London Underground Ltd v Citylink Telecommunications Ltd
[2007] EWHC 1749 (TCC);
[2007] 2 All E.R. (Comm) 694;
[2007] B.L.R.391
Both parties applied, under s68(2) of the Arbitration Act 1996 (the "Act"), to have an arbitral decision set aside on the grounds of serious irregularity, in that the decision had caused or would cause substantial injustice to the party applying.
The basis for London Underground Limited's ("LUL") claim was that s33 of the Act had not been complied with, because the arbitrator had proceeded to determine a claim based on a case which was not pleaded nor addressed in evidence nor argued by the parties.
Citylink Telecommunications Ltd's ("CTL") application came under s68(2)(a) or (b) and further that, under s68(2)(d) the arbitrator had failed to address a significant issue raised before him. CTL also applied under s69 of the Act for leave to appeal on the basis that the arbitrator had erred in making the findings he did.
The arbitration from which the disputed decision arose concerned delay claims arising from a Private Finance Initiative ("PFI") project to replace and operate LUL's communication system. CTL contracted with LUL to implement this work in 1999 (the "Contract"). The original grounds for claim predominantly arose out of LUL's delay in performing contractual preparatory work which required completion prior to CTL's Contract scope being performed.
The arbitrator found, although dismissing CTL's claim for an 81 week extension, that CTL were entitled to an interim 48 week extension according to the principles of global claims set out in the case of John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] S.C. 713 IH (Ex Div). The methods used by CTL to show the alleged 81 week delay, including critical path analysis, were either not appropriate or did not produce a reliable basis for measuring delay, and the arbitrator therefore used the global claims process as an alternative.
As to the question of whether there was an "irregularity", Ramsey J found that the underlying principle is that of fairness. Deciding a case on the basis of a point which was not raised as an issue would be procedurally illegal if the parties were not then given an opportunity to comment on it. However, Ramsey J also found that a tribunal may autonomously make findings of fact which may differ from the facts either party contended for; in such a case the tribunal does not have to give the parties an opportunity to address these findings of fact. Whether there is a procedural irregularity and whether it is serious is a matter of fact and degree which requires a judgment to be made taking into account all the relevant circumstances of the arbitration. In the circumstances of this case, the findings made were within the pleadings, submissions and evidence; there was nothing by way of fairness which would have required the arbitrator to seek further submissions from the parties before making his findings.
Particularly with reference to the arbitrator's use of the global claims principle, Ramsey J highlighted that the approach set out in the decision in Doyle v Laing was not challenged on the application from either party, and he accepted that approach. The essence of a global claim is that, whilst the breaches and the relief claimed are specified, the question of causation linking the breaches and the relief claimed is based substantially on inference, usually derived from factual and expert evidence. The consequence of undermining a global claim is that the claim will fail as a global claim.
Nonetheless, to the extent that certain events have been pleaded and shown by the evidence to have caused delay, the surviving or remaining claim will therefore emerge from the evidence which has been adduced. Tribunals frequently have to deal with cases where a claim or a defence has not wholly succeeded and it is necessary to determine what result flows from the partial success or failure. As long as the result is based on primary facts which have been at issue in the proceedings, there can in principle be no objection to a tribunal taking such a course, although to an extent this is a question of degree and fact.
In this instance, Ramsey J found that the course used was not unfair and the decision was based on the pleadings made, taking account of the failure of the global claim. In such circumstances, there was no need for the arbitrator to have to seek further submissions from the parties and there was therefore no serious irregularity under s68 of the Act.
As to whether there would have been "substantial injustice" (in the event that serious irregularity had been found) Ramsey J stated that one must focus on the issue of whether the arbitrator had come by inappropriate means to one conclusion whereas, had appropriate means been adopted, he might realistically have reached a conclusion favourable to the applicant. Further, Ramsey J adopted the principle used in Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd, The MV Pamphilos' [2002] All ER (D) 94 (Nov) that, if a particular procedural irregularity is not serious, it is difficult to see why a second procedural irregularity would make the first more serious. He did not consider that a party could use multiple non-serious irregularities or multiple irregularities that do not cause serious injustice to arrive at a serious irregularity or substantial injustice by aggregation.
Ramsey J refused CTL's application for leave to appeal under section 69(2)(b), on the basis that a judge should accept the decision of an arbitrator unless it was shown "either (i) that the arbitrator misdirected himself in point of law or (ii) that the decision was such that no reasonable arbitrator could reach." (Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) (No.2) [1982] A.C. 724 HL at 73814). In this instance, there was nothing to indicate that either (i) or (ii) had occurred.
On a more minor point, CTL contended that the arbitrator had failed to decide on CTL's submission that there was no evidence that the design produced by CTL caused delays to the preparatory work. In referencing Fidelity Management SA v Myriad International Holdings BV [2005] EWHC 1193 (Comm) Ramsey J found that subsection 68(2)(d) of the Act could not be used as a means of launching a detailed enquiry into the manner in which various issues were determined; it is concerned with essential issues in this case and not the reason for their determination. Although in the arbitrator's decision he did not expressly refer to these submissions, Ramsey J held that the judgment did cover the issue of causation, and that he could not therefore find any irregularity.
Although the case deals with the review of an arbitrator's award, London Underground v Citylink may be seen as an endorsement of the global claims principle as set out in the Scottish case of Doyle v Laing. A "global claim", typically made in the construction industry (as delay claims), is a contractor's claim for loss arising from a range of different causes for which the employer is responsible but where there is no link between the individual causes and the loss. Such claims have conventionally been rejected by the courts on the grounds that they do not establish a sufficient causative link between the circumstances giving rise to losses and the losses themselves.
Doyle v Laing suggested that, where a global claim is presented and it can be shown that some of the events that caused loss were not the responsibility of the employer, this does not necessarily mean that the entire claim should fail; it may be possible to apportion the loss between events that were the responsibility of the employer and those that were not. This essentially makes it easier for a contractor to make a wide-ranging global claim and hope that some of the evidence it presents in respect of the various elements of that claim "stick".
Ramsey J endorsed this approach: whilst a claimant making a global claim runs the risk that the entire claim will be undermined, provided that sufficient convincing evidence is presented in respect of individual elements of a claim, those individual elements may succeed and a claimant may recover some of the losses it has claimed even though the claim does not succeed in its entirety.
Does this make it easier for a contractor to make a global claim against an employer? Not necessarily. Whilst a contractor may wish to adopt the "kitchen sink" approach and throw every possible cause of loss at an employer, hoping that the tribunal or court will deal with issues of causation and that at least some of its claim will succeed, such a speculative approach is no guarantee of success. Even a judicially-endorsed global claim is no substitute for a well-argued, clearly defined claim backed up by supporting evidence.
As regards Ramsey J's comments in relation to the setting aside of an arbitrator's award, it was made clear that in the absence of a serious irregularity causing substantial injustice, the courts will be reluctant to intervene. If parties require a right of appeal to the courts in respect of an arbitration award then it would be wise to set out this right in the arbitration agreement.
