitration rules have received scant praise since their publication and there must have been few occasions indeed when their optimistic procedures and timetables were adhered to without difficulty. The case of Lovell -v- A W Construction tells the story of an arbitrator who manfully tried to struggle with the JCT rules and ended up by being removed by the court for misconduct. Despite arbitration procedures such as the JCT rules, which allow for tight timetables and where considered appropriate 'documents only' arbitration, an arbitrator is obliged to determine fairly the issues put before him. This may require oral evidence from witnesses as well as discovery of documents. The arbitration in question arose out of a building subcontract between Lovell and A W Construction (AWC). AWC commenced arbitration on the grounds that a dispute had arisen in respect of Lovell's failure to make certain interim payments. At a preliminary meeting in front of the arbitrator, the parties agreed that JCT Rule 5, 'Procedure without Hearing', would be used. In addition it was determined that the arbitrator would make an interim award, although exactly what that award should cover was not capable of being precisely defined at that stage. The intention appears to have been that the arbitrator, being an experienced quantity surveyor, would issue an interim award as to the principles of measuring and valuing items in dispute, leaving the parties' surveyors to carry out actual figure work and calculations to arrive at the quantum. A W Construction's statement of case was duly served. It raised issues going into the nature and terms of the contract as well as its execution and included complaints about variations, disruption costs, additional preliminaries and other increased costs. Not surprisingly the solicitors who had by now been instructed by Lovell began to wonder if a documents only approach was appropriate. They wrote to the arbitrator asking for an urgent review of the future conduct of the arbitration. The arbitrator indicated that he would decide this matter once pleadings were closed and would review the case and direct in accordance with rule 5.8, any clarification or further documents or interviews which he considered necessary to decide the matters. Despite this, some weeks later the arbitrator wrote to the parties that the pleadings having closed he was now able to determine many of the matters in dispute from the submitted documents. He advised that he was therefore preparing an interim award dealing with those matters which could be readily disposed of and would issue further directions in accordance with rule 5.8 for any outstanding matters. The interim award was issued three weeks later. It identified for the first time the preliminary issues with which the arbitrator considered that he could deal and disposed of them one by one. Two of these issues involved determinations on correspondence and documentation alone, that oral agreements which Lovell alleged had been made had not been reached. Equally jarring was the arbitrator's approach to the counterclaim. This the arbitrator broke down into five preliminary issues and by reference to the documentation annexed to the statements of the parties' respective cases, he ruled against Lovell on each of these heads on the basis that Lovell had failed to prove the case as to liability, causation and/or loss. At this point in reading the interim awards Lovell and their advisers were probably red with rage. In ruling on all of this, Mr Justice Mance held that the arbitrator went wrong at the issue of his interim award in three connected respects which constituted significant misconduct in the proceedings. First he had failed to ensure that the nature and terms of the preliminary issues were crystallised and communicated to the parties. Had he ensured this, the parties would have had the opportunity to address their resolution before the arbitrator had actually determined them. The second was that the arbitrator had purported to determine by his interim award a number of issues which no-one had previously suggested as fit for determination by an interim award. In particular this applied to the issues raised by counterclaim. Finally his decision to proceed to determine these issues was reached and implemented in the face of Lovell's clear insistence at all material times upon the need for further evidence to be adduced. The arbitrator's misconduct of the proceedings in these respects meant that the award must either be set aside or remitted for consideration in whole or in part. This would have to be linked with the further question of whether the arbitrator should be removed. On this point Mr Justice Mance stated that the legal test was whether a reasonable person would no longer have confidence in the present arbitrator's ability to come to a fair and balanced conclusion on the issues if remitted. In conclusion, he held that what had gone wrong in this case was of such a serious nature that the whole interim award would be required to be set aside and the appropriate course was to order the removal of the arbitrator with a view to the appointment of a fresh arbitrator.
CJ-9633
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