This is an appeal brought by the Claimant contractor (“Sisk”) by way of Part 8 proceedings pursuant to section 69 of the Arbitration Act 1996 (“the Act”) seeking variation, alternatively remission, of a Partial Award dated 20^th November 2015 (“the Award”). The Award arose out of arbitral proceedings between Sisk and the Defendant mechanical and services contractor (“Carmel”) before Mr Nigel Dight BSc FRICS MCIArb (“the Arbitrator”) relating to a mechanical and electrical services sub-contract entered into between Sisk and Carmel in 2008 (“the Sub-Contract”).

By the Award the Arbitrator awarded to Carmel £975,965.48, together with VAT, compensation for late payment (in the sum of £100) and interest on the late payment of £975,965.48 (in the sum of £359,329.10). The late payment compensation and interest awards were made pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 (“the Debts Act”).

Sisk contends that in doing so the Arbitrator made errors of law on the following three questions :

The burden of proof in relation to Carmel’s claim under Clause 7.7.4 of the JCT Conditions incorporated into the Sub-Contract (“Clause 7.7.4”) (“Issue 1”);

Whether or not Sisk’s primary claim to set-off under Clause 7.7.4 was a global claim and thus irrecoverable (“Issue 2”);

The rate of interest to be applied to sums awarded to Carmel (“Issue 3”).

There is no suggestion that the Arbitrator did not have jurisdiction to rule on these matters. Sisk’s sole complaint is that he was wrong in law on each issue. Nor is there any suggestion that this claim falls outside the scope of section 69 of the Act, or that leave to appeal is required under section 69(2)(b) of the Act (since it is common ground that the parties agreed in the Sub-Contract (pursuant to section 69(2)(a) of the Act) that either party could (on notice) appeal to the courts on any question of law arising out of an award made in an arbitration under the Sub-Contract).

Thus, it is open to this Court to confirm the Award, vary the Award or remit to the Arbitrator the Award in whole or in part for reconsideration pursuant to section 69(7) of the Act, or to set the Award aside in whole or in part.

Sisk was engaged by Bolsover Street Limited under a JCT 2005 Rev 1 2007 Without Quantities contract for the construction of a nine-storey reinforced concrete frame mixed-use building at 41-51 Bolsover Street, London W1S 5AQ (“the Project”). The Project was for the creation of forty apartments, together with a new Outpatients Department for the Royal National Orthopaedic Hospital.

By the Sub-Contract, which was dated 22nd September 2008, Carmel agreed with Sisk to carry out the supply and installation of mechanical and electrical services on the Project. The Sub-Contract was contained in and consisted of the following documents :

The Sub-Contractor Order;

The Sub-Contract Particulars published by Sisk (SFQS 12 Rev 06) (“the Sisk Particulars”);

The Conditions of Sub-Contract published by Sisk (SFQS 13 Rev 10) (“the Sisk Conditions”);

Minutes of Pre-order Meeting of 15^th August 2008 (SFQS 15 Rev 13), together with Sub-Contractor’s Pre-Order Trade Checklist;

Sub-Contractor Enquiry Sheet 28^th February 2008;

Sisk enquiry to tender letter of 28^th February 2008 and subsequent tender addendums;

The ascertainment of the Sub-Contract sum, being a breakdown of the Sub-Contract sum and a materials documents;

Carmel’s quantified Schedule of Rates of 3^rd September 2008 and Carmel’s tender of 11^th April 2008;

Health and Safety code of practice SFSA (12 Rev 06);

Target Programme IMH/TP/01.

Clause 2.0 of the Sisk Particulars expressly incorporated the conditions of the JCT Conditions of Sub-Contract SBCSub/C2005 Rev 1 2007 (“the JCT Conditions”). In the event of conflict between the JCT Conditions and the Sisk Conditions, the Sisk Conditions were to prevail :

Clause 16.4 of the Sisk Conditions provided that any disputes arising out of or in connection with the Sisk Conditions should be referred to arbitration in accordance with the procedures set out in the JCT Conditions.

On 1^st June 2009 Carmel submitted its Application for Interim Payment No 8 to Sisk in respect of work carried out up to 29^th May 2009. On 4^th June 2009 following a joint site inspection earlier that day Sisk notified Carmel that it had valued Carmel’s work (for the purpose of determining the amount of further payment to be made by Sisk to Carmel under Interim Payment Application No 8) at £2,688,728.86 (gross) (“Valuation No 8”). Final payment was then due on 3^rd July 2009.

However, on 19th June 2009 Carmel entered into administration. It ceased work under the Sub-Contract. Sisk terminated the Sub-Contract on 23^rd June 2009 by notice pursuant to Clause 7.5.1 of the JCT Conditions which provided :

Clause 7.7 of the JCT Conditions set out various provisions in the event of Carmel’s employment were terminated materially as follows :

On 26th April 2013, the Works having completed, Carmel gave notice of reference to arbitration. The Arbitrator was appointed on 5th September 2013. It is common ground that the CIMAR Rules applied. Rule 5.4 provides:

Pleadings and other documents were exchanged in the arbitration between October 2013 and October 2014. Carmel’s principal claim was to be paid the sums allegedly due to it under Clause 7.7.4 in the sum of £1,975.286.44. Sisk’s position was that, on a proper operation of Clause 7.7.4, no sum was due to Carmel. Moreover, Carmel had a counterclaim pursuant to Clause 7.7.4 in respect of the amount of the direct loss and/or damage caused to it as a result of the termination and other amounts payable to it under the Sub-Contract. The sum claimed by Sisk in was £646,281.99. Each party claimed associated late payment interest and, in the case of Carmel, statutory fixed compensation, from the other. Carmel also had a claim for damages for conversion against Sisk in relation to computer records left on site.

There were multiple interlocutory hearings, culminating in an evidential hearing spanning 7 days between 27^th April and 6^th May 2015, at which the parties were fully represented. Witnesses of fact and expert opinion gave evidence.

As indicated above, the (thirty-seven page) Award was published on 20^th November 2015. This claim was issued on 17^th December 2015.

Before considering the issues, the Arbitrator addressed the question of burden of proof. In the context of Carmel’s claim under Clause 7.7.4 he referred to Valuation No. 8. This valuation had, as indicated above, been issued by Sisk on 29th May 2009, some three weeks prior to the termination. It had been prepared by Mr Melges of Sisk, and reviewed during the arbitration by the respective quantity surveyor experts: Mr Collins for Sisk and Mr Simper for Carmel. All three gave evidence before the Arbitrator.

The Arbitrator found materially as follows:

In relation to the valuation of the Claimant's work at termination, in respect of which the Claimant contends for one figure and the Respondent contends for a lesser figure, the legal burden falls on the Claimant to prove the value of any work which it carried out but for which it has yet to be paid, and for which it is therefore entitled to payment in accordance with the “first limb” of Clause 7. 7.4

However, since, three weeks prior to termination, the Respondent produced a valuation of the Claimant's work which was significantly higher than the valuation for which it now contends, the evidential burden falls on the Respondent to show, as it has endeavoured to do, why that earlier valuation was erroneously high

In relation to the sums which the Respondent says it is entitled, in accordance with the “second limb” of Clause 7.7.4 to deduct from any balance due under the “first limb” and/or recover from the Claimant, the burden falls on the Respondent to prove that the Claimant is responsible, in terms of both liability and quantum for each such sum…”

He went on to identify the relevant issue in section M as :

The Arbitrator considered this issue at paragraphs N8 to N54 of the Award, concluding that the payment to which Carmel was entitled under Clause 7.7.4 was £1,042,853.01. In doing so his reasoning included the following :

The corrected value of Valuation No 8 is £2,533.449.90 which I consider should be the minimum terminal valuation

The Claimant's terminal valuation is £3,465.010.19

The Respondent’s terminal valuation is £2,016.928.03

Mr Simper's terminal valuation is £2,673,434.40

Mr Simper’s opinion is that it is “logical to conclude” that the value of the termination account should exceed Valuation No 8 by at least £500,000 but says (despite having seen the Respondent's contemporaneous upstream valuation) that there is no evidence for him to increase his valuation

Mr Jewell's terminal valuation is £2,091.967.29

The Arbitrator gave detailed reasons in paragraph N20 for his conclusion (in paragraph N19 as set out above) that Valuation No 8 was not a significant overstatement of value in respect of the work carried out as at 29^th May 2009 and by reference to the evidence before him. He then considered certain discrete issues raised by Sisk to decide whether any specific adjustment was required to that valuation as a result. He proceeded to make one adjustment (in respect of an “upfront” payment that had been made by Sisk for light fittings that were not then in fact delivered). He rejected the suggestion that an adjustment needed to be made in respect of some drawing office work. He also declared himself “not satisfied” that Carmel had significantly overstated the progress of its subcontractors or that Carmel’s pre-administration applications had been overstated substantially to a degree that was not appreciated at the time. Having reached a value for the works as at 29^th May 2009, he went on (as set out above) to consider the value of works carried out in the following three weeks.

In determining what was due to Sisk under Clause 7.7.4 by way of set-off, the Arbitrator was required to consider two alternative claims:

Sisk’s primary claim, under Appendix 4 to its Re-amended Defence and Counterclaim, which claimed the sum of £1,344,477.96, being the whole of the losses which Sisk said had been caused to it by the termination and which were recoverable under the said clause;

Sisk’s secondary claim, under Appendix 3 to its Re-amended Defence and Counterclaim, which claimed the sum of £1,145,506.93, being the itemised costs which Sisk said had been caused to it by the termination and which were recoverable under this clause.

Carmel submitted that, as a matter of law, Sisk’s primary claim was a ‘global’ claim and thus irrecoverable.

The Arbitrator was thus required to determine whether Sisk’s primary claim was a ‘global’ claim and therefore irrecoverable. He held as follows:

Thus the Arbitrator rejected Sisk’s primary claim on its set-off.

The Arbitrator was required to determine the amount of interest due to Carmel upon the sums awarded to it, including the rate of interest applicable. Carmel sought statutory interest in accordance with the Debts Act. Sisk argued that Clause 4.10.5 of the JCT Conditions was a term of the Sub-Contract, and constituted a substantial remedy for the late payment of the debt, with the result that the Debts Act had no application.

The Arbitrator found as follows :

Sisk contends that the Court must determine whether the Arbitrator’s decision was correct and that there is no margin of appreciation : see Mustill and Boyd on Commercial Arbitration, 2^nd ed. p.594 :

Although addressing the law before the Act, this remains an authoritative source.

Nevertheless, appeals from arbitrators are not granted lightly : see Russell on Arbitration, (24^th Edition, paragraph 8-132, page 531, citing MRI Trading AG v Erdenet Mining Corp LLC [2012] EWHC 1988 Comm (upheld in the Court of Appeal at [2013] EWCA Civ 156) (“MRI Trading”):

Sisk suggests that this section is unreliable, in the sense that it is not clear whether it is directed at applications for leave (where different considerations apply) or at substantive appeals. However, the passage is directed expressly at an “overall approach”, suggesting that it is aimed not only at applications for leave but also substantive appeals. This is reinforced by the reference to MRI Trading, which itself involved a substantive appeal. There, albeit that the principles advanced were broadly not in dispute between the parties, Eder J said that he was prepared to proceed on the basis that the following principles reflected the correct legal test as follows :

Certainly, the first of these principles was endorsed expressly by the Court of Appeal (at paragraph 23) (and no disagreement expressed more generally) : as a matter of general approach, the courts strive to uphold arbitration awards; the approach is to read an arbitration award in a reasonable and commercial way, expecting as is usually the case, that there will be no substantial fault that can be found with it; not only will the court not be astute to look for defects, but in cases of uncertainty it will so far as possible construe the award in such a way as to make it valid rather than invalid. In Bunge SA v Nibulon Trading BV [2013] EWHC 3936 (Comm) Walker J described these guiding principles were being of “fundamental importance” (albeit, for the purposes of that case, they did not enable the court to give to an award a meaning plainly not intended by its authors).

Sisk did not take issue with these four principles in broad terms. It submitted, and I agree, that the second principle is of little assistance on the facts of this case where the Arbitrator did not have any particular expertise to which deference should be paid on the questions of law before him. And there are limits to the principle of judicial deference to the arbitrator (as exemplified by the first instance and Court of Appeal’s judgments in MRI Trading themselves, although that was a case of an arbitrators’ decision that was described as “somewhat surprising if not bizarre”).

Carmel places significant emphasis on the third and fourth principles. As to the third principle, the arbitrator is master of the facts. As Steyn LJ put it in The “Baleares” (supra):

And it is important that the Court does not permit an appellant to dress up what are essentially issues of fact as questions of law. The Court must be constantly vigilant in this regard (see The “Baleares” (supra) (at 228) and also Demco Investments and Commercial SA v S E Banken Forsakring [2005] 2 Lloyd’s Rep 650 (per Cooke J at paragraphs 35 to 48).

As to the fourth principle, on appeals by reference to questions of mixed fact and law, reversal of an award can only be justified if it can be shown that the correct legal test must have been misapplied because no arbitrator could have applied that test correctly and reached the conclusion that he or she did. The position is a strong one. By way of example and by reference to Issue 1, only if the Court were to conclude that no arbitrator applying the correct legal burden of proof could possibly have come to the conclusion that the Arbitrator did on the valuation of Carmel’s work could the Court interfere.

Sisk contends that the Arbitrator was in error in that:

The burden of proof lay on Carmel to establish what was due to it under Clause 7.7.4;

Sisk did not have any burden of proof, whether to show that its earlier valuation was erroneously high, or at all;

Valuation No.8 was not the best available, or any, starting point for the exercise which the Arbitrator was obliged to carry out. The best available, and only starting point for the exercise, which the arbitrator was obliged to carry out, was such account as Carmel were able to render in accordance with Clause 7.7.4;

There is no, or no helpful, distinction to be drawn between legal and evidential burdens in this case.

Mr Williamson QC for Sisk concentrated on the Arbitrator’s statement (in paragraph L3 of the Award) that an “evidential burden” fell on Sisk to show why Valuation No 8 was erroneously high. He submitted that in that paragraph the Arbitrator self-directed himself (incorrectly) on the law. He carried that direction through (at paragraph N19 in particular) when he stated that he was “un-persuaded” by any of Sisk’s evidence that, in effect, Valuation No 8 was a significant overstatement of value. The Arbitrator thus erroneously imposed a burden on Sisk, when the burden lay throughout on Carmel to prove the value of its works.

Sisk submits that this issue raises a pure question of law. To the extent that it raises a mixed question of law and fact, the Arbitrator’s conclusion is necessarily inconsistent with an application of the correct legal test. Sisk submits that the appropriate remedy in relation to this issue then is for the Court to remit the award to the tribunal for reconsideration in the light of the court’s determination. There is simply no way of telling what decision the Arbitrator might have arrived at if he had correctly directed himself as to the burden of proof.

In my judgment, and despite Mr Williamson’s able submissions, there was no material error of law in the Arbitrator’s approach on Issue 1 and there is no basis for interference with the Arbitrator’s decision on Issue 1 as alleged.

First, the Arbitrator correctly identified that, in relation to the valuation of Carmel’s work at termination, the legal burden of proof fell throughout on Carmel to prove the value of any work which it had carried out but for which it had yet to be paid. There is nothing in the Award to suggest that he did not adhere faithfully in his approach to that principle in reaching the conclusions that he did. Nor is it (nor could it be) suggested that the Arbitrator did anything other than correctly identify and apply the relevant standard of proof, namely the civil standard of balance of probabilities.

Secondly, as for the reference to “evidential burden” facing Sisk, whilst it can be said to be a legal term of art (see Phipson on Evidence 18^th ed. at paragraph 6-02), the Arbitrator was in context doing no more than saying “in practical terms” that Sisk had an evidential hurdle to overcome, given the contents of Valuation No 8 which had been agreed between the parties following a joint site inspection. The valuation figures being advanced by way of defence for Sisk (with a terminal valuation of £2,016,928.03) were significantly below those figures agreed on behalf of Sisk only three weeks before termination and in a neutral pre-dispute context. It was the elephant in Sisk’s room. It was an obvious point of substance of which Sisk was fully aware, and one which, as the Arbitrator recorded, Sisk sought to overcome, albeit unsuccessfully.

Thirdly, the central finding of the Arbitrator was that at paragraph N11 of the Award, namely that the best available starting point for evidence of the value of Carmel’s work at termination was Valuation No. 8. That was a finding of fact, and one which the Arbitrator was fully entitled to reach, and which cannot be assailed in this jurisdiction. It is not for this Court to evaluate the correctness of the finding. But it can be noted that it was given for careful and lucid reasons and in circumstances where the Arbitrator had expressly considered the “interim” nature of the valuation. In so far as the finding may have trespassed into an area of law, it related to an evidential finding again wholly within the Arbitrator’s purview and unchallengeable. It was not a finding reached with any reference to any evidential burden on Sisk.

It is important to note that, having made that finding, the Arbitrator did not treat Valuation No 8 as in any way conclusive of the question of valuation. He simply took it as his starting point. When he described himself as being “un-persuaded” by any of Sisk’s evidence that it was a significant overstatement, he identified in detail his reasoning. In reaching his conclusion he was effectively doing no more than accepting Carmel’s case, as recorded in paragraph N19 : it seemed most likely to him that Mr Bonye and Mr Melges were the people in the best position to determine the correct value of Carmel’s work and they did so in Valuation No 8.

It does not seem to me therefore that the Arbitrator’s conclusions turned on any misapplication of some evidential burden. Rather the Arbitrator was deciding whether or not Carmel had carried out work to a value for which it had not yet been paid, and if so to what extent, issues on which he correctly understood at all times the legal burden of proof to lie on Carmel. What the Arbitrator was doing at the outset was to identify an obviously important contemporaneous piece of evidence that was at stark odds with the position being adopted by Sisk position in the arbitration as to the value of Carmel’s works.

For these reasons, I dismiss the claim on Issue 1.

The question of the correct characterisation of claims for costs was considered by Akenhead J in Walter Lilly v Mackay [2012] 1 BLR 519 (“Walter Lilly”) at paragraph 484 in particular :

Then at paragraph 486 Akenhead J said this :

Sisk contends that the Arbitrator was obviously wrong to reject its primary claim. The Arbitrator’s reasoning was as follows:

Sisk’s claim was not a global claim but a total costs claim;

In relation to a total costs claim, there was a principle that the burden upon a party seeking to prove such a claim was greater than the burden it would bear in having to prove the same claim on an itemised basis;

For such a claim, this burden required a party to demonstrate not only that every element of the actual cost said to have been incurred is valid and has been properly incurred but also the financial validity of the hypothetical comparative cost.

Sisk contends that its primary claim was not within the principles summarised in Walter Lilly or, if it was, that those principles did not require the Arbitrator to disregard the primary claim, as follows :

The primary claim was not a global, or total costs, claim at all. There is no distinction between these terms, as the Arbitrator seemed to think. This was a claim for all the costs and losses incurred by Sisk due to a single event, namely the termination. Walter Lilly had no application. The Arbitrator correctly found, at one point in the award, that this was not a global claim but then purported to apply the global claim principles to the claim;

Alternatively, insofar as the claim was a global, or total costs, claim, the principles set forth in Walter Lilly did not impose a greater burden of proof upon Sisk in seeking to prove the actual costs incurred than any other claim would impose;

Walter Lilly did not require a party to demonstrate not only that every element of the actual cost said to have been incurred is valid and has been properly incurred but also the financial validity of the hypothetical comparative cost.

Thus, in summary, the Arbitrator is said to have gone up a blind alley in two principal respects : first, he appeared to think (incorrectly) that global and total costs claims were different things : he thought that, whilst Sisk’s primary claim was not a global claim, it was nevertheless a total costs claim; secondly, in relation to such a (total costs) claim, he proceeded on the (incorrect) basis that there was a greater evidential burden of proof.

As on issue 1, Sisk contends that the issue that arises is one of pure law and, if one of mixed law and fact, then the Arbitrator reached a conclusion necessarily inconsistent with a correct application of the law. Sisk contends that the appropriate course is for the issue to be remitted to the Arbitrator for reconsideration.

I have concluded that there is no merit in this second challenge to the Award.

The context of the Arbitrator’s consideration of Issue 2 was the valuation exercise to be carried out in respect of Sisk’s set-off/counterclaim. The question was to identify the correct methodology for that exercise. That is reflected in the heading of the relevant section, namely “Correct method of determining set off pursuant to “second limb” of Clause 7.7.4.”

The Arbitrator found in Sisk’s favour on its primary two contentions of principle in this regard : he accepted that Sisk’s primary claim was not a global claim and accepted in any event that, even if it were, that would not preclude the claim being brought. He went on (correctly) to say that a party endeavouring to prove a global or total costs claim will carry a greater burden than a party endeavouring to prove the same claim on an itemised basis. This was not to introduce some flawed legal principle, but rather to reflect the comments of Akenhead J at paragraph 486 (d) in Walter Lilly (supra). There are added evidential difficulties in proving a global or total costs claim.

I do not consider that, fairly read, the Arbitrator in fact treated global and total costs claims as separate concepts (and then treated Sisk’s primary claim as a total costs claim, even though it was not a global claim). That seems to me to be placing undue emphasis on the words “or, for that matter” in Paragraph N67. It would have been an odd mistake to make, given that the Arbitrator otherwise demonstrated a good understanding of the decision in Walter Lilly. At the very least, it is not clear that the Arbitrator was under the impression that global and total costs claims were different animals, falling to be treated differently. The fact that he went on to deal with the added evidential difficulties relating to global or costs claims is consistent with him doing no more than addressing fully the parties’ submissions on the law (in particular, Carmel’s submission that, were it to be a global claim, it could not be advanced as a matter of principle). The position is complicated further by the fact that (in paragraph N60) the Arbitrator defined Sisk’s primary claim as the “total costs claim” and in paragraph N68 elided the concept of global and total costs claims in the single phrase “total costs claim”.

But, even if the Arbitrator was under the misapprehension that a total costs claim was something different to a global claim, I cannot identify any resulting material error of law. As already identified, there is nothing objectionable in his comments of principle at paragraphs N67 and 68. He was there stating that, in order to succeed, a global or total costs claim has to be proved properly, which may be more difficult than in the case of an itemised claim.

He then turned to consider the facts of the case before him. His central finding was at paragraph N69. He found as a matter of fact, on the basis of all the evidence, that Sisk had failed to prove its primary claim (on the facts). As Lord Marks QC pointed out for Carmel, the oral evidence of Mr White, Sisk’s financial controller, to which the Arbitrator referred expressly in paragraph N69, was but an example of why the Arbitrator found Sisk’s primary claim not to be made out. The Arbitrator had earlier (in section K) found the evidence of Mr White to be useful and reliable as regards costs booked, but of no assistance in establishing the validity of those costs. The Arbitrator had also set out earlier his findings on all of the various witnesses, including the parties’ respective programming and quantum experts, earlier in section K of the Award.

For these reasons, I dismiss the claim on Issue 2.

As indicated above, Carmel sought statutory interest on sums found to be due to it in accordance with the Debts Act.

The Debts Act contains the following sections so far as relevant:

The Sub-Contract contained the following relevant provisions (relating expressly to interest and/or interim payments under the Sub-Contract) :

By Clause 1.1 of the JCT Conditions :

“Conditions” was defined as “the clauses set out in sections 1 to 8 of these Conditions, together with and including the Schedules hereto, as modified by any Schedule of Modifications included in the Numbered Documents”;

the phrase “Interest Rate” was defined as “a rate 5% per annum above the official dealing rate of the Bank of England current at the date that a payment due under this Sub-Contract becomes overdue”.

By Clause 1.4 of the JCT Conditions, :

Sisk argued before the Arbitrator that Clause 4.10.5 of the JCT Conditions constituted a substantial remedy for the late payment of the debt, with the result that statutory interest was not carried (by virtue of section 8(2) of the Debts Act).

Sisk contends that the Arbitrator’s conclusion (that once Clause 15.9 was declared void under section 8(4) of the Debts Act, there was no contractual remedy for late payment and the provisions of the Debts Act were accordingly implied) was wrong as a matter of law. The effect of the conclusion was to declare Clause 15.9 of the Sisk Conditions void but nonetheless having the effect of deleting Clause 4.10.5. Sisk submits that the Arbitrator should have held that, since Clause 15.9 was declared void, there was no divergence between Clause 15.9 and Clause 4.10.5. Clause 15.9 simply fell away in its entirety. There is no scope for “red-pencilling” only parts of Clause 15.9 (as Carmel seeks to do). Clause 4.10.5 was thus an operative term of the Sub-Contract, and constituted a substantial remedy for the late payment of the debt. He should, therefore, have determined as matter of law, that the Debts Act was inapplicable. There was no possible basis to exclude both of these clauses, even if one were incompatible with the other. The Arbitrator should, therefore, have held that Clause 15.9 and Clause 4.10.5 were both provisions of the Sub-Contract. Their combined effect of this was that Sisk had both a power and a duty to pay interest on late payments at the Interest Rate (as defined in the Sub-Contract).

Sisk thus submits that the Award should be varied so as to declare that the applicable interest rate was 5% per annum above the official dealing rate of the Bank of England current at the date that a payment due under the Sub-Contract becomes due, alternatively should remit the issue to the Arbitrator for reconsideration in the light of my findings.

Carmel seeks to support the Arbitrator’s conclusion by reference to the following two principal and independent submissions :

Clause 15.9 does not cease to exist as a result of section 8 of the Debts Act. The effect of section 8 of the Debts Act is only to remove the offending words “(but shall not be obliged to)”, since it is only those words that “purport to exclude the right to statutory interest in relation to the debt”. The result, albeit admittedly an odd one, is that there is a permissive contractual provision alongside a compulsory one, which thus takes effect. That cannot bring to life the inconsistent Clause 4.10.5;

In any event, Clause 4.10.5 only applies to interim payments due from Sisk to Carmel in accordance with the provisions of Clause 4.10. It has no application to debts due to Carmel under Clause 7.7.4. Thus Clause 4.10.5 does not provide a substantial contractual remedy for late payment.

I turn to analyse the competing arguments. It is common ground that the question raised is one of pure law. It is also common ground, as it was before the Arbitrator, that Clause 15.9, with its optional payment regime for the payment of interest, was not a “substantial contractual remedy” for the purpose of section 8 of the Debts Act.

The Arbitrator’s reasoning (based on timing and the suggestion that Clause 4.10.5 was somehow “deleted”) as set out in paragraphs N246 to N252 of the Award is difficult to follow. In truth, Carmel did not seek to support it, conceding that the Arbitrator’s approach was “an odd way of looking at it” and that the issue was not really one of timing. But Carmel maintains that the result is correct. It suggests that the better (and real) question is whether or not the Sub-Contract, interpreted as a whole, provided a substantial contractual remedy for the late payment of the debt. If not, then it is not open to Sisk to rely on the operation of section 8 (1) of the Debts Act to insert Clause 4.10.5, that was not within the Sub-Contract because of the inconsistent Clause 15.9 which remained part of the Sub-Contract, and then to argue that Clause 4.10.5 provides a substantial remedy.

As is apparent, the parties disagree as to the effect and operation of section 8 of the Debts Act on Clause 15.9, and on the proper construction and inter-relation of the relevant provisions of the Sub-Contract in so far as they survived the Debts Act.

In my judgment there is a short answer to the conundrum posed by this disagreement as a result of the proper construction of Clause 4.10.5. Even if Sisk is correct, and Clause 4.10.5 is operative, Clause 4.10.5 does not provide for the payment of interest by Carmel on anything other than late payments by Carmel of amounts due to Sisk by way of interim payment under Clause 4.10. Thus the provisions of the Debts Act are to be implied, as the Arbitrator found.

Clause 4.10 follows on from Clause 4.9 which deals with the issue of interim payments (and nothing else). Clause 4.9 sets the mechanism for interim payments (and no other types of payments) becoming due. Clause 4.10 then deals (again exclusively) with the amounts due by way of interim payment in accordance with Clause 4.9 (and then interest in the event of late payment of such amounts). Clause 4.10.5 is a sub-clause of Clause 4.10. It is the final sub-clause, following logically on the earlier sub-clauses which deal with the anterior questions of the amounts to be due by way of interim payment (Clause 4.10.1) and then the timetable and mechanism for payment (Clauses 4.10.2 to 4.10.4).

That Clause 4.10.5 relates only to payment of interest on interim payments is reflected in the fact that it operates by reference to terms of art defined by reference to interim payments only (and not, for example, to payments under Clause 7.7.4). Thus there is for example reference to payment by “the final date for payment”. That is a date defined in Clause 4.9 and only by reference to interim payments. There is no such date for payments under Clause 7.7.4 (or indeed any provision in Clause 7.7.4 for late payment or interest at all). Equally, the reference in Clause 4.10.5 to the fact that acceptance of any payment should not be construed as a waiver of Carmel’s right to suspend performance is specific to interim payments only, arising in the context of ongoing performance obligations (as opposed to a post-completion or termination situation under Clause 7.7.4). The significance of this point is underlined by the absence of such a proviso in Clause 4.12 (when dealing with final payments).

Sisk relies on the fact that Clause 4.10.5 refer in its opening two lines to Carmel failing to pay amounts due to Sisk “under these Conditions”. “Conditions” are defined in section 1 of the JCT Conditions as all of the Conditions in sections 1 to 8, so encompassing section 4. But read in the context set out above it is clear that the reference to “these Conditions” in Clause 4.10.5 must be a reference to the Conditions in Clause 4 for interim payments, and not more widely so as to encompass Clause 7.7.4. This is made explicit later in the Clause, where there is reference to the acceptance of any payment of interest “under this clause 4.10.5”.

This conclusion is reinforced by the heading of Clause 4.10 of “Interim Payments – amounts due”, which in context is of relevance to the question of interpretation. It is also consistent with, if not required by, the separate provision in Clause 4.12 for the payment of interest on final payments. The existence of such separate provision makes the suggestion that Clause 4.10.5 was intended, on objective construction, to cover late payment of any sums under any other provision a very difficult one. If Clause 4.10.5 was not wide enough to cover interest payments for late payment of a final payment under Clause 4.12 (where there is at least the parallel concept of a final date for payment), then it cannot be properly read as wide enough to cover interest payments for late payment under Clause 7.7.4.

This is sufficient to dispose of Issue 3.

However, I should record that Carmel sought also to advance two new arguments which were not before the Arbitrator. Given my conclusion above, it is not necessary for me to address them. However, for the sake of completeness only :

Carmel seeks to argue that Clause 4.10.5 does not amount to a substantial remedy because interest is payable “only if the Contractor fails properly to pay the amount or any part of it due to the Sub-Contractor under these Conditions by the final date for payment” in which case “the Contractor will pay to the Sub-Contractor in addition to the amount not properly paid simple interest thereon at the Interest Rate for the period until such payment is made.” This is said to be an inadequate substantial remedy for late payment under Clause 7.7.4 because Clause 7.7.4 is concerned with balancing what is owed to the contractor for work executed and goods and materials supplied prior to the termination against losses sustained by the contractor arising out of the termination. For such a “netting off” procedure to yield adequate interest to the sub-contractor, interest would have to be added to payments due to the sub-contractor over the whole of the period for which money was outstanding, while the direct loss and damage sustained by the contractor arising from termination would have interest added to it only for the period after the loss was sustained. Where the period for which payment to the subcontractor is long and that following the contractor’s loss attributable to termination short, the interest that ought to be payable to the sub-contractor should be far greater than interest that is merely calculated on the balance. This was a point raised, so far as I am aware, for the first time in Carmel’s skeleton argument;

Carmel seeks to argue that, by reason of Clause 7.7.3 of the JCT Conditions, upon termination of Sisk’s employment under Clause 7.5, Clause 4.10.5 ceased to apply. As set out above, Clause 7.7.3 provided :

As to the first new point, not only was it not advanced by Carmel before the Arbitrator, it is clear that the submission gives rise to broad considerations for which I do not have the necessary material. As Sisk points out, whether or not a remedy is a substantial remedy for the purpose of the Debts Act involves a consideration of all the relevant circumstances at the time that the terms in question are agreed (see section 9(2) of the Debts Act). An assessment has to be made as to whether or not it would be fair or reasonable to allow the remedy to be relied on to oust the right to statutory interest that would otherwise apply. For this purpose regard must be had not only to the benefits of commercial certainty but also the strength of the parties’ relative bargaining positions, detriment and inducement, all in accordance with sections 9(1)(b) and (3) of the Debts Act. Given the nature of the new issues raised and the evidential lacuna, I would dismiss this submission.

As to the second new point, Sisk submits :

That Carmel should not be allowed to raise this new issue now. The court discourages attempts to salvage awards on the basis of arguments not put before the arbitrator in question : see MRI Trading at paragraphs 38 to 39. Although permission to appeal was not required in this case, the Court should nevertheless be reluctant to admit new arguments to be advanced (particularly when raised for the first time in oral submission). Reliance is placed on the decision of Moore-Bick J (as he then was) in Icon Navigation Corp v Sinochem International Petroleum (Bahamas) Co Ltd [2003] 1 All ER (Comm) 405 (at pages 411 and 412):

That Clause 7.7.3 does not in any event have the effect contended for by Carmel. Clause 7.7 addresses the consequences of termination under Clauses 7.4 to 7.6 (where the sub-contractor is in default, insolvent or corrupt). Thus it makes sense that in those circumstances the provisions of Clause 7.7.4 are to apply and other provisions requiring further payment shall cease to apply. It is directed at preventing the sub-contractor from pursuing applications for further interim payment unless and until the sub-contract works were complete and a final reckoning possible. Clause 4.10.5 is not concerned with such a payment, but rather with a failure on the part of the contractor to pay what is due;

That if it does, it is void because of the Debts Act. On Carmel’s construction it would exclude the statutory implied term and be void under section 8(1) of the Act.

Carmel maintains its position. Amongst other things, it contends that Sisk’s argument on construction ignores the plain meaning of the words in Clause 7.7.3 which expressly require a payment by the contractor. That payment is a further payment if it has not already been made at the date of termination under Clause 7.5. There is no violation of the Debts Act, since Clause 7.7.3 takes effect subject to the statutory implied term.

It is of course highly unsatisfactory for this point to be raised for the first time by Carmel in oral submission. The reason for the lateness has however been frankly explained : the point was simply not identified earlier. (It appears to have been “spotted” by Carmel’s solicitor for the first time during the hearing before me.) There is force in the submission that it is a pure question of law the raising of which does not create any prejudice that cannot be compensated for by way of costs. And it was always for Sisk to establish the existence of a contractual substantial remedy for late payment such as to oust the implied term under section 8(1) of the Debts Act. Albeit that I accept Sisk’s submission that the general approach of the Court is to support the finality of arbitral awards subject only to matters properly raised by way of the appeal itself or any timely response thereto, I would allow Carmel to raise this new point of law in all the circumstances of this case.

As indicated, it is not necessary for me to reach a final determination on the question of construction. I have considered the parties’ respective written submissions carefully. In short, I would conclude, if necessary, that Clause 7.7.3 did not have the effect that Clause 4.10.5 ceased to apply on termination. This conclusion follows on in a sense from my primary conclusion that Clause 4.10.5 gives rise to a right to interest only where the contractor is late in making a due interim payment under Clause 4 (and my rejection of Sisk’s submission by reference to the phrase “these Conditions” in Clause 4.10.5). Clause 7.7.3 is not addressing past accrued rights, but rather looking to the future upon termination of the Sub-Contract for default, insolvency or corruption (which is the meaning of the word “thereupon”). Nor is Clause 4.10.5 addressing the making of a further payment within the meaning of Clause 7.7.3 but rather addressing a failure on the part of Sisk to make an interim payment timeously. It is perhaps for these reasons that what would otherwise have been an obvious point, was not taken until the eleventh hour of an appeal following a full arbitral process.

This conclusion renders Sisk’s third objection otiose but, for the sake of completeness again, I would not find, on Carmel’s construction of Clause 7.7.3, that it offended the Debts Act. It would not have purported to exclude the implied term in section 1 of the Debts Act.

Putting these new matters aside, in the light of my finding as to the proper scope of Clause 4.10.5, I dismiss the appeal on Issue 3. Although my reasoning differs from that of the Arbitrator, the conclusion remains the same. The applicable interest rate is the statutory rate under the Debts Act.

For the reasons set out above, I dismiss all three limbs of the claim. I invite the parties to draw up an order reflecting the above and to agree all outstanding matters, so far as possible, including costs.