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It's a worry when Mr Toad, the arbitrator, is in the driving seat

legal matters

Those who embark upon any formal dispute resolution process usually have complete confidence in the tribunal. If they did not, they would probably think twice about starting the ball rolling, since litigation, and its alternatives, are all games that need only one player to start proceedings but require the cooperation of all players to stop them.

And who, in their right mind, would agree to play by such rules if they thought they would draw a madman as a referee?

Instead, most would-be litigants are convinced that the judge will find wholly in their favour and vilify the conduct of the other side.At least half of them are in for a surprise, since it is an inevitability of litigation that 50 per cent of litigants will be losers. There are occasions, however, when both parties, playing nicely by the rules, realise that they are at the mercy of a tribunal that does not appear to know what it is doing.

Consider the analogy of litigation as a taxi journey with the meter running for an undefined duration, to an unknown destination, in a cab with locked doors and no means of communicating with the driver.

Then add Mr Toad as chauffeur, and you will appreciate the point.

The seriousness of this situation was illustrated by the recent case of Wicketts and Sterndale v Brine Builders and HC Siederer (2001). The claimants commissioned the respondents to build a house for them.Their contract contained an arbitration clause and when a dispute arose Mr Siederer was appointed as arbitrator.

The claimants' claim totalled some £60,000 and the defendant builder raised an unquantified counterclaim.The arbitrator gave 19 sets of directions for the conduct of the arbitration, but after seven days of hearing, the arbitrator had reached no conclusion on any of the issues. The claimants' frustration at the rising costs and apparent lack of progress finally erupted during the hearing, and in what was described as a 'heated exchange', they remonstrated with the arbitrator about his total lack of ability to manage the arbitration.

The claimants applied to the court under section 24 of the Arbitration Act to remove the arbitrator for failing to conduct the proceedings properly. Two of the arbitrator's orders called for special scrutiny. The first was an elaborate order for security for the arbitrator's own fees. The order was designed to ensure that both parties provided the arbitrator with a sum equivalent to his total likely fees in advance of the arbitration. If complied with, the arbitrator would have had security for twice the amount of his fees, up front.

The second order followed attempts between the parties to reach a compromise. It included a list of items to be addressed by the parties in any settlement agreement but prevented the implementation of the agreement before the arbitrator's fees had been paid.

The judge listed the many things wrong with the first order. The arbitrator had made directions that had not been asked for by either party. He had called for his fees to be doubly secured, without any evidence that either party would be unable to pay the costs of the arbitration if ordered to do so. The order, the judge found, demonstrated a total lack of understanding on the part of the arbitrator of his proper function.

The second order fared even worse. The judge considered it to be 'the most outrageous ever seen' and amounted to the clearest evidence that the arbitrator had failed properly to conduct the proceedings.

The judge concluded that the arbitrator had a pitifully inadequate comprehension of the nature of his function, what powers he had and the appropriate way to exercise them, with the result that if the arbitration continued, there would be substantial injustice.The judge removed the arbitrator and slashed his fees by half, on the basis that much of the work done was unnecessary.

This episode reflects badly on the arbitration process. But at least the Arbitration Act provides the mechanism by which Mr Toad can be removed from the driving seat.There is no equivalent to the ejector-seat button for comparable processes such as litigation in the courts.

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