Bias and Impartiality under the Party Wall etc Act 1996 – Lessons from Arbitration.

Insights - 15/12/2020

Bias and Impartiality under the Party Wall etc Act 1996 – Lessons from Arbitration.

In this article, Matthew Hearsum, a Party Wall Act expert from our Dispute Resolution team, looks at a recent Supreme Court judgement and how it impacts Bias and Impartiality under the Party Wall etc Act 1996 .

Surveyors appointed under the Party Wall etc Act 1996 (“Party Wall Act”) are not arbitrators.

That said, whilst the law of arbitration may not be binding upon the tribunal of surveyors, some of the decisions in the context of an arbitral tribunal can be a useful guide as to how the Courts might approach a similar issue were it to arise in the context of the 1996 Act.

On 27 November 2020 the Supreme Court of the United Kingdom delivered the landmark judgment in Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48 which is now the leading authority on the duties of impartiality and disclosure required of an arbitration tribunal where there are multiple appointments of the same arbitrator. The principles considered in that case are likely to be a good guide to how the Court may approach the issue in the context of the Party Wall Act.

Duty of Impartiality

In the context of the Party Wall Act there is surprisingly little authority on the impartiality required of the Tribunal beyond the guidance given by HHJ Bailey in Welter v McKeeve (read our article on this case here) when he said:

The party wall surveyor must act impartially … Acting impartially requires the party wall surveyor (whether an owner-appointed surveyor or a third surveyor selected by the owner-appointed surveyors) not to favour either owner over the other

This will require the tribunal of surveyors to avoid both circumstances of “actual bias”, where the tribunal has a financial or other interest in the matter that they are deciding, and “apparent bias”, where the tribunal does not have a direct interest in the outcome but there are other circumstances which may give rise to the appearance of bias. The test for apparent bias is “whether the circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased." This has become known as the "fair-minded and informed observer" test.

The Halliburton Case - Halliburton Company v Chubb Bermuda

In the context of arbitration, the Supreme Court of the United Kingdom recently delivered the landmark judgment in Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48 which is now the leading authority on the duties of impartiality and disclosure required of an arbitration tribunal and, as such, is likely to be a good  guide to how the Court may approach the issue in the context of the Party Wall Act.

The decision arises out of the explosion of the Deepwater Horizon drilling rig in 2010. Halliburton, who provided the cement intended to seal the oil well, settled claims against it arising out of the incident, and then sought to recover the settlements under an insurance policy it held with Chubb. Chubb refused, and Halliburton commenced arbitration proceedings (“the Halliburton dispute”).

The process for the appointment of the arbitration tribunal was similar to process for appointment of surveyors under the Party Wall Act; each party appointed an arbitrator, and the two nominated arbitrators selected a chairman of the tribunal. The two appointed arbitrators could not agree on the chairman, and so the Commercial Court appointed Mr Rokinson QC, who accepted the appointment.

Later on, Mr Rokinson QC also accepted appointments in two separate but related disputes arising out of the same incident, between the rig owner Transocean and their insurers (“the Transocean Disputes”). In one of those cases the insurer was Chubb, and Mr Rokinson QC was appointed by Chubb as their appointed arbitrator.  Mr Rokinson QC did not disclose the appointment in the Transocean Disputes to Halliburton.

When Halliburton discovered that Chubb has appointed Mr Rokinson QC as their arbitrator in the Transcoean Disputes they applied to remove him as chairman of the tribunal in the Halliburton Dispute on the basis that there were circumstances that gave rise to justifiable doubts about the impartiality of Mr Rokinson QC. This challenge was unsuccessful in the High Court and the Court of Appeal, and Halliburton appealed to the Supreme Court.

The two legal issues before the Supreme Court were (a) whether an arbitrator may accept appointments in different disputes but which arise out of the same subject matter without creating an appearance of bias and (b) whether an arbitrator may accept such appointments without making disclosure to the party who is not the common party.

In dismissing Halliburton’s appeal, the Supreme Court gave the following guidance:

  1. Appointment of the same arbitrator in disputes in different disputes where there is one common party, but the which arise out of the same subject matter, may create the appearance of bias by that arbitrator, but whether it in fact does so depends on all the circumstances of the case, including whether such multiple appointments are customary.
  2. Arbitrators have a positive duty to disclose to the parties appointing them anything that might reasonably cause a fair-minded and informed observer to conclude that there is a real possibility that they are biased. This will include being appointed in disputes between different parties, but which arise out of the same subject matter.
  3. This duty of disclosure is limited by their other duties of privacy and confidentiality, so that before disclosing the existence of the appointment they must obtain the consent of the parties to the appointment, and if the arbitrator does not or cannot obtain the consent required to disclose either the earlier or later appointment, they must decline the later appointment.

Lessons tor the Tribunal of Surveyors

In the context of the Party Wall Act a set of facts similar to the Halliburton case would be unusual. A surveyor who is appointed as a third surveyor in a dispute with one adjoining owner to a development is unlikely to then accept an appointment as building owners surveyor in a dispute with another adjoining owner for the same development.

However, it is common for surveyors to accept multiple appointments where a building owner may appoint the same surveyor in respect of disputes with each of the adjoining owners to one development, or multiple adjoining owners may instruct the same surveyor in respect of the works by one building owner.

Before accepting multiple appointments, surveyors should consider carefully the "fair-minded and informed observer" test and whether accepting more than one appointment might give rise to a perception of bias.

Surveyors should also, as a condition of accepting multiple appointment, obtain consent to disclose the fact that they are appointed in more than one dispute. If they cannot obtain that consent, they should consider declining one of the appointments.

Contact us

Please contact Matthew Hearsum, a partner in our Dispute Resolution team if you would like to discuss this further.

Disclaimer:

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.