The Seven Years War

How Engineering Services was the subcontractor for two contracts at Cannon Street railway station, London. Lindner Ceilings, Floors and Partitions was a sub-subcontractor. The two fell out over suspended ceilings. Lindner said it was disrupted day-in, day-out, and had its ceiling grid bashed about. How got the bill but wouldn’t pay. So, the parties trooped off to arbitration. That was in 1992. Seven years later, the battle is still raging.

Last October, the arbitrator made two key decisions. He awarded about £142 000 to Lindner and dismissed by consent How’s counterclaim. Now, the idea of arbitration is that everything is done and dusted at that point. The curtain falls on the play.

This time there was an encore. But when the players came back the scene had changed. How had marched the award to the High Court.

It had three reasons for doing so. The first, I will call “mutton dressed as lamb”, the second I will call “the global claims affair”, and the third I will call “the arbitrator’s close shave”.

Why “mutton dressed as lamb”? It’s like this. If an arbitrator goes wrong, it will be either about facts or about law. Sometimes it is a jumble of fact and law. If a point of law was decided in the arbitration then most standard contracts will allow it to be examined again by a judge. So far, so good. But the real problem is trying to get an error of fact re-examined. The doors are bolted. The ingenious lawyers of these parts will look at the arbitrator’s decision of fact and try to dress up the question of fact as a question of law, and by that means seek an appeal.

It was bizarre. The blue touch paper was lit when the arbitrator stopped the lawyers attending a meeting he would hold

Say, for example, the factual decision was against the weight of the evidence – so perverse that it is attractive to classify it as an error of law. This is what How argued. It said that the arbitrator’s approach to Lindner’s global claim was wrong. His job was to ascertain Lindner’s loss, but he didn’t. “Ascertain” means, said How, “to find out for certain”. Instead, the arbitrator made general assessments. Not the same thing. Do you see how using the wrong test may be classified as going wrong in law? The judge gave guidance about the right approach: when the facts are clear, the arbitrator shall calculate a loss figure as precisely as possible. When facts are less clear, there is scope for differences of opinion.

To put this into practical terms, look at what happened on this site. Lindner proved that it was frequently disrupted. It showed that its original bid was compiled on fair productivity. Then it showed the arbitrator how the disruption had affected its out-turn labour costs. This is called a “total cost” claim. Presumably the arbitrator fairly exercised his judgment and was reasonably satisfied that this global approach was right. The judge said: “This is a difficult area, and in my view, the court should be slow to interfere with an arbitrator’s ascertainment of loss.” This approach was no error of law. The arbitrator could not be faulted.

Two things are worth underlining. First, this case does not relieve arbitrators, nor the parties, from making every attempt to identify the precise cause of loss, precise right to claim, precise calculation of loss. Second, arbitrators help themselves, the parties and the courts if they give their reasons, analysis, and tests employed.

And what of the “arbitrator’s close shave”? How tried to have him removed for misconduct. He ordered the parties’ experts to meet together without lawyers on a without- prejudice basis so that they could publish technical facts on which they agreed or disagreed. All that is normal. None of it binds, and the experts are free to debate out of earshot of the arbitrator.