Comparing Liability of Arbitrators, Adjudicators, Experts and Advocates

1 July, 2004
by: Cripps

Many construction professionals in the twenty-first century hold dual or multi-qualifications. It is not uncommon for someone who was simply an expert witness ten years ago to now sit as an arbitrator and an adjudicator. Many barristers and solicitors are also practising arbitrators and adjudicators. It is sometimes difficult, particularly when the professional may be working in the different capacities over one period of time, to remember which “hat” he or she is wearing and the rules, risks and responsibilities of each role.

 

Arbitrators and Adjudicators

Section 29 of the Arbitration Act 1996 provides arbitrators with statutory immunity from prosecution for acts or omissions whilst carrying out their function. A dissatisfied party cannot therefore allege failure on the part of the arbitrator and bring proceedings against him (or her).

29(1) “An arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the act or omission is shown to have been in bad faith”.

(2) “Subsection (1) applies to an employee or agent of an arbitrator as it applies to the arbitrator himself”.

The application of subsection (2) means that any legal adviser or expert appointed to assist the arbitrator is similarly immune.

Section 108(4) of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”) mirrors the Arbitration Act wording.

108(4) “The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability”.

Under neither Act can the parties remove the protection enjoyed by the arbitrator/adjudicator by agreement. The protection is mandatory.

Contractual immunity

The significant difference between the two forms of protection is contained in the opening words of s108(4) “The contract shall… provide…”. The Construction Act does not confer direct statutory protection on the adjudicator. It is the precise wording of the contract which provides the level of immunity. If the contract does not comply with s108(4) then the provisions of the statutory Scheme for Construction Contracts will apply. Paragraph 26 of the Scheme repeats s108(4) of the Construction Act exactly.

Other sets of adjudication rules which might be referred to in the contract are those such as the JCT Rules, ICE Rules and TeCSA Rules.

Negligence

The JCT and ICE immunity provisions are similar to the Scheme. However, the TeCSA and CIC rules go further. They say that the adjudicator is not liable for anything in the discharge of his functions as adjudicator (whether in negligence or otherwise).

If the inclusion of the words “whether in negligence or otherwise” carries any weight then this casts real doubt on the protection that the Scheme and rules such as the JCT or ICE give to adjudicators.

The reason that TeCSA and the CIC have included the additional wording is that a contractual exclusion of liability (as opposed to statutory immunity) is only effective in excluding liability for negligence if the intention to exclude negligence is made clear.

This is the legal position following Gillespie Bros. & Co. Ltd v Roy Bowles Transport Ltd (1972) where the words “all claims or demands whatsoever” were held to constitute an agreement in express terms that the trader indemnified the carrier against all claims without exception, including a claim arising from the negligence of the carrier.

For an adjudicator to successfully defend a negligence claim he would have to show that it was the intention of the parties when entering into their contract that his liability for negligence should be excluded. An adjudicator could include in his own terms and conditions a provision that the immunity includes claims for negligence. This would however be dependent upon the thorny issue of whether a separate contract exists between the adjudicator and the parties. It is often the case that the contract crystallises when the adjudicator accepts the nomination, and that his own terms and conditions are too late to form part of the arrangement.

Nevertheless, except for a possible negligence action against an adjudicator, an arbitrator and adjudicator currently enjoy immunity from suit.

This also means that a party cannot defend a claim by an arbitrator/adjudicator for payment of his fees, on the basis that he allegedly did a bad job. The fees themselves can only be challenged on grounds of the reasonableness of the amount charged and time spent.

Bad faith

The exception to both s29 of the Arbitration Act and s108 of the Construction Act is where the arbitrator/adjudicator acted in “bad faith”. In the context of the tort of misfeasance in public office, or, as it is sometimes called, deliberate abuse of power, the term “bad faith” has had a restricted meaning. Traditionally a moral element has been an essential ingredient. Lack of good faith connotes either (1) malice in the sense of personal spite or a desire to injure for improper reasons, or (2) knowing that one does not actually have the power to make the decision in question. It remains to be seen whether “bad faith” under the 1996 Arbitration Act and Construction Acts will be interpreted more widely by the courts.

An allegation of bad faith is only to be made where there exists prima facie evidence justifying the allegation. If there is no reasonable evidence or grounds to support the allegation, the statement of claim making such an allegation will be struck out as an abuse of process.

Third parties

It is possible that an adjudicator who makes a decision that a building is structurally safe where the building subsequently collapses injuring a third party might be liable in negligence to that person. The statutory Scheme does not make provision for this situation. Some rules such as the ICE rules require the parties to indemnify the adjudicator against claims from third parties. Others such as the CIC rules state that no duty of care is owed to third parties, but there has yet to be a court case to decide whether such a duty of care exists.

Professional indemnity insurance

Given the uncertainties surrounding the potential liability of adjudicators, it is important that sufficient PI insurance cover is maintained. Were there to be a successful negligence claim against an adjudicator this would inevitably increase the premiums for adjudicators and be another blow to the adjudication process. In contrast, for arbitrators it is not essential that insurance is in place.

Resignation

The position if an arbitrator resigns without completing his duties is as follows; s.29 of the Arbitration Act states that s.29(1) and (2) do not affect any liability of an arbitrator by reason of his resigning, that is to say if the arbitrator resigns he is no longer protected. However, under s.25 of the Act unless the consequences have been pre-agreed, an arbitrator may apply to the court to grant him relief from liability incurred by reason of his resignation. Strangely, if an arbitrator is removed by the court under s.24 of the Arbitration Act, he retains his immunity.

There is no similar wording in the Construction Act but an adjudicator, subject to the applicable rules, may find himself unable to recover any fees or expenses if he has failed to make a decision. The various adjudication rules do not deal expressly with the issue of liability in the event of resignation and it appears therefore that immunity is retained, except in instances of bad faith.

Summary

The key difference between the protection given to arbitrators and adjudicators is the greater immunity provided to arbitrators by reason of the statutory nature of their role. Adjudicators are at greater risk from the tort of negligence.


Adjudicator Nominating Bodies (“ANB”s) and Arbitral Institutions

Under s.74 of the Arbitration Act a person or institution designated to appoint or nominate an arbitrator enjoys similar immunity. Again this is subject to the exception of bad faith.

The immunity only protects the institution from the consequences of anything done or not done by the arbitrator simply because it has appointed or nominated him, but not in other circumstances. So if the institution acts negligently in the discharge of its other administrative functions s.74 will not afford protection.

The majority of adjudication rules are silent on the potential liability of the nominating body. Only the TeCSA rules expressly state that neither TeCSA, nor its chairman or his deputy, shall be liable for anything done or not done in the discharge or purported discharge of the functions of the adjudicator. Once again, this protection is removed if the act or omission is in bad faith.

Public Policy

The argument in favour of immunity for arbitrators and adjudicators is that, if they were exposed to claims from the parties, any award or decision might result in further litigation, this time against the arbitrator, and the whole judicial process would be undermined. Further it is argued that the cost of PI insurance could be prohibitive. However, as stated above, it is debatable whether PI insurance for arbitrators is even required. It is also said that many arbitrators/adjudicators would simply be unwilling to serve.

The same principle of public policy applies to judges who cannot be called to account even if they have a poorer than average record of their judgments being overturned on appeal. The position was the same until recently for barristers, who were immune from prosecution. However, their immunity from suit in respect of their advocacy was removed in 2000 in the House of Lords decision in Hall v Simons, which is covered later in this article.

Expert Witnesses

It is important for professionals to remember that acting in the capacity of expert is very different from sitting as arbitrator or adjudicator. It is still surprising that many experts are not familiar with the requirements of the Civil Procedure Rules and their Practice Directions, particularly if they have never appeared before a judge or arbitrator to explain and justify their written report.

Perhaps this is because experts believe they enjoy considerable immunity. Evidence given by the expert in court or arbitration, and work which is preliminary to the giving of such evidence are protected. This protection extends to the production of a report or approval of a report which is disclosed. It also covers the contents of a without prejudice agreed statement (see Stanton v Callaghan [1998] All E R (D) 327.

However, what is not covered is work done for the principal purpose of advising the client on the merits of the claim, particularly before proceedings have commenced.

In essence there is a difference in the protection given to the expert in the carrying out of his overriding duty to the court (CPR Part 35) and in his role as adviser to a party.

The principle of witness immunity dates back to Victorian times. As with judges, arbitrators and adjudicators the justification is that it is in the public interest. However, with the payment of professional expert witnesses highlighted by the current media interest in experts on “cot death” the right to protection from actions in negligence is regularly questioned.

In Stanton v Callaghan Mr and Mrs Stanton wanted to bring a negligence claim against the consulting engineer who had advised them in a subsidence claim against their building insurers. Unfortunately for the Stantons, Mr Callaghan drastically changed his advice following a meeting with the other side’s expert, which resulted in the Stantons reluctantly accepting an earlier payment into court with adverse costs consequences to themselves. Mr Callaghan relied upon his immunity as an expert witness, but at first instance his application to have the claim against him struck out failed.

In the Court of Appeal Chadwick L.J. traced the development of witness immunity from Dawkins v Lord Rokeby (1873) and Watson v McEwan (1905) where immunity was based on ensuring that witnesses were not deterred from coming forward, but thought that there must be a difference “where the witness is a professional man who had agreed, for reward, to give evidence in support of his opinion on matters within his own expertise…”. He then considered the application of advocate immunity and compared the cases of Rondel v Worsley (1969) and Saif Ali v Sydney Mitchell & Co. (1980). The first case concerned a barrister’s immunity in court and the immunity was upheld on three grounds:-

(a) The administration of justice required that a barrister should be able to carry out his duty to the court fearlessly and independently;

(b) Actions for negligence would make re-trying of the original actions inevitable and so prolong litigation, contrary to public interest; and

(c) The cab-rank rule by which a barrister is obliged to accept any client who sought his services.

By contrast in the later case of Saif Ali v Mitchell a barrister had settled claim documents and advised on the issue in dispute. The House of Lords held by a bare majority that the barrister would not be immune on the basis that only pre-trial works so intimately connected with the conduct of the hearing of the case in court, would be immune.

Applying this reasoning the Court of Appeal struck out the negligence claim against Mr Callaghan. Chadwick LJ held that any joint statement following a meeting of experts should be immune, the public policy reason being to avoid a tension between the duty to assist the court and fear of the consequences of departing from previous advice. Since it was in the public interest to encourage full and frank discussion between experts and that required a freedom to make proper concessions without fear that any departure from previous advice to the retaining party would be considered negligent, an immunity was justified.

He did not however go so far as to say that all reports prepared for use in proceedings where the expert has not given evidence would attract immunity.

It has also to be borne in mind that in 1998 when Stanton v Callaghan was decided, the principle of advocate immunity in civil actions was still firmly in place.

A major change in the law occurred in Hall v Simons [2000] 3 WLR 543 when the House of Lords disapproved Rondel v Worsley and upheld a decision that solicitors were not protected by an advocate’s immunity from suit, holding that advocate’s immunity was no longer justified in the light of changes in the law of negligence, the functioning of the legal profession, the administration of justice and public perception.

The House of Lords held that the public policy arguments in favour of exemption were no longer appropriate for the following reasons:

First, there was evidence that the standard of advocacy had not declined since the introduction of the wasted costs jurisdiction under the CPR. The courts were able to judge between inevitable errors of judgment and true negligence thus the floodgates would not be opened to negligence claims.

Secondly, the court was accustomed to dealing with the problems of re-litigation and had an intrinsic power to strike out claims for abuse of process.

Thirdly, the “cab-rank” argument was unverifiable and insubstantial.

Thus the immunity of an advocate was removed.

Summary

It is difficult to see why a distinction should continue to be made between barristers/solicitor advocates and experts, all of whom owe a duty to the court.

Nevertheless in a later case, Raiss v Paimano [2000] ALL E R (D) 1266 not only did the expert perform badly in the witness box to his client’s disadvantage but it turned out that his claim to be on the Panel of Arbitrators for the RICS was false. Because, on the facts, the negligence claim was about his performance in court the judge applied Stanton v Callaghan and held that witness immunity extended to his false statement, stating that there was nothing in their Lordships opinions in Hall v Simons which undermine the authority or the rationale of the principle of witness immunity.

The current position therefore is not whether experts have immunity but how far that immunity extends i.e. how integral to the court hearing was the work or advice in question.

The argument yet to be decided is whether it is in the public interest that experts should continue to be free to give evidence in court without fear of repercussions (other than by the media) for what they say.

The role of professional bodies

In the field of construction law during the last three or so years, there has been considerable criticism of the abilities of several qualified adjudicators and this has been met in general by the nominating bodies responsible for their training and panel membership issuing feedback forms to the parties, requiring proof of continuing professional development in the adjudication field, and taking disciplinary action including the removal of the adjudicator from their panel where it is felt necessary.

Interestingly in the court case of Pearce v Ove Arup Partnership Limited [2002] the expert architect was strongly criticised by the judge for failing in his duty to the court. Mr Justice Jacob stated that the expert bore “a heavy responsibility for this case ever coming to trial – with its attendant cost, expense and waste of time…”. He went on to say that although there were no rules providing specific sanctions for breach of Part 35, nor any system of accreditation of experts he could see no reason why a judge could not refer a serious breach to that professional’s governing body.

He went on to refer the expert’s conduct to the RIBA (who exonerated him).

The training of judges has also improved as part of Woolf LJ’s investigations into the civil justice procedure. In principle therefore there is no reason why judges who make mistakes cannot be sent for further training or in extreme situations be “demoted” in the ranks of the judiciary.

Certainly the Chartered Institute of Arbitrators runs regular workshops and conferences for their arbitrators to improve their skills and keep up to date with developments in the law.

Conclusion

There is certainly a change in public perception that professionals engaged for reward or who hold a position of public office should be accountable for loss or damage occasioned by their actions or omissions. The question arises as to whether there would be a dearth of judges, arbitrators, adjudicators and experts if immunity were removed. This does not seem to affect the professions of solicitors, medics and construction professionals such as surveyors, engineers and architects from pursuing their careers.

Equally well there is arguably a balance to be struck so as to enable judges, arbitrators and adjudicators to carry out their judicial functions. If the current position on expert’s immunity for giving evidence in court but not for advice to their client is correct, then it is right that similar immunity should extend to arbitrators and adjudicators.

If the balance is right then an aggrieved party or client’s complaint is balanced by the public good. This is in the interests of public policy insofar as it prevents expensive re-hearings.

The problem with this is that our system protects those who make the law and those carrying out their duty to the court, whilst at the same time offering no or little sanction for serious breaches of professional conduct. The public would be better served by a more transparent and consistent system of calling to account by the relevant appointing and professional bodies.

Reviewed in 2015