It is not unusual in construction disputes for parties to go back to the same advisors time and again. Everyone has their “favourites”, their preferred experts, mediators, adjudicators and arbitrators, who will be appointed as required.
Therefore, Hamblen J’s judgment in Cofely Ltd v Anthony Bingham and another acts as a reminder to all those involved in our industry of the relationships that may develop and the need for transparency about those relationships. It demonstrates the consequences that may arise when that does not happen and is bound to cause people to sit up and think carefully about who their adjudicator or arbitrator is, and who else may instruct (or has instructed) them.
Cofely Ltd v Anthony Bingham and another
Cofely v Bingham concerned an application for the removal of an arbitrator under section 24 of the Arbitration Act 1996. This application was unrelated to the underlying dispute giving rise to the matter which was, in turn, referred to arbitration.
The underlying dispute arose out of Cofely’s contract with Stratford City Developments Ltd and the Olympic Delivery Authority (ODA) (the employers) to design, build, maintain and operate energy services at the Olympic Park and the Westfield shopping centre.
Various disputes arose and Cofely appointed Knowles Ltd to advise it and to help progress its claims, including its delay and extension of time claim. Knowles was paid a little under £1.2 million for that help and, when Cofely became concerned about the escalating costs of its claim, it entered into another agreement with Knowles. This included a success fee, payable if certain events occurred.
Cofely remained concerned about the costs and the advice it was receiving from Knowles and so, part way through an adjudication Knowles had started on its behalf, it settled its dispute with the employers without reference to Knowles. Knowles alleged this was a breach of the parties’ agreement, and claimed a £3.5 million success fee.
It was this dispute that was referred to arbitration and it was in this arbitration that Mr Anthony Bingham was appointed as the arbitrator (he was nominated by CIArb). The arbitration started in January 2013 and progressed (with a period of inactivity) through to early 2015.
Eurocom v Siemens
In November 2014, Ramsey J handed down his judgment in Eurocom Ltd v Siemens plc, finding that there was a “strong prima facie” case that the referring party’s representative (Mr Giles of Knowles Ltd) had made a fraudulent misrepresentation when he applied to RICS for an adjudicator to be nominated and had identified 13 individuals who may have a conflict of interest. This invalidated the adjudicator’s appointment, which meant the adjudicator lacked jurisdiction to reach a decision. The adjudicator in Eurocom v Siemens was Mr Bingham.
In February 2015, Cofely set out its concerns arising out of the Eurocom v Siemens judgment, initially in correspondence with Knowles and its advisors, and then subsequently in correspondence with the arbitrator.
One of Cofely’s concerns was the relationship between Knowles Ltd and Mr Bingham. The parties exchanged questions and answers, but the arbitrator failed to answer the majority of the questions put to him, until eventually the information Cofely had sought became available. Mr Bingham had been appointed 137 times in the previous three years and had:
“…been appointed 25 times in 3 years in matters involving Knowles either as referring party or acting for the referring party.”
This was almost one fifth of his total appointments and, on 16 occasions, Knowles had excluded other candidates in the request for an appointment (just like they did in Eurocom v Siemens).
Ultimately, the court concluded that Cofely had established the grounds necessary to remove the arbitrator under section 24. In doing so, it considered in detail the relationship between Knowles and Mr Bingham, Knowles’ ability to influence appointments through the use of a “blacklist” and Mr Bingham’s attitude to Cofely’s reasonable enquiries. Along with many other findings, the court said:
“These concerns are further heightened by Mr Bingham’s witness statement. This shows that even now Mr Bingham does not recognise the relevance of the relationship information or the need for any disclosure… This lack of awareness demonstrates a lack of objectivity and an increased risk of unconscious bias.”
This is not the first time we have seen what could be described as a serial appointment scenario. However, it is rare for this very private information to make it into the public domain. In the past, Matt Molloy has written about concerns he has had when the same party has sought to appoint him as an adjudicator multiple times. In the end, he said enough was enough and declined to accept any further appointments.
Bias and apparent bias
Bias is a funny thing. Actual bias may be very rare and difficult to prove, but apparent bias is something else. When I was at university, it was all about the “man on the Clapham omnibus“. He was the hypothetical reasonable person that everything was measured against. Nowadays, he has been replaced by the “fair-minded and informed observer”, of whom Jackson LJ said:
“…must be assumed to know all relevant publicly available facts. He or she must be assumed to be neither complacent nor unduly sensitive or suspicious. He or she must be assumed to be fairly perspicacious, because he or she is able ‘to distinguish between what is relevant and what is irrelevant, and when exercising his judgment to decide what weight should be given to the facts that are relevant’…”
This means, the fair-minded and informed observer must be considered in context.
Applying that to construction disputes, as a lawyer regularly advising on this type of dispute, you will be taken to know that the pool of adjudicators and arbitrators is small (more a puddle than a pool) and that the panels of individuals different organisations hold are made-up of largely the same people (just look at an individual’s memberships to see how many they have). Similarly, you know the same handful of chambers will be providing barristers for a dispute. How often have you spoken to the clerks, only to find your “favourite” junior is already taken by the other side?
This means the answers to the questions you ask about conflicts of interest are all the more important.
In Cofely, the CIArb form included the following statement:
“To the best of my knowledge I am not aware of any involvements, interests, relationships or other matters which are likely to affect my independence or impartiality or which might reasonably be perceived as likely to do so. If I become aware, at any future stage of the dispute resolution process, of any interests, relationships or other matters which are likely to affect my independence or impartiality, or might reasonably be perceived as likely to do so, I will disclose those to the parties.”
It also asked a broad question:
“If you are aware of any involvement, however remote, but in particular an involvement you or your firm has (or has had in the last five years) with either party to the dispute please disclose.”
I haven’t checked, but I’m sure all the nominating bodies have similar wording on their forms.
In Cofely, the broad question went unanswered by Mr Bingham. In light of what subsequently transpired, it seems to me that prudent parties, and the appointing bodies, should no longer be content to allow that to happen. If a key section of a nomination form is left blank, then more questions should be asked. Parties not used to seeing nomination forms should start requesting them. Parties should not be content to maintain the status quo.
Of course, of itself, leaving the form blank does not mean there is something to hide. It may simply be an oversight that is easily corrected, or it could be that the individual doesn’t usually bother filling that bit in and no-one has questioned it before. In Cofely, the judge said that Mr Bingham did not “recognise the relevance of the relationship information or the need for any disclosure”.
Ultimately, Cofely v Bingham and Eurocom v Siemens are two cases that are “game changers”. They show how important transparency is, that it is not just about being transparent, but also about being seen to be transparent (no pun intended).
I for one now await all those additional natural justice challenges in adjudication enforcement…