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Bidding farewell to the old school of costly construction arbitration

legal matters

I have commented before upon the dramatic reversal of reputation enjoyed by litigation and arbitration respectively, as the appropriate arena for construction disputes. In the past decade or so, construction arbitration has shaken off the reputation for delay and expense inherent in the leviathan procedures adopted by 'old school' arbitrators, which used to result in expensive preparation and interminably long hearings.

Modern day construction arbitrators use their powers under the user-friendly Arbitration Act, to adopt procedures suitable to the circumstances of the case and to avoid unnecessary delay or expense. One construction arbitrator complained recently that he had held a meeting by telephone conference call. The whole procedure took seven minutes. It was, he said, hardly worth charging for. At the same time arbitrators can take account of the agreement of the parties as to how their dispute is to be resolved.

In the absence of agreement, construction arbitrators have responded to the draughtsman of the Act, Lord Saville, and his injunction to 'get a grip'.

The process is better for it.

In contrast, the Technology and Construction Court (TCC) is viewed more warily by would-be litigants. In response to the Civil Procedure Rules, some TCC judges have jettisoned tried-and-tested approaches in favour of leaner, meaner and, in some cases, wholly unexpected procedures imposed by the court, irrespective of the parties' agreement. A trip to the TCC can, in some cases, be likened to a procedural white knuckle ride with the added thrill of not knowing quite where you will end up.

It would be harder to imagine two cultures further removed than the old school style of construction arbitration and the new, lean-andmean TCC. It was inevitable, therefore, that if ever they met there would be forensic fireworks.

In R C Pillar & Sons v Edwards (judgment 11.1.01), TCC judge Anthony Thornton QC was obliged to review the award and procedures adopted by the senior RIBA arbitrator, John Timpson. The claimant builder claimed a final account value of some £340,000 for refurbishment works carried out for the defendant, where the final certificate had been issued for £240,000. There was a counterclaim for defects and delay. The dispute was referred to arbitration. Both parties were represented by construction consultants, the claimants by the well-known firm James R Knowles.

The subsequent arbitration involved a 10-day hearing. At the conclusion, the parties had incurred costs of about £160,000 each. Including the arbitrator's fees of £40,000, the dispute had generated a total costs bill of £400,000, four times the sum in dispute. The judge was astonished that a simple dispute should have taken so long - and cost so much - to decide.

He was critical of the parties' representatives for exchanging a considerable quantity of correspondence, and of Knowles for presenting an extensive statement of case with voluminous appendices instead of the short Scott Schedule an experienced litigator would have prepared. He criticised the number of experts called (a total of seven) when only two were required, and of the experts' failure to reach any agreement as to the issues in dispute or the quantum of the claim.

He was also critical of the arbitrator himself. The judge pointed out that the arbitrator's orders as to exchange of statements of case, schedules and expert meetings were underpinned by the requirements of the Act for speed and cost efficiency. Nevertheless, the parties produced prolix and profuse cases with schedules that did nothing to define the issues.

The arbitrator failed to detect these shortcomings and failed to require the parties to put them right. Because of this, and the number of unnecessary witnesses, the hearing took 10 days when a much shorter hearing should have taken place.

There was, said the judge, something inherently wrong with an arbitral process which involves such large sums being spent on costs, relative to the size of the sums in dispute.

In this case it was because the parties' nonlawyer representatives had incurred more costs than lawyers would have done, had produced unnecessarily complex documentation, and because the arbitrator had failed to get a grip and stop them.

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