Arbitrator banking cheque from one party following his request to both for interim payment of fees – Money returned when clear that other party unwilling to pay – Whether arbitrator guilty of misconduct – Whether right to demand such payment should be implied into arbitration agreement
Parties to a rent review clause failed to agree upon the rent payable for shop premises as from June 16 1991. On February 15 1993 an arbitrator was appointed at an hourly rate of £100. By letter dated March 15 1993 the arbitrator indicated that the award would be made by June 30 1993 and proposed to provide the parties with an estimate of additional costs should he require legal advice. Over the following 11 months a number of preliminary hearings were held to determine evidential and procedural points raised by the plaintiff tenant. By letter dated May 10 1994 the arbitrator, having reminded both parties of mounting costs and the need to agree a timetable, went on to say ‘. . . following discussions with the RICS Arbitration Service . . . I propose that an interim account should be settled before proceeding to the stage of the hearing . . . I look forward to receiving payment in settlement of the interim account’. An enclosed account showed that the parties had incurred fees (including fees for legal advice) amounting to £6,462.50 to be borne in equal shares pending a final ruling on costs. When asked by the plaintiff’s solicitor whether he intended to withdraw if the interim account was not paid, the arbitrator expressed the ‘hope’ that the parties would agree. On June 6 1994 the defendant council sent a cheque for £3,231.25 to the arbitrator which he paid into his bank account. On September 9 1994 the arbitrator, seeing no prospect of payment by the plaintiff, returned the £3,231.25 to the defendants. On November 11 1994 the plaintiff issued proceedings under section 23 (1) of the Arbitration Act 1950 claiming that the arbitrator had rendered himself vulnerable to the imputation of bias and was accordingly guilty of misconduct. The action was dismissed and the plaintiff appealed.
Held The appeal was dismissed.
1. Properly construed, the arbitrator’s letters amounted to a request not a demand which, being addressed to both parties, could not amount to misconduct unless followed by an arrangement with one party only. Although the arbitrator should have returned the cheque, his conduct was not such as to put fear of prejudice in the mind of a reasonable person.
2. Pill LJ dubitante: Since it made no made no business sense to expect an arbitrator to work without present remuneration while the parties chose to delay, there was a strong case for implying a right to demand interim payment as a condition for continuing to act , such demand to be made within reasonable time and before the parties became too deeply committed to that arbitrator. Such an implication was not precluded by the judgments in K/S Norjarl A/S v Hyundai Heavy Industries Co [1992] 1 QB 863 which concerned a commitment fee as distinct from payment for work already done: see the useful discussion in Mustill and Boyd Commercial Arbitration 2nd ed pp241-242.
Mark Pelling (instructed by Southcombe & Haley, London agents for David Barney & Co, of Stevenage) appeared for the appellant; Joanne Moss (instructed by the solicitor to Stevenage Borough Council) appeared for the respondents.
