Construction & Engineering Law Vol 7, Issue 1 EDITORIAL Paying for Justice ........................................................................................................3 Michael P Reynolds ARTICLES E-Commerce in the Construction Industry ..........................................................7 Philip Morrison E-Commerce: Jurisdiction International Issues ..............................................15 Philip Morrison E-Commerce: Formal Requirements in Digital Signatures ..............................23 Philip Morrison CASE REPORTS Shimizu Europe Ltd v Automajor Ltd ................................................................30 China National Petroleum Corporation and Others v Fenwick Elliott and Techint International Construction Company ..............46 R C Pillar & Sons v Edwards ................................................................................62 REGULARS Book Reviews ............................................................................................................89 Information for Contributors ................................................................................92 Contact Details ........................................................................................................92 The information provided and the views expressed in this publication are for further consideration and should not be acted upon without independent consideration and professional advice. The views of contributors are not necessarily those of the Publishers or Editor(s). Neither EMIS Professional Publishing Ltd, the Editor(s), nor the contributors to this service will accept any responsi- bility for any loss occasioned to any person acting or refraining from acting as a result of material contained in this publication. © EMIS Professional Publishing 2002. Printed by Antony Rowe. 1 Construction & Engineering Law, Volume 7, Issue 1 The Editorial Board Honorary President Vivian Ramsey QC, MA (Oxon), CEng, MICE (Keating Chambers) The Rt Hon Sir Philip Otton, Chartered Arbitrator (20, Essex Street) John Reilly, BArch, RIBA, Member of the Joint Contracts Tribunal, Consultant General Editor (Trehearne & Norman) Michael P Reynolds, LLM, MSc, Dr Derek Ross BA, BAI, CEng, FIEI, FCIArb, Solicitor and Chartered FCIArb, Chairman South-East Branch Arbitrator (Merricks) Chartered Institute of Arbitrators Nick Stuart BSc, MSc, CEng, Members MIStructE, FCIArb (Railtrack) Roger Bloomfield, Dip Arch RIBA, Professor Ian Duncan Wallace QC, MA MAE (Bickerdike Allen Partners) (Oxon) Philip Britton, Director of the Centre of Construction Law, Kings College Foreign correspondents London North America: Ronan Champion BSc, LLB, FRICS Robert Pattison BA, LLB, Group (Currie & Brown) Counsel, Ontario, Canada (SNC Lavalin Peter Curtis FCIOB (Ladymead Group Inc) Projects) Far East: Dr Robert Gaitskell QC, Vice President Nicholas Seymour MSc, FRICS, of the Institute of Electrical Engineers FCIArb, Director (Battersby Kingsfield (Keating Chambers) Limited) Alison Green LLB, LLM, Barrister-at- Middle East: law (Chambers of Dermod OBrien QC, 2 Temple Gardens, Temple) Gordon Clark Fiona Hammond, Solicitor (BAA) Ireland: Rhona Holman, LLB, Dip LP, Dundas Adrian Kearney (Kearney Associates) & Wilson Foreign correspondents Kenneth Hughes LLB, MSc, FInstCES, FCIArb (Consultant) John Wasilewski BSc, CEng, MICE, MAE (Babtie Group) Stuart Macfarlane, Head of Construction, Semple Fraser Chris Ennis MSc, FRICS, FCIArb (Northcroft) Chris Miers BA, Dip Arch, MSc, RIBA, FCIArb, MAE (Probyn Miers) 2 Editorial Editorial: Paying for Justice Michael P Reynolds General Editor The partial privatisation of court services would seem to be a reality, an extension of the private-public sector investment programmes that the State and probably all politicians see as the economic solution to electoral liabilities of the public sector. The public sector is to be run more efficiently by accountants. It is also to be run more efficiently by IT managers who can develop the necessary resources for access to justice. Accommodation is to be utilised more effectively: the squeeze is on. Since 1 April 2001 the Court Service is run on what is called a Resource Accounting and Budgetary System (RAB). The emphasis is upon managing resources as they are consumed. It seems remarkable that the service has never overspent in 150 years but that is a fact. But suddenly with this change it is feared they may overspend in the next three years. One wonders, why? It does seem to the outsider that it is analogous to a great corporation that has received new management from outside and that its accountants have advised it that it may not be commercial or profitable if it does not make certain changes. The idea appears to be that the service should pay for itself to some extent through its fees. The Court Business Plan for 20012002 provides that in setting its budget the Court Service will need to balance the amount it spends with the level of fees users are willing to pay and the amount of money the Government is prepared to provide. That is nothing new perhaps but how much is the government willing to invest in justice? That surely is the most relevant question in determining what fees can be charged. Many may wonder about that because it does not readily equate with the aspirations of the Access to Justice Movement over the last 30 years or so. It all seems to assume that the infrastructure remains in some cases the state of the art of the 1880s. The trouble with that curious idea is that this is a court service; a public service of the State and one of its most vital. It is not something you can privatise, albeit some elements of the private sector may one day play a part in providing some of its services, as adjudication does in effect by reducing the case burden on the courts in construction matters, but some would argue that the State is neglecting its judicial duties in using private agents. The State is now concerned not so much with litigants as with customers. The language of the grocers daughter has replaced the language of the law. Court service is a public service but it is not a shop, it is not a supermarket 3 Construction & Engineering Law, Volume 7, Issue 1 where we buy our goods; it is not a commercial service but a public service somewhat like the health service but in many respects more vital because without the Court Service the State would not exist. So it deserves a higher priority especially in times when the global economy is governing our daily lives in such a dynamic way that what happens in New York can easily affect economic confidence all over the world. The Court Service does not simply serve the general publics needs but also those of industry and commerce. So what impression is created, say, when the Chief Executive of a multi-national comes to St Dunstans House and sees the way the users or customers are crammed into small courtrooms smaller than their offices and their boardrooms: what sort of impression is that to create for international work in London courts? But then you might contrast that with the courtroom of the Privy Council where I spent my early years during articles. No problem there. The facilities were excellent, but then that was in Downing Street and the court was the highest in the Commonwealth and the judges were the most eminent of all. The Court Business Plan for 20012002 sets out a vision. That entails a Community Legal Service, the internet, interactive information kiosks, call centres and when necessary face to face in a range of other buildings. This is all very useful but what about the buildings themselves? The Victorian Palace in the Strand was built for a different age. It is a grand design and certainly awesome but it is not practical for this age. It was intended as the home of a Supreme Court rivalling the United States Supreme Court: that has yet to be seen. A new building may not be practical but consideration will have to be given to housing the Supreme Court in one building. That is obviously a long way from information kiosks but if the Supreme Court is to enjoy international recognition in attracting more international business this is what it will need. Ominously the report does not refer to any such work or modernisation of that building but does say that court space will be reduced by approximately 10% and space in Court Centres reduced by 5%. Where possible courts are going to be co-located. Presumably if space could be found in the Law Courts Building the TCC and other parts of the Queens Bench Division could return home whether that is practical may be another question. The Plan supports greater use of case management to improve efficiency, achieve timely outcomes and modernise the civil process. A National Customer Survey is to be carried out each year. The unit cost of originating process is to be reduced by 3% per annum. Proceedings may be issued on-line. There is still a vast disparity between claims issued in the High Court and the County Court. Claims in the QBD in 19992000 stood at 8,470 and by 20012002 had fallen to 5,500 a reduction of 35%. The transfer of county court matters has been reduced in this time from 2,044,000 to 1,868,000 a drop of approximately 8.61%. So whilst the civil procedure reforms have reduced cases in the Queens Bench by about one in three they have reduced 4 Editorial claims in the county court by only one in 25. Time spent in hearings in the two areas appear to confuse the matter because despite the overall reduction in the QBD the judges have sat for a longer time from 6,236 sittings in 2000 to 7,636 in 20012002 a rise of about 22%. In the county courts sittings have risen from 92,994 sittings in 19992000 to 94,097 sittings in 20012002 a rise of just over 1%. For the TCC the Business Plan includes a provision of £30,000 to implement changes in the specialist courts. These changes are not identified but include reference to work under the Arbitration and Companies Acts for the respective courts. In all this one wonders how the £30,000 for the implementation of changes concerning the specialist jurisdictions will be implemented. It is interesting to note the reference to the Arbitration Act and Companies Act in the provision for such changes. What precisely the LCD has in mind is not clear but the recent encouragement to the industry for ideas about possible international enhancement of the court is interesting. London has been a centre for international arbitration for many years and its reputation in that sector is high compared with the domestic construction scene. The latter is dominated by the statutory adjudication process which has undoubtedly reduced the number of references to arbitration and applications to the court. On the IT side, an area of continuing high expenditure, the service will be enhanced by 2004 with an Electronic Research Management System. The judiciary are also being properly equipped with IT over a period of time. The 1980s experience of the Official Referees and Masters of the Supreme Court surely taught a great lesson that the volume of work had to be matched by the State with adequate resources. Despite the apparent decline in the numbers of new claims, cases are more complex and judges in many cases need more time to consider them; they also need civilised conditions of work. Some time ago an eminent judge wrote to a leading legal paper complaining about the facilities. It makes life very difficult for the Court Service to attract more international work or other types of work if they are not as well-equipped as the best law firm in the City or even the best law school in London. It has been suggested that judges could be provided with research assistants, which would seem to be a good idea. Despite this unbelievable lack of facilities which would regarded as pre-requisite in the United States, the judges, even in the House of Lords, perform an incredible service with minimal support. Politicians have recently moved to new state of the art premises and the Palace of Westminster, a former home of the High Court, is constantly being improved. In constitutional terms, the facilities available to the judicial arm of the government are not in proportion to those granted to Members of Parliament and members of the Executive. The Plan confirms that the majority of the judges who try civil cases are circuit judges. There are 616 circuit judges as against 104 High Court judges, 35 5 Construction & Engineering Law, Volume 7, Issue 1 Lords Justices and 412 district judges. No mention is made of any structural reform of the hierarchy. The question is not even raised. But if the figures are what they are and the rules have been working now for two years, is it not time for consideration to be given to whether this imperial structure is right for the 21st century? When the Judicature Commissioners revolutionised the system, which was not without great difficulty, they won the support of most of the judiciary for a more modern organisation of a Supreme Court. They partly succeeded but the House of Lords was not abolished, despite two Parliaments bent on abolition, and so we were left with two appellate courts. Now perhaps is the time to consider a Constitutional Court to deal with constitutional questions as part of a new Supreme Court along the United States model, for example, and realign the High Court and County Court jurisdictions in one civil court with different procedural tracks and substantive law specialisation. Such a court would of course have to interact sensibly with ADR and arbitration. Not a matter for a mere Business Plan but a Royal Commission. But to achieve such a grand design would in the long term perhaps achieve those very aims of the Business Plan: of enabling all to fulfil their potential through education and employment, to create a fair and inclusive society which is healthy and secure, and to create higher productivity through substantial growth and effective co- operation with our European and International partners. If one reviews the history of civil justice over the last 20 years one can clearly see that a radical solution may be required, what in the 1950s used to be called simply modernisation. 6 E-Commerce in the Construction Industry, by Phil Morrison E-Commerce in the Construction Industry Philip Morrison Semple Fraser WS On 10 August 2001 the government launched the next phase of formal consultations on implementation of the E-Commerce Directive. The Directive is designed to lift barriers to e-commerce, thereby giving extra confidence to business and consumers. The Governments Office of the E-Envoy has also put in place a working group to develop the policy of digital signatures which is also undergoing public consultation. In a series of three articles Phil Morrison examines how e-commerce has affected the construction industry and how contracts can be formed on-line. He will also discuss the security and jurisdictional problems encountered when contracting on-line. E-commerce in the construction industry The Internet changes everything. The newest innovations which we label information technologies, have begun to alter the manner in which we do business and create value, often in ways not readily foreseeable even five years ago.1 The construction industry is, therefore, in no position to ignore the new developments in information technology and in many cases it must be seen to embrace them if it is to offer an economic and expeditious construction process to its clients. The ability to enter into valid and binding contracts on line is crucial for business and consumers alike to benefit from e-commerce, i.e. the exchange of information across electronic networks. Notwithstanding the legal uncertainties, the commercial needs of business and the personal convenience of consumers are dragging forward online contracting. In order to appreciate the construction industry fully, it is necessary to recognise that it is fragmented on both a trade and geographical basis yet the scale of its business operations are considerable (in the UK it accounts for 10% of the gross domestic product). It is worth £65bn a year. The UK Government spends approximately £7.5bn a year on new construction projects 7 Construction & Engineering Law, Volume 7, Issue 1 which will increase to £19bn following the Government Review 2000.2 E-commerce arrived in the construction industry, promising to add hand- held organisers and web browsers to builders tool chests. The construction market is getting its fair share of attention as sites offer project management, services and communications tools for the tourist industry. Statistics The percentage of UK businesses which were connected to the internet in the year 2001 was 84%, with 25% of businesses trading on-line.3 Interestingly, the larger the business the more likely that they will access the internet with the figure for connection rising to 80% for businesses with more than 250 employees. UK e-commerce transactions have the potential to grow tenfold reaching around 4% of total UK gross domestic product (GDP) by 2002. Examples of specific business benefits of electronic commerce are reduced advertising costs, reduced delivery costs, notably for goods that can also be delivered electronically; reduced design and manufacturing costs; improved market intelligence and strategic planning, more opportunity for niche marketing; equal access to markets; access to new markets; customer involvement in product and service innovations. E-commerce is not defined by geographic or national boundaries, but rather by the coverage of computer networks. Anyone with a laptop can move from country to country whilst conducting business. Since the most important networks are global in scope, electronic commerce enables even the small suppliers to achieve a global presence and to conduct business world-wide. However, e-commerce does not operate in a vacuum. The significant issues that affect anyone using e-commerce to create contracts are the lack of national boundaries, the speed with which transactions can be completed and the ease with which a shop window can be set up. For a contract to be valid and enforceable parties to it must not only have reached agreement, but have reached agreement on reasonably certain and definite terms. If they have not done so they cannot be treated as having reached agreement despite their protestations that they have. This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the court is very willing to imply terms if these are required to make the contract work.4 Scots law allows contracts to be formed in any available manner orally, by telephone, by written document or by fax. It also allows a contract to be formed on the basis of the conduct of the parties. Accordingly, there is no barrier to forming legally binding contracts by e-mail and on the World Wide Web. Given that the E-Commerce Directive5 has now come into being, Member States of 8 E-Commerce in the Construction Industry, by Phil Morrison the EU are required to provide by 16 January 2002 that contracts can be concluded electronically. There is now a duty on Scots Law to ensure that contracts can be electronically formed. Contract formation scenarios The real issue is, however, whether or not the agreements which parties formulate using e-commerce can constitute contracts and if so where they were formed. This may seem trite but it is vital. In order for there to be a contract the exact time it came into existence must be identifiable. The most common method of making a contract is an offer followed by an acceptance which, subject to the rules on constitution and proof of obligations, may be in any form. Analysis in terms of offer and acceptance can become very complex depending on the situation. For an offer to have legal effect it must be communicated to and come to the notice of the offeree. As Lord President McNeill put it in Thomson v James (1855) 18D 1 (at p. 10): an offer is nothing until it is communicated to the party to whom it is made, and who is to decide whether he will or will not accept the offer. Acceptance of offers An acceptance is an expression by the offeree of willingness to bind themselves legally to a contract with the offeror on the terms stated in the offer. Acceptance is a useful tool in deciding whether or not there is consensus in idem. The rules show that there can be a contract without the parties actually reaching agreement at the same time. Consensus, for these purposes, means objective consensus, not a meeting of minds. In the case of acceptance by post, Scots and English law have adopted the rule that an acceptance is irrevocable and binding from the time it is posted, on the hypothesis that the Post Office is the agent of the offeror, to carry his offer and to receive his acceptance, or a middle man between the parties, or the agent of both parties. It would seem that this dicta has come about either because the postal service is seen as reliable and that once the offer leaves the hand of the offeror it is likely to reach the hand of the offeree in a reasonable time or it is because the offeree can do no more. The classic Scots case is Thomson v James (supra). On December 1 an acceptance of an offer was posted at Edinburgh. On the same day the offeror posted at Jedburgh a letter withdrawing his offer. It is uncertain which was posted first. Both letters were delivered the following day. It was held that there was a contract. Following the decision in Brinkibon Ltd v Stahag Stahl Un Stahlwarenhandelgesellscaft [1983] 2 AC 34, the postal rule does not apply to 9 Construction & Engineering Law, Volume 7, Issue 1 instantaneous modes of communications, such as telephone, telex and fax. These acceptances are deemed to be received immediately the receipt rule. In this context the internet presents an interesting dilemma. In short, if the offeror and offeree have continuous (or near continuous) and direct access to the internet, the rule governing instantaneous communications appears to be the appropriate one to apply. However, if internet access is dial-up which will frequently be the case with consumers, such communication will not be instantaneous. Moreover, one of the key clause considerations behind the instantaneous communication rule is the fact that the accepting party will be aware, at the time of the communication, that the communication has been successful for example, by a fax transmission report. With respect to the internet, receipt requests are, at present, an agenda item on contract lawyers list rather than a technological reality. Methods of contracting on-line There are essentially three different ways of contracting on line, namely Electronic Data Interchange, e-mail and websites. Electronic Data Interchange This is where parties trade under the framework of an Electronic Data Interchange (EDI) agreement which governs the exchange of messages between the parties. In the construction scenario, the JCT standard forms have a specific EDI agreement. E-mail This is akin to a negotiation of one or more interlinked transactions by exchange of letters and documents whereby parties can exchange e-mails and perhaps attachments setting out more detailed terms of their contract and the exchange of these e-mails will represent the offer and acceptance between the parties. The electronic analogy of electronic mail seems more suited for the postal rule. Electronic mail is not instantaneous and subject to using the receipt and read controls once the offeree clicks the send button control of the message is lost. There is a question however as to what is its destination, whether it is when it arrives at the server or when it is downloaded on to the computer or when it is finally opened and read by the receiving party. Reasons also exist for arguing that electronic mail acceptances are subject to the receipt rule. The courts originally formed the postal rule on the basis that the post was reasonably fast, very reliable and there was nothing further for the offeree to do. However instantaneous it may seem, electronic mail is not as reliable as the postal service. In cyberspace, electronic mails can get lost (under 10 E-Commerce in the Construction Industry, by Phil Morrison the postal rule if the e-mail acceptance is lost in the post, the contract is arguably still binding6) become garbled and are often rejected by corporate firewalls. In addition, unlike the postal service but similar to the telex, the sender (offeree) of an electronic mail message is likely to know if a message does not arrive at its destination. If there is a transmission fault or a non- existent address, electronic mail will often be bounced back to the sender with an error message indicating that the intended person did not receive it. Unlike post, electronic mail is usually fast enough (returned within a few hours) for the sender to take remedial action if an error should occur. Websites This is akin to mail order whereby one party maintains the website at which he advertises his goods and services and a prospective purchaser finds out details of those goods and services on the website and then completes an electronic form akin to an order form whereby he orders goods and services from the seller. Online advertisements need to be carefully constructed so that they are only invitations to treat, not offers. This gives the online business the option to accept or refuse dealings with particular customers after obtaining their specific details (location, age, etc) without raising the spectre of a breach of contract. It has been argued that web pages informing users of the availability of goods or services will be treated as advertisements and therefore as invitations to treat7 and the analogy between shop windows and websites is a strong one. However, the problem can be exacerbated when the website is set up by a supplier to a particular industry, e.g. the construction industry. In this case they may be construed as orders in trade which involve parties who enter the agreement in the course of their business. Displaying contract terms on-line The terms and conditions in a standard form of contract will have no effect unless the customer is given notice of these before the contract is formed. For example, a contract for a hotel room made inside the hotel at the reception desk was not subject to terms found on a notice in the bedroom.8 However, the requirements or notice could pose a greater obstacle to online standard form contracts. The following list describes a number of methods by which on-line merchants can display their terms and conditions. Reference statement without hyperlink Merchants could include a statement such as this contract is subject to the companys standard terms and conditions at the bottom of the order form. 11 Construction & Engineering Law, Volume 7, Issue 1 While this small statement may be commercially attractive, it may fail a reasonable notice requirement. Reference statement with hyperlink The reference statement could be linked to a page containing the standard terms and conditions. This technique is popular with many web merchants because it achieves some legal credibility without substantial disruption to the promotional and commercial aspects of the order form or web page. Display terms at bottom of page Instead of hyperlinking standard terms and conditions, the merchant could include the whole text at the bottom of an order form or web page. Dialogue box One of the most elaborate display mechanisms is to create a dialogue box that forces the user to scroll through the terms and conditions and clicking I agree or I have reviewed these terms before they are allowed to move through the site. Unlike electronic mail contracts, which arguably fall somewhere in-between the postal rule and the receipt rule and thus cause confusion, determining an acceptance rule for contracts made under the world wide web is more straightforward. The World Wide Web exhibits the features of a method of instantaneous communication (interactive and in real time). The sender has almost immediate feedback and errors or faults are readily apparent. There is an argument that the communications between parties may be bounced around servers in different countries and that the website may not be the actual domicile of the company advertising on the website. Rules for on-line acceptances In light of the postal rule and the receipt rule, where will electronic mail and web contracts be formed? This question is important as the place of creation affects many factors critical to dispute resolution such as implied terms, choice of law and jurisdiction. No case law has decided this question yet, but a look at the attributes of both forms of communication may reveal what the courts might decide if such a dispute should arise, as it inevitably will. If electronic mail does fall under the receipt rule then the contract would form at the offerors location. However, a receipt rule for electronic mail raises a number of other thorny issues. For example, where does receipt actually occur? Is receipt when the acceptance arrives at the offerors server, when it is downloaded on to the computer or when the offeror reads it? In determining 12 E-Commerce in the Construction Industry, by Phil Morrison the precise time of receipt, the courts will most likely use the doctrine in Scheld Delta Shipping BV v Astbart Shipping Limited (the Pamela) [1995] 2 Lloyds Rep 249, based on the expected time of receipt. Thus, if the offeror uses an Internet Service Provider (ISP), acceptance will be effective only after the electronic mail is downloaded off the server onto the computer. In accordance with recent court decisions, this interpretation views ISPs as public telecommunication operators.9 While the electronic mail is on the ISP mail server, it is still technically in transit and the responsibility of the sender. Article 11 of the E-Commerce Directive modifies the common law requirement. Article 11 states that, except when otherwise agreed by parties who are not consumers, the service provider (i.e. the seller) is obliged without undue delay to send the acknowledgement of receipt of an order by electronic means and the order and the acknowledgement of receipt are deemed to be received when the party to whom it is addressed is able to accept it. Conclusion There have been a number of websites set up to service the construction industry. One of the first was buildonline.com which launched itself in the UK providing what was touted as the first interactive website for the UK construction industry. The site was sold as acting as an internet market place for buyers and sellers of building materials and services. It was also intended to provide space for designers, builders and architects involved in any given project to collaborate on that project. E-commerce revolution is not, however, confined to foreign dot-coms. The well-known major contractors, Laing, Bovis, Balfour Beatty, Amec and Kvaerner set up the first industry-wide e-commerce venture, calling it Arrideo. However this high profile failure along with those of iScraper and Mercadium is evidence that the industry has not been transformed overnight. The companies set up to service the construction industry fall into three categories. 1. Information suppliers the main players use their existing trade magazines titles to push these. 2. Providers of calibration systems 1,500 UK projects are using £20bn of these systems. These help overcome the problems of bad communication and tracking design changes. 3. Market places; the construction procurement chain. The problem here is that although the industry spends £30bn a year on supplies this is made up of 10m transactions for an average of £300 (www.nceplus.co.uk). It would seem that the e-com revolution has not been embraced quite as wholeheartedly by the construction industry as had been originally envisaged. In a recent article in Contract Journal (4 April 2001) the view was stated that the 13 Construction & Engineering Law, Volume 7, Issue 1 e-commerce companies that survive will be those that select a specialist area and become the top quality providers. They cite as proof the example of eu.supply.com which focuses on procurement and supply chain services across Europe and target the top 200 companies in Europe. As we can see, the construction industry has been bombarded with details as to why the changes wrought by e-commerce can revolutionise their work and make major savings for them into the bargain. It would, therefore, be very easy to lose sight of the contractual requirements and repercussions where these are not followed in the rush to take advantage of these savings, but this referral to take into account the unique qualities of e-commerce will inevitably only lead to greater problems and further disputes in the future. A prudent seller or buyer using the internet to conduct his business would therefore be well advised to ensure that all his communications are treated in the same way as he has treated all other forms of communication, since they could have legal consequences. The seller or buyer should therefore ensure that, where possible, it is clear when and where a contract is formed and its exact terms and conditions. Notes 1. Bill Gates, Business at the Speed of Thought (1999). 2. Modernising Construction, Report by the Comptroller and Auditor General, 11 January 2001 (www.nao.gov.uk). 3. See www.e-envoy.gov.uk/2000/progress. 4. E-business benchmarking 2000, Scottish Enterprise (www.scottish-enterprise.com). 5. Directive 2000/31/EC OJLI78 July 2000. 6. Household Fire Insurance Limited v Grant (1879) 4EX D216, of Thomson v James. 7. Lars Davies, Contract Formation on the Internet, in Shattering a Few Myths & Law and the Internet (Oxford: Hart Publishing, 1997). 8. Olley v Marlborough Court (1949) 1K 532. 9. Zeran v American Online (1997) 971523 FEDAPP.1523P (4th CIR.) Electronic Citation. 14 E-Commerce: Jurisdiction International Issues, by Phil Morrison E-Commerce: Jurisdiction International Issues Philip Morrison Semple Fraser WS It is obvious that the global and borderless nature of electronic commerce means that anyone setting up business in the UK and using the internet to sell its goods is just as likely to attract buyers and sellers from different countries as well as the local market. This will have an effect on the terms of the contract to be entered into by the parties and a number of things need to be considered in each contract. These issues come under the heading of forum and are decided by the laws of jurisdiction. Jurisdictional issues which will be encountered online are not new or novel and are well addressed by legislation and international conventions drafted before the emergence of electronic commerce. However, the borderless nature of electronic commerce when used in practice has raised the importance of jurisdictional issues to a far more immediate level. Online merchants as well as customers will need to know how their contracts will be interpreted in foreign jurisdictions and how to enforce their contracts against foreign parties in the global economy. Conventional disputes in this area focus on three issues and there is no reason to presume that e-disputes will focus on anything else. These three issues are: 1. Which courts or tribunals have jurisdiction to deal with the dispute? 2. What is the proper law governing the dispute, both in terms of the issues to be resolved and the procedural law to be applied, e.g. the rules of evi- dence to be applied? 3. How and where will any judgment be enforced? The jurisdiction of the Scottish courts covers the whole of Scotland. Any contract that is performed in and has both parties resident in Scotland will obviously fall within that jurisdiction. It is where all these matters do not fall within Scottish boundaries that questions will arise. In order to identify whether a court in Scotland has jurisdiction over a case will require the common law and the rules of both the Brussels Convention1 and the Lugano Convention2 to be examined. The former is incorporated into UK law by the Civil Jurisdictions 15 Construction & Engineering Law, Volume 7, Issue 1 and Judgements Act 1982 (CJA). The conventions determine which contracting States court (if any) has jurisdiction to hear a dispute and whether an order by the court of one contracting State must be recognised and enforced by the court of another contracting State. The conventions apply where the parties to a contract are domiciled in different States and both States are members of these conventions. The common law of Scotland is secondary to the conventions, such that the Scottish court cannot claim jurisdiction where the conventions dictate that another court has jurisdiction. However, the parties can get around this by ensuring that the contracts are made subject to a contractual term that the courts of Scotland or another country have jurisdiction over disputes arising under the contract. A key determinant for jurisdiction is domicile. For the conventions to apply, the defendants domicile must be either in the UK or another contracting State. Interestingly, the Brussels Convention leaves the rules regarding domicile to domestic law. Under Scots law, domicile is defined under ss 4146 of the Civil Jurisdiction & Judgements Act 1982. A defendant is domiciled in Scotland if they are resident in Scotland and if the nature of that residence indicates a substantial connection with Scotland (Civil Jurisdiction & Judgement Act 1982, s 41(2)). A substantial connection is automatically presumed, although disputable, if the period of residence is greater than three months (s 41(6)). However, if the defendant does not satisfy either of the above criteria or is domiciled in a non-contracting State, jurisdictional issue questions will be determined by Scottish common law. A defendant is domiciled in a non- contracting State if they are resident in that foreign country and their residence constitutes a substantial connection. The Brussels Convention will be largely superseded by a new Brussels Regulation 44/2001 that was adopted on 8 December 2000 and comes into effect on the 1 March 2002. The Brussels Regulation, when in force, will apply in respect of claims against defendants domiciled within the EU, save for defendants domiciled in Denmark, which is not participating in the new Regulation. The Brussels Regulation will be effective law immediately on 1 March 2002 without need for national implementing legislation as the UK has opted in to the Regulations. It will apply to documents formally drawn up and legal proceedings instituted after its entry into force. The Brussels Regulation: introduces uniform standards for jurisdiction in civil and commercial matters; in principle, simplifies the formalities for automatic recognition and enforcement via a uniform procedure; extends the circumstances in which consumers are able to sue in their home jurisdiction, with important consequences for online contracts and the development of e-commerce. 16 E-Commerce: Jurisdiction International Issues, by Phil Morrison Like the Brussels Convention, the Brussels Regulation establishes the basic principle that jurisdiction is to be determined by reference to the defendants place of domicile (Article 2). The domicile of a company or other legal entity or association is now defined as where it has any of the following: its statutory seat; its central administration; its principal place of business (Article 60). The Brussels Regulation makes no changes to the definition of domicile for any individual. The intention is that the European Court of Justice (ECJ) will police the application of the Brussels Regulation in order to ensure its consistent application throughout the Member States. Like the Brussels Convention (Article 4), the Brussels Regulation (Article 4) provides that where the defendant is not domiciled in a Member State, jurisdiction is determined in accordance with the law of the Member State in which jurisdiction is sought. Where the defendant is domiciled in a Member State that is not bound by the Brussels Regulation, jurisdiction is governed by the Brussels Convention. This is the case in relation to Denmark. Contract The Brussels Regulation (Article 5(1)) contains the same rules on ascertaining jurisdiction in contract matters as the Brussels Convention, namely that the courts for the place of performance of the obligation in question have jurisdiction. The Brussels Regulation does, however, seek to resolve one of the problematic aspects of the Brussels Convention by defining the place of performance of the obligation in question. The place of performance under the Brussels Regulation is the place where the goods or services should have been delivered or provided. While this is clearly a vast improvement in relation to sale of good contracts, claimants may still encounter some difficulty in ascertaining where services (such as consultancy) should have been provided. The new rules may be displaced by an express agreement between the parties (subject to certain formal requirements). The Brussels Regulation provides that a defendant may only be sued in the home courts of a co-defendant with certain exceptions. These exceptions include disputes arising out of consumer contracts and where the parties agree an alternative jurisdiction. In relation to contractual disputes, defendants may also be sued in the court for the place of performance of the obligation in question (Article 5(1), subject to the express jurisdiction clause). 17 Construction & Engineering Law, Volume 7, Issue 1 Consumer contracts The Brussels Regulation follows the Brussels Convention in that an EU based supplier of goods and services must, in general (and unless the contract says otherwise), sue a customer in the customers own country or in the country in which the goods are delivered or services performed. However, consumers are placed in a more advantageous position: a consumer (a customer buying goods or services for a purpose which can be regarded as being outside his trade or profession) can choose (whatever the contract says) to sue either in the consumers own courts or those of the supplier, while the supplier can only sue in the consumers home jurisdiction. This provision is clearly designed to ensure that consumers are not disadvantaged in participating in cross-border transactions, such as those conducted over the internet, mobile phones or through digital television. The Brussels Regulation includes in its scope contracts formed with suppliers who direct their activities to a Member State. While it seems appropriate that the new Brussels Regulation should take account of electronic commerce, the likelihood that the Regulation will be interpreted as defining a website as active selling has raised concerns amongst industry representatives that the Regulation will stifle e-commerce. The classification of the internet as a form of active sales is contrary to the Commissions classification of websites for other purposes, such as competition law, where a website is considered to be a form of passive sales.3 There is concern that it will discourage at least the smallest traders from using new mediums to conduct their business. Traditional retailers may also find themselves subject to the new law if they offer a mail order service or if they advertise in other Member States. Subject to the above additional protections afforded to insurance and employment contracts (see Articles 13, 17, 21 and 23 respectively), the parties to an agreement can override the rules contained in the Brussels Regulation by express agreement. Where the agreement does not expressly state whether the parties submission to the jurisdiction of a particular forum is to be exclusive or non-exclusive (the latter contemplating the possibility of proceedings in another forum), it is assumed to be exclusive although non-exclusive agreements are also enforceable. The E-Commerce Directive (00/31/ec) seeks to solve any jurisdiction problems within the European Union by adopting the county of origin approach. The directive states that a service provider will be liable in the Member State where it is based, not in all the Member States where the website advertisement may be accessed. The E-Commerce Directive provides that a service provider shall render at least the following information to recipients of the service: (a) the name of the service provider; (b) the geographic address of service provider; 18 E-Commerce: Jurisdiction International Issues, by Phil Morrison (c) the trade regulator in which service provider is entered and its regulation number; (d) particulars of any relevant supervisory authority; (e) professional body; (f) VAT Number. However, this only applies within the EU. This is incompatible with the country of destination principle in the Brussels Regulation. Applicable law/choice of law Relying upon the Brussels Convention, Brussels Regulation, E-Commerce Directive or the common law to determine jurisdiction can therefore cause major problems for electronic commerce business. Not least because there is the possibility of the forum for contracts being different, dependent on which of these are applied. Electronic commerce businesses clearly have good reason to specify jurisdiction explicitly in the standard terms and conditions. Both common law and the Brussels Convention attach great weight to express jurisdiction clauses and will usually allow the clauses to override all other determination of jurisdiction. The Brussels Convention states in Article 17: If the parties, one or more of whom is domiciled in a contracting State, have agreed that a court or courts of a contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction. Although they are often discussed together, applicable law or choice of law (the law that governs a contract) is not equivalent to jurisdiction (the right to hear a contractual dispute), jurisdiction deals with issues of forum, whereas applicable law deals with what legal principals that forum applies. In the UK, the issue of applicable law is governed by the Contract (Applicable Law) Act 1980. The Act implemented the Rome Convention that sought to harmonise applicable law principles throughout the European Union. The purpose of the Rome Convention is to provide uniform rules for selecting the law applicable to contractual obligation which fall within its scope in any situation involving a choice between the laws of different countries. In other words, it is designed to secure a harmonisation of conflict of law rules as they affect choice of law in contractual matters. The Act implements the Convention by including it as a schedule to the Act. The choice or determination of applicable law can be critical in a contractual dispute because it defines the rules and principles by which the courts will interpret the contract. Applicable law can mean the difference between a party being found in breach or not or the contract itself being enforceable or unenforceable. The courts will decide on material validity, 19 Construction & Engineering Law, Volume 7, Issue 1 capacity, performance, the consequences of breach of subsequent damages and the illegality of the contract using the applicable law for each contract. The Act allows almost freedom of choice in selecting applicable law4 subject to some exceptions. The most notable of these is that the mandatory rules of a country will apply to a contract that is purely domestic in nature even though the parties have specified that the applicable law is that of a foreign country. The specific contractual term or even the standard terms of conditions can expressly select the law that governs the contract. Obviously, express choice is by far the best option for an electronic commerce business. Implied choice As is the case for other contractual terms, where no choice of law is explicitly made, it can be inferred from the circumstances under which the contract is formed. The Act and the Rome convention acknowledge this possibility by accepting implied choices of law where the choice is demonstrated with reasonable certainty. However, in the absence of a choice of law, the law of the country most closely connected to the contract governs the contract. Exactly which country is mostly connected however is often unclear. Article 4(2) of Schedule 1 to the Act therefore provides a presumption: It shall be presumed that the contract is most closely connected with the country of where the party who is to effect the performance which is characteristic for the contract has, at the time of conclusion of the contract, his habitual residence, or in the case of a body, corporate or un- incorporate, its central administration. It is worth considering the ways in which a law may be implied into a contract: 1. If there had been previous dealings between the parties. 2. Similarly, if there is a standard contract which is commonly used within the industry or sector which is based on the law of that particular country and that may enable the law of that country to be implied. 3. If the parties have chosen a particular forum in which any disputes would be held then in the absence of any other choice it would be logical to imply that the chosen law is the law of that jurisdiction. 4. If no forum has been chosen but the contract refers to specific legislation that may also enable a particular countrys laws to be implied. In the online environment, examples of characteristic performance will include the delivery of goods and the supply of services or digitised services. Those goods and services, not necessarily the payment in exchange for them, constitutes the essence of the contract. In a simple contract for the supply of goods and services, the characteristic performance will be the supply of those goods or services, such that the law of 20 E-Commerce: Jurisdiction International Issues, by Phil Morrison the country where the sellers business is located will be the applicable law. In a complex agreement, where both parties assume a number of obligations, it would be impossible to identify the characteristic performance so this test will be difficult if not impossible to apply. In that situation, it is for the court that has jurisdiction over the dispute or where jurisdiction is yet to be determined, the court before whom the dispute is brought to assess with which country the contract is most closely connected. This leads to the rather curious position of a court using its power to hear the arguments put to it and then deciding that it is not the best place to hear the dispute. Because of the uncertainty caused by these rules, it makes considerable sense for e-merchants to specify which law will govern their contract. Conclusions There is, of course, nothing new about international trade and all the legal issues raised by it. However, in the past these issues have largely arisen in business to business transactions and then only between businesses experienced in foreign trade. The internet has transformed the way in which we do business. It has, as Bill Gates said, changed everything. Anyone using the web to sell their goods or services may enter into transactions with people overseas. It can be as easy for a consumer to buy goods from a website of a business based in France as it is from a British business. It is obvious to state that in order to provide certainty then the parties would be wiser to seek to agree contractually as to which jurisdiction applies and also which law you wish to apply. If the parties agree to submit to a particular jurisdiction, then in most cases the courts will not interfere unless the agreement is with a consumer. A simple jurisdiction clause that states that a contract will be governed by and construed in accordance with, for example, the laws of Scotland and the exclusive jurisdiction of the Scottish courts will probably suffice. There may be a number of jurisdictions which are either undesirable because of the local laws or because of the nature of the online business. In such circumstances, the online vendor may wish to seek to protect themselves by the use of disclaimers and provisions limiting the countries with whose nationals or residents he is prepared to conduct business. It might be said to be trite advice to say that parties should be specific in their choice of jurisdiction and law, however, as very many lawyers the world over have based their careers on such lack of specification it is advice which is often ignored. Difficulties are caused by the fact that almost no e-commerce is purely domestic and that there is no European, let alone global harmonisation of e- commerce legislation. By definition, the use of the internet raises the question of the application of overseas laws and the even harder question of how many conflicts between these various national laws will be resolved. 21 Construction & Engineering Law, Volume 7, Issue 1 Notes 1. Brussels Convention on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matter 1968. 2. Lugano Convention re the Civil Jurisdiction and Judgements Act 1991. 3. See Commissions Guidelines on vertical restraints at www.lawdepartment.net Vertical restraints and the internet GC, 2000, V(6), 29. 4. Contracts (Applicable Law) Act 1990 c.36. Sched I Art 3. 22 E-Commerce: Formal Requirements in Digital Signatures, by Phil Morrison E-Commerce: Formal Requirements in Digital Signatures Philip Morrison Semple Fraser WS As discussed in the previous articles, it is an aspect of the general principal of freedom of contract that parties entering binding legal contracts are usually free to enter into contracts in such a manner and under such terms as they may choose. Following this theory, the fact that a contract is entered into electronically should have no impact upon its legal validity. To continue with this view, however, would be to ignore the fact that different jurisdictions have differing governing laws. In a number of jurisdictions legal provisions sometimes require that a contract is constituted in writing, which would suggest that they are of a tangible rather than electronic nature and that it be signed by the parties involved. It is contracts like these which show that commercial enterprises are affected by the restrictions on the validity of electronic contracts, which may present significant obstacles to the development of internet trade and on-line business. Article 9 (1) of the EC Directive 2000/31/EC states: Member States shall ensure that their legal system allows contracts to be concluded by electronic means [and] shall in particular ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means. As noted above, many legal systems require writing as a necessary component for the formal validity of certain juridical transactions. In Scotland, for example, the Requirements of Writing (Scotland) Act 1995 codifies the existing common law requirements and provides that writing would only be required for the valid constitution of three categories of legal act, namely gratuitous unilateral obligations, contracts relating to dealings in land and the making of a will or trust. An English example would be the Consumer Credit (Agreements) Regulations 1983 (1983/1553) which provides that certain contracts are only 23 Construction & Engineering Law, Volume 7, Issue 1 enforceable once signed. Article 23(1) of the Brussels Regulation, coming into force in 2002, requires that an agreement as to jurisdiction over disputes should be in writing although it does allow exceptions where a form is agreed in a course of dealing or arising out of wide-spread trade usage. This regulation does go on to say that: any communication by electronic means which provides a durable record of the agreement shall be equivalent to writing Article 23(2). The Interpretation Act 1978, which applies throughout the UK, defines writing as including: Typing, printing, lithography, photography and other modes representing or reproducing words in a visible form, and expressions referring to writing are construed accordingly. How writing is then dealt with in the electronic age can be found in the UN Model of 1996, which introduces the concept of a data messaging defined as: information, generated, sent, received or stored by electronic, optical or similar means including, but not limited to, electronic document interchange (EDI), electronic mail, telegram, telex or telecopy and goes on to provide that: where the law requires information to be in writing the requirement is met by data message if the information contained therein is accessible so as to be useable for subsequent reference. There is therefore an argument that these provide the necessary requirement that documents in electronic form can be construed to be in writing. Thereafter the next requirement to be considered is the addition of a signature to the document. In many instances, documents will be signed by or on behalf of a contracting party. For the vast majority of cases, there is no specific legal requirement that there be a signature, and its prime purpose will be to evidence the fact that the document has originated from, or been approved by, a particular individual. What is a signature? The nature of the requirement varies according to the legal document in question and from legal system to legal system. In a number of cases, it has been provided that a variety of methods of signature may be applied. Comparatively few statutory definitions exist in the United Kingdom but a substantial body of case law has sanctioned the use of mechanical aids to produce a signature. In Goodman v J Eban Ltd [1954] QB 550, the Court of 24 E-Commerce: Formal Requirements in Digital Signatures, by Phil Morrison Appeal held that a solicitor satisfied the requirement under the Solicitors Act 1932 that bills be signed by using a rubber stamp embossed with the name of its firm. In the case of Re Debtor (No. 2021 of 1995) [1996] 2 All ER 345, it was held by Laddie J that a faxed copy of a signed proxy form complied with statutory requirements for signature: Once it is accepted that the close physical linkage of hand to pen and paper is not necessary for the form to be signed, it is difficult to see why some forms of non human method for impressing the mark on the paper should be acceptable while others are not. It is possible today for a fax to be transmitted directly from a computer without the need for a paper original. A copy of a signature can be digitised and then appended with such a transmission being printed out as a fixment facsimile of the original signature on the recipients machine. This will be the only paper based copy of the document and signature. Although the comment must be regarded as obiter, Laddie J suggested that this document should be regarded as having been signed by its author. These cases indicate that the concept of a signature in UK law will be interpreted very broadly, so long as there is the eventual attachment to paper of some physical mark, which can be identified as indicating its adoption or approval. Although it would be normal for a signature to take the form of the signatorys name, a glance at many signatures will indicate that legibility is seldom a feature of these instruments and, in general, any mark will be acceptable so long as it can be evidenced that this is the signatorys normal method of endorsing documents. It is all very well to find that written signatures when transmitted and received are given the same status as those directly appended but this does not necessarily give us an answer to the validity of the next generation of signatures digital signatures. What is a digital signature? The International Standards Organisation defined the concept of a digital signature as: data appended to, or a cryptographic transformation of a data unit that allows a recipient of the data unit to prove the source and integrity of the data unit and protecting its forgery. Although the form is very different, the purpose of a digital signature is equivalent to that of the more traditional analogue version, namely authentication that the document has come from the sender. We may, however, find in due course that rather than have a signature which 25 Construction & Engineering Law, Volume 7, Issue 1 is appended to a document to guarantee its authenticity, that the whole document is turned into a digital signature. The term digital signature is more commonly used to refer to a situation where the text of a data message is encrypted in such a way that a recipient can be confident that it originated from the identified sender and that it has not been subject to any modification or amendment during the course of transmission. To this extent the entire message becomes the digital signature. Modern developments in cryptography have rendered the digital signature far less susceptible to forgery. Cryptography is a method of hiding the contents of a message used from ancient time to the present. Encryption is the process by which the method is disguised sufficiently to hide the substance of the content and decryption performs the opposite procedure. In essence, contemporary cryptographic systems change readable symbols into a second set of unreadable symbols using a mathematical process controlled by a number. This number is called a key. Forms of encryption Encryption itself represents only one element of the problem. The message may indicate that a particular individual had sent the message. The use of cryptography may provide a guarantee that the message has not been altered subsequent to its transmission but cannot of itself provide conclusive evidence that it did originate from the alleged sender. One method of overcoming this difficulty is to involve a third party, effectively to act as a witness to the fact that the message truly has been sent by a particular person. This participation, more generally referred to as trusted third parties is intended to provide assurance to the parties involved. One of the immediate areas where this application of cryptography is welcome is in the field of electronic commerce. Whilst systems or EDI are well established, the future of more generic forms of electronic commerce is that contracting parties may have had no previous dealings with each other. As will be discussed below, the trusted third party concept has become an important element in governmental attempts to regulate the use of cryptography. Trusted third parties Trusted third parties or trust service providers are public or private bodies who act to certify the connection between a person and their public key number. The trusted third party guarantees the authenticity of the public key number. Trusted third parties are also called certification authorities, sometimes abbreviated to CA. The certification authority issues an electronic authentication certificate, which has the following characteristics: 26 E-Commerce: Formal Requirements in Digital Signatures, by Phil Morrison 1. It identifies the certification authority. 2. It identifies the subscriber. 3. It contains the subscribers public key. 4. It is digitally signed with the certification authoritys private key. This then leaves us with the question of legality of the transmissions with a digital signature. Legal recognition of electronic signatures EU legislation The EU Electronic Signature Directive (1999/93/EC) is intended to harmonise the legal acceptance of certain electronic signatures throughout the EU. The main elements of the Directive are: Legal recognition The Directive stipulates that an electronic contract and the electronic signature cannot be legally discriminated against solely on the grounds that it is in electronic form. If a certificate and the service provider as well as the signature product used meet a set of specific requirements, there will be an automatic assumption that any resulting electronic signatures are as legally valid as a hand- written signature. Moreover, they can be used as evidence in legal proceedings. Free circulation All products and services related to electronic signatures can circulate freely and are only subject to the legislation and control by the country of origin. Member States cannot make the provision of services related to electronic signatures subject to mandatory licensing. Liability The legislation establishes minimum liability rules for service providers who would, in particular, be liable for the validity of a certificates content. This approach ensures the free movement of certificates and certification services within the Internal Market, builds consumer trust and stimulates operators to develop secure systems and signatures without restrictive and inflexible regulation. A technology-neutral framework Given the pace of technological innovation the legislation provides for legal recognition of electronic signatures irrespective of the technology used (e.g. digital signatures using asymmetric cryptography or biometrics). 27 Construction & Engineering Law, Volume 7, Issue 1 Scope The legislation covers the supply of certificates to the public aimed at identifying the sender of an electronic message. In accordance with the principles of party autonomy and contractual freedom it does, however, permit the operation of schemes governed by private law agreements such as corporate intranets or banking systems, where a relation of trust already exists and there is no obvious need for regulation. International dimension So as to promote a global market in electronic commerce, the legislation includes mechanisms for co-operation with third countries on the basis of mutual recognition of certificates and on bilateral and multilateral agreements. The Directive clarifies that the Internal Market principle of mutual recognition of national laws and the principle of control in the country of origin must be applied to Information Society services. This would ensure that such services provided from another Member State were not restricted for reasons falling within the scope of the proposal. The Directive will not interfere with the application of the Brussels Convention on jurisdiction, recognition and enforcement of judgments in civil and commercial matters and the Rome Convention on the law applicable to contractual obligations in consumer contracts or with the freedom of the parties to choose the law applicable to their contract. UK legislation In response to the EC Directive the UK Government enacted the Electronic Communications Act 2000 (ECA). This is a piece of legislation that was put in place to boost e-commerce by declaring that digital signatures are equivalent to written ones when it comes to signing documents. It is designed primarily to facilitate the use of electronic commerce in the United Kingdom by building confidence in electronic commerce and the technology underlying it by providing for approved encryption services, recognition of electronic signatures and removing legal obstacles to the use of electronic communication and storage of information in place of paper. Section 7 of the ECA provides that electronic signatures and certificates that support them can be used as evidence in court in much the same way as hand-written signatures. Section 8 of the ECA empowers the appropriate minister to modify any enactment by statutory instrument to remove restrictions from individual pieces of legislation preventing the use of electronic communication. It does not provide that all electronic signatures will now satisfy any legislative requirements for a written signature. An example of this legislation would be the Companies Act 1985 (Electronic Communications) Order 2000 (SI 28 E-Commerce: Formal Requirements in Digital Signatures, by Phil Morrison 2000/3373) which enables parties to communicate electronically with Companies House. The Act will also create the establishment of registered and approved Cryptography Service Providers by registering the name and address of that person; the services in respect of which that person is approved; and the conditions of the approval. Members of the public will be able to inspect the contents of the register and a public scheme will be created to ensure that withdrawal or modification of licences is a matter of public record. However, the Act has been criticised and it has been suggested that Part I of the Act relating to Cryptography Service provider is irrelevant as this sector is unlikely to need a formal regulation mechanism either at present because there is no demand for it, or in the future as market forces are likely to suffice. Part II has been criticised as adding little to the law as it currently stands, merely restating the current position that electronic documents are admissible in evidence and that the court should take into account the surrounding circumstances in deciding what weight to give them. Conclusion Along with other sectors of commerce, it is clear that electronic transactions are here to stay even if they have not quite revolutionised the business world as was first thought. Therefore anyone wishing to utilise the new technology will have to take stock of the legal ramifications and act accordingly. This should mean the sensible businessman taking legal advice and having the necessary contracts put in place before he starts to trade. Given the publics predilection for acting without thinking, though, and the time pressures on everyone today it will come as no surprise when lawyers are called in to advise on cross-border contracts which are either not evidenced properly in writing or contradictory terms and conditions are in place. Nevertheless it remains the best advice that it is in everyones interest if the terms of the contract are clearly set out and agreed by the parties. It is only in this way that the numerous problems encountered in contracting on the internet can begin to be avoided. 29 Construction & Engineering Law, Volume 7, Issue 1 Case Report: Shimizu Europe Ltd v Automajor Ltd High Court of Justice, Queens Bench Division, Technology and Construction Court, 17 January 2002, before HHJ Richard Seymour QC 1. HHJ RICHARD SEYMOUR QC: In this action the claimant, Shimizu Europe Ltd (Shimizu), seeks against the defendant, Automajor Ltd (Automajor), enforcement of the award (the Award) of Mr Stephen Haller dated 5 November 2001 that Automajor should pay to Shimizu a sum of £321,300.99. Mr Haller made that award in the capacity of an adjudicator appointed under the terms of the Technology and Construction Solicitors Association Adjudication Rules 1999 Version 1.3 (the TeCSA Rules). By the Award Automajor was required to make payment of the sum which I have mentioned within seven days of the date of it, that is to say, by 12 November 2001. Automajor in fact made payment of a sum of £146,231.89 on 14 November 2001. There are claims in this action for the outstanding balance of £175,069.10, for interest on the whole sum of £321,300.99 for the period of three days between 12 and 14 November 2001 inclusive, and for interest on the sum of £175,069.10 from 15 November 2001 until judgment. 2. By an undated agreement (the Contract) in the Standard Form of Building Contract With Contractors Design, 1998 edition, issued by The Joint Contracts Tribunal Ltd and made between Automajor as employer and Shimizu as contractor Shimizu agreed to undertake for Automajor the design and construction of approximately 3140 square metres of business workspace on three storeys at a site at 111115, Salusbury Road, London NW6. The agreement incorporated the TeCSA Rules. 3. The TeCSA Rules incorporated the following provisions which are presently material: 3(i)These Rules shall apply upon any Party giving written notice to any other Party requiring adjudication, and identifying in general terms the dispute in respect of which adjudication is required. 11. The scope of the Adjudication shall be the matters identified in the notice requiring adjudication, together with (i) any further matters which all Parties agree should be within the scope of the Adjudication, and 30 Case Report: Shimizu Europe Ltd v Automajor Ltd (ii) any further matters which the Adjudicator determines must be included in order that the Adjudication may be effective and/or meaningful. 12. The Adjudicator may rule upon his own substantive jurisdiction, and as to the scope of the Adjudication. 14. Decisions of the Adjudicator shall be binding until the dispute is finally determined by legal proceedings, by arbitration (if the Contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. 28. Every decision of the Adjudicator shall be implemented without delay. The Parties shall be entitled to such reliefs and remedies as are set out in the decision, and shall be entitled to summary enforcement thereof, regardless of whether such decision is or is not to be the subject of any challenge or review. No party shall be entitled to raise any right of set-off, counterclaim or abatement in connection with any enforcement proceedings. 4. By a document (the Notice) entitled Referring Partys Notice Requiring Adjudication dated 19 September 2001 sent on its behalf by its solicitors, Messrs. Hammond Suddards Edge (HSE), to Mr Peter Rees, the Chairman of Technology and Construction Solicitors Association, under cover of a letter also dated 19 September 2001, Shimizu sought adjudication in relation to various matters of alleged dispute with Automajor under the Contract. At section 5 of the Notice was set out a Summary of Dispute. That included the following: 5.1 Pursuant to TeCSA Rule 3, SEL [that is, Shimizu] give the following general particulars of the dispute. The dispute that has arisen between the Parties is in relation to: 5.1.1 monies payable under the Contract in respect of which SEL asserts that no or no valid notice of payment and/or set off/withholding has been given; 5.1.2 alternatively sums due under the contract; 5.1.3 entitlements to time; 5.1.4 the existence, status and terms of the agreement; 5.1.5 release of retention 5.4 SEL seeks redress in the form of: 5.4.1 an award for the payment of monies due including interest/financing charges. 31 Construction & Engineering Law, Volume 7, Issue 1 5.4.2 a declaration and/or award of SELs entitlement to time under the Contract; 5.4.3 a declaration in respect of the Agreement. 5.4.4 Further SEL seeks an order that Automajor do pay the adjudicators costs of this matter. 5. One of the elements in the claims referred by Shimizu to adjudication was a claim for a sum of £153,530.28 in respect of alleged variations to the works the subject of the Contract. The detailed breakdown of that sum is not presently material, but it included both additions and omissions. The item within the claim in respect of alleged variations which is important for the purposes of this judgment related to smoke ventilation works. Shimizu claimed a total of £161,996.89 in respect of alleged variations to those works. Automajor did not accept that there had been any variation in relation to smoke ventilation works. Its position was that smoke ventilation works were within the scope of the works which Shimizu had undertaken under the Contract, albeit that the works undertaken were considerably more extensive and expensive than Shimizu had allowed for in its tender because of the need to comply with statutory requirements. Automajor had, prior to the making of the reference to adjudication, paid a sum of £50,000 on a without prejudice basis towards the alleged value of the alleged variations in relation to smoke ventilation works. 6. In the adjudication before Mr Haller Automajor sought to raise a counterclaim in respect, amongst other things, of the £50,000 paid without prejudice on account of the alleged cost of the alleged variations to the smoke ventilation works. Mr Haller ruled that he had no jurisdiction to entertain any counterclaim. He also ruled that the alleged variations to the smoke ventilation works in respect of which Shimizu sought to claim payment of an additional sum of £161,996.89 were not variations. 7. The Award included the following: 2.6.12 As regards the interim application dated 24 August 2001 (and after some argument): 2.6.12.1 The Referring Party stated that it withdrew its claim at paragraph 5.1.1 of Notice of Adjudication and no longer relied on strict compliance with clause 30.3.5 of the Contract but did rely on paragraph 5.1.2 of Notice of Adjudication . 2.6.12.2 Both parties made clear that they wanted me to deal with the merits of the application for payment notwithstanding the arguments which had been put to me. 2.6.12.3 Both parties confirmed that there were only 2 items in the list of variations in File 2 divider 16 of the Notice of Adjudication which were not agreed but the parties accepted 32 Case Report: Shimizu Europe Ltd v Automajor Ltd that they could not be challenged in this adjudication given my decision on the question of the Counterclaim. 2.6.12.4 Given that the money claims relate to an interim application and the final account and other matters under the Contract remain live between the parties, the parties requested me, without necessarily giving detailed reasons, to give some indication of how I arrive at any sums which I might award so as to enable the parties to have regard to such matters in their subsequent dealings with the Contract. 2.7 The matters recorded in paragraph 2.6 above are not presented as reasons for my decision. They are recited because they indicate concessions or agreements made by the parties which effectively altered the matters referred to me for decision. 8. At paragraph 4.2.2 of the Award Mr Haller indicated that: I have taken the full value of variations but then reduced that by £10,000 to allow for the omission (accepted by both parties) of floor finishes and notified to me by e-mails from the parties dated 1 November 2001. He went on to award Shimizu a sum of £321,300.99. The breakdown of that sum was set out at paragraph 4.2.6 of the Award. It included an element of £143,530.28, being the sum of £153,530.28 claimed by Shimizu in respect of alleged variations less the sum of £10,000 identified by Mr Haller in paragraph 4.2.2 of the Award. It thus included as an element in the calculation an amount of £161,996.89 in respect of the alleged variations to smoke ventilation works which Mr Haller had held were not variations, and made no allowance for the without prejudice payment on account in connection with the alleged variations of £50,000. 9. At paragraph 4.2.3 of the Award Mr Haller explained that: In relation to the measured works claim at File 2 divider 13 of the Notice of Adjudication, this sum is carried forward into the list of variations in File 2 divider 16 of the Notice of Adjudication. In view of paragraph 2.6.12.3, no adjustment has been made but it is part of my decision that my monetary award, which relates to an interim application, should not prevent the parties from adjusting the Final Account (to the extent permitted by the Contract) to reflect other matters that I have decided. 10. It appears that Mr Haller consciously included in his calculation of the sum to be awarded to Shimizu an amount in respect of the alleged variations to smoke ventilation works, notwithstanding that he did not consider there had 33 Construction & Engineering Law, Volume 7, Issue 1 been any variation in those works, in the expectation that appropriate adjustments could be made in the calculation of the sum, if any, due to Shimizu under the Final Account. 11. Following receipt of the Award the solicitors acting on behalf of Automajor, Messrs S J Berwin (Berwins) wrote to Mr Haller a letter dated 6 November 2001 which was, so far as is presently material, in the following terms: We write to acknowledge receipt of your Adjudication Decision dated 5 November 2001. Having considered the Decision carefully, however, we wish to advise that we consider the Decision contains an error which goes to your jurisdiction. In clause 4.1.5.1 of your Decision you state that the atrium roof glazing/fire strategy (including smoke extract) was within the Referring Partys original scope of work and was not a variation. You further state that the Referring Party is not entitled to an extension of time for the item but that in any event, the delay on this item was concurrent with the delays relating to the rear doors and incoming power. In paragraphs 4.2.2 and 4.2.3 of your Decision you state that you have allowed full value of the variations and note that the measured works claim at file 2, divider 13 is included in the list of variations to which you have made no adjustment because of what you say in paragraph 2.6.12.3 of your Decision. You have awarded the Referring Party £143,530.28 in respect of variations which is the figure in the Amount Complete column in the Summary of Variations included in divider 16 of the Referring Partys documents (less the agreed £10,000 deduction for floor finishes). However, this decision is, we regret, erroneous because it fails to take account of one of the payments already made the figure of £26,533.41 in the Approved Amount column. The Referring Partys claim for unpaid variations was £126,996.87 which is the difference between the Amount Complete and the Approved Amount column. In other words, the Referring Party was seeking payment of the difference between what they had claimed and what they had actually received from the Responding Party. The column on the left-hand side headed Submitted Amount is misleading because it contains claims for variations which have subsequently been cancelled and do not form any part of the Referring Partys claim. In awarding the Referring Party £143,530.28 in respect of variations, you have awarded them more than the Referring Party considers they are entitled, without actually allowing the Referring Party any more variations. Secondly, and equally fundamentally, paragraph 2.6.12.3 is incorrect. The Responding Party accepted on the final day of the hearing that as a result of your decision on the 34 Case Report: Shimizu Europe Ltd v Automajor Ltd Counterclaim you had no jurisdiction to deal with the claim for repayment of £50,000 paid on account of the smoke ventilation costs (without admitting any liability) and the claim for an increased deduction in respect of the inter-tenancy walls. However, the Responding Party did not accept that the sum claimed for the smoke ventilation costs of £161,996.89 could not be challenged. As a result of this, an error has arisen in your Decision as under paragraph 4.1.5.1 you have stated that the smoke ventilation costs are not a variation yet in paragraph 2.6.12.3 and paragraphs 4.2.2 and 4.2.3 you have allowed the Referring Party costs of that work as a variation. You appear to have taken this decision on the understanding that both parties have accepted that the claim for smoke ventilation costs and the deletion of inter-tenancy walls could not be challenged in the adjudication. As we have said, that acceptance related only to the Counterclaim elements of those two items. Neither party addressed you on the final day with regards to Summary of Variations as the only two items that were outstanding on the Summary of Variations and had not been included in accounting between the parties were the smoke ventilation costs and the deletion of the inter-tenancy walls. Both parties had addressed you at length on the smoke extract costs as a measured work item. We are sorry that an error has occurred after all your patient work during the course of the adjudication but the effect of it is to award the Referring Party the costs of an item as a variation having decided that the item was not a variation. On behalf of Automajor we did not accept that smoke ventilation costs should not be challenged during the Adjudication, merely that the Counterclaim element in relation to them could not be raised. The correct figure in paragraph 4.2.6 for the sum claimed under paragraph 4.2.3 should be nil. The Responding Party, of course, claims that it is entitled to repayment of the £50,000 paid on account of the smoke extract and the proper allowance for deletion of the inter-tenancy walls but these items did not form part of this adjudication as they were included in the respondents Counterclaim. We calculate the award in favour of the Referring Party should be no more than £129,917.37 together with VAT of £22,735.54, making a total of £152,652.91. We invite you by this letter (and the Referring Party by copy of this letter) to amend your Decision so that the sum awarded pursuant to paragraph 4.2.3 is nil. We consider that you have power to do so pursuant to the slip rule as explained in Bloor Construction v Bowmer & Kirkland (London) Limited. 35 Construction & Engineering Law, Volume 7, Issue 1 12. Mr Haller replied to the letter dated 6 November 2001 written by Berwins in a letter dated 7 November 2001. In that letter he explained that he considered that he had taken into account in his calculations of the sum due to Shimizu the sum already paid in respect of variations. He then went on to deal with what he called his alleged error relating to smoke ventilation costs as follows: I am fully conscious that my decision at paragraph 4.1.5 holds that the relevant work was not a variation. I am also fully conscious that the figures (as paragraphs 4.2.2 and 4.2.3 of my decision make clear) include the value of the items which I decided were not variations. In this respect , I have the following comments: 2.1 You say on the second page of your letter that, on the final day, neither party addressed me with regard to the Summary of Variations, but that is not correct. It was expressly addressed. I was told that there were two items marked to be agreed (and which were still not agreed) but that there was no dispute or issue on the balance of that list. 2.2 I then specifically anticipated the very matter about which you complain by asking, in relation to the smoke ventilation costs, what was to happen if I were to find against the Referring Party in principle. I further specifically asked whether, in such circumstances, I would need to omit the relevant sum in respect of this work. In this context, I reminded the parties that I had ruled that the counterclaim was not within my jurisdiction and indicated my concern, if not in so many words, that this might be a back-door method of circumventing my decision on the counterclaim. My notes then clearly record that it was agreed not, i.e. agreed that I should not make such an adjustment. My notes also clearly record my statement that this was not a dispute on the final account and that I thought the issue would be capable of adjustment in the final account, which I believed the parties accepted. 2.3 At the conclusion of the discussion, I wrapped up (in part as a question to the parties) by stating that, if I were to award anything in respect of the variations, it would effectively have to be on the basis that the list stands as drawn (again I quote from my notes). There was no challenge to or dissent from that. I believe, therefore, that paragraph 2.6.12.3 of my decision is a correct record of where the parties agreed this issue should rest for the purposes of this adjudication. 2.4 I was at all times conscious of the oddity produced by deciding that these matters were not a variation and at the same time not adjusting the account to reflect this but that arose in the circumstances described above. It was for that very reason, in paragraph 4.2.3 of my decision, that I made it clear that my monetary decision related only to the interim 36 Case Report: Shimizu Europe Ltd v Automajor Ltd application and that nothing in my decision should prevent the parties from adjusting the final account to reflect the other matters which I had decided, which would naturally include the decision that these matters were not variations. However, in the light of what I have said, I believe that both parties agreed that I should not adjust the variations account in this adjudication but I was comfortable in the knowledge that my decision on this would not leave the Referring Party without a remedy for the oddity, as I expressly made clear. 2.5 It seems to me that the real issue you raise is whether what I record at paragraph 2.6.12.3 is correct. My recollection and notes are clear, as I described above. If, despite my recollection and understanding, both parties in fact intended me to deal with the particular issue as it arose at the hearing differently, and there was a common understanding between the parties as to that intention, then it seems to me that the parties would be at liberty to ask me to amend my decision to reflect this. However, that would require me to be vested with ad hoc jurisdiction to deal with the issue in that way. It would also require the parties to make clear precisely what was the true and common intention on this issue in terms of what both parties were agreeing and expecting me to do. In the absence of that, however, I do not see that I can take the matter any further. For the reasons explained above, I do not accept or believe that there has been any slip or error in my decision on either of the points raised. My decision reflects precisely what I intended to decide, having regard to the matters referred to in paragraphs 2.5 and 2.6 of my decision and specifically paragraph 2.6.12.3 which is a summary of the points mentioned above. 13. There were put in evidence at the hearing before me the witness statements of Ian Insley, a partner in Berwins, dated 12 December 2001, Jane Hudson, a solicitor in the construction group at Berwins, dated 11 December 2001, and Philip Ward, a director of Peram Design Group Ltd, which acted as project manager for Automajor in relation to the works the subject of the Contract, dated 11 December 2001. Each of those people had been present at a hearing before Mr Haller on 31 October 2001, which was the final day of a series of hearings before him. The effect of the evidence of each was that Mr Haller had misunderstood the position of Automajor in relation to the sum to be included in any award in favour of Shimizu in respect of variations to smoke ventilation works. All that Mr Insley, who presented Automajors case before Mr Haller, agreed to was that Automajor was not entitled to a credit for the £50,000 paid on account, because to allow such a credit would be to give effect to the counterclaim of Automajor. No evidence was put before me on behalf of Shimizu which was directed specifically to the question of what had actually 37 Construction & Engineering Law, Volume 7, Issue 1 been said on behalf of Automajor to Mr Haller on 31 October 2001 about what account should be taken of the sum claimed by Shimuzu in respect of the alleged variations to smoke ventilation works. 14. As I have already recorded, of the sum awarded by Mr Haller Automajor has paid an amount of £146,231.89. Although Miss Delia Dumaresq, who appeared on behalf of Automajor, accepted that the sum had been wrongly calculated, it appears that that sum was intended to represent an amount of £321,300.99 less £111,996.89, being £161,996.89 less £50,000, plus Value Added Tax at 17.5%. Arithmetically the correct result of such a calculation would be £189,704.65. 15. The claim form in this action was issued under CPR Part 8. The first issue raised on behalf of Automajor by Miss Dumaresq was the question whether it was appropriate to proceed under CPR Part 8 in a case in which it appeared that there was, or might be, a dispute of fact as to what had or had not been said to Mr Haller at the hearing before him on 31 October 2001. Miss Dumaresq urged me either to dismiss the claim as being inappropriate in form, or to direct that it proceed as if commenced under CPR Part 7 and give consequential directions for the resolution of the factual questions which arose at a trial. 16. Mr Adam Constable, who appeared on behalf of Shimizu, submitted that it was not necessary for me to give any directions concerning the resolution of factual disputes because no factual issue needed to be resolved in order to reach the conclusion that Shimizu was entitled to judgment for the balance unpaid of the amount of the Award. He submitted that, if Mr Haller had made a mistake as to the position adopted on behalf of Automajor in relation to the account which should be taken by Mr Haller of the amount claimed by Shimizu in respect of variations to smoke ventilation works, the effect of that was only that his decision in the Award was wrong, not that it was made without jurisdiction. If the sum determined in the Award as payable to Shimizu by Automajor was ascertained in the course of reaching a conclusion as to a matter referred to him for his decision by the Notice, it did not matter, submitted Mr Constable, that it could be demonstrated that the sum was, or might be, incorrect. 17. Mr Constable relied, in support of the submission set out in the preceding paragraph, upon the decisions of, first, Dyson J and then the Court of Appeal, in Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] Building LR 522. The leading judgment in the Court of Appeal was that of Buxton LJ. At page 526 of the report, in paragraph 14 of the judgment, Buxton LJ said: This is a very short point. I am satisfied that the judge was right in rejecting Bouygues argument. Although the effect of Mr Gards award was as Bouygues said, that was not because he answered a question about the release of the retention monies. No such question was put to him by the parties, and he did not pose any such question to himself. The 38 Case Report: Shimizu Europe Ltd v Automajor Ltd case is quite different from, for example, that hypothesised by Dillon LJ in Jones v Sherwood Computer Services plc [1992] 1 WLR 277 at page 287A, where an accountant instructed to value a parcel of shares values the wrong parcel, either by extent or by identity. Here, Mr Gard answered exactly the questions put to him. What went wrong was that in making the calculations to answer the question of whether the payments so far made under the sub-contract represented an over-payment or an underpayment, he overlooked the fact that that assessment should be based on the contract sum presently due for payment, that is the contract sum less the retention, rather than on the gross contract sum. That was an error, but an error made when he was acting within his jurisdiction. Provided that the Adjudicator acts within that jurisdiction his award stands and is enforceable. 18. Mr Constable also relied upon an unreported decision of His Honour Judge Gilliland QC in Farebrother Building Services Ltd v Frogmore Investments Ltd, in which judgment was handed down on 20 April 2001. That case concerned a decision of an adjudicator acting under the TeCSA Rules, but in respect of which no reasons were given. The sum awarded by the adjudicator showed that he had not allowed a set-off for which the respondent party had contended. It was submitted by Counsel for the respondent party that not to decide a matter referred to him for his decision amounted to giving a decision in excess of the jurisdiction of the adjudicator. In the course of his judgment Judge Gilliland said, at pages 3 to 4 of the copy put before me: Now, as far as adjudication awards are concerned, the approach of the court in relation to not enforcing the award has been to look not at the merits of the decision, but at the question of jurisdiction. If an adjudicator makes an award which is outside his jurisdiction, then it is of no effect and will not be enforced by the court. If, on the other hand the award was within his jurisdiction, then the court will normally give effect to that award. It seems to me that Mr Raesides submission in the present case must involve the proposition that if it be the case that the adjudicator ignored or failed to take account of an issue of substance put forward by the defendant in the present case that is a matter which goes to jurisdiction. I am bound to say that it seems to me that that is not a matter which goes to jurisdiction. Rather it is a matter which goes to the conduct of the proceedings. The adjudicator may have been wrong or he may have erred in what he did, but it is an error which is, in principle, within his jurisdiction. He has simply made a decision which is incorrect. An adjudicators decision is not like an arbitrators award where the court has power to interfere in pursuance of a statutory power under the Act. This is a case where statute says the adjudicators award is binding until 39 Construction & Engineering Law, Volume 7, Issue 1 set aside in subsequent proceedings. 19. Miss Dumaresq sought to distinguish the decision of Judge Gilliland in Farebrother Building Services Ltd v Frogmore Investments Ltd on the ground that in that case the adjudicator gave no reasons for his decision. She sought to rely on the decision of Lord Reid in the Scottish case of Ballast plc v The Burrell Company (Construction Management) Ltd [2001] Building LR 529 to the effect that an adjudicator was bound to determine the dispute referred to him and could not, with binding effect, determine the extent of his own jurisdiction or narrow or extend his jurisdiction. She submitted, as I understood it, that if an adjudicator made any mistake about what he was supposed to decide or as to the basis upon which he was being invited to decide a question, such went to his jurisdiction and vitiated his decision. The particular mistake which Miss Dumaresq contended that Mr Haller had made was to misunderstand that he had been asked to decide two separate questions, namely, first, what sums Shimizu was entitled to under the Contract, and, second, what sums, if any, were payable to Shimizu as sums due under the Contract. She went on to submit that, having found, as a stage in the evaluation of the matters referred to him, that there had been no variations in relation to the smoke ventilation works, the effect of which finding, she submitted, was that he had found that nothing was due to Shimizu in respect of variations, Mr Haller had had no jurisdiction to go on to include in his overall assessment of the sum due to Shimizu, the element which he did in respect of variations. 20. It seems to me that the decision of Lord Reid in Ballast plc v The Burrell Company (Construction Management) Ltd depends critically upon the fact that, so it appears from paragraph 36 of that decision itself, under Scots law the remedy of judicial review is available not only in public law cases, but also in relation to powers conferred on a third party by a contract to make decisions as to the rights of the parties to the contract. What Lord Reid said at paragraph 36 of the judgment was: Like Dyson J I have approached the issues raised by adjudication within a contractual framework, for the reasons I have explained. One difference between Scots and English law (in procedure at least), however, is (as I have already mentioned) that judicial review is not confined under Scots law to issues of public law, but extends to powers conferred by a contract upon a third party to determine the rights of the parties to the contract inter se. In particular, judicial review under Scots law extends to arbitration and is not uncommon in the context of arbitration under building and engineering contracts. This is a factor which appears to me to be potentially relevant, as those responsible for the Scottish Scheme [of adjudication] can be taken to have been aware both of the possibility, under Scots law, of a relatively rapid determination of questions as to the compatibility of a decision with 40 Case Report: Shimizu Europe Ltd v Automajor Ltd what might be described as Wednesbury standards; and they can also be taken to have been aware of the role played by judicial review under existing Scots law and practice in relation to construction contracts. 21. It was against the background of the availability of judicial review as a mechanism for challenging a decision of a third party appointed under a contract as to the rights of the parties under such contract that the passages in the judgment of Lord Reid upon which Miss Dumaresq particularly relied must, in my judgment, be understood. Those passages were as follows: 39. Balancing the various considerations to which I have referred, I have come to the conclusion that the Scheme should be interpreted as requiring the parties to comply with an adjudicators decision, notwithstanding his failure to comply with the express or implied requirements of the Scheme, unless the decision is a nullity; and it will be a nullity if the adjudicator has acted ultra vires, (using that expression in a broad sense to cover the various types of error or impropriety which can vitiate a decision), for example because he had no jurisdiction to determine the dispute referred to him, or because he acted unfairly in the procedure which he followed, or because he erred in law in a manner which resulted in his failing to exercise his jurisdiction or acting beyond his jurisdiction. 40. Applying that general approach to the circumstances of the present case, it seems to me that the adjudicator was bound to determine the dispute referred to him, provided the dispute fell within his jurisdiction. Paragraph 20(1) of the Scheme expressly provides that the adjudicator shall decide the matters in dispute (subject to his power to issue separate decisions on different aspects of the dispute); and that is reflected in paragraph 9(2). The adjudicator cannot determine with binding effect the extent of his own jurisdiction: the limits of his jurisdiction are determined by the notice of adjudication and the provisions of the Scheme, and cannot be narrowed or extended by the adjudicators misconstruing those limits. 22. In my judgment the propositions which Miss Dumaresq submitted were to be found in the decision of Lord Reid in Ballast plc v The Burrell Company (Construction Management) Ltd are not supported by that decision. I could elicit no principle from the words of Lord Reid that any mistake whatsoever made by an adjudicator as to what he was supposed to decide or as to the basis upon which he was being invited to decide a question inevitably went to his jurisdiction and vitiated his determination. The distinction which Miss Dumaresq sought to draw between a reference to Mr Haller of a dispute as to what sum Shimizu was entitled to under the Contract and a dispute as to what sum was payable to Shimizu under the Contract seemed to me to be a distinction without a difference in the circumstances of the present case. What 41 Construction & Engineering Law, Volume 7, Issue 1 had been referred to Mr Haller, so far as is presently material was a dispute as to sums due under the contract. It seemed to me that the most attractive way in which the objection which it was sought to take on behalf of Automajor could be put was that Mr Haller had made a decision as to how to deal with the sums claimed in respect of alleged variations to the smoke ventilation works which he would, or might, not otherwise have made under the misapprehension that the parties to the Contract agreed that he should deal with such sums in the way he believed they had agreed. In a sense, so it could be argued, they had, in his belief, extended his jurisdiction so as to enable him to take an account of Shimizus claim in relation to variations to the smoke ventilation works which would not otherwise have been proper. 23. In order to decide whether Mr Haller had jurisdiction to deal with the question of what sum, if any, to include in his calculation of a sum to be paid by Automajor to Shimizu in respect of alleged variations to the smoke ventilation works in the way he did it is necessary, in my judgment, in the light of the comments of Buxton LJ in Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd to which I have referred, to identify what question or questions were referred to him for decision. Miss Dumaresq accepted that, in relation to a reference to adjudication governed by the TeCSA Rules, the jurisdiction given to an adjudicator under Rule 11, by which it is provided, so far as is presently material, that: The scope of the Adjudication shall be the matters identified in the notice requiring adjudication is to determine those matters which, by Rule 3(i), are required to be specified in a notice requiring adjudication. Rule 3(i) requires that a notice of adjudication state: in general terms the dispute in respect of which adjudication is required. Miss Dumaresq also accepted that in the present case the disputes so described in general terms were those set out in section 5 of the Notice, and thus included: 5.1.2 sums due under the contract. What, in my judgment, Mr Haller in fact decided in the Award, other than in relation to the costs of the adjudication, was that Automajor should pay Shimizu under the Contract the sum of £321,300.99. I consider that it is obvious that he had jurisdiction, given the terms of the Notice, to decide both that some sum was payable by Automajor to Shimizu and what that sum was. Miss Dumaresq did not suggest the contrary. Once the issues referred to Mr Haller for decision are correctly identified, it becomes plain, it seems to me, that, if Mr Haller made a mistake, it was as to a matter relevant, or possibly relevant, to the evaluation of what sum, if any, should be paid by Automajor to 42 Case Report: Shimizu Europe Ltd v Automajor Ltd Shimizu under the Contract. It was not a mistake as to what he was being asked to decide. He asked himself, it seems to me, the correct question. He answered that question. If the evidence of Mr Insley, Miss Hudson and Mr Ward is correct, as it may well be, Mr Haller got the answer wrong because he misunderstood the submissions being made to him on behalf of Automajor about one element which might have given rise to an entitlement in Shimizu to a payment under the Contract. The proper mechanism for correcting the error, if error there was, seems to be in the course of a final account negotiation or in arbitration proceedings. It is not to challenge the Award on jurisdictional grounds, because, as must now be considered to be well-established, an adjudicator has jurisdiction to make a mistake, as long as he asks himself a question or questions which have actually been referred to him for decision and seeks to answer such question or questions. 24. In the result it is not, in my judgment, material to the question whether the Award is binding, to the extent for which Rule 28 of the TeCSA Rules provides, whether the evidence of Mr Insley, Miss Hudson and Mr Ward is correct, or whether the understanding of Mr Haller, as set out in his letter dated 7 November 2001 to Berwins, is right. Consequently, the procedure adopted on behalf of Shimizu of proceeding under CPR Part 8 cannot, it seems to me, be faulted, and the procedural objection taken on behalf of Automajor fails. 25. There will be judgment for Shimizu for the balance unpaid of the amount of the Award, namely £175,069.10, together with interest in respect of non-payment of the sum of £321,300.99 for the three days 12 to 14 November 2001 inclusive, quantified at £211.27, and interest on the sum of £175,069.10 from 15 November 2001 until today, as to which I shall hear Counsel. 26. Although it is not strictly necessary to do so, in the light of the conclusions which I have already expressed, I should like to comment on the alternative case put forward by Mr Constable, that even if Mr Haller had exceeded his jurisdiction in making the Award, any right which there would otherwise have been to raise objection on behalf of Automajor had been waived by making part-payment of the sum awarded by Mr Haller and/or by inviting him to correct the Award. In support of that submission Mr Constable drew to my attention the observations of His Honour Judge Humphrey Lloyd QC in paragraph 24 of his judgment in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd, an unreported decision handed down on 17 July 2000. So far as is relevant to the point now under consideration, what Judge Lloyd said was: Mr Darling [Counsel] was on surer ground in submitting that in trying to read such a decision there could be no severance of whatever the adjudicator decided so as to separate the good from the bad. Mr Harris [Counsel] contended that there could be a severance for otherwise he could not treat the adjudicators apparent adoption of KNSs gross valuation of £1,136,076 as the adjudicators valuation, nor could he isolate (in order to discard as ultra vires) the figures of £107,143 and 43 Construction & Engineering Law, Volume 7, Issue 1 £23,613. He relied on what Dyson J had said in Bouygues (UK) Ltd v Dahl- Jensen UK Ltd [2000] BLR 49 at page 54 (para 25): If the mistake was that he decided a dispute that was not referred to him, then his decision was outside his jurisdiction, and of no effect. I have already explained why the dispute referred to the adjudicator included any ground open to Sindall which would justify not paying KNS. There may be instances where an adjudicators jurisdiction is in question and the decision can be severed so that the authorised can be saved and the unauthorised set aside. This is not such a case. There was only one dispute even though it embraced a number of claims or issues. KNSs present case is based on severing parts of the adjudicators apparent conclusions from others. It is not entitled to do so. Adjudicators decisions are intended to be provisional and in the nature of best shots on limited material. They are not to be used as a launching pad for satellite litigation designed to obtain what is to be attained by other proceedings, namely the litigation or arbitration that must ensue if the parties cannot resolve their differences with the benefit of the adjudicators opinion. KNS must therefore accept the whole of this decision and if it does not like it to seek a remedy elsewhere. 27. Mr Constable also relied on the comments of His Honour Judge Gilliland QC in Farebrother Building Services Ltd v Frogmore Investments Ltd at the conclusion of the judgment in that case: It seems to me that a party cannot pick and choose amongst the decisions given by an adjudicator, assert or characterise part as unjustified and then allege that the part objected to has been made without jurisdiction. That is not permissible under the TeCSA Rules. Either the adjudicator has jurisdiction or he does not. If he had jurisdiction, it seems to me that his decision is binding even if he was wrong to reach the conclusion he did. 28. Miss Dumaresq submitted that both the decision in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd and the decision in Farebrother Building Services Ltd v Frogmore Investments Ltd were distinguishable in relation to the comments which I have quoted. She submitted that a decision may have many separate and severable elements within it. 29. In my judgment it cannot be right that it is open to a party to an adjudication simultaneously to approbate and to reprobate a decision of the adjudicator. Assuming that good grounds exist on which a decision may be subject to objection, either the whole of the relevant decision must be accepted or the whole of it must be contested. It may, of course, be important correctly to characterise what constitutes a decision of the adjudicator. It is likely that, to be relevant for the purposes now under consideration, a decision will be the 44 Case Report: Shimizu Europe Ltd v Automajor Ltd answer to a question referred to the adjudicator, rather than a conclusion reached on the way to providing such answer. For example, if the adjudicator has had referred to him or her for decision both the question how much money is due to a contractor and also the question to what extension of time for completion of construction works the contractor is entitled, it is likely that it will be open to a party to the adjudication to accept the determination in relation to the sum due while disputing, if otherwise there are good grounds for so doing, the assessment of the extension of time, or vice versa. In such a case two separate questions would have been referred to the adjudicator. However, that situation is to be distinguished from the case in which in order to answer the question to what sum a party is entitled it is necessary to consider a number of elements of claim, or the case in which in order to reach a conclusion as to what extension of time is appropriate a number of grounds of possible entitlement to extension of time need to be considered. In each of these latter cases the result of the evaluation of the various elements will be a single cash sum or a single period of extension of time. It seems to me that the option available to a party who otherwise has good grounds for objecting to a decision that a particular sum is payable is to accept it in its entirety or not at all. He does not have the option of declining to accept the decision in its entirety, but to accept the reasoning which led to particular items being included in the overall total. Similarly with an evaluation of a period of extension of time. The overall period of extension must be accepted or none. 30. In the present case Mr Hallers error, if such it was, was committed in the course of reaching a conclusion as to how much was due to Shimizu. It was not a decision on a separate question which had been referred to him. In my judgment by inviting Mr Haller to correct the Award under the slip rule Berwins on behalf of Automajor accepted that the Award was valid. It is true that in its letter to Mr Haller dated 6 November 2001 Berwins asserted that the Award contained an error which went to Mr Hallers jurisdiction, but, if that were right, it would follow that the Award, or the relevant part of it, was a nullity. There would be nothing to correct. I accept the submission of Mr Constable that the invitation to Mr Haller to correct the Award under the slip rule is only consistent with recognising it as valid. I also accept the submission of Mr Constable that by paying part of the sum the subject of the Award Automajor elected to treat the Award as valid. Otherwise there was no need to pay Shimizu anything, and it was not appropriate to do so. Consequently, had it been necessary to do so, I should have held that Automajor had elected to forgo any opportunity which it might otherwise have had to object to the Award. Adam Constable (instructed by Hammond Suddards Edge) appeared for the claimant. Delia Dumaresq (instructed by S J Berwin) appeared for the defendant. 45 Construction & Engineering Law, Volume 7, Issue 1 Case Report: China National Petroleum Corporation and Others v Fenwick Elliott and Techint International Construction Company High Court of Justice, Chancery Division, 31 January 2002, before The Vice- Chancellor Introduction 1. THE VICE-CHANCELLOR: The claimants are incorporated in, respectively, China, Malaysia, Canada and Sudan. They are the members of a consortium (the Consortium) engaged in the Muglad Basin Oil Development Project in the Sudan. In July 1997 Claimants engaged OGP Technical Services Sdn Bhd (OGP), a firm of consulting engineers, to act for them in the management of the Project as project management consultants. 2. The second defendant (Techint) is a company incorporated in the Bahamas with its principal place of business in Buenos Aires, Argentina. It carries on business as an international contractor, particularly in oil, gas, water supply and pipeline industries. On 21 February 1998 Techint entered into two contracts with the Consortium for the construction, as part of the Project, of a marine terminal, pumping stations and a telecommunications and control system. 3. The construction contracts between the Consortium and Techint are governed by Sudanese law. They make provision for increases in the contract price in the light of changes in the scope or nature of the work to be done by a system called the change order system; but they make no provision for OGP or any architect or engineer to certify appropriate increases. In addition, they contain arbitration clauses for the resolution of disputes under ICC Rules. 4. Differences arose between the Consortium and Techint with regard to the proper working of the change order system. Techint claimed substantial sums for additional work done. Efforts to compromise the differences failed and on 46 Case Report: China National Petroleum v Fenwick Elliott and Techint 13 July and 21 September 2000 Techint referred its claims to arbitration. For the most part they are claims for additional remuneration on the grounds that the nature and scope of the contract works have changed. Originally the claims were for US $110m, they have now increased to US $1530m. 5. The first defendant (FE) is the firm of solicitors acting for Techint in the arbitration. In the course of doing so, on 16 October 2001, FE wrote a letter to the solicitors for the Consortium, Masons, which, the Consortium claims, revealed that Techint or FE must have received confidential documents or information belonging to the Consortium. 6. On 17 October 2001 and on several subsequent occasions Masons asked FE to reveal how, when and from whom it had received such documents or information. On 27 November 2001, no answer satisfactory to Masons having been received, these proceedings were commenced by the Consortium against FE and Techint. The Consortium claims injunctions restraining the use or disclosure of such documents or information, delivery up of such confidential documents as either of them have, and an order requiring both defendants to disclose the source of such documents and information. On 28 November 2001 the Consortium obtained permission to serve the proceedings on Techint in the Bahamas; this was done on 11 December 2001. 7. There are three applications before me, namely: (a) the application dated 27 November 2001 of the Consortium for orders (i) restraining FE and Techint from using or disclosing confidential informa- tion (ii) delivery up of all confidential information and (iii) disclosure on oath of how when and from whom such documents or information were obtained; (b) the application dated 3 December 2001 of FE for an order, pursuant to CPR Rule 3.4, Part 24 or the inherent jurisdiction of the court, that the claim be struck out, dismissed or stayed; and (c) the application dated 14 January 2002 of Techint for an order setting aside the order granting permission to serve Techint out of the jurisdiction and setting aside, staying or dismissing these proceedings against Techint. Those, in summary, are the issues I have to determine, but to explain the submissions made to me and my conclusions it is necessary to describe the facts in greater detail. The facts 8. As I have indicated, the arbitrations were commenced in July and September 2000. The Arbitral Tribunal consists of a chairman, Professor John Uff QC, and two others. The issues requiring the decision of the Tribunal include what are described as Tranche 1. These concern the questions who was responsible for certain delays and whether Techint is entitled to be paid for the changes which resulted therefrom. 47 Construction & Engineering Law, Volume 7, Issue 1 9. On 23 August 2001 FE wrote to the Chairman of the Tribunal concerning the formulation of the Tranche 1 issues and seeking a hearing in respect of them over the two weeks following 10 December 2001. In addition they sought disclosure of all documents containing advice or recommendations of OGP to the Consortium with regard to each change order proposal. They asked the Tribunal to make a direction that such documents be disclosed on or before 31 August 2001. FE also sought directions for the Consortium to provide oral evidence from OGP. 10. On 7 September 2001 Masons wrote to the Chairman of the Tribunal. They indicated that the Consortium were considering whether they had any documents in the category sought by Techint and if so whether they were relevant and disclosable. With regard to oral evidence from OGP they said that the Consortium would call personnel from OGP to give comprehensive and balanced evidence. They added: If [Techint] wishes to call OGP witnesses as well, this is entirely a matter for it. 11. On 13 September 2001 the Chairman of the Tribunal directed the Consortium to respond to Techints request for the specific disclosure sought in the letter from FE dated August 23 within seven days. On 1 October 2001, following a procedural meeting with the parties representatives at which FE sought a peremptory order for specific disclosure of all OGPs written recommendations, the Chairman of the Tribunal directed that the Consortium provide responses to the requests for specific disclosure which had by then been made. He allowed a further seven days in respect of the request made on August 23. 12. On 8 October 2001 Masons wrote to FE, referring to the directions given on October 1, and stating We are continuing to review the large number of files provided to us by the [Consortium] and have now located some of the documents requested in your letter dated 23 August 2001. These documents are as follows: [there follows a description of a letter from OGP to the Consortium containing an assessment of change order proposals for four separate aspects of the project] The review of the project documentation is continuing and we will be forwarding to you copies of documents (as they are located) that meet the request for specific disclosure contained in your letter dated 23 August 2001. This crossed with a letter written by FE to Masons on the same day complaining that the Consortium had not complied with the directions for responses within the period allowed by the Chairman of the Tribunal. 48 Case Report: China National Petroleum v Fenwick Elliott and Techint 13. On 16 October 2001 FE wrote the letter to the Chairman of the Tribunal which has given rise to these proceedings. They raised again the question of disclosure orders. They wrote: That leaves finally the outstanding disclosure of the OGP advice and other matters sought in our letter of August 23 and September 21, in respect of which you made a disclosure order on October 1. So far, only a very small part of this documentation has been disclosed; by their letter of October 8 the respondents disclosed OGPs advice of 21 August 1999 in relation to four Change Order Proposal (none of them in themselves Tranche 1 issues). We believe that some of these documents, such as OGPs recommendation that the Owner pay $40 million in respect of Change Orders not formalised, will be of general background assistance for the Tribunal in relation to Tranche 1 issues. Other recommendations, particularly in relation to the number and optimisation throughput of the Pumping Stations and the capacity of the Marine Terminal, will be of direct relevance. We invite the Tribunal to make a peremptory order in respect of those matters. (Emphasis added.) 14. The Consortium claims that the passage I have quoted, in particular the highlighted subordinate clause, demonstrates three important matters. They submit that the description of the OGP recommendation shows that the issue in respect of which the recommendation was made was fundamental and not just as to the amount of the extra charge, that a dispute had arisen between Techint and the Consortium by the time the recommendation was made and that the recommendation constituted advice how that dispute might be compromised. The Consortium claims that the document containing such advice must have been both confidential and privileged and that such a status must have been obvious to FE. The Consortium maintains that the letter indicates that there was and perhaps still is a mole in the Consortiums camp which it is entitled to require FE and Techint to reveal. 15. On 17 October 2001 Masons wrote to both FE and the Chairman of the Tribunal in the following terms: Any communication between OGP and the Owners is confidential, whether oral or written. It may also be privileged. Since the respondents have not disclosed to you or to your clients in these arbitral proceedings any recommendation from OGP to the Owners to pay US $40 million, we require to know by return: (i) How and when the information to which you refer was received into the possession of the claimant? (ii) How and when the information to which you refer was received into the possession of the claimants advisers, including, but not limited 49 Construction & Engineering Law, Volume 7, Issue 1 to Fenwick Elliott, James R Knowles and Derek Jerram? (iii)Who gave the claimant or Fenwick Elliott permission or authority to publish the information to which you refer? We should be grateful if you would also send us a copy of any document evidencing OGPs alleged recommendation in relation to the Change Orders to which you refer. It goes without saying that a copy of any such document should not be disclosed to the Tribunal. Our clients reserve their rights against the claimant and any of its advisers who may be found to have been in breach of any duty of confidence. 16. FE responded on the same day. They pointed out that documents disclosed in the arbitration remained confidential outside it. They continued: We see no basis upon which OGPs advice to the respondents could possibly be privileged. Firstly, it predates any contemplation of litigation or arbitration. Secondly, it arises pursuant to OGPs role under the EPC contracts to provide management and monitoring of the project. Thirdly, the Tribunal has already made an order for disclosure of OGPs advice by paragraph 8(1) of the Chairmans letter of 1 October 2001. No objection was raised by you at that time on the ground of privilege. Fourthly, by your letter of October 8 you wrote to us to say that you were continuing to review your files to locate the documents requested, and you disclosed one piece of advice requested, namely OGPs letter of 21 August 1999. No doubt you were prepared to disclose that piece of advice because you did not think it particularly prejudicial to your clients case. You are not entitled to pick and chose as to which documents to disclose according to your own judgment as to which documents are harmful to your clients case. Fifthly, in your letter of October 8, you said that the review of the project documentation was continuing and that you will forward to us copies of documents as they are located that meet the August 23 request. This amounts to a waiver of any privilege that could conceivably have existed. 17. Thereafter there was much, increasingly acrimonious, correspondence between Masons and FE, the former repeating the three questions first asked on 17 October 2001, the latter refraining from answering them. I do not propose to deal with this correspondence in any detail. But it is necessary to record some matters referred to in it. 18. On 1 November 2001 there was a telephone conversation between Mr Fenwick Elliott and Mr Black of Masons in the course of which reference was made to a mole. Mr Black said that there was no such document as that to which FE had referred in their letter of October 16. Mr Fenwick Elliott claimed to be extraordinarily well informed about the case and indicated that he would 50 Case Report: China National Petroleum v Fenwick Elliott and Techint fall off his perch if the document [sc. that referred to in the letter of 16 October 2001] did not exist. Mr Black reiterated that so far as he knew there was no such document. Mr Black threatened proceedings. According to his note: Fenwick Elliott asked what the nature [of] any application would be and I said we wanted what we had asked for in our letters. He said You want to know who your mole is. He then went on to say that he would not tell us. I said that he might have to. He then said We will not tell you and I will tell you why. He would be killed. Your clients kill people they wiped out half the cabinet. I was dismissive of the suggestion 19. On 5 November 2001 FE applied to the Chairman of the Tribunal for a peremptory order for specific disclosure. In a very long and somewhat intemperate letter dated 12 November 2001 Mr Fenwick Elliott stated that Techints information about [OGP]s recommendations and valuations is oral. If we had the complete set of [OGP]s recommendations and valuations in documentary form we would not be seeking disclosure of them 20. On 15 November 2001 the Consortium requested the members of the Tribunal to excuse themselves and applied to ICC to remove them. The ground, in each case, was that the disclosure by FE of the amount at which OGP had advised the Consortium to settle the claims of Techint precluded the conduct of a fair arbitration because it might affect the Tribunal in deciding what sum to award to Techint. Both applications were refused on the grounds that whatever figure had been advised by OGP was irrelevant to the conclusions of the Tribunal. 21. In responding to the Consortiums application to ICC FE wrote Masons are quite wrong in inferring that we have knowledge of a single document containing OGPs global recommendation. We would not be surprised if there were such a document; Masons seem to be suggesting that there is. Where, as here, a recalcitrant party is in breach of a disclosure obligation, it is entirely legitimate for the other party to smoke out the documents in the way we have. Masons suspicion of a single mole is unfounded: rather we have tuned into the Khartoum grapevine that is entirely typical of large projects at a variety of points and times. 22. As I have already recorded the Consortium commenced these proceedings on 27 November 2001. In the particulars of claim it is alleged that OGP made reports to the Consortium both orally and in writing (para 4), that the information contained in such reports was confidential (para 5), that Techint and FE were in possession of such information (para 7), that it had not, as they 51 Construction & Engineering Law, Volume 7, Issue 1 both must have known, been obtained by legitimate means, that on behalf of Techint FE had used such information for improper means by revealing the recommended amount (para 9) and that unless restrained both defendants would continue to make improper use of such information (para 10). 23. In his witness statement made in support of the application of the Consortium for interlocutory relief Mr Black said: 14. On 16 October 2001 Messrs Fenwick Elliot (the First Defendants) wrote to the Tribunal in support of a request for disclosure. In that letter they referred to the existence of a document in which it was alleged that OGP had recommended to the claimants a substantial lump sum settlement in respect of the Second Defendants claims. The claimants are still seeking to identify the document referred to. What is plain, however, is that such a document, and the information which it contains, would be plainly confidential to the claimants, and would almost certainly be covered by privilege, since advice as to global settlement can only have come into being after relations between the parties had entered the arbitral/dispute stage. Its sensitive nature, relating as it apparently does to the level at which the claimants advisers were advising the settlement of a substantial existing dispute, hardly needs emphasising. 15. The claimants are at a loss to understand how such information came into the hands of the Second Defendants and their solicitors. They have not communicated that information to the defendants, and they have not authorised its dissemination. The inevitable inference is that the Second Defendants obtained it by unauthorised and improper means, and it is inconceivable that they did not understand its confidential nature. Equally, the First Defendants must have comprehended the confidential nature of the information, and either shut their eyes to its origin or, if informed thereof by their clients, were prepared nevertheless to make use of it. 16. If the defendants are in possession of one piece of confidential information obtained by improper means, it would appear likely that they are in possession of further such information, and their past actions demonstrate that they will not scruple to use it to obtain tactical or forensic advantages. It is my belief that the Second Defendants have had access to a mole within the claimants organisations, and that unless they are restrained they will continue to obtain and abuse confidential information of the claimants. 24. On 3 December 2001 Mr Fenwick Elliott made a witness statement in response to that of Mr Black. Amongst other matters he said: 24. The claim in these proceedings derives, it seems, entirely from my 52 Case Report: China National Petroleum v Fenwick Elliott and Techint firms letter of 16 October 2001 and the reference to OGPs recommendation to pay $40 million, in respect of Change Orders not formalised. I would confirm the following points: (a) my firm does not have the original or copies of any documentary communication between OGP and the [Consortium], save as disclosed by the [Consortium] in the arbitration proceedings; (b) in the course of my firms conduct of the litigation, we have been collecting evidence from potential witnesses. A number of sources have suggested the existence of recommendations from OGP as to Change Orders and delays. One such person I have caused to be interviewed suggested the figure of $40 million. None of these people has shown us or referred us to any specific documents in support of the information. The information has been given orally, and not from within this jurisdiction; (c) Techint claims legal professional privilege in relation to the information given and my firm cannot waive that privilege; (d) To the best of my knowledge (from all the information provided to me to enable my firm to deal with the arbitrations) there is not so much a mole within the [Consortium]s organisation as a fairly widespread grapevine, typical, in my experience, of all large projects, especially where, as here, one of the parties is a consortium of very different entities. Mr Black is wrong when he suggest otherwise in paragraph 16 of his witness statement; (e) I know of no reason why the information to which I have referred at (b) above should have been obtained by improper means as Mr Black suggests in paragraph 15 of his witness statement. In the light of the disclosure obligations already debated before and determined by the Tribunal, it had not occurred to me when I drafted my firms letter of 16 October 2001 that any confidentiality attached to any OGP recommendations as regards Techint in the arbitrations; nor had any claim been made to privilege and I had no reason to think any such claim could be made. Given the [Consortium]s failure, even now, to particularise their assertion of confidentiality and/or privilege despite repeated requests and several opportunities to do so, I would still challenge that assertion. The inferences of impropriety which Mr Black seeks to draw in paragraph 15 and 16 of his witness statement are thus wholly misplaced; (f) the issues of privilege can still be determined by the Tribunal as the Tribunal itself has said in its second letter of 16 November 2001 but (as is also clear from that letter) the [Consortium] had not sought to bring that issue before the Tribunal. 53 Construction & Engineering Law, Volume 7, Issue 1 25. Mr Fenwick Elliott also suggested that the reputation of the Government of the Sudan in respect of human rights left a good deal to be desired. He exhibited material relating to that suggestion which, he contended, would be relevant to any exercise of the courts discretion whether or not to grant the order sought. 26. The Consortium accepts that in view of the contents of the witness statement of Mr Fenwick Elliott the original claims for injunctions and delivery up cannot be pursued further. The application for interlocutory relief is now pursued only in respect of the claim for an order that FE and Techint do identify all confidential information in their possession and the source thereof. 27. The Tribunal commenced the hearing of the Tranche 1 issues on 10 December 2001. In the course of the next two weeks the Arbitrators made a number of material determinations. First, they concluded that the documents produced by OGP containing advice or recommendations to the Consortium were, prima facie, disclosable. Second, they decided that privilege had not been established in respect of any of them. But, third, they determined that the values placed on change orders by OGP were not relevant. 28. On 14 January 2002 Techint applied for an order setting aside the order granting permission to serve out or for a stay of proceedings. It is supported by a witness statement of Mr Francisco Elizondo in which he contends that the identity of the potential witness to whom Mr Fenwick Elliott had referred is privileged. He confirms that Techint does not waive its privilege. 29. It is convenient to deal with the three applications to which I have referred in paragraph 7 above in the order in which I described them for my conclusion in respect of an earlier application is likely to affect the position in respect of a later one. I start then with the application of the Consortium. The application of the Consortium for a disclosure order 30. It is contended by counsel for the Consortium that the evidence before the court demonstrates a strong prima facie case to the effect that FE obtained from the potential witness information which he must have known was confidential and was being imparted to him in breach of a duty of confidence owed, as an employee or ex-employee, to the Consortium or OGP. He relies on the letter of 16 October 2001 from FE to the Tribunal in the respects to which I have already referred in paragraph 14 above. 31. Counsel for the Consortium submits that it is improper for a solicitor to take a proof from an employee or ex-employee of an opposing party to the proceedings concerning the confidential information of his present or former employer. He relies on Hollander & Adam on Documentary Evidence 7th ed paras 1703 and 04 where it is stated that it is often said there is no property in a witness. There are however 54 Case Report: China National Petroleum v Fenwick Elliott and Techint constraints. The main constraints are as follows: (a) (b) The witness will be obliged not to reveal to you confidential information. Where the witness has or had had some form of professional relationship with the other side, such as being a former employee, it is not permissible to encroach on areas where the witness would commit a breach of confidence on divulging information to you. (c) Approaches to witnesses connected with the opposing party require special care. If the witness breaches a confidence, it may be that you incur liability for inducing breach of contract or unlawful interference. Counsel also pointed to the duty of a solicitor, as indicated in para 16.06(5) of the Guide to the Professional Conduct of Solicitors issued by the Law Society in 1999, who is in receipt of information to which his client is obviously not entitled to return it to the person who is. 32. Counsel for the Consortium submitted that the identity of the potential witness did not attract privilege because the circumstances in which the proof was taken should be equated with the exception for crimes and fraud exemplified in Dubai Aluminium Co Ltd v Al Alawi [1999] 1 WLR 1964 and the cases there cited. If contrary to that submission privilege arose then, counsel argued, it had been waived by all or one or more of the letter of 16 October, the telephone conversation of November 1, the letter from FE to the Tribunal dated November 27 and the first witness statement of FE. 33. On the basis of all the foregoing the Consortium claimed to have a good cause of action against both FE and Techint for the relief sought. Reliance was placed on the recent decision of the Court of Appeal in Ashworth Security Hospital v MGN [2001] 1 WLR 515, 529G516F. 34. These submissions are challenged by both FE and Techint. They submitted, by reference to the original claim for interlocutory relief, that the matters to which the letter dated 16 October 2001 referred were neither confidential nor privileged. They disputed the contention that there was or could be any impropriety in Mr Fenwick Elliott taking a proof from any potential witness concerning those matters. They maintained that, even if there was, the communications between Mr Fenwick Elliott and the potential witness whose proof he took and information as to the identity of that person were privileged from disclosure. They contended that nothing done by FE or Techint could or did waive the privilege to which Techint was entitled. 35. No claim is now made for the disclosure of any document or proof of evidence given by the potential witness. This is obviously right. It is now apparently accepted by both sides that neither the Consortium, FE or Techint has or has seen any document from OGP answering the description given in 55 Construction & Engineering Law, Volume 7, Issue 1 the letter of 16 October 2001. Were it otherwise then the Consortium would be in breach of its disclosure obligations in the arbitration. Equally the proof of evidence obtained by FE is, prima facie, privileged and any objection to the admissibility of the evidence the witness might give may be taken if and when his witness statement is produced in the arbitration. 36. Counsel for FE contends that the claim is in any event insufficiently specific. In the circumstances prevailing when the proceedings were commenced the claim was sufficiently made. But as events have unfolded so the paucity of essential detail has become increasingly apparent. If there is no document answering the description given in the letter of 16 October 2001 then what is the confidential information and how was it conveyed? The confidential information must be the advice of OGP and its conveyance the oral communication by one individual on behalf of OGP to another on behalf of the Consortium of which the potential witness gave secondary evidence to FE. 37. I am not satisfied that any advice or recommendation by OGP to the Consortium of the type alleged in the particulars of claim is either confidential or privileged as between the Consortium and FE and Techint. The actions of the Consortium in agreeing to disclose the documents and inviting Techint to obtain such oral evidence from OGP as they wish is inconsistent with the claim to confidence and privilege now maintained. The Tribunal has already determined that documents of the description given in the particulars of claim are disclosable and are not privileged. Neither FE nor Techint has threatened to use any information they may obtain outside the proper confines of the arbitration. 38. With regard to the conveyance of such information orally from OGP to the Consortium there is no allegation at all with regard to the parties to the conversation, the circumstances in which it took place and its contents. Accordingly it is impossible to form any view as to whether, prima facie, either the communication from OGP to the Consortium or the secondary evidence of it provided by the communication from the potential witness to Mr Fenwick Elliott could have involved any breach of any duty of confidence owed to the Consortium. 39. Further, given the correspondence between FE and Masons in September 2001 to which I have referred it requires more than the fact that advice of the type recorded in the letter of 16 October 2001 was given by OGP to the Consortium to put FE on notice that the potential witness, or some other person of whom he spoke, was disclosing something he should not. So far as the arbitration was concerned Masons had made no suggestion that such advice or recommendation was confidential or privileged; to the contrary, they had invited Techint to obtain such evidence from such personnel of OGP as it chose. 40. It is in these circumstances that I must consider whether the Consortium 56 Case Report: China National Petroleum v Fenwick Elliott and Techint has shown that its claim has a real prospect of success at the trial. The claim is based on the principles clearly affirmed by the Court of Appeal in Ashworth Security Hospital v MGN [2001] 1 WLR 515. In that case an employee had abstracted confidential information relating to a patient from the hospitals database and passed it on to an intermediary. The intermediary passed it on to the defendant who published it. The hospital sued the publisher for an order requiring them to disclose the identity of the intermediary so that, from the latter, the hospital might discover the identity of the employee. The judge made the order sought. The publisher appealed on the ground, amongst others, that the court had no jurisdiction to make such an order. 41. The Court of Appeal dismissed the appeal. The Master of the Rolls, with whom May and Laws LJJ agreed, held that the principle of Norwich Pharmacal Co v Customs & Excise [1974] AC 133 applied to all who were mixed up in the underlying wrongdoing not merely innocently or who are themselves liable for the same wrong. In paragraphs 64 to 66 the Master of the Rolls said: 64. At the outset of his judgment in the Norwich Pharmacal case Lord Reid said, at p 173: Discovery as a remedy in equity has a very long history. The chief occasion for its being ordered was to assist a party in an existing litigation. But this was extended at an early date to assist a person who contemplated litigation against the person from whom discovery was sought, if for various reasons it was just and necessary that he should have discovery at that stage. Such discovery might disclose the identity of others who might be joined as defendants with the person from whom discovery was sought. Indeed in some cases it would seem that the main object in seeking discovery was to find the identity of possible other defendants. It is not clear to me whether in all these cases the plaintiff had to undertake in some way to proceed against the person from whom he sought discovery if he found on discovery being ordered that it would suit him better to drop his complaint against that person and concentrate on his cause of action against those whose identity was disclosed by the discovery. But I would think that he was entitled to do this if he chose. 65. Even if, contrary to my view, the jurisdiction to order discovery against an innocent party only arises when that party has been mixed up in tortious wrongdoing, I see no basis for extending that restriction to the case where the defendant is susceptible to suit on the ground of the same wrongdoing as that perpetrated by those whose identity is sought. 66. In summary, I find that the jurisdiction of the court was properly invoked in this case because: (1) the Norwich Pharmacal principle is not restricted to cases involving tort or (2) if it is so restricted, the restriction does not apply where the defendant is not merely innocently mixed up 57 Construction & Engineering Law, Volume 7, Issue 1 in the wrongdoing but is a party to it. 42. In the light of the conclusions I have already expressed I do not see how there is a real prospect that such principles can be applied in the circumstances of this case. For the reasons already given it is by no means clear that the advice of OGP to the Consortium was ever or is now confidential. Even if it was there is no evidence that the potential witnesss knowledge of it was improperly obtained or disclosed. And even if those necessary preconditions are satisfied there is no evidence that in proofing that potential witness Mr Fenwick Elliott was either implicated in the original wrongdoing or himself liable for breach of any duty of confidence owed by him to the Consortium. 43. Counsel for the Consortium, whilst disclaiming any wish to see the proof of evidence obtained by Mr Fenwick Elliott, protested that the problems facing his client arise from the refusal of FE or Techint to share with the Consortium the information they have received from the potential witness. He suggests that the claim of FE and Techint to be entitled to withhold both the information and the identity of the potential witness on the ground of privilege should lead me to draw all possible inferences against them. 44. Litigation privilege exists because it is in the public interest that litigants should seek and obtain confidential advice in respect of actual or contemplated litigation. There is no such privilege where the communications are not made in the usual course of the solicitors retainer because, for example, they are made in furtherance of a crime or fraud. The extent of the privilege and the exceptions to it were comprehensively examined by the Court of Appeal in Barclays Bank plc v Eustace [1995] 1 WLR 1238 and by Rix J in Dubai Aluminium Co Ltd v Al Alawi [1999] 1 WLR 1964. I note, in particular, that inducing a breach of duty is not, without more, within the exception. Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553. 45. In the normal course of proceedings a solicitor will interview and obtain proofs of evidence from all manner of potential witnesses for use in actual or prospective litigation. Both the information given and the identity of the person supplying it are confidential and privileged unless and until the privilege is waived by that person giving evidence in the proceedings or some other equivalent action. This was and is recognised in the common form claim to privilege contained in the former affidavit of documents as well as in the present disclosure statement in neither of which was or is the name of the witness who has given the proof revealed. 46. If the information provided by and the identity of a potential witness is privileged information then the claim to privilege made by Techint must preclude the grant of the order now sought by the Consortium. There is no evidence to justify any conclusion that the nature of the communications between Mr Fenwick Elliott and the potential witness were such as to exclude any claim for privilege. Even if it is assumed that the potential witness is an employee of OGP or the Consortium the information he is assumed to have 58 Case Report: China National Petroleum v Fenwick Elliott and Techint given cannot have been imparted to Mr Fenwick Elliott in breach of duty because it is not, as between the parties to the arbitration, either confidential or privileged. Even if the information given by the potential witness indicated some earlier breach of a duty of confidence by him or another that cannot preclude privilege for the communication between him and Mr Fenwick Elliott. Frequently information given by a potential witness to a solicitor indicates the past commission of a crime or fraud but that is no ground for denying privilege in the communication; quite the opposite. If, as I conclude, the communication between the potential witness and Mr Fenwick Elliott is privileged then it must follow that the identity of the person giving the proof is similarly privileged. 47. The Consortium also contends that the privilege was waived. There was no express waiver and I find it impossible to imply one from any of the matters on which the Consortium relies. I was referred to the distinction between what has been described as a mere reference to a document and an implied waiver of privilege in respect of its contents. Government Trading Corpn v Tate & Lyle (19 October 1984, unreported, Court of Appeal); Marubeni v Alafouzos (6 November 1986, unreported, Court of Appeal). Those cases deal with the contents of a privileged document not the identity of a potential witness. 48. In my judgment there was no waiver of privilege in respect either of the contents of the communications between Mr Fenwick Elliott and the potential witness or in respect of his identity. The letter of 16 October 2001 refers to the recommendation as an example of documents which, FE believes, would be of general background assistance to the Tribunal. It is written in the context of a request for an order for specific disclosure. In my view it is insufficient to waive privilege in the document had there been one. It is wholly inadequate to waive privilege in respect of the communication of that information by the potential witness to Mr Fenwick Elliott for it does not even refer to it. Similarly there is not even a reference to the potential witness let alone anything which could be regarded as the waiver of privilege regarding his identity. 49. The Consortium also relied on the telephone conversation between Mr Fenwick Elliott and Mr Black which occurred on 1 November 2001. I have referred to the nature of that conversation in paragraph 18 above. I am unable to see how such a conversation can waive privilege in anything. Discussion off the record of whether there is a document or a mole cannot undermine privilege in the contents of the document or identity of the mole, if, in either case, there is one. 50. The Consortium also relied on the letter from FE to the Chairman of the Tribunal and the passage in it to which I have referred in paragraph 21 above. The point was not developed. Suffice it to say that I am unable to read that letter as waiving any privilege. 51. Finally the Consortium relied on the witness statement of Mr Fenwick Elliott in these proceedings. But that cannot constitute a waiver as it specifically claims privilege on behalf of Techint. Counsel for the Consortium pointed out 59 Construction & Engineering Law, Volume 7, Issue 1 that it is not permissible to have a partial waiver. In that context he submitted that the witness statement was a partial waiver which should now be completed by disclosure of the name of the potential witness. Again, in my view, there has been no partial waiver so there is nothing to complete. 52. It follows that, in my judgment, the claim for privilege is properly made. In that event I refuse to draw any adverse inference from the fact that Techint has claimed it. The privilege exists for good reason; the exceptions have been developed to protect others in cases where such protection is needed. If adverse inferences are drawn in cases where the privilege, not the exception, applies then it will undermine the privilege itself. Thus; to draw such an inference would be contrary to the very public interest the privilege is intended to serve. 53. In the result I conclude that (1) the claim of the Consortium is not sufficiently made and (2) Techint is entitled to claim that the information sought by the Consortium is privileged. For all these reasons I refuse to grant to the Consortium the relief they seek. FEs application to strike out or dismiss the action 54. It follows for the reasons I have already given that I consider that the Consortium has no real prospect of succeeding on its claim in this action. Nor do I see any compelling reason why the case should be disposed of at a trial. Accordingly I dismiss it pursuant to CPR Rule 24.2. Whether or not it should also be struck out under CPR Rule 3.4 is of only academic interest. Techints application to set aside permission to serve out 55. Given my conclusion on the claim by FE to dismiss the action under CPR Rule 24.2, as Counsel for the Consortium accepted, it must follow that I should discharge the order permitting the Consortium to serve these proceedings out of the jurisdiction on Techint because the Consortium has not shown that it has a good arguable case. Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438. In those circumstances it is unnecessary for me to consider whether the claim fell within any or all of paragraphs (2), (3) and (8) of CPR Rule 6.20. It is also unnecessary for me to deal with the alternative claim that these proceedings should be stayed under s 9 Arbitration Act 1996. Summary of conclusions 56. For all these reasons: 60 Case Report: China National Petroleum v Fenwick Elliott and Techint (a) I dismiss the Consortiums application for interlocutory relief. (b) I dismiss the Consortiums action against FE. (c) I set aside the order granting the Consortium permission to serve the pro- ceedings out of the jurisdiction on Techint and dismiss the action against Techint also. Mr Gordon Pollock QC and Mr Martin Griffiths (instructed by Messrs Masons) appeared for the claimants. Mr Christopher Pymont QC (instructed by Messrs Fenwick Elliott) appeared for the first defendant. Mr Thomas Ivory QC (instructed by Messrs Nicholson Graham & Jones) appeared for the second defendant. 61 Construction & Engineering Law, Volume 7, Issue 1 Case Report: R C Pillar & Sons v Edwards Technology and Construction Court, 23 January 2001, before HH Judge Thornton QC 1. Introduction 1. This judgment is concerned with wide ranging applications to the court that arise out of two related building arbitrations and are made pursuant to the courts supervisory jurisdiction over arbitrations contained in ss 68, 69 and 79 of the Arbitration Act 1996. The particular jurisdiction being invoked is the courts jurisdiction to remit an award to the arbitrator on the grounds of serious irregularity (s 68) and to extend relevant procedural time limits applicable to the arbitrators power to correct his awards (ss 79 and 80). Such is the procedural tangle in the arbitration that there are four separate applications, each of which seeks to obtain a variety of separate supervisory orders from the court. Each of the parties to the arbitration brings two of these applications. 2. The essential background starts with the retirement plans of Mr and Mrs Edwards (the Edwards). In 1996, when Mr Edwards retired from a long and successful career in industry, the Edwards acquired Staverton House, Staverton, Devon. The property was large and comprised an existing property and an extension, only the shell of which had been constructed. It therefore required extensive alterations, additions and completion work, largely of a fitting out nature, and the Edwards undertook this with care. They did not have a particular budget sum to spend on the finishing work they were to carry out but they did have a ball park figure of about £150,000 in mind. Following the retention of an architect, Mr Smith, who had set up his practice of Andrew Smith Architects in 1994, the Edwards entered into a contract on about 16 October 1996 in the JCT Minor Building Works Standard Form with a Contract Sum of £190,000. The contractor was a local family company, RC Pillar & Sons Ltd (Pillar) of Dartmouth, Devon whose principal personnel are Mr R C Pillar, who has been a director for 37 years, and his son, Mr J Pillar. The work was carried out between September 1996 and June 1997 with the Edwards taking possession on 6 March 1997. The final certificate, dated 5 February 1998, certified a total contract sum of £242,784.35. The Edwards were prepared to accept it as the final sum due to Pillar and this was paid. However, 62 Case Report: RC Pillar & Sons v Edwards Pillar maintained that the final value of the work should be about £340,000. 3. The Edwards took quantity surveying advice before the issue of the final certificate and the sum certified was uplifted from the sum that Mr Smith originally intended to certify in the light of that advice. The Edwards resisted Pillars subsequent claim in the light of that advice and Pillar referred the resulting dispute to arbitration in May 1998. The RIBA appointed Mr John Timpson as arbitrator and he notified the parties of his acceptance of this appointment on 29 May 1998. Ultimately, two arbitrations were conducted by Mr Timpson since certain disputes raised in the first arbitration were held by the arbitrator to be outside the terms of his appointment and these were dealt with in a second arbitration which he also conducted. The first arbitration culminated in a 10 day oral hearing. The second arbitration was determined as a documents only arbitration. Each party, throughout the two arbitrations and at the oral hearing, were represented by firms of building contract claims consultants, James R Knowles acting for Pillar and Chappell-Marshall acting for the Edwards. 4. By the time the two final awards were published and corrected, the parties had each incurred the astonishing sum of about £160,000 in costs and fees and the arbitrator had incurred a further at least £40,000 in fees. Thus, before these court challenges were started, the professionals involved in the resolution of a comparatively simple building dispute involving a claim for about £100,000 and a modest cross-claim for damages for delay and defects have already incurred on the parties behalf, a total of nearly £400,000 in fees and costs. No dispute of such comparative simplicity ought normally to generate fees and costs, including those of the arbitrator, that exceed the sum in dispute, let alone fees and costs which, in total, are nearly four times the sum in dispute. 5. Following the publication of each award, the parties applied to the arbitrator for them to be corrected and the arbitrator published corrections to both awards. In the case of the principal award, these corrections led to a complete reversal of the award from one awarding Pillar almost its entire claim to one awarding Pillar a very modest amount. These applications are now driven by the question of who should be liable to pay the very large sum for costs and fees incurred by both parties and the arbitrator. There are in existence three sealed offers which were made during the course of the proceedings. I have not been informed of the contents of this offer and the arbitrator was only sent a copy, in a sealed envelope, by the Edwards solicitor, after both the two final awards had been published and corrected. The arbitrator has, however, reserved the costs of the principal arbitration to a subsequent hearing which has yet to take place. 6. The principal award, when published on 17 April 2000, awarded Pillar a net sum of £75,113.52 and £26,076.57 in interest. Following the series of corrections instigated by the Edwards, this sum was subsequently corrected on 19 June 2000 so that the award, in its final form, awarded Pillar a net sum of 63 Construction & Engineering Law, Volume 7, Issue 1 £8,851.00 and £2,600 in interest. The second award and its subsequent corrections were more modest. The second award was published on 12 July 2000 and this awarded Pillar a sum of £2,104.83. Following corrections published on 23 August 2000, this sum was increased to £2,128.03. 7. There is something inherently wrong with an arbitral process which involves such large sums being spent in costs relative to the size of the sums in dispute. That process initially yielded an award substantially in Pillars favour. However, that victory appears to have been snatched from Pillar following the correction by the arbitrator of what he held had been a series of significant mistakes, errors and omissions in the award. These corrections transformed the award into one substantially in favour of the Edwards. This switch is potentially disastrous for Pillar given the parties possible liability for costs. If the first sum awarded exceeded the sealed offer and the second corrected sum was less than that offer, there would be a considerable swing in Pillars fortunes. Without knowing the details of the sealed offer, it is not possible to speculate what the size of that swing might be but, at its greatest, the swing would be from Pillar recovering, by way of principal interest and costs, in excess of £250,000 to Pillar paying out in excess of £100,000. There would obviously be a corresponding swing in the position of the Edwards. 8. Pillars major complaint is that this potentially unjust consequence of the exercise by the arbitrator of his power to correct his award occurred after Pillar had itself also sought corrections to the principal award which were of potentially critical importance yet, unfortunately from Pillars standpoint, the arbitrator declined even to consider these suggested mistakes, errors and omissions because he held that he had received Pillars application out of time. As a final twist to this unhappy sequence of events, it would appear that the corrected principal award might contain a further, uncorrected, error of about £10,000 in value to the detriment of the Edwards. 9. Pillar seeks redress in three alternative ways. It first seeks to persuade the court to declare that the corrections in the principal award are of no effect since the arbitrator allegedly made his corrections out of time. If unsuccessful in that application, Pillar seeks a general remission of the two awards under s 68 of the Arbitration Act. If Pillar is also unsuccessful in that second application, it seeks an extension of the time within which it should apply to the arbitrator for corrections to the principal award and a limited remission for that purpose. 10. The Edwards applications are defensive. After the principal award had been published, it was not initially clear whether the arbitrator would be prepared to correct it at all. The Edwards therefore mounted a court challenge to the original uncorrected award. This challenge is no longer pursued since the award was subsequently corrected. However, following the arbitrators corrections to that award, the Edwards were faced with Pillars suggestion that those corrections are invalid. If that argument is accepted, the Edwards seek an 64 Case Report: RC Pillar & Sons v Edwards extension of time for making their original application to the arbitrator so as to regularise the corrections he has made to the award. 11. The Edwards have chosen not to seek a further correction of the corrected award to deal with the error that they regard it as now containing, so long as the award remains in its current corrected form. 2. The course of the arbitration 12. The Notice to Refer served by Pillar was dated 14 April 1998. This was served pursuant to the JCT Minor Building Works contracts standard arbitration clause which reads: Article 4 If any dispute or difference as to the construction of this Agreement or any matter or thing of whatsoever nature arising thereunder or in connection therewith, shall arise between the Employer or the Architect on his behalf and the Contractor either during the progress or after the completion or abandonment of the Works it shall be and is hereby referred to arbitration in accordance with clause 9. Clause 9, so far as material, provides that: 9.2 the Arbitrator shall, without prejudice to the generality of his powers, have power to direct such measurements and/or valuations as may in his opinion be desirable in order to determine the rights of the parties and to ascertain and award any sum which ought to have been the subject of any certificate and to open up, review and revise any certificate, opinion, decision, requirement or notice and to determine all matters in dispute which shall be submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given. 9.3 The award of such arbitrator shall be final and binding on the parties. 9.5 The arbitration shall be conducted in accordance with the JCT Arbitration Rules current at the date of this Agreement 13. On appointment, the arbitrator directed that he would conduct the arbitration pursuant to the Full Procedure with hearing in accordance with Rule 6 of the JCT Arbitration Rules which sets out the procedure for pleadings and other related matters for such an arbitration. The arbitrator held a preliminary meeting on l5 June 1998 and, by an order dated 26 June 1998, he gave written directions for pleadings, the exchange of experts Preliminary Reports, a first meeting of experts and the exchange of Experts Reports, the 65 Construction & Engineering Law, Volume 7, Issue 1 exchange of witness statements, the provision of Scott Schedules by the relevant party or parties and for the agreement of figures wherever possible. He also directed that all concerned should keep available a provisional twoweek eight-day period in January 1999 for the hearing. 14. The dispute referred arose out of the Final Certificate issued on 5 February 1998. That document incorporated a further document, entitled Certified Cost Summary which showed how the Contract Sum adjusted in the Final Certificate had been made up. Since the contract is a lump sum contract, it is subject to the process of omission and addition for any constituent part of the lump sum which might be altered as a result of the application of provisions of the contract. The Certified Cost Summary omitted the Provisional sums and replaced them with the actual provisional sums expenditure. It also listed the certified extra works and the certified omissions with the cost attributable to each item in these two categories. Pillar contended that several additional items of extra works should be added to the list and that the provisional sum items and most of the omissions and extras items should be revalued. In addition, a further £19,140 should be paid for prolongation costs over a 5 month period as well as loss and expense for non-productive working. The cause of these additional costs was said to be the extras upon which the claim was based. The defence challenged these claims in their entirety and added a counterclaim for defects and omissions, valued in total at about £57,000, and a small claim for liquidated damages for delayed completion of £3,500 for an alleged delay period of 14 weeks. 15. It is to be noted that the claims and counterclaims were intimately related since the counterclaims were almost entirely work items which also featured in the claim and to which questions of set-off and abatement arose. Similarly, the delay period founding both the claims and the counterclaims for delay was the same. The overriding dispute was the extent to which the Final Certificate and its accompanying Certified Cost Summary should be opened up, reviewed and revised by virtue of both claims and counterclaims. 16. The nature, range and extent of these disputes were, in comparison with most building disputes, relatively small. Careful preparation by an experienced litigator with the assistance of one expert, either an architect or a quantity surveyor, acting for each party could have confined the essential pleaded allegations to short composite Scott Schedules coupled with a very short Statement of Case and Defence. Instead, Pillars Statement of Case ran to 59 pages and 193 paragraphs with a supporting 20-page Scott Schedule and a voluminous Appendix of supporting documentation, the Edwards Statement of Defence ran to 89 pages and 371 paragraphs and 3 lengthy schedules and the Statement of Reply ran to a further 7 pages and 3 lengthy reply schedules. 17. Each party called two experts, an architect and a quantity surveyor. In addition, Pillar called someone with much experience in construction contract matters who had advised Pillar during and after the work and the Edwards 66 Case Report: RC Pillar & Sons v Edwards called their architect and his assistant. There were, therefore, seven building professional experts giving evidence, albeit that some evidence from the three professional witnesses involved in the contract also included factual evidence. In addition, the building contract claims consultants representing the parties had building professional expertise. Despite that amount of professional involvement, no experts agreements recording (1) any agreement of figures as figures or (2) any agreed definition of the extent and nature of each disagreement on technical matters were produced by the experts. The arbitrator had given detailed procedural directions which clearly envisaged the production of such agreements. 18. The parties representatives exchanged with each other a considerable quantity of inter-party correspondence. The arbitrator noted in his major final award that: The whole arbitration was characterised by disputatious attitudes and delays. Moreover, during the pre-hearing preparatory stages of the arbitration, the arbitrator had to issue a number of directions in an attempt to stem the flow of paper passing between the parties representatives. These directions included those that reminded the parties of the need to eliminate unnecessary costs and of the copious correspondence being exchanged. 19. During the early preparatory stages of the arbitration, the Edwards representative took a jurisdictional objection to certain items of Pillars claim. The arbitrator had, in consequence, to rule on his own jurisdiction in an interim award following an oral hearing. He ruled out some of the items of claim with the inevitable consequence that a second arbitration was started in relation to those excluded items. The parties agreed that this arbitration should be conducted by the same arbitrator. It was unfortunate that the parties and the arbitrator did not agree that, whatever the technical niceties concerning the arbitrators jurisdiction in the first arbitration, never the less all disputes between the parties that ultimately emerged should immediately be brought within one arbitration without incurring procedural costs in contesting jurisdiction and in establishing a second related arbitration. 20. The hearing in the first arbitration occupied ten working days in April and August 1999 and was followed by written closing submissions. The hearing was closed on 1 October 1999 when the record was completed by the service of the last of the written closing submissions. The reasoned award was published nearly 7 months later on 17 April 2000. The arbitrator does not appear to have complied with Rule 6.9 of the JCT Arbitration Rules which requires him to publish his award within 28 days of the close of the hearing or to notify the parties within that period when it will be published. 21. In appearance, the reasoned award is a formidable document, running to 212 pages. However, 147 of those pages merely comprise a photocopy of 67 Construction & Engineering Law, Volume 7, Issue 1 the Statement of Case and the Statement of Defence which, thus, are incorporated into the award and form part of the arbitrators reasons. Since these pleadings themselves, in total, incorporated and referred extensively to a further seven schedules and a bulky annex of documents, this confusing and repetitive material forms the major part of the reasons for the award and the arbitrators own reasoning is only very shortly set out. This has made it particularly difficult to ascertain the reasons for, and the potential errors in, the principal award. 22. In the award, the arbitrator dealt with the claims and counterclaims separately. In dealing with the claims, he found that Pillar had been prevented from completing the work and, having briefly reviewed each suggested reason for Pillars entitlement to an extension of time, he awarded Pillar an extension until 23 May 1997, He therefore concluded that the Edwards were not entitled to any liquidated damages. The arbitrator, with only very brief reasons being given in each case, then made findings as to each variation and provisional sum item separately. The total sum awarded for these items was £65,552.74. He also awarded, with no reasons being given: (1) £2,620 for loss and expense; (2) £l,380 for additional management costs; (3) £5,019.19 for profit; and (4) nothing for either non productive overtime or for the cost of finance. The arbitrator then went through each item of the counterclaim and, again with only very brief reasons being given, awarded the Edwards a total of £17,911.89. He then totalled up the awards in the claim, deducted the awards in the counterclaim and, on the net balance in Pillars favour, awarded compound interest. The total award with interest came to £101,190.09. 23. As an immediate pointer to the likelihood that something had gone seriously wrong with the arbitrators reasoning, it is to be noted that the gross sum awarded to Pillar, before taking into account the counterclaim or any interest, was £93,025.41 in relation to a total sum that had been claimed of £97,528.42 where the award had dismissed, or substantially reduced, many of Pillars items of claim. 24. Not surprisingly, this award and the fragmentary reasoning it contained caused consternation within the ranks of both parties. The Edwards were the first off the mark. Two detailed letters dated 10 and 11 May 2000 were written to the arbitrator seeking the exercise of his power to correct the award. In summary, the Edwards contended that the arbitrator had failed to account for the sum already paid or credited for variations, provisional sums and omissions. The letters contended that the award contained further errors. Furthermore, the suggested errors were that it provided for two small variations which the arbitrator had already held to be outside his jurisdiction, it failed to include a small credit, it overlooked a small claim for liquidated damages, it awarded profit twice over and it awarded Pillar some of its costs although the costs to be awarded were still to be the subject of submissions. Finally, it was contended that the award had failed to deal with five of the items in the counterclaim. The 68 Case Report: RC Pillar & Sons v Edwards first of these two letters included a detailed schedule which listed and compared every sum for variations, provisional sums and omissions in the corrected Certified Cost Summary which the arbitrator was invited to consider in detail when dealing with the application to correct the award. 25. This application was responded to on Pillars behalf in two letters dated 26 May and 9 June 2000. The first letter questioned whether the points raised on behalf of the Edwards could be addressed by the limited statutory jurisdiction allowing a correction of the award. The letter continued that, in order to avoid litigation, Pillar would accept that the arbitrator could consider whether or not he should correct his award. The letter also invited the arbitrator to consider corrections to a further seven items in the variations claims. The second letter provided further detail concerning these seven variation items and of Pillars answer to the points made on behalf of the Edwards. This letter, too, contained a detailed schedule listing out each item and showing which of these should be corrected. 26. Pillar suggested that the arbitrator should convene a further hearing following the exchange of written submissions. It also contended that since the Edwards had sought to open up and have clarified the entire award, by referring to all the variations and payments on account, the points made on behalf of Pillar were not a separate application for corrections but were made as part and parcel of Pillars response to the overall application already being made. By way of response, it: was suggested on behalf of the Edwards that their application only related to specific items in the award and that Pillar was making a cross- application in respect of different items which had been made out of time. In consequence, they contended that only their points could be considered in any correcting exercise conducted by the arbitrator. 27. The arbitrator accepted the Edwards procedural arguments. In consequence, he only considered their points and declined to even consider Pillars points. He also rejected Pillars suggestion that there should be an oral hearing since he concluded that there was insufficient time left to hold such a hearing within the 28 days allowed him to make any corrections. He then published corrections to this award on 19 June 2000. The corrections he made can be summarised as follows. He sought to take account of sums already paid for variations and provisional sums and went through the schedule of variations and omissions submitted by the Edwards item by item showing where he was making corrections. He also allowed a small credit previously omitted, withdrew the award for those variations that he had already ruled were outside his jurisdiction and, without reasons, he withdrew the amount for profit that he had previously awarded. 28. The arbitrator held that a further sum of nearly £10,000 should be deducted from the award to take account of omissions. The reason for making this finding was as follows: I do not accept the argument that the [Edwards] can both impose one 69 Construction & Engineering Law, Volume 7, Issue 1 charge for damages by a reduction in payment and argue the case for a claim for the same damages without taking account of the compensation already received. Although not entirely clear, this reasoning shows that the arbitrator had in mind that the items of claim and counterclaim were intimately related and that the valuation exercise he had embarked upon involved, for any part of the work for which there was both a claim and counterclaim, three separate questions: (1) the value of work originally detailed which was varied or omitted; (2) the value of work replacing that varied or omitted work; and (3) the cost of remedying both the defects in, and the incomplete elements of, the work undertaken. 29. Neither Pillar nor the Edwards were satisfied with these corrections. Pillar believed that the arbitrator should have considered the further seven items it had drawn attention to. It also believed that the corrections gave rise to fresh errors that left the corrected award in a state which required further corrections. These points were drawn to the attention of the arbitrator in a letter dated 27 June 2000 but, following an exchange of correspondence with both parties on the contents of this letter, the arbitrator declined to make any further corrections in a letter dated 12 July 2000. I have already referred to the Edwards dissatisfaction with these corrections. 30. The second award, following a documents only consideration by the arbitrator, was published on 12 July 2000. Pillar was awarded a net sum of £2,104.83, inclusive of compound interest, and its costs which were to be taxed by the High Court if not agreed. This award was made the subject of a separate application for corrections on behalf of Pillar in a letter dated 1 August 2000. The application sought corrections in relation to the corrected award in connection with a number of variations and sought the removal of eight items of counterclaim on the grounds that the Edwards claim for damages for these items was outside the jurisdiction of the arbitrator in this second arbitration. Following an exchange of correspondence, the arbitrator published his corrections on 23 August 2000. This consisted of a review of eight items of variation and the corresponding items of counterclaim and consequent corrections to those items. The resulting award, inclusive of interest, was increased to £2,128.03. The costs award in favour of Pillar remained unchanged. The arbitrator, in a letter dated 25 August 2000, declined one further request for a correction which had been advanced on behalf of Pillar in a letter dated 24 August 2000. 3. The law 3.1 Introduction 31. I am concerned with applications for judicial supervision of these inter- related arbitrations at two separate levels. At the first level, I am asked to grant 70 Case Report: RC Pillar & Sons v Edwards appropriate extensions of time within which essential procedural steps concerned with corrections must be made. At the second level, I am asked to remit the two corrected awards for further consideration and for additional corrections to be made to them. Although Pillars preferred course is for a declaration that the principal corrections document is invalid, that would only assist Pillar if I made no other order. The Edwards, however, are making applications which would nullify the effect of such a declaration if made and, in reality, the contest between the parties is as to whether the existing award, in its corrected state, should stand or whether, instead, both awards should be remitted. If they are to be remitted, I must also decide whether that remission should be on a general basis or only on a limited basis defined in the order to remit. 32. My relevant powers are to be found in the Arbitration Act 1996. Given the unfortunate history of this arbitration, I must consider the limited powers given to the arbitrator to correct his award and to the court to intervene to set aside or remit an award, the procedural requirements imposed on the parties for giving notice when applying for these powers to be invoked and the additional procedural powers given to the court to extend the time within which such notices must be given. 3.2. The statutory provisions 3.1.1. Correction of award by the arbitrator 33. Section 57 of the Arbitration Act 1996 gives the arbitrator the power to correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or to remove any ambiguity in the award or to make an additional award in respect of any claim which was presented to the tribunal but was not dealt with in the award. These powers are not to be exercised without first affording the other parties reasonable opportunity to make representations to the tribunal. 34. Three time limits are provided for: 1. Any application to exercise s 57 powers must be made within 28 days of the date of the award or in such longer period as the parties may agree. 2. Any correction of an award must be made within 28 days of the date the application was received by the tribunal or in such longer period as the parties may agree. 3.1.2. Extension of time to make s 57 applications 35. The parties may agree to extend the time for either applying for a correction of the award under s 57 or of the period within which the arbitrator should make any appropriate correction to it pursuant to that section. If the relevant period of time has not been extended by an agreement of the parties, the Arbitration Act provides, in s 79, that either party may apply to the court for an 71 Construction & Engineering Law, Volume 7, Issue 1 order to extend any time limit specified in the Act having effect in default of agreement. 36. Section 79 of the Arbitration Act provides that: (1) Unless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings or specified in any provision of this Part [which includes section 57] having effect in default of such agreement. This section does not apply to a time limit to which section 12 applies (power of court to extend time for beginning arbitral proceedings, etc). (3) The court shall not exercise its power to extend a time limit unless it is satisfied (a) that any available recourse to the tribunal and (b) that a substantial injustice would otherwise be done. (4) The courts power under this section may be exercised whether or not the time has already expired. (5) An order under this section may be made on such terms as the court thinks fit. 37. The relevant rule of court concerned with all arbitration applications is CPR 49(1) which provides that the provisions of the relevant practice direction shall apply to arbitration applications, defined as any application to the court under the Arbitration Act 1996 including any application under s 79 of the Act to extend time under s 57 of the Act. The relevant practice direction (49GPD- 008) sets out the procedure for arbitration applications. It follows that the applicable procedure is that provided in the practice direction. 38. Pillars limited application in the principal arbitration is for an order extending the time for applying to the arbitrator to make corrections to his award. An application in the appropriate form was made to the court on 17 July 2000 whereas it should have been by 15 May 2000, 28 days after the date of the award. 39. The Edwards are also making an extension of time application under s 57. This arises since Pillars first application relating to the principal arbitration is for a declaration that the corrections made to that award in the Edwards favour are of no effect because they were made by the arbitrator in a document dated 19 June 2000 which was more than 28 days after the alleged date he received the Edwards application. In case the court accepts that the corrections document was issued out of time, the Edwards seek, if needed, an order extending the time by which the arbitrator should have made his corrections to 19 June 2000 since, on Pillars argument, the corrections should have been made by 8 June 2000. 72 Case Report: RC Pillar & Sons v Edwards 3.1.3. Remission under s 68 40. Section 68 is entitled Challenging the award: serious irregularity. The relevant parts of the section read as follows: (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging the award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3). (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant (a) failure by the tribunal to comply with section 3 (general duty of the tribunal); (b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction; see section 67); (c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties; (d) failure by the tribunal to deal with all the issues that were put to it; (f) uncertainty or ambiguity as to the effect of the award; (h) failure to comply with the requirements as to the form of the award; (i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal (3) if there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may (a) remit the award to the tribunal, in whole or in part for reconsideration, (c) declare the award to be of no effect, in whole or in part. The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration. Section 68 refers to three further sections. The relevant provisions referred to are as follows: 73 Construction & Engineering Law, Volume 7, Issue 1 Section 33: General duty of the tribunal (1) The tribunal shall (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred upon it. Section 70: Challenge or appeal: supplementary provisions (2) An application or appeal may not be brought if the applicant has not first exhausted (a) any available arbitral process of appeal or review, and (b) any available recourse under section 57 (correction of award or additional award). (3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any process of appeal or review of the date when the applicant or appellant was notified of the results of that process. Section 73: Loss of right to object (1) If a party to arbitral proceedings takes part, or continues to take part in the proceedings without making, either forthwith or within such time as is allowed by the arbitral agreement or the tribunal or by any provision of this Part, any objection (a) that the tribunal lacks substantive jurisdiction, (b) that the proceedings have been improperly conducted, (c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part; or 74 Case Report: RC Pillar & Sons v Edwards (d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection. 3.1.4. Extension of time to apply for a remission of the award 41. Pillar is applying for a general remission of the two awards under s 68. The Edwards argued that the application that Pillar is making under s 68 in the principal arbitration had been made out of time since the award was published on 17 April 2000 and the last date for making a s 68 application was 28 days thereafter on 15 May 2000. The application was actually made on 17 July 2000. The Edwards also argued that the court had no jurisdiction to extend the time within which a s 68 application could be made. (1) Is an extension of time required? s 70(3) 42. There is, potentially, a short answer to the Edwards submission that Pillars application was made out of time, namely that the application was made within time since, by virtue of s 70(3) of the Act, the requisite 28 day period within which a court challenge must be made runs from the date of the award unless there has been any arbitral process of appeal or review. In such a case, the period within the application must be made runs from the date when the applicant was notified of the result of that post-award process. It would seem arguable that the process of correcting each award that was undertaken by the arbitrator was a process of review, in which case the relevant starting date for the 28 day period for the principal award was 17 June 2000. On this view, Pillars s 68 application in connection with that award was made in time. However, it is also arguable that the process of correction is something different from a process of appeal or review, particularly since s 70 appears to distinguish a process of correcting the award from other processes of review. Section 70(2)(a) refers to a process of appeal or review and s 70(2)(b) refers to any available recourse under section 57. I will, therefore, consider and determine Pillars application for an extension of time since an extension of time would appear to be required as a prerequisite for my determining that application. (2) Has the court jurisdiction to grant an extension of time? 43. On behalf of the Edwards, it was suggested that the court has no jurisdiction to grant Pillar an extension of time within which to make a s 68 application. This potential bar was said to arise because of the restrictive wording of s 70(3) when read with the wording of s 79(1). The latter section allows a court: 75 Construction & Engineering Law, Volume 7, Issue 1 by order [to] extend any time limit agreed by [the parties] in relation to any matter relating to the arbitral proceedings or in relation to any matter specified in any provision of this Part having effect in default of such agreement. Section 70(3) states that any application or appeal: must be brought within 28 days of the date of the award. This provision is to be contrasted with many time provisions in the Act which are in this form (taking one of those in s 51 as an example): Any correction of an award shall be made within 28 days of the date the application was received by the tribunal or such longer period as the parties may agree. 44. It was argued on behalf of the Edwards that the relevant time limit in s 70(3) must be brought within 28 days and that, since that requirement was not subject to a default provision relating to the agreement of the parties, s 79 could not be invoked by Pillar for initiating its remission proceedings. 45. In considering this submission, attention must also be paid to s 80(5) which relates to the powers of the court to extend time in relation to legal proceedings that are concerned with the making of an arbitration application, appeal or other step. This provision states that: (5) Where any provision of this Part requires an application or appeal to be made to the court within a specified time, the rules of court relating to the extending or abridging of periods apply in relation to that requirement. As summarised in paragraph 37 above, the relevant rule of court, CPR 49(2)(b), incorporates the practice direction concerned with arbitration applications, 49GPD-001. Paragraph 22 of that practice direction provides for this procedure: In any case where an applicant seeks to challenge an award under section 67 or 68 of the Arbitration Act after the time limit of 28 days has already expired, the following provisions shall apply: (1) the applicant must state in his arbitration claim form the grounds why an order extending time should be made and his affidavit evidence or witness statement in support shall set out the evidence on which he relies; (2) a respondent who wishes to oppose the making of an order extending time shall file an affidavit or witness statement within 7 days after service of the applicants evidence, and (3) the court shall decide whether or not to extend time without a 76 Case Report: RC Pillar & Sons v Edwards hearing unless it appears to the court that a hearing is required and, where the court makes an order extending the time limit, the respondent shall file his affidavit or witness statement in response to the arbitration application within 21 days after the making of the order. 46. Mr Speaight QC, on behalf of the Edwards, argued that the governing provision concerned with extensions of time for s 68 applications is s 79. He argued that s 80, as a procedural and subordinate section to the earlier sections of the Act, had to be construed so as to be consistent with s 79. Thus, s 80 could not be used to support an argument that the court had jurisdiction to grant an extension of time for a s 68 application. Furthermore, to the extent that the wording of the arbitration practice direction allows for an extension of time for s 68 applications, it was ultra vires or not applicable given the absence of any statutory power in the Act giving the court the power to extend time for such applications. 47. There is a short answer to the Edwards submission. This is that ss 79 and 80 are discrete sections dealing with different types of application and that s 80 is, but s 79 is not, applicable to s 68 applications. Section 79 is concerned with applications to extend time limits where the Act provides a time limit and expressly links that time limit to the ability of the parties, by agreement, to extend it. Such time limits would normally be ones arising during the arbitral process directly affecting the conduct of the arbitration. Section 80, on the other hand, is concerned with applications or appeals to the court. These are made directly to the court and are concerned with attempts to invoke the intervention of the court into the arbitration process or in connection with an award once made. Such applications must, as provided for in s 80, be made within the time limits imposed by court rules, including any provision in the rules for extensions of time. Thus, the governing provision for an extension of time in connection with a s 68 application is s 80. 48. I derive support for this interpretation of s 80 from two sources. The first supporting source is the supplementary report of the Departmental Advisory Committee to the Department of Trade. The DAC was a committee set up by the DTI, the sponsoring Department of the Arbitration Act 1996, to advise it on the need for, and the contents of, a new Arbitration Act. It had a distinguished membership drawn from practitioners and academics concerned with arbitration and was chaired by Saville LJ (now Lord Saville of Newdigate). The DAC had been troubled in its original report on the Arbitration Bill when that had first been published by the potentially narrow wording of what became s 79 because that wording could have been said to preclude the court from granting extensions of time for serious irregularity applications (i.e. s 68 applications) or appeals to the court under s 69. In its supplementary report, prepared after what is now s 80(5) had been inserted into the original Bill by amendment, the DAC stated: 77 Construction & Engineering Law, Volume 7, Issue 1 In paragraph 382 of Chapter 6 we noted that this provision did not cover cases where the time stipulated was not one having effect in default of agreement between the parties e.g. what is now section 70(3). We suggested an amendment to what is now section 79(1). This suggestion was not adopted, but the point was covered by adding the words the extending or abridging of periods to what is now section 80(5). 49. The second supporting source for my interpretation of s 80 is the unreported decision of Toulson J in Ranko Group v Antarctic Maritime SA. He was confronted with the same argument that I am concerned with, namely that the court has no jurisdiction to extend time for initiating s 68 and 69 applications and appeals and he concluded, as I have done, that s 80(5) creates and confirms the courts jurisdiction to extend time for such applications and that the governing procedure is that provided for by the rules of court. (3) No extension of time claimed by Pillar 50. The possible need for Pillar to obtain an extension of time for its s 68 application was only first appreciated during the hearing and no application for an extension is currently sought in Pillars application. However, on behalf of the Edwards, no objection was taken to an application being made by Pillar without an amendment being obtained, without any written grounds being formulated by Pillar or without any additional witness statements being served. (4) Pillars application 51. I will deal with Pillars application for an extension of time in paragraphs 7274 below. 4. The process of correcting the awards 52. It is first necessary to determine whether the arbitrators correcting document was sent to the parties within time and whether Pillars request that corrections should be made to the principal award additional to those corrections contended for by the Edwards was received by the arbitrator out of time. 4.1. The application for corrections 53. It was suggested on behalf of the Edwards that the letters sent to the arbitrator on behalf of Pillar on 26 May and 9 June 2000 gave rise to a separate and discrete request for corrections to the principal award from the request made by the Edwards for corrections made in their two earlier letters dated 10 and 11 May 2000. This was a tactical submission since it was suggested that the Edwards request was within time whereas Pillars was out of time. If so, the 78 Case Report: RC Pillar & Sons v Edwards arbitrator had been correct to exclude from consideration Pillars complaints. The conclusion that was drawn on behalf of the Edwards was that the court should not make an order extending Pillars time for applying to the arbitrator under s 57 since this would have the effect of bringing Pillars complaints into contention for the first time. 54. I regard this suggested approach to Pillars letters as an unduly narrow and formalistic approach to the respective complaints of both parties that were being made about the contents of the award. In reality, there was only one application that had been made for corrections. This had been made by the Edwards but it covered all suggested corrections put forward on behalf of both parties. 55. It must be remembered that the arbitration was fundamentally concerned with an accounting exercise in which each item in the Certified Cost Summary that had been attached to the Final Certificate was to be examined and considered for possible opening up and revision. Furthermore, most, if not all, of the items of claim were closely related with at least one item of counterclaim. This was because the valuation of a work item as originally defined in the contract documents, the valuation of any related omission arising from a variation to that work item ordered by the architect and the further valuation of any defective or omitted work connected with that work item all had to be undertaken together so as to avoid any duplication or omission within the overall valuation exercise. However, these three valuation exercises were undertaken separately by the arbitrator in his award. By incorporating all the pleadings and associated schedules and documents into his award without making any attempt to reconcile the pleadings or giving full reasons for his individual awards, the arbitrator left the parties in doubt as to what had been awarded for related items of dispute, as to whether there was any duplication or omission in his valuations and as to the basis of his various awards. 56. Thus, any correcting exercise would necessarily involve the arbitrator in going through each item of the claim and counterclaim and in reviewing each finding that he had made. The arbitrator clearly accepted that that was what he was doing since, in his corrections document correcting the principal award, he stated: I published my award on 17 April 2000. I have now received an application from one of the parties to correct an Award under section 57 of the Arbitration Act and have also received a response to that application from the other side, I have now considered these representations and make corrections, clarifications and additional awards. I have also received a similar application from the other side but not within the time limit required by the 1996 Arbitration Act. The response received from Pillar was the identical document as the similar 79 Construction & Engineering Law, Volume 7, Issue 1 application document, namely the letter of 9 June 2000. 57. In truth, the arbitrator had received one application to correct his award which was concerned with a dispute as to how the Final Certificate and associated accounting documents should be corrected. The gist of this application was that the arbitrator should look again at the entirety of his award which related to the entirety of the make up of the Final Certificate and then make all necessary corrections to his award. This application was made by the Edwards first letter concerned with corrections, dated 10 May 2000. Each party then made submissions as to how that application should be dealt with. The Edwards submissions were set out in the two letters dated 10 and 11 May 2000 and Pillars submissions were set out in the two letters dated 26 May and 9 June 2000. 58. This approach to the application to make corrections is supported by the wording of s 57 of the Act. It is noteworthy that s 57 provides that the tribunal might on its own initiative or on the application of a party correct an award. Thus, once the arbitrator had been asked to make corrections to his award by the Edwards, it was incumbent on him to consider all possible accidental slips, omissions or ambiguities in the award. Strictly speaking, there was therefore no need for Pillar to make any application at all before the arbitrator commenced his consideration of the award. The arbitrator should have considered Pillars points even if they had not been drawn to his attention by Pillar. However, in drawing them to his attention, Pillar was not making an application, it was making representations in connection with the application that had already been made by the Edwards. 59. It follows that by not considering Pillars points, the arbitrator was in breach of his obligation, imposed by s 57(3), to give Pillar a reasonable opportunity of making representations to the tribunal and of his obligation to consider and give effect to all potential errors in his award. These failings arose because the arbitrator excluded many of Pillars representations from consideration. He did so because he adopted the erroneous contention made on behalf of the Edwards that these representations constituted a fresh application under s 57 which was out of time. 4.2. The arbitrators correcting document 60. The arbitrator was sent two letters on behalf of the Edwards dated 10 and 11 May 2000. The first of these letters, which was the operative one for initiating a s 57 process of correction, arrived in his office by fax on 10 May 2000. He actually became aware of these letters when he returned to his office after a short absence on 24 May. His correcting document is dated 19 June 2000. If the relevant date setting off the 28 day period within which the arbitrator had to act ran from 10 May 2000, when the fax arrived at the arbitrators office, the last date for the arbitrator to act was 7 June 2000 and his correcting document was issued 12 days out of time. If, on the other hand, the 80 Case Report: RC Pillar & Sons v Edwards critical date starting the 28 day period was the date on which the arbitrator first became aware of the s 57 application, the starting date was 24 May 2000 and the last date for issuing his correcting document would have been 21 June 2000, 2 days after that document was actually issued. On this latter view, the correcting document was issued within time. 61. The arbitrator and the Edwards, in contending that the correcting document was issued within time, placed some reliance on the fact that the arbitrator had written on 9 May 2000 a short letter to the parties which informed them that he would be away from his office from 11 until 23 May 2000. However, although it was courteous of the arbitrator to inform the parties of his impending absence from his office, his notification letter cannot affect the question of the date on which the relevant 28 day period started to run. That date is fixed by the Arbitration Act or, if the parties had expressly agreed to a different date, by that agreement. Whatever date arose as the date by which the application had to be made as a result of the operation of the statutory formula within 28 days of the date the application was received by the tribunal, that date was not affected by the arbitrators letter to the parries. The letter, at best, was merely good evidence that even if the application had arrived at the arbitrators office on about 10 or 11 May 2000, it did not first come to his knowledge until 24 May 2000. 62. It is, thus, necessary to determine whether the arbitrators correcting document was dated with a date no more than 28 days after the application had been received by the tribunal. This requires me to determine what is meant by the phrase within 28 days of the date the application was received by the tribunal. This phrase has, potentially, two separate meanings. Received could refer to the date on which the document was to be taken to have arrived at the relevant place for service in conformity with the prevailing procedure for service provided for, in this case, by the documents service rules of the Arbitration Act and the JCT Arbitration Rules. Alternatively, received could refer to the date on which the document first came to the notice of the arbitrator. 63. On behalf of the Edwards it was contended that the second meaning was intended by s 57. It was suggested that the use of the verb received is significant. The use of received in a context concerned with the service of notices or documents is the only use of that verb in the Arbitration Act. In other similar contexts, including s 76 that is concerned with the service of notices generally in connection with the arbitral proceedings, the phrase used is served on. Thus, received means something different to served on which latter phrase clearly refers to the date the document arrived at a particular address for service. It was also suggested that, in its natural meaning, received connotes the physical receipt of a document by an individual rather than the impersonal arrival of a document at a particular location or address. 64. In deciding this question, recourse must first be had to s 76 which is one 81 Construction & Engineering Law, Volume 7, Issue 1 of the sections contained under the heading Supplementary and is headed Service of notes, etc. This is because an application notice under s 57 must be served on somebody or at some address. Thus, the terms of s 76 are applicable to such applications. The material parts of this section provide: (1) The parties are free to agree on the manner of service of any notice or other document required or authorised to be given or served in pursuance of the arbitration agreement or for the purposes of the arbitral proceedings. (2) If or to the extent that there is no such agreement the following provisions apply. (3) A notice or other document may be served on a person by any effective means. (4) If a notice or other document is addressed, pre-paid and delivered by post (a) to the addressees last known principal residence or, it he has been carrying on a trade, profession or business, his last known business address it shall be treated as effectively served. 65. The arbitrator, by his first order for directions dated 26 June 1998 which was stated to have been made by consent and which followed a directions hearing attended by a representative of each party, directed that communications should be made as provided for by Rule 3 of the JCT Arbitration Rules. This direction was clearly intended to govern communications to him. Rule 3 provides that, subject to proof to the contrary, service of a document shall be deemed to have been effected two days after its date of posting, excluding Saturdays and Sundays or upon its fax transmission having been effected. It follows that the parties, by an agreement enforceable by virtue of s 76(1) and 76(4), created the situation whereby any notice required to be served on the arbitrator was to be treated as being validly served two days after it had been posted or on the day it was faxed. 66. In this case, the letter of 10 May 2000 was both taxed and sent to the arbitrators business address. It follows that the latest date that it is to be taken to have been served on the arbitrator was 12 May 2000, which was a Friday and two days after the 10 May 2000. 67. The only basis for contending that the requisite notice served under s 57 was not subject to s 76 is that the use of the word received in s 57 shows that s 76, despite its unqualified terms which appear to apply its provisions to any notice or other document requiring service in connection with the arbitration, is nonetheless qualified by the wording of s 57 for applications made to the arbitrator under that section. Section 57, however contains no such 82 Case Report: RC Pillar & Sons v Edwards qualification, at least it is not provided for in clear terms. At best, the word received in s 57 is ambiguous since it could refer to the date on which the arbitrator was validly served with the application or the date on which he came to know of it. It is not, therefore, possible to read the provision for the service of a s 57 application on the arbitrator as being unaffected by the rules for service of documents provided for in s 76. 68. This conclusion is reinforced when the possible consequences of a rule linking the time limit to the date of the tribunals first becoming aware of the application are considered. If there was such a rule for service of a s 57 application, it would make the critical date one which the parties would not be able to fix with certainty since only the arbitrator would know what that date was. Moreover, there would be no defined date in relation to the not uncommon situation of an arbitral tribunal consisting of three arbitrators. These considerations point away from the Edwards suggested interpretation of received and reinforce the view that s 57 is subject to the provisions of s 76. 69. It follows that the arbitrator was out of time when publishing his corrections document. 4.3 Extensions of time 70. Thus, I must consider three [sic] related questions: 1. Should the time within which the arbitrator should be able to make correc- tions to his principal award be extended from 7 to 19 June 2000 so as to regularise his corrections document? 2. Should the time within which Pillar should be able to apply for a remission under s 68 be extended from 15 May until 17 July 2000? 71. It is clear that each party will potentially suffer enormous prejudice if, in Pillars case, the application it makes is not granted or, in the Edwards case, the application they make are not granted. Given the existence of the sealed offers and the consequent huge sum in costs that is potentially affected by the precise figure awarded by the arbitrator, an inability to consider or give effect to corrections to the award has potentially ruinous consequences to either party. 72. It would clearly not be just to allow the Edwards application without allowing Pillars and vice versa. In those circumstances, I allow both applications. 4.3. Conclusion s 57 application irregularities 73. One obvious way for the court to deal with both irregularities that I have identified as having occurred in respect of the s 57 corrections process would be to remit the corrected award with a direction that the arbitrator should consider Pillars points which were not previously considered, having first regularised the corrections document by extending the time within which it should have been made. However, that course would leave each party 83 Construction & Engineering Law, Volume 7, Issue 1 potentially suffering from a number of potential injustices. Firstly, the Edwards contend that the corrected award, even if further corrected following a remission, would still contain potentially significant further mistakes, errors or omissions arising [from] the first correcting exercise. Secondly, the close inter- relationship of the many items of claim and counterclaim requires the arbitrator, in fairness to the parties, to examine all other relevant items in the award whilst considering whether to correct any one of them. Thirdly, there is considerable doubt as to whether any of the corrections sought by both the Edwards and Pillar can in fact be corrected under s 57 if the narrow jurisdiction to correct created by that section is strictly applied. At least some of the many suggested corrections can only be dealt with, if at all, by way of appeal or by way of a general remission and reconsideration of the award. This doubt is intensified by the fact that the arbitrator provided an award with very sparse reasoning supporting many of the items of award but with excessive incorporation of pleadings and allied documentation. 74. Thus, as Pillar contends, for justice to be done, the arbitrator should be able to reconsider all items of claim and counterclaim in both awards by way of a general remission of both awards without being trammelled by a limited remission or by the restricted powers given to him to correct mistakes, errors and omissions in the principal award. This course would avoid further procedural argument as to whether any particular complaint could or should be corrected under s 57, as to whether any complaint was one which was only capable of being dealt with by an appeal, as to whether the reasons in the awards were sufficient or should be supplemented or as to whether any particular item of claim was within or outside the arbitrators jurisdiction in either arbitration. On behalf of the Edwards, however, it was contended that the court had no power to order a general remission under s 68, given that that section, is also limited in its scope. 5. The scope and applicability of s 68 5.1. Introduction 75. Section 68 of the Arbitration Act imposes a very high threshold requirement before it can be invoked. The court can only consider remitting or setting aside an award or granting a declaration that an award should be of no effect if there has been serious irregularity of a kind defined in s 68 which has caused substantial injustice to the applicant. The DAC, in its commentary on this section in its Report on the Arbitration Bill, stressed the limited power given to the court by s 68. The DAC stated that: 280. Irregularities stand on a different footing [to challenges to the substantive jurisdiction of the tribunal]. Here we consider that it is appropriate, indeed essential, that these have to pass the test of causing 84 Case Report: RC Pillar & Sons v Edwards substantial injustice before the court can act. The court does not have a general supervisory jurisdiction over arbitrations. We have listed the specific cases where a challenge can be made under [s 68]. The test of substantial injustice is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to the action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice. In short [s] 68 is really designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. 5.2 Initial threshold requirement s 70(2) 76. Section 70(2) of the Act precludes a s 68 application being brought if Pillar has not first exhausted any available recourse under s 57. Pillar has clearly complied with that requirement. It first sought to persuade the arbitrator to consider its suggested mistakes, errors and omissions in both awards and, following the issuing of corrections to each award, sought further corrections. The arbitrator declined to consider Pillars points when making corrections to the principal award or to consider its application to make further corrections to that corrected award or to consider its application to make further corrections to the corrected second award. It follows that Pillar has complied with s 70(2) and that I can consider its s 68 applications. 5.3. Serious irregularity 77. It is first necessary to consider each respect in which the two arbitrations went wrong, to consider whether those errors come within the possible grounds for a remission defined by s 68 and then to stand back and see whether, overall, the tribunal has gone so wrong in the conduct of the arbitration that justice calls out for it to be corrected. 5.3.1. The process of defining the issues 78. The arbitrator directed that statements of case and of defence and counterclaim should be exchanged, that Scott Schedule 8 should be served and that a process of experts meetings should be arranged so that figures could be agreed as figures wherever possible and the remaining issues in dispute could be identified. In seeking to comply with these directions, the parties and the arbitrator were under a duty, imposed by s 33, to adopt procedures which 85 Construction & Engineering Law, Volume 7, Issue 1 avoided unnecessary delay or expense. These directions clearly envisaged that short summaries of each partys claim or defence would be pleaded with the detail being summarised in Scott Schedules. These Schedules are schedules which bring together into one document, for each work item in dispute, both parties respective cases. In the context of this arbitration, that exercise required the parties to bring together into one Scott Schedule item any claim or counterclaim item concerned with each work item in dispute. 79. The pleadings that were actually produced were prolix and diffuse and the schedules, which were not Scott Schedules, failed to consolidate and reduce into a composite pleading all aspects of each disputed work item. No agreed lists of items about which they agreed about and disagreed about were produced and they failed to agree any figures as figures. The result of these failures was a significant increase in the costs of each party and a failure to produce a coherent list of issues for resolution by the arbitrator in a form that would have enabled an award to be drafted which dealt with all remaining disputes without mistake, error or omission. 80. Overall, the arbitrator should have detected the failings that I have identified and should then have directed the parties to put them right. In not doing so, the arbitrator was in breach of s 33 of the Act. 5.3.2. The second arbitration 81. On behalf of the Edwards, jurisdiction issues were raised at an early stage of the first arbitration in connection with some items of claim put forward by Pillar. Surprisingly, it does not appear to have been drawn to the attention of the arbitrator that, even if these items of claim were not in dispute then the notice of arbitration had been served, nonetheless the subsequent dispute in relation to them fell within his jurisdiction. This was because the relevant arbitration clause referred to the arbitrator all disputes arising [under the contract] or in connection therewith. Had the arbitrator been presented with that submission, he would probably have accepted that he had jurisdiction to deal with every item claimed by Pillar. 82. In any case, the parties should have agreed with each other that the jurisdiction of the arbitrator should be widened. As an alternative, the parties and the arbitrator should have agreed to consolidate the second arbitration with the first arbitration so as to keep costs to a minimum. By maintaining, arguing and deciding jurisdiction questions and then by pursuing a separate, documents only arbitration, the parties and the arbitrator were in further breach of s 33. 5.3.3. The hearing and the award 83. The hearing took 10 working days when a much shorter hearing could and should have taken place. The length of the hearing was the result of: the number of witnesses giving expert evidence, the failure of the parties and the experts to define and reduce the number of issues and the absence of time- 86 Case Report: RC Pillar & Sons v Edwards limited cross-examination. 84. The principal award took 7 months to prepare and, when it was published, it was diffuse, lacked any substantial reasoning and incorporated verbatim the extensive pleadings. Both awards, on the basis of the arbitrators corrections, contained a significant number of mistakes, errors and omissions which were admitted to by the arbitrator. The two correcting documents included within the corrections examples of the following matters: items of claim that had not been dealt [with] at all, omissions, ambiguities, items of award which were possibly outside the arbitrators jurisdiction and accidental slips. 85. The consequence of these problems was that the arbitrator had to make a large number of corrections to his awards which, cumulatively, made an enormous difference to the apparent success of Pillar and the original lack of success of the Edwards. These corrections resulted from errors that had occurred in preparing for the hearing, from a failure to define the issues in dispute, from the length of time taken to prepare the award and from the way in which the award was drafted. 86. Three further injustices must be added to the difficulties that l have identified: (1) the failure of the arbitrator to consider Pillars specific complaints about the principal award; (2) the fact that the arbitrator made his corrections to the principal award out of time; and (3) the corrections made to the principal award have left the Edwards with the belief that a further £10,000 should be deducted from the sums awarded to Pillar by that corrected award. 87. These various difficulties are, when considered together, ones that are examples of one or more of the following grounds for invoking s 68: the tribunal failing to comply with s 33; the tribunal exceeding its powers; the failure of the tribunal to conduct the proceedings in accordance with the agreed procedure; a failure by the tribunal to deal with all issues put to it; uncertainty and ambiguity as to the effect of the award; a failure by the tribunal in drafting its award to comply with essential requirements as to the form of the award; and irregularity admitted by the tribunal as to each award. 5.3.4. Costs 88. Because of the way in which the proceedings were conducted and because of the way each party has been charged for the professional services of their respective representatives, a huge liability in costs has built up. In principle, non-lawyers conducting arbitration proceedings should run up the same or less by way of costs than lawyers would have run up in the same proceedings. 89. Each partys representatives in an arbitration should minimise correspondence and any drafting to the minimum needed to pursue a partys case, should strive at all stages to achieve costs savings, should seek to compromise the disputes at all stages of the arbitration and should prepare and present a partys case before and at the hearing with skill and economy. 87 Construction & Engineering Law, Volume 7, Issue 1 6. Conclusion 90. Any failure to beat the sealed offer by one or other party could have a devastating effect on that partys fortunes. This potential consequence is the result of the huge costs that have been incurred. Any uncorrected error in the award, even if of limited monetary value, could mean the difference between success and failure to the adversely affected party. Both awards have been made following serious irregularity affecting both the proceedings and the award. Unless both awards are remitted to the arbitrator for reconsideration, serious injustice to at least one of the two parties will result. 91. Following the remissions to him, the arbitrator must be in a position in which he is able to reconsider any part of either of his two awards that either party wishes to draw to his attention. The arbitrator will have to determine whether any further evidence or documents should be admitted into the proceedings but, as a starting point, the arbitrator should take each of his two awards and consider any correction contended for by either party. The parties will need to define in written submissions, in advance of any hearing, their respective cases as to any changes being sought in each award and a brief, half to one day hearing will then be needed. The timescale will need to be defined in the remission order giving effect to this judgment but I suggest that a starting point should be that the two awards should be reissued within a period of 28 days from the date that the order giving effect to this judgment is perfected. 92. The arbitrator cannot deal with the costs of either arbitration until the process of finalising both awards has been completed. However, the arbitrator might well consider that any detailed assessment of costs, following his cost orders that will themselves follow the reissue of the two awards, should be undertaken by the court. The arbitrators award in the second, documents only, arbitration, which is now being remitted for reconsideration, contained a direction that Pillars costs should be assessed by the court if not agreed and this precedent could well be followed by the arbitrator when making costs awards in each arbitration. 93. Once the arbitrator has dealt with the parties costs, each party will face a bill for that part of the costs of its own representatives which is not to be met by the opposing party. These costs cannot be made the subject of court assessment since non-lawyer representatives, unlike solicitors and barristers, need not submit their bills of costs to any form of external review when these are disputed by the client. It is to be hoped that both firms representing these parties will agree to informal mediation from a costs draughtsman or to an assessment by the arbitrator or the court if any part of their bills are considered unreasonable by their clients. If no voluntary process of review can be agreed to, either client can invoke the court. That party can start an action to recover or dispute professional fees if that party is dissatisfied with the bill that it has been presented with or if there is a belief that the charges being made are significantly higher than a solicitor would have charged to represent that party. 88 Book Review, by Sir Philip Otton Book Reviews International Arbitration and National Courts: The Never Ending Story. ICCA International Arbitration Conference. Ed. by Albert Jan Van Der Bergh. 268pp. Kluwer Law International. 2001. $69.00. A prestigious and important conference was held in New Delhi in March 2000 entitled International Arbitration and National Courts: The Never Ending Story. It was organised by the Indian Council of Arbitration and the International Council for Commercial Arbitration with the assistance of the International Bureau of the Permanent Court of Arbitration, The Hague. Inevitably the conference attracted a distinguished panel of chairpersons, speakers and commentators. There was a large attendance from across the commercial world. Fortunately for those of us unable to attend, Kluwer Law International has published an admirable volume that records the proceedings for us to peruse at our leisure. The conference concentrated on four topics: Session I: The contract: ensuring its validity and effectiveness. Session II: The arbitrators responsibility for the proper conduct of pro- ceedings and the role of the courts in providing support and supervision. Session III: Interim relief: the role of arbitrators and the courts. Session IV: Enforcement and setting aside of awards. Within the context of these omnipresent and global topics in international commerce, particular attention was given to the Indian Arbitration and Conciliation Act 1996. This Act is closely modelled on the UNCITRAL Model Law with variations applicable to that country. The courts of India have yet to determine whether they can grant interim relief in relation to an arbitration taking place outside India. The conference opened with an inspiring inaugural address by the President of India, His Excellency Shri K R Narayanan, in which he gave a fascinating account of the history of arbitration in India. He pointed out that international arbitration must bear in mind that there are great inequalities between contesting parties from different parts of the world. Developing countries and even commercial organisations and corporate entities in developing countries are inherently at a disadvantage. In Session I, M I M Aboul-Einem (Secretary General of the Arab Union of International Arbitration) posed the intriguing question: What causes courts to disregard agreements to arbitrate, and how can such agreements be 89 Construction & Engineering Law, Volume 7, Issue 1 improved to avoid that fate according to the new Arab Laws of Arbitration? He suggested practical solutions to ensure the autonomy of the arbitration clause. Michael Pryles (President, Australian Centre for International Commercial Arbitration) dealt with multi-tiered dispute resolution clauses. Hilmar Raeschke-Kessler (the German member of ICC Commission on International Arbitration) explored some developments on arbitrability and related issues tracing the developments following Article II(1) of the European Convention on International Commercial Arbitration of 1961. In Session II, as if to emphasis the international character, Yves Fortier CC, QC, from Canada (President of the LCIA) posed the question, Who has the last word? Gerrold Hermann, from Austria (immediate Past Secretary of UNCITRAL) addressed the arbitrators responsibilities for the proper conduct of proceedings and the supervisory role of the courts. This was then enlarged upon by Arthur Marriott QC from the United Kingdom and United States overview. R K Shankardass (former President, IBA) and Mukul Rohatgi (Additional Solicitor General) gave the Indian perspective. In Session III an impressive array of papers was presented by a distinguished body of Indian arbitration specialists. The cumulative effect was that whilst the UNCITRAL Model Law has made a strong attempt to provide a standard set of legal rules for the conduct of International Commercial Arbitration, neither the Model Law nor the New York Convention provides an adequate framework in relation to interim orders. This area is currently only governed by domestic law and rules of conflict laws, and there is a pressing need to establish a sound legal framework for the grant and enforcement of interim relief by arbitrators. Inevitably, Session IV was devoted to enforcement and setting aside of awards. R S Lodha (Vice-President, Indian Council of Arbitration) explained the Indian position. The perspective of the common law countries was given by Michael Hwang and Andrew Chan (Partners, Allen & Gledhill, Singapore). Pierre Mayer (President, ICA, ILA) revisited the decisions in Hilmarton and Chromalloy. B S Rao (Legal Advisor, Ministry of External Affairs, Government of India) examined the Condition of Reciprocity in India. The latter expressed the view that even in the absence of a notification, given the broad objectives of the Indian Act to promote expeditious resolution of commercial disputes through international arbitration, there appears to be no bar to approach the Indian Court for recognition and enforcement of a foreign arbitral award provided that the State where the award was made is a party to the New York Convention and that there was reciprocity with that State to enforce an Indian arbitral award in its jurisdiction. This was indeed a positive outcome which fully justified the holding of the conference. No doubt this conclusion will have been noted by the representatives of the 39 countries who attended. For those who were present this book will be an indispensable aide memoire. For those who were less 90 Book Review, by Sir Philip Otton fortunate it is imperative reading. For both it will be a valuable lead-in to the next ICCA Congress entitled Important Contemporary Questions, to be held in London, 1215 May 2002 and hosted by the Chartered Institute of Arbitrators. Sir Philip Otton 91 Construction & Engineering Law, Volume 7, Issue 1 Information for Contributors Members of the legal and construction professions are invited to submit articles on topical construction issues and other matters of interest. Letters making comments upon articles having appeared in the journal are also invited. (Please advise when such letters are not intended for publication.) Articles should be between 2,000 and 5,000 words in length according to the importance of the subject matter. They should be submitted to the Editor for preliminary consideration in electronic format Word being preferred by post on floppy disk or by email:
[email protected]. In particular cases the Editor will submit articles to an appropriate member of the Editorial Board for review before publication. Contact Details If you require any further information, or would like to submit an article for publication, please contact: Michael P Reynolds, General Editor Email:
[email protected]Or contact the publishers: EMIS Professional Publishing Ltd 3133 Stonehills House Howardsgate Welwyn Garden City AL8 6PU Email:
[email protected]Tel: (01707) 334823 Fax: (01707) 335022 92