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Arbitrator was not functus officio (High Court)
Practical Law UK Legal Update Case Report 9-504-2482 (Approx. 5 pages)
Arbitrator was not functus officio (High Court)
by PLC Arbitration
| Published on 15 Dec 2010 • England, Wales |
In Martin Dawes v Treasure & Son Ltd [2010] EWHC 3218 (TCC), the High Court ruled that an arbitrator was not functus officio and had jurisdiction to consider further claims referred to him.
Speedread
The Technology and Construction Court (TCC) has held that an arbitrator was not functus officio (that is, having performed his office) following a settlement between the parties.
In this case, the claimant (Dawes) engaged the defendant (Treasure) to carry out works under a JCT standard form of prime cost contract. The contract provided for arbitration under the Construction Industry Model Arbitration Rules (CIMAR). Disputes arose and were referred to arbitration. Following a settlement, the parties referred the issue of costs to the arbitrator (S), who made a series of costs awards. After the first costs award, Dawes attempted to commence a fresh arbitration alleging defects in the work carried out by Treasure, and to appoint a different arbitrator. Treasure argued that the settlement covered all Dawes' allegations. S decided that he had jurisdiction to consider the scope of the settlement and then made an award finding that the settlement did encompass Dawes' defects claim. Dawes appealed both the decision on jurisdiction and the subsequent award.
Akenhead J held that the arbitrator was not functus officio following the settlement between the parties. The settlement of a dispute does not generally terminate the arbitrator's mandate, until a final award disposes of all issues, including costs. There had been no final award here and the parties clearly thought the arbitrator had jurisdiction to decide the issue of costs at least. Further, the CIMAR expressly provided for either party to refer another dispute to the same arbitrator. The arbitrator therefore retained jurisdiction to consider whether the settlement encompassed the later defects claims made by Dawes. The judge went on to uphold the arbitrator's award on the scope of the settlement.
The decision provides some helpful guiding principles on the issue of functus officio. In particular, it confirms that an arbitrator will normally retain jurisdiction until he has made a final award disposing of all issues, including costs. (Martin Dawes v Treasure & Son Ltd [2010] EWHC 3218 (TCC) (10 December 2010).)
Background
The JCT standard forms of building contract include an arbitration clause that requires arbitration in accordance with the Construction Industry Model Arbitration Rules (CIMAR). Under CIMAR rule 3.3, after an arbitrator has been appointed, either party may issue a further notice of arbitration referring to the arbitrator any other dispute which falls under the same arbitration agreement to those arbitral proceedings. The arbitrator may order the subsequent dispute to be consolidated with the existing arbitration proceedings.
CIMAR rule 14.4 requires the parties promptly to inform the arbitrator of any settlement, in which case section 51 of the Arbitration Act 1996 (Arbitration Act) applies. Section 51 provides that if the parties settle their dispute, then unless otherwise agreed:
- The tribunal shall terminate the substantive proceedings and, if requested by the parties and not objected to by the tribunal, record the settlement in the form of an agreed award (section 51(2)).
- If payment of costs has not been settled, the arbitrators may deal with that issue in accordance with sections 59 to 65 of the Arbitration Act (section 51(5)).
An arbitrator ceases to have jurisdiction once a final award disposing of all issues referred to arbitration (including the issue of costs) has been made . At that point, he is functus officio (although he may correct clerical errors or clarify ambiguities in his award and his jurisdiction can be revived if a successfully challenged award is remitted to him).
Facts
The facts in this case are set out in detail in Legal update, Appeal of arbitrator's costs award rejected. In brief, the claimant (Dawes) entered into a JCT standard form of prime cost contract with the defendant (Treasure) for works at his country estate. There were a number of disputes between the parties, and following an adjudication and court enforcement proceedings, Dawes paid Treasure over £1 million.
Treasure commenced arbitration against Dawes under the arbitration clause in the contract. An arbitrator (S) was appointed. In his defence and cross-claim, Dawes claimed that the adjudicator's award was wrong and had over-compensated Treasure by some £869,000, of which Dawes claimed repayment. Treasure offered to settle all claims and cross-claims in the arbitration. The offer was framed in terms that would leave it to the arbitrator to determine liability and quantum of costs, including liability for the arbitrator's fees and expenses. Dawes accepted the offer.
Neither the parties nor the arbitrator drew up any order or award reflecting the terms of the settlement. S made a first costs award holding that Dawes should pay Treasure's costs and S's fees and expenses. He later made a series of further costs awards against Dawes. In the meantime, Dawes attempted to commence a fresh arbitration in respect of alleged defects in the works carried out by Treasure. It proposed a different arbitrator. However, S stated that he continued to have jurisdiction, based on the CIMAR. Treasure served a further notice of arbitration referring to S a dispute in relation to Dawes' ongoing allegations regarding defects and Treasure's assertion that the defects previously pleaded had been compromised in the settlement between the parties.
S decided that he had jurisdiction over this dispute and that he was not functus officio. He went on to make an award holding that the settlement covered all defects raised in the arbitration. Dawes challenged both S's decision on jurisdiction and the subsequent award on the scope of the settlement.
Decision
Akenhead J held that S was not functus officio and retained jurisdiction after the settlement. Further, he upheld the arbitrator's award regarding the scope of the settlement.
The judge noted that there was not much relevant authority on the issue of when and how an arbitrator becomes functus officio. However, he identified the following principles from arbitration law and practice:
- As arbitration is usually a consensual process, it is necessary to look at the contract between the parties to determine what the parties have agreed, expressly or by implication, about when the arbitrator's jurisdiction becomes exhausted.
- The settlement of a dispute after it has been referred to arbitration but before any final award is rendered does not necessarily terminate the arbitrator's jurisdiction. Section 51 of the Arbitration Act suggests that there remains a jurisdiction following settlement to terminate the substantive proceedings and resolve issues of costs or any other matters remaining in dispute. There is no statutory limitation on that jurisdiction.
The question in this case was whether S retained any jurisdiction other than in relation to costs. Akenhead J concluded that S retained unqualified jurisdiction, which enabled him to consider whether the settlement encompassed Dawes' defects claim. He reasoned that:
- S would have retained jurisdiction if there had been an issue as to whether there was any settlement at all.
- There was nothing in section 51 to imply that an arbitrator's jurisdiction necessarily ceased save only in respect of costs.
- The parties did not proceed as if the arbitrator had no jurisdiction after the settlement. It was clear that they considered that he had jurisdiction at least to deal with costs and they did not think it necessary to agree a consent award or invite the arbitrator to do anything formal to terminate the proceedings.
- The CIMAR, which the parties had adopted, expressly give a party a right "after an arbitrator has been appointed" to refer another dispute to the same arbitrator and he has the right to consolidate it with the existing proceedings. That is effectively what S did in relation to the issue as to whether Dawes' defects claim was covered by the settlement.
- There was no time-related restriction in the CIMAR which would prevent the arbitrator from dealing with such further dispute within his jurisdiction.
The judge went on to decide that, on the facts of this case, the parties' settlement covered all Dawes' claims for defects. Therefore, the arbitrator's award on that issue was right.
Comment
Although fact-specific, this is a helpful decision, given the dearth of authority on the issue of functus officio. In particular, it confirms that an arbitrator will normally retain jurisdiction until he has made a final award disposing of all issues, including costs. In this case, although the arbitrator had dealt with costs, he had not made a final award and in the meantime a further dispute had been referred to him, which he had jurisdiction to consider by virtue of the CIMAR to which the parties had agreed.