Cofely v Bingham and Anor

The judgment published on 17 February 2016, Cofely Limited v Bingham and Another [2016] EWHC 240 (Comm), considers the situation where circumstances might exist to give rise to justifiable doubts as to the impartiality of an Arbitrator. The Claimant sought an order for the removal of Anthony Bingham, a very well known and respected Arbitrator, from an ongoing Arbitration.

The Claimant did not allege actual bias.

The Claimant is a construction company. The 2nd Defendant, JR Knowles, is a well-known and respected claims consultant.

Disputes arose between the Claimant and the 2nd Defendant from a Success Fee Agreement dated 26 October 2011. That agreement contained an Arbitration Clause. On 21 January 2013 JR Knowles, having given Notice of Arbitration to the Claimant, sought the appointment of an Arbitrator from the Chartered Institute of Arbitrators. The Notice stated that the 2nd Defendant considered it was preferable that the Arbitrator had both Quantity Surveying and Delay Analysis experience and specifically identified Anthony Bingham as the likely Arbitrator.

Those representing the Claimant informed the Chartered Institute of Arbitrators that while concurring that it agreed that the Arbitrator should have legal experience, it did not consider that experience as a Quantity Surveyor or in Construction Delay was necessary. It proposed the appointment of a member of Keating Chambers. The Chartered Institute appointed Mr Bingham.

Thereafter, various procedural matters were dealt with in the Arbitration and on 21 August a Partial Award in favour of JR Knowles was issued. That award was not challenged.

Thereafter, various exchanges of correspondence between the parties and also between the parties and Mr Bingham took place. On 18 February 2015, matters took a different turn.

The Claimant wrote to JR Knowles seeking information in relation to its dealings with the Arbitrator in the light of the decision of Mr Justice Ramsay in Eurocom Ltd v Siemens PLC [2014] EWHC 3710 (TCC).

In that case, Eurocom applied, by summary judgment, to enforce a decision of the Adjudicator, Mr Anthony Bingham. The application was dismissed and the Court found, that as it had determined that the Adjudicator had no jurisdiction by reasonable fraudulent misrepresentation allegedly made by JR Knowles in applying for the appointment of Mr Bingham on behalf of Eurocom, Siemens had real prospects of success in defending the application for enforcement of the Adjudicator’s determination.

The alleged misrepresentation made on behalf of JR Knowles to the Royal Institution of Chartered Surveyors was made when seeking the appointment of an adjudicator and related to the application form. On the application form, the agent of JR Knowles stated that numerous other named candidates had a conflict of interest and were therefore unable to act. Mr Justice Ramsay, in his judgment, stated that there was a “very strong case that Mr Giles (of JR Knowles) deliberately or recklessly answered the question as to whether there were conflicts of interest so as to exclude adjudicators who he did not want to be appointed”.

Subsequently, the Court considered that this was a general practice of Mr Giles.

The letter described earlier, 18th of February 2015, stated that it had concerns arising out of that Eurocom judgment. The letter then asked 6 questions seeking information concerning the nature and extent of the relationship between JR Knowles and the Arbitrator.

On 27 February 2015, JR Knowles responded to the Claimant’s letter answering 5 of the questions. On 11 March 2015, Stephenson Harwood, on behalf of the Claimant, raised further questions as a result of the responses provided by JR Knowles.

On the same day for the first time Stephenson Harwood wrote to the Arbitrator seeking related information and setting out a series of specific questions:
“How many times in the last 3 years have you acted as adjudicator or Arbitrator in disputes where Knowles represented, or was itself, the claimant/referring party?
Please would you break your answer in 1 down so as to clarify how many of the above relate to:

• appointments first made in the last 3 years; and
• appointments made more than 3 years ago in respect of matters which are ongoing or have been decided in the last 3 years.

How many times have you made an award or decision in favour of the claimant/referring party (either in whole or in part) in the adjudications and Arbitrations referred to above?

What proportion of your professional income as a barrister/ adjudicator/ Arbitrator was accounted for from the referrals covered by requests 1 and 2 above for each of the 3 years in question?

What proportion of your professional income as a barrister/ adjudicator/ Arbitrator was accounted for from the referrals covered by request 3 above for each of the 3 years in question?

What, if anything, have you done during this Arbitration to satisfy yourself that there is no information that you should disclose to Cofely which could reasonably be interpreted (on an objective basis) as undermining your apparent impartiality?”

On 17 March, Stephenson Harwood sent a further communication to the Arbitrator seeking answers to the questions asked so that the Claimant might feel reassured about its position in the Arbitration.

On 19 March, the Arbitrator responded that he had been appointed as an Adjudicator/Arbitrator 137 times in the last 3 years. The Arbitrator asked Stephenson Harwood what they alleged was wrong in the light of this answer combined with the answers given by JR Knowles in the letter of 27 February.

On 23 March, Stephenson Harwood asked the Arbitrator to confirm that he had received 25 appointments from JR Knowles in the previous 3 years and further that he, the Arbitrator, was willing to answer questions as to what proportion of his income had arisen from these appointments.

Further exchange of correspondence took place between the parties. As a result, the Arbitrator determined that a hearing would take place on 17 April 2015 at the offices of JR Knowles.

The Claimant alleged that at the hearing the approach of the Arbitrator was aggressive towards it, and further the Claimant considered that the Arbitrator showed impatience when questions were asked relating to facts potentially relevant to the apparent impartiality of the Arbitrator.

On 30 April 2015, Anthony Bingham issued an Arbitrator’s Ruling which decided that the Tribunal, his own position, was properly constituted and that there was no conflict of interest as far as he was concerned.

Further correspondence relating to the concerns of the Claimant was exchanged between the parties. On 5 June 2015, JR Knowles asked the Arbitrator to provide specific total figures as to his income derived over the previous 3 years and the amount of fees he had earned as a result of appointments from JR Knowles.

The Arbitrator replied on the same day that he had earned £1,146,939 and £284,593.75 (from JR Knowles).

On 3 July 2015, JR Knowles responded to Stephenson Harwood stating that JR Knowles had in the application forms excluded other candidates on the basis of being conflicted on 16 occasions, when as a result Anthony Bingham had been appointed without Mr Bingham being named specifically in the application form.

On 8 July, Stephenson Harwood requested the Arbitrator to recuse himself. The Arbitrator had not responded to that request at the time of the hearing.

The Court considered the requirements of Section 24 (1) (a) of the Arbitration Act 1996.

“A party to arbitral proceedings may (on notice to the other parties, to the Arbitrator concerned and any other Arbitrator) apply to the court to remove an Arbitrator on any of the following grounds-

that circumstances exist that give rise to justifiable doubts as to his impartiality;”

The Court reviewed the main authorities relating to that Section of the Act. The judgment further stated:

74. “The fact that an Arbitrator is regularly appointed or nominated by the same party/legal representative may be relevant to the issue of apparent bias, particularly if it raises questions of material financial dependence – see A v B [2011] 2 Lloyds Rep 591 per Flaux J at [62]; Fileturn Ltd v Royal Garden Hotel [2010] TCC 1736, [2010] BLR per Edwards-Stuart J at [20(7)].
    

75. The tribunal’s explanations as to his/her knowledge or appreciation of the relevant circumstances are also a factor which the fair minded observer may need to consider when reaching a view as to apparent bias – see, for example, In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 and Woods Hardwick Ltd v Chiltern Air Conditioning Ltd [2001] BLR 23. In this regard Cofely relies in particular on Paice v Harding [2015] EWHC 661, [2015] BLR 345, per Coulson J at [46]-[51] in which it was held that the explanations given by the adjudicator made apparent bias more rather than less likely having regard in particular to the “aggressive” and “unapologetic” terms in which they were expressed which suggested that he had concluded that something had gone wrong and that “attack was the best form of defence”.”

It is these judgments that appear to be particularly relevant to the facts in this case.

There are concerns within the arbitral community that Specialist Arbitrators who are appointed regularly by certain parties and whose conduct may be impeccable may however be at risk as a result of the trend of these judgments. However, this comment is not necessarily applicable to the facts in this particular case.

The judgment noted that Anthony Bingham did not answer the following question, which was set out in the form supplied by the Charted Institute of Arbitrators on his acceptance of the nomination:

“If you are aware of any involvement, however remote, but in particular any involvement you or your firm has (or has had in the last 5 years) with either party to the dispute, please disclose.”

The Court concluded that evidence of unilateral communications with JR Knowles and a review of the general conduct of the referral did not provide any basis for concluding that there was a real possibility of bias, whether considered individually or together with the other grounds relied upon.

The Court found that various matters set out in the applications by the Claimant raised concerns of apparent bias. These concerns included:

• the relationship between the Arbitrator and JR Knowles;
• the evidence that while JR Knowles did not appoint an Arbitrator/ Adjudicator directly, it was able to influence and did influence such appointments both positively and negatively;
• the existence of the appointment blacklist by JR Knowles was also a matter of significance; this blacklist was important for any Adjudicator/ Arbitrator whose appointments and income were materially dependent upon JR Knowles;
• while noting that only 3 of the 25 cases (where Anthony Bingham was appointed) involved JR Knowles as a party, those facts in themselves would be sufficient to trigger disclosure in the general circumstances of the nomination forms and under the Orange list guidance;
• the aggressive response by the Arbitrator to the questions raised by Stephenson Harwood heightened concerns as the relationship;
• the fact that neither party sought a ruling as to apparent bias could be seen when the ruling was issued to be evidence of pressure being placed upon the parties by the Arbitrator to pre-empt any request that he recuse himself;
• that evidence that the Arbitrator descended into the arena was exhibited by the tone of the cross-examination of the representative of the Claimant by Mr Bingham during the hearing as to impartiality;

The Court therefore found that there was sufficient force in the grounds raised by the Claimant to raise a real possibility of apparent bias on the part of the Arbitrator.

The Court found that there was nothing untoward about the Partial Award or the conduct of the Arbitration up until March 2015.

The Court ordered that the grounds for the removal of the Arbitrator were made out.

As stated earlier, this case raises many concerns for Arbitrators both domestically and internationally who are appointed regularly by parties. Possibly the key points for such Arbitrators to note is the need for regular and continuous disclosure and immediate response to questions relating to relationships. Openness to the parties in relation to any matter which might make one or both of the parties feel uncomfortable is vital.