Norbrook Laboratories Ltd v Tank
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE COLMAN,Mr Justice Colman |
| Judgment Date | 12 May 2006 |
| Neutral Citation | [2006] EWHC 1055 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2005 FOLIO 716/717 |
| Date | 12 May 2006 |
[2006] EWHC 1055 (Comm)
Mr Justice Colman
Case No: 2005 FOLIO 716/717
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Steven Berry Qc and Ms M Anaydike-Danes (instructed By Cartmell Shepherd) for the Claimant
Mr Jonathan Turley solicitor advocate of Mott MacDonald for 1 st Defendant
Mr Stephen Coombs, MD of Moulson Chemplant Ltd, for Second Defendant
Hearing dates: 26 January 2006 and 22 February 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
The Hon
Introduction
There are before the court two applications under the Arbitration Act 1996. They arise out of an arbitration commenced on 2 December 2003. The dispute arose under an agreement made on 13 February 2002 under which the claimant in the arbitration (Norbrook Laboratories Ltd), to which I refer as "Norbrook", purchased certain pharmaceutical equipment from the respondent in the arbitration (Moulson Chemplant Ltd), to which I refer as "Moulson". The equipment in question was a methanol recovery plant to be designed, manufactured, supplied, installed and commissioned by Moulson. Its function was to remove methanol from organic waste. It is Norbrook's case that the plant as delivered does not comply with the specification in as much as it cannot discharge waste slurry at 50 per cent solids in water/methanol. Norbrook claims that it has suffered losses, including additional waste disposal costs and remedial costs, totalling £434,498.98. Moulson counterclaims £145,252.02, including the costs of additional equipment and services and delays.
The equipment agreement incorporated the following arbitration clause:
"13.1 In the event that a dispute shall arise between the parties to this contract, it is hereby agreed that the dispute shall be referred to arbitration by a single expert (the "Arbitrator") being a Chemical Engineer of at least 10 years qualification with substantial experience of equipment such as the Equipment to be appointed, upon the application of either party, to the President of the Institution of Chemical Engineers from time to time. The costs of the arbitration shall be at the discretion of the Arbitration. The award rendered by the Arbitrator shall be final and binding upon the parties hereto."
The arbitration was agreed to be conducted under the Arbitration Rules of the Institution of Chemical Engineers. The Arbitrator, Mr Tank, was nominated by the President of the Institution. Mr Tank is a Chartered Engineer and Fellow of the Institution of Mechanical Engineers and the Institution of Chemical Engineers. He has been involved in management, design and construction in the process industries for over 35 years and has much experience in the technical areas involved in the dispute. He is also a member of the Chartered Institute of Arbitrators and since 1994 when he was first appointed an Arbitrator he has acted as an expert witness and presided over expert determinations under the Rules of the Institute of Chemical Engineers.
The Arbitrator made two decisions or awards; one on 16 June 2005 ("the First Decision") and one on 8 August 2005 ("the Second Decision").
In order to understand the basis of these two Decisions it is necessary to consider the provisions of the Arbitration Rules and in particular those Rules which provide for what is in substance a fast-track arbitration regime. These are Rules 15 and 16 – the Short Procedure Rules:
"15.1 Where the parties so agree (either of their own motion or at the invitation of the Arbitrator), the arbitration or any part thereof shall be conducted in accordance with the following Short Procedure Rules.
15.2 Within thirty days after the Preliminary Meeting held under rule 6.1 or the parties agreeing directions under Rule 6.3, the claiming party shall set out its case in the form of a file containing:
(a) a statement as to the orders or awards it seeks;
(b) a statement of its reasons for being entitled to such orders or awards: and
(c) copies of any documents on which it relies (including statements) identifying the origin and date of each document;
and shall deliver copies of the said file to the other party and to the Arbitrator in such manner and within such time as the Arbitrator may direct.
15.3 The other party shall, either at the same time or within thirty days of receipt of the claiming party's statement as the Arbitrator may direct, deliver to the claiming party and the Arbitrator its statement in the same form as in Rule 15.2.
15.4 After reading the parties' cases the Arbitrator may at any time view the site or the Works and may in his sole discretion order, permit or require either or both parties:
(a) to submit further documents or information in writing;
(b) to prepare or deliver further files by way of reply or response. Such files may include witness statements or Expert Witnesses reports.
15.5 Within thirty days of completing the foregoing steps the Arbitrator shall fix a day to meet the parties for the purpose of:
(a) receiving any oral submissions which either party may wish to make; and/or
(b) the Arbitrator's putting questions to the parties, their representatives or witnesses.
For this purpose the Arbitrator shall give notice of any particular person he wishes to question but no person shall be bound to appear before him.
5.6 The time periods in Rules 15.2, 15.3 and 15.5 may be varied as the Arbitrator may see fit.
15.7 Alternatively with the agreement of the parties the Arbitrator may dispense with the meeting and upon receipt of the further files (if any) or any viewing of the site or Works under Rule 15.4 proceed directly to the Award in accordance with Rule 15.8.
15.8 Within thirty days following the conclusion of the meeting under Rule 15.2, or in the absence of a meeting thirty days following receipt of the further files under Rule 15.4, or such further period as the Arbitrator may reasonably require, the Arbitrator shall make and publish his award.
16.1 Unless the parties otherwise agree the Arbitrator shall have no power to award costs to either party and the Arbitrator's own fees and charges shall be paid in equal shares by the parties. Where one party has agreed to the Arbitrator's fees the other party by agreeing to these Short Procedure Rules shall be deemed to have agreed likewise to the Arbitrator's fees.
Provided always that this Rule shall not apply to any dispute which arises after the Short Procedure Rules have been adopted or imposed by the Contract.
16.2 Either party may at any time before the Arbitrator has made his award under these Short Procedure Rules require by written notice served on the Arbitrator and the other party that the arbitration shall cease to be conducted in accordance with these Short Procedure Rules. Save only for Rule 16.3 the Short Procedure Rules shall thereupon no longer apply or bind the parties but any evidence already laid before the Arbitrator shall be admissible in further proceedings as if it have been submitted as part of those proceedings and without further proof.
16.3 The party giving written notice under Rule 16.2 shall thereupon at the Arbitrator's discretion become liable to pay:
(a) the whole of the Arbitrator's fees and charges incurred up to the date of such notice; and
(b) a sum to be assessed by the Arbitrator as reasonable compensation for the costs (including any legal costs) incurred by the other party up to the date of such notice.
Payment in full of such charges shall be a condition precedent to that party's proceeding further in the arbitration unless the Arbitrator otherwise directs. Provided that non-payment of the said charges shall not prevent the other party from proceeding in the arbitration."
By the First Decision the Arbitrator, stating that he saw no reason why Rules 16.2 and 16.3 should not be applied in full and that he had reviewed a schedule of costs previously provided by Moulson which he found to be "not unreasonable", ordered that Norbrook should pay the amount of that schedule, namely £47,704.85, to Moulson within 14 days. That was intended by the Arbitrator to be an exercise of his powers under Rule 16.3 to the effect that he concluded that Norbrook had given notice on 1 June 2005 terminating the short form procedure and that Norbrook should therefore pay to Moulson what the Arbitrator assessed as reasonable compensation for Moulson's costs up to that date.
This Decision evoked strong objections from Norbrook, whose solicitors ("TA") wrote to the Arbitrator on 1 July 2005 challenging that Decision as wrong in law, constituting a serious irregularity and failing to comply with Rule 16.3, as well as being contrary to natural justice and inviting the Arbitrator to correct it accordingly. The letter, prefaced by the implicit threat that it was written without prejudice to Norbrook rights under Section 24 of the Arbitration Act 1996, further stated:
"1. Your decision of 16 June 2005 was premature in that no decision at all had been given in respect of Rule 16.2.
2. It is our respectful submission that you have not carried out an assessment of Moulson's costs, as required by Rule 16.3.
3. Our client was never given an opportunity to comment on Moulson's costs prior to the making of your decision."
The Arbitrator responded on 1 July 2005 that he was willing to suspend the matter of payment of the £47,704.85 until he was able to give an informed opinion on Norbrook's objections.
Following extensive further correspondence between the Arbitrator and both parties, on 8 August 2005 he wrote to the parties a long letter in...
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