Construction disputes, and particularly arbitrations, can sometimes seem like a small world. The pool of suitable arbitrators can be limited, and the same faces can appear again and again. But when an arbitrator becomes too comfortable with one party it can lead to accusations of apparent bias, as in the recent TCC case of Cofely Ltd v Bingham & Anor  EWHC 240 (Comm).
Cofely is a construction company. Knowles is a firm of claims consultants dealing with construction claims. Tony Bingham is an experienced arbitrator in construction disputes.
Cofely entered into a contract to design, build, maintain and operate district energy services to the Olympic Park and Westfield Shopping Centre. Various disputes arose and Cofely appointed Knowles to advise upon potential EOT and delay claims. Cofely and Knowles subsequently agreed a "Success Fee Agreement", whereby Knowles was potentially entitled to a success fee on certain occurrences.
Cofely became concerned about the advice being provided by Knowles and entered into direct settlement negotiations with the employer, eventually reaching a settlement of all outstanding claims.
Knowles then alleged that in settling their claims without the involvement of Knowles, Cofely had acted in breach of the Success Fee Agreement, claiming that approximately £3.5m was payable as fees by Cofely.
The Success Fee Agreement contained an arbitration clause and so, in January 2013, Knowles gave notice of arbitration to Cofely and applied to the Chartered Institute of Arbitrators ("CIArb") for the appointment of an arbitrator. It requested an arbitrator with both quantity surveying and delay analysis experience and the appointment of Mr Bingham was sought.
Cofely wrote to the CIArb stating that it did not agree to the appointment of Mr Bingham. However, in February 2013, the CIArb confirmed the appointment of Mr Bingham as arbitrator.
Mr Bingham signed a CIArb form upon his acceptance of his nomination which confirmed his impartiality. Mr Bingham did not state, in response to a specific question, whether he had had any prior involvement with either party.
The arbitration proceeded slowly.
In early 2015, Cofely became aware of the decision of Mr Justice Ramsey in Eurocom Ltd v Siemens Plc. This concerned a summary judgment application made by Eurocom against Siemens in respect of an adjudication decision of Mr Bingham. The application failed on the basis that the adjudicator had no jurisdiction because of a fraudulent misrepresentation that had allegedly been made by Knowles in applying for the appointment of an adjudicator on Eurocom's behalf. Knowles had requested Mr Bingham’s appointment, whilst also stating that numerous other named candidates had a conflict of interest and were therefore unable to act. Knowles had confirmed that they had a general practice of excluding candidates in this manner.
Cofely wrote to Knowles to request further information about their prior involvement with Mr Bingham. Knowles stated that Mr Bingham had been involved in 25 adjudications/arbitrations where Knowles had been a party or had represented a party, out of a total of 137 adjudications/arbitrations in which Mr Bingham had been involved in the past three years.
In March, Cofely wrote to Mr Bingham to ask, inter alia, how many times in the prior three years he had been instructed by or on behalf of Knowles, and what percentage of his income in that period had come from Knowles.
Mr Bingham responded defensively, refusing to answer the question. After being pressed, he queried why Cofely were asking for this information. Mr Bingham then chose to hold a meeting to consider the issues arising out of Cofely's request.
During the meeting Mr Bingham refused to confirm Knowles’ figures and took offence at the questions being asked of him. He effectively cross-examined Cofely's Counsel as to what Cofely was planning to do with this information. Cofely’s position was that they could not use the information until they had been provided with it.
Following the meeting, even though neither party had asked for a ruling, Mr Bingham issued an "Arbitrator's Ruling" as to whether the tribunal was 'properly constituted' – concluding that it was and that he had no conflict of interest.
Eventually, Knowles asked Mr Bingham to provide figures as to his income over the past three years and the amount of fees he had earned from appointments involving Knowles. Mr Bingham responded the same day stating that the figures were £1,146,939 and £284,593.75 respectively.
In July 2015, Cofely wrote to Mr Bingham asking him to recuse himself. No response was received, resulting in Cofely applying to Court for an order that Mr Bingham be removed due to his apparent bias. Knowles and Mr Bingham both rejected the suggestion of apparent bias.
Section 24 of the Arbitration Act 1996 allows a party to an arbitration to seek to remove an arbitrator where "circumstances exist that give rise to justifiable doubts as to his impartiality"
In addition, Cofely referred to Rule 3 of the CIArb Code of Professional and Ethical Conduct for Members, which requires arbitrators to “disclose all interests, relationships and matters likely to affect the member's independence or impartiality or which might reasonably be perceived as likely to do so."
Mr Justice Hamblen found that there was clear evidence of apparent bias on the part of Mr Bingham. In particular:
a) Over the last three years 18% of Mr Bingham's appointments and 25% of his income as arbitrator/adjudicator derived from cases involving Knowles.
b) The evidence showed that Knowles was able to influence and did influence arbitrator's appointments, both positively and negatively. The Eurocom case was striking evidence of that.
c) Mr Bingham had failed to identify, following his appointment, his previous instructions by Knowles despite being asked that question.
d) Mr Bingham's aggressive responses to Cofely's reasonable questions also heightened the impression of apparent bias.
e) Whilst it was reasonable for Mr Bingham to arrange a meeting, a ruling on bias was not sought and it was not an appropriate matter for him to be making a ruling upon.
f) Mr Bingham's conduct during the meeting was aggressive and hostile, and amounted to him "entering into the arena" in an inappropriate manner.
g) Finally, Mr Bingham's witness statement in the proceedings indicated that he did not recognise the relevance of the relationship information or the need for any disclosure, did not regard his conduct of the meeting as in any way inappropriate, demonstrating a "lack of objectivity and an increased risk of unconscious bias".
Taken together, these amounted to "a real possibility of apparent bias" and accordingly Cofely had established the requisite grounds for removal of Mr Bingham as arbitrator.
Comforting as it might be to have a known quantity ruling on your claims, construction professionals must be aware of the risk of getting too cosy with arbitrators or adjudicators. Even if there is no actual bias on the part of an arbitrator, a prior history of instructions can give the impression that an arbitrator might not be entirely impartial and the courts will act to avoid such an impression.
From an arbitrator's perspective, a financial reliance on a small number of clients should also be avoided where possible.
The case also provides a salutary warning that arbitrators cannot become too involved in cases they are ruling on, nor can they be considered to act too defensively; the approach taken by Mr Bingham when questions were asked regarding his prior instructions was heavily criticised and will not make for pleasant reading. Parties to arbitrations should always be aware that an arbitrator's behaviour during an arbitration, as well as before it, can provide grounds to challenge that arbitrator's jurisdiction.
For more information contact Robert Calnan.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.