Quantity surveyor – Negligence – Breach of contract – Claimant insurer alleging defendant negligent in respect of building conversion – Claimant and other insurers accepting liability – Claimant and defendant referring matters to arbitration – Arbitrator making final awards – Whether claimant entitled to costs arising from applications to correct final awards – Claim allowed in part
The defendant was a firm of quantity surveyors. It was retained by a housing association (R) to provide quantity surveying and other services in respect of a project to convert a building into flats. A dispute arose as to whether the defendant had been negligent and/or had acted in breach of contract with regard to the services provided to R. The claimant, the lead insurer, together with other insurers, acted as professional indemnity insurers in respect of the dispute.
R started legal proceedings and the insurers, accepting in principle that they were liable with regard to the claim against the defendant, were advised to settle the claim if it could be done at a reasonable price. A settlement was negotiated, whereby the defendant would contribute £325,000 as part of an overall settlement with R. The defendant opposed that figure, but the insurers took the view that, under the terms of their insurance contracts with the defendant, they were entitled to settle without the insured’s consent, which was what happened.
Three arbitrations between the defendant and the insurers were essentially resolved in favour of the latter; two of the arbitrations were dealt with by an arbitrator and one by the court sitting as judge-arbitrator appointed under the Arbitration Act 1996. The claimant, as lead insurer, applied to the court to enforce the various costs awards made in the insurers’ favour, including the costs of the application and the costs incurred following the final award in dealing with applications by the defendant to the judge as arbitrator to correct errors or to make additional awards.
The defendant failed to attend and was not represented at the enforcement hearing, although it had been served with the proceedings.
Held: The claim was allowed in part.
It had not been shown that either the arbitrator or the judge-arbitrator did not have jurisdiction to make the relevant costs awards against the defendant in respect of the enforcement of their awards. Therefore, in the absence of good grounds that would justify either the non-enforcement of the award or a stay of execution, summary judgment should be given with regard to those costs. Moreover, costs that were incidental to or attributable to the enforcement of the arbitrator’s awards were directly enforceable under section 66 of the 1996 Act.
However, costs that arose in connection with the applications to correct errors in the awards gave rise to legal difficulties since section 57(3) of the 1996 Act, which gave the tribunal jurisdiction to correct an award or make an additional award in certain circumstances, created a lacuna with regard to the parties’ costs in respect of any corrections or to any application to correct.
Such corrections were usually of the slip rule type where an arbitrator had reached an incorrect figure or misidentified a party and where it was obvious from the language or the figures used that the arbitrator had made a drafting error. The arbitrator could easily correct the mistake.
However, section 57 did not suggest expressly or by implication that the arbitrator had a right or jurisdiction to make a further award on the costs occasioned by the correction. If an additional award were made following the tribunal’s exercise of its power under section 57(3), it would be appropriate or at least not wrong, in those circumstances, if the additional award addressed the costs of and incidental to the need for the further additional award. In the instant case, the judge had decided as arbitrator that an additional award was not required. Thus, there was no actual award to make provision for the post-award costs, which consequently could not be the subject matter of the exercise of the court’s discretion in the instant claim.
Lynn McCafferty (instructed by Beale & Co) appeared for the claimant; the defendant did not appear and was not represented.
Eileen O’Grady, barrister
