EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Kingarth Lord Eassie Lord Carloway	[2009] 39 OPINION OF THE COURT delivered by LORD CARLOWAY in the petition of APOLLO ENGINEERING LTD., Petitioners and Reclaimers; against JAMES SCOTT LTD., Respondents: for Judicial Review of decisions of an Arbiter _______

Act: RNM Anderson; Warners

Alt: Ellis QC; MacRoberts LLP

21 May 2009

1. Background

[1] In or about 1990, the petitioners entered into a sub-contract with the respondents in terms of which the petitioners were to supply specialist fabrication and installation services in connection with pipe-work required in the construction of an explosives handling floating jetty at Coulport. The jetty was to service nuclear submarines and some of the pipe-work was to convey toxic waste from the submarines. The value of the work was almost four million pounds and it was estimated initially that it would take eighteen months, and later over two years, to complete. The parties fell out and, by the end of September 1991, the sub-contract was at an end. The respondents sued the petitioners for recovery of materials, which they maintained belonged to them but which were in the petitioners' possession. This was met with a counterclaim for over two million pounds; the petitioners claiming that the respondents had failed to pay them for work completed and that they were liable to them in damages for failing to provide the necessary drawings to enable them to carry out the contract works on time. The petitioners maintained that the respondents had repudiated the contract. On 24 June 1993, the Court sisted the action, upon the respondents' plea, pending arbitration in terms of the sub-contract.

[2] An arbitration was commenced, but the arbiter later resigned on the ground of his advancing age. The parties required to select a new arbiter. On 1 and 11 July 2005, the parties executed a Joint Deed of Appointment of an Arbiter. It was agreed that the arbiter would have power: (a) to award payment of any sums due and payable under the sub-contract; and (b) to award damages due in respect of any breach of the sub-contract. Although requested to do so by the arbiter, the parties failed to agree any set of procedural rules to govern the conduct of the arbitration. It therefore proceeded at common law. The procedure, which was actually adopted by the parties, was similar to that of an Ordinary Action in the Court of Session. The petitioners lodged their claim. On 31 August 2005, there was an initial meeting with the arbiter, who had the assistance of a legally qualified clerk. The arbiter set a timetable for a response to the claim, adjustment of the claim and answers and the lodging of supporting productions and expert reports. The petitioners had originally stated that they would not be relying on expert testimony but, by the end of the year, that position had changed. By that time also, the adjustment period had been completed, but the arbiter allowed the petitioners time to amend their claim thereafter. There then ensued a prolonged period of adjustment of the consequent Minute of Amendment and Answers.

[3] The parties developed an elaborate set of written pleadings detailing their conflicting claims in great detail. The manner in which the petitioners set out their claim was in the form of a first, general crave seeking a "declarator" that the respondents had repudiated the contract in terms of a letter dated 30 August 1991. Rather than seeking a single sum, there was a second crave with a series of sub-craves and sub-sub-craves for payment of a number of different amounts said to relate to different entitlements under the contract, notably:

2(i) £881,827 (delay and disruption);

(ii)(a) £715,954 (fabricated material on site);

(ii)(b) £691,748 (unfabricated material on site);

(ii)(c) £273,639 (fabricated but undelivered material);

(ii)(d) £510,917 (preliminaries)

(iii)(a) £552,567 (loss of profit - measured works completed by others);

(iii) (b) £748,949 (loss of profit - increased scope of sub-contract works);

(iii)(c) £693,070 (loss of profit - acceleration); and

(iv) £30,644 (site accommodation).

Thus, the petitioners' claim had grown to exceed five million pounds. Each sub-sub-crave had its own article of condescendence (articles 21, 30-33, 36-38 respectively). The sum in sub-sub-crave 2(i) was said (pleas-in-law 1 and 2) to be due by way of "re-imbursement" or "reparation" caused by material delay and disruption of the work. The amounts in sub-sub-craves 2(ii)(a) to (e) (sic) were said to be sums due under the contract for work completed (plea-in-law 4). All of the sums due under sub-crave 2(iii) were said to be due as reparation for breach of contract (plea-in-law 5). The sum in sub-crave 2(iv) was in respect of "retained property" belonging to the petitioners.

[4] In its final form, after substantial amendment, the "closed record" in the arbitration ran to one hundred and sixty eight pages. Many parts of the pleadings were couched in highly technical language. They referred to schedules giving even greater detail of costs incurred. They purported to incorporate, or at least "refer to", sundry documents, including letters, minutes, submissions, appendices, manuals, sketches, bills of quantity, drawings, charts and reports of experts. In particular, by way of the amendment, the petitioners made reference to a "Supplemental Report", dated June 2006, from their new expert, and to attachments to that report.

[5] The essence of the petitioners' claims seems to have been that the petitioners incurred substantial expense in sourcing the necessary raw materials, notably specialist metals, with which to build the pipe-work. They had commenced work on site in Spring 1990 and had fabricated much of the required pipe-work over the succeeding months into the Summer 1991, by which time they had encountered substantial "cash flow" problems as a result of the respondents' delays and disruptions to the works. Eventually, in August 1991, the respondents purported to vary the contract by removing the installation element. The following month, the petitioners went into liquidation and that, in turn, led to the termination of their involvement in the contract altogether on 11 September 1991.

[6] Both parties incorporated preliminary pleas into their pleadings complaining of inadequate specification and aspects of irrelevancy in their opponents' averments. The petitioners' plea (8) sought to "repel" the Answers and the respondents' plea (1) maintained that "the claims should be dismissed". By interlocutor dated 12 May 2006, the arbiter sought both parties' written proposals for further procedure. The respondents, in a ten page document, sought to obtain from the arbiter the expenses of the amendment procedure on the Court of Session scale, together with an additional fee and certification of four skilled witnesses. They moved the arbiter to allow a legal debate on the basis that:

"there are critical legal issues which will allow at least substantial parts and perhaps almost all of the claimants' case to be disposed of without proof".

The respondents set out their complaints about the relevancy of the petitioners' claims under seven relatively succinct sub-headings. The petitioners also submitted a note of their proposals. This document observed:

"3. This arbitration is now at a crossroads. The arbiter may now proceed down one of several paths. Broadly, he may take the easier option and allow the case to drift to a proof on one or more claims mirroring court procedure. Another path is to have some form of legal debate to see whether issues can be narrowed".

However, the proposals suggested a hybrid approach whereby the arbiter could just decide the merits of certain issues, which were thereafter set out, at a "round table discussion" between experts and non-legal representatives. Paragraph 20 of the document stated that the petitioners maintained that, on a proper reading of the report of one of the respondents' experts, they were due at least £400,000 in respect of sub-sub-craves 2(ii)(a) and (b). It also stated that the petitioners:

"concede the proper expenses occasioned by the amendment on a party and party basis as the same may be agreed, and failing agreement as taxed".

[7] In their pleadings in the present petition process, the respondents make detailed averments about the procedure which was then adopted during the arbitration. These averments are not fully or candidly answered by the petitioners; perhaps because of changes in counsel or agency. However, the respondents' averments were, for the most part, not disputed at the hearing of the reclaiming motion. The respondents aver that, at the hearing to determine future procedure and expenses, counsel then acting for the petitioners conceded, as he had done in writing, that the expenses of the amendment procedure ought to be awarded against the petitioners on a party and party scale. He did not suggest, it is averred, that the Court of Session scale was inappropriate. Certification of witnesses was not opposed by him as incompetent. What was said was that an additional fee could only be allowed at the end of a case, even in the Court of Session. On the issue of procedure, the petitioners' counsel had not suggested that the allowance of a legal debate was incompetent. He had said that, in order to understand his pleadings, the arbiter would have to look at the petitioners' expert reports.

[8] Following upon the hearing, the arbiter issued the following interlocutor dated 26 September 2006:

"(1) allows the pleadings to be opened up and amended in terms of the Minute of Amendment for the [Petitioners] and Answers thereto on behalf of the Respondents (both as adjusted);

(2) finds the [Petitioners] liable to the Respondents in respect of the expenses thereof; such expenses (in the event of disagreement) to be taxed by the Auditor of the Court of Session by reference to the table of fees set out in Rule 42.16 of the Act of Sederunt (Rules of the Court of Session) 1994 on a party/party basis and in connection therewith allows the Respondents' agents an additional fee (the level of which to be determined by the Auditor); in respect of (a) the complexity of the cause; (b) the skill, time, labour and specialised knowledge required of the solicitors involved; and (c) the number and importance of the documents prepared and perused;

(3) sanctions the cause as suitable for the employment of senior counsel;

(4) certifies [PS, AD and GR] as skilled witnesses who have carried out investigations on instructions of the Respondents;

(5) allows parties a Debate ... in respect of the Respondents' first plea-in-law and the [Petitioners'] eighth plea-in-law and in connection therewith ordains parties to lodge Notes of Argument ... and responses to the other party's Note of Arguments ... ".

The interlocutor also allowed the petitioners to lodge a Note in support of their application for an interim payment of at least £400,000 (supra). This prompted the petitioners to lodge an eighty four page document containing a detailed and highly technical critical analysis of certain features of the case in support of a claim for an interim payment of £703,142. This document dwelt in particular upon the report of one of the respondents' experts. However, in November 2006 the petitioners' dropped their application.

[9] The petitioners lodged a modest two page document in support of their eighth plea-in-law. However, the respondents lodged a Note of Argument extending to one hundred and sixty eight pages (coincidentally the same length as the closed record itself) purporting to dissect the petitioners' claims into irrelevant sections and seeking "dismissal" of the various sub-heads of claim. The response from the petitioners reached thirty one pages, plus appendices containing minutely detailed calculations. The response commenced:

"The Respondents have chosen to address issues of specification and relevancy within this arbitration as if these issues were being dealt with by a Court. The test for relevancy and specification which is applied in aspects of judicial determination is not appropriate for application mutatis mutandis in arbitration where a skilled Arbiter will use his own experience, expertise and knowledge to understand and apply the relevant criteria for decision making in the forum of an arbitration".

The respondents' reply to the petitioners' arguments on relevancy added a further forty five pages of written argument.

[10] The arbiter heard a debate on this material over a period of some five days in February 2007; by the end of which parties had still not completed their oral submissions. Written submissions were added to complete this part of the process. Around this time, in February-April 2007, the petitioners applied for what they termed a "part award", based on the pleadings and documents, of up to two million pounds or thereby to be paid within fourteen days. This was categorised by the respondents as an interim award and opposed by them as incompetent (Grounds for Opposition paras 2(i)-(iii)). This application has not been formally dealt with.

[11] The arbiter produced his draft Opinion in 28 March 2007; this becoming a "Final Draft Opinion", after further written observations from the parties, on 18 May 2007. The decision was as follows:

"7. Having considered the Parties' submissions, I decline to dismiss Crave 1 and sustain [the respondents'] motion for the dismissal of Craves 2(i), 2(ii)(a), 2(ii)(b), 2(ii)(c), 2(ii)(d) and 2(iii)(a), 2(iii)(b) and 2(iii)(c) ...

8. ... I decline to exclude from probation any of [the respondents'] averments ... ".

In short, the arbiter dismissed almost the whole of the petitioners' case other than their declaratory crave and that for £30,644 regarding retained site accommodation. The arbiter set out detailed reasons for his decision. The form of expression of these reasons does not always adopt the customary language of a lawyer and understanding the reasons is not straightforward. But one feature is that the arbiter disagreed with the "methodology" of the petitioners' claims for damages. In his analysis, the arbiter did have regard to the reports of the petitioners' expert, Mr Hunter. The content of his Final Draft Opinion is the subject of a Stated Case for the Opinion of the Court of Session under section 3 of the Administration of Justice (Scotland) Act 1972. There are some eighteen questions (some involving sub-questions) asked of the Court, including especially whether the arbiter was "entitled" to dismiss the various sub-craves on the basis of a lack of relevant supporting averments.

[12] Meantime, the account of expenses in respect of the amendment procedure had been made up and remitted to the Auditor for taxation. On 30 May 2007 the Auditor taxed the account at the somewhat surprising sum of £195,497.05. This, of course, seems rather high as representing the costs to the respondents of replying to the petitioners' Minute of Amendment. Much of the expense appears to have related to law agents' time considering, often with the respondents' own experts and counsel, the new pleadings and the petitioners' new expert report. Counsel's fees for a number of consultations played their part too. But of particular significance were the experts' fees of £27,438.44, £40,700.75 and £3,963 respectively (i.e. a total of £72,102.19) and an additional fee of £24,400, being an uplift of 50% on agents' account, excluding those fees relating to the taxation itself.

[13] Although there had been no decerniture for expenses (as distinct from a finding on liability), the respondents served upon the petitioners a statutory demand for the taxed expenses under the Insolvency Act 1986. As already noted, the petitioners had been placed in liquidation. However, the liquidation was sisted following the making of a creditors' voluntary arrangement.

2. The petition, decision and submissions

[14] The petitioners have raised this petition for judicial review seeking, essentially: reduction of the arbiter's decision of 25 September 2006 in so far as it relates to the award of expenses (statement of fact III); and reduction of the relevancy decision contained in the "Draft Final Opinion" issued by the arbiter on 18 May 2007 (IIIA). By interlocutor dated 7 March 2008, the Lord Ordinary dismissed the petition. It had been maintained before him that the arbiter did not have the power to make an award of expenses, other than in his final decree arbitral, since this would amount to a "part award". But the Lord Ordinary held (para [4]), primarily on the strength of Pollich v Heatley 1910 SC 469 (Lord President (Dunedin) at 482), that an award of expenses is not part of an arbiter's award and thus not a "part award". He determined that an arbiter had a considerable discretion as to the procedure to be adopted in an arbitration and that his general power to deal with expenses included the ability to deal with the expenses of chapters of the case from time to time. He could see no reason why an arbiter's powers should not extend to the allowance of additional fees and the certification of skilled witnesses. Any Court of Session practice, that certification was not dealt with until the allowance of proof (APC v Amey Construction [2007] CSOH 129), did not extend to this arbitration "by the agreement of the parties to it". He continued:

"[5] In any event, even if the award of expenses complained of were to be regarded as a part award, I note that the majority of the Inner House in Lyle v Falconer (1842) 5 D 236 observed that an arbiter has an implied power to grant interim awards. If that is correct, it would be surprising if the same did not apply to part awards. ... [A] part award is not a final award ... an arbiter has an implied power to deal with the remit to him on a staged basis".

The Lord Ordinary also noted that:

"[7] Further and in any event, in a Note to the arbiter in the lead up to the relevant hearing, the then senior counsel for the petitioners expressly conceded that the arbiter could make an award of expenses as taxed in respect of the amendment procedure. It seems plain that, at least to this extent, the parties approached the hearing in agreement as to the arbiter's powers. It would not now be open to the petitioners to renege on that agreed position".

In relation to the "Final Draft Opinion" of 18 May 2007, the Lord Ordinary concluded:

"It is not open to me in judicial review proceedings to enter into the merits of the arbiter's decision to dismiss parts of the petitioners' claim. However that is exactly what I am being asked to do. It was accepted by [the petitioners] that the arbiter has the power to rule on issues of relevancy, and, where appropriate, to dismiss all or part of a claim. Whether the arbiter would be correct to do so in the present case, and any criticisms as to his reasoning as set out in his final draft opinion, are matters for the Inner House to resolve in the context of the stated case now before it. Judicial review is not a method of appealing against an arbiter's decisions on matters of fact or law. Aside from stated case procedure, the arbiter's decisions on such questions are final".

The Lord Ordinary also rejected certain allegations of apparent bias (infra).

[15] The petitioners submitted first that the arbiter had exceeded the powers of an arbiter at common law in awarding expenses and dismissing the craves during the course of, as distinct from at the end of, the arbitration process. It was incompetent, in a common law arbitration, to make such "part" on "interim" awards in the absence of express power to do so (Bankton : Institutes I.23.455; Taylor v Neilson (1822) 1 S 240). The Lord Ordinary had been in error in considering that the majority in Lyle v Falconer (supra) had been of the view that arbiters could make interim awards at common law. In that case the parties had consented to the registration of interim decrees-arbitral. The Lord Ordinary (Jeffrey at 239, 240) had founded upon that consent in reaching his decision both in the Outer and Inner House. All the judges in the Inner House (Lord President (Boyle) and Lords Mackenzie and Fullerton) had also done so. Despite some obiter remarks in that case, which had not been applied subsequently, the general view was against the implication of a power at common law to grant interim or part awards (Bell: Arbitration 216; Irons and Melville: Arbitration 183; Taylor Woodrow Construction (Scotland) v Sears Investment Trust 1992 SLT 609, Lord Cameron of Lochbroom at 611; Lord Hope of Craighead: Stair Memorial Encyclopaedia Re-issue Vol 2, sub nom. "Arbitration" paras 67-68). Nothing turned on the distinction between "part" and "interim" awards. What was clear was that a decision which failed to exhaust the submission was reducible (Grampian Regional Council v John G McGregor (Contractors) 1994 SLT 133, Lord President (Hope) at 138). Since there was no express power to make interim or part awards, the arbiter had not been entitled to decide matters of relevancy on a preliminary basis or to exclude or dismiss parts of the claim on that basis.

[16] It was accepted that parties might agree that an arbiter could make interim or part awards during the course of an arbitration, but the petitioners had opposed a legal debate, even if they had not suggested that it was incompetent. The respondents themselves had opposed the making of an interim award on the ground of incompetency. It was accepted also that an arbiter could regulate expenses and that, as the petitioners' counsel had conceded, he could make awards relative to parts of the process. What was complained of was the making of an award, during the course of the arbitration, which had resulted in making the sum of £195,000 or thereby instantly payable. An award of expenses was either an interim or a part award and not something sui generis, as the Lord Ordinary had held.

[17] The petitioners' second submission was that the arbiter had misconducted himself in "grimly" following Court of Session procedure (ERDC Construction v HM Love & Co 1996 SC 523, Lord President (Hope) at 528, Lord Prosser at 532). The relevancy of a claim was a matter of substantive law (Maxwell: Court of Session Practice p 194, para 8). There was a difference between relevancy and questions of fact. The question was whether the arbiter had looked at relevancy in the proper manner. The petitioners averred that they had suffered financial consequences as a result of a contractual repudiation. Whether the petitioners' had sustained losses as a result of that repudiation was a matter which required proof. The arbiter had erred in failing to allow such a proof (Lord Hope: "Arbitration" (supra) paras 47 and 86 under reference to Henderson v McGown 1915 2 SLT 316; Mowbray v Dickson (1848) 10 D 1102, Lord Justice-Clerk (Hope) at 1109-10). The arbiter had dismissed the claims because he did not approve of the petitioners' "methodology" as set out in their expert's report. But that could never be a matter of relevancy. It was one of fact requiring proof. The arbiter was not entitled to reject a claim just because he disapproved of the method of calculating the losses. That is what he had done. He had looked at one expert's report and decided, on that basis, that the petitioners' case was hopeless and that he was throwing it out. He had not said that the pleadings were irrelevant. Where there was such a fundamental error, it was susceptible to judicial review (Shanks & McEwan (Contractors) v Mifflin Construction 1993 SLT 1124, Lord Cullen at 1129-30). It would be incredible if, as the arbiter had held, not one penny was due even if the petitioners proved that the respondents had repudiated a multi-million pound contract. Although the stated case did address the issue of whether the arbiter had been entitled to dismiss the claims, it did not address the fundamental question of whether he had been entitled to dismiss the craves without proof.

[18] The petitioners raised matters of bias in the petition. Although they did not seek to challenge the Lord Ordinary's reasoning on this matter in principle, the petitioners did feel strongly that what had occurred did amount to bias when the circumstances were looked at in the round, with almost all of the claims being dismissed.

[19] The third submission dealt with the arbiter's ancillary decisions upon expenses. The Lord Ordinary had accepted that the Court of Session practice was not to certify witnesses as skilled in advance of the allowance of proof. No Court of Session judge would have allowed an additional fee at the stage of an amendment procedure. The certification of witnesses and the grant of an additional fee in the Court of Session were creatures of statute and the subordinate legislation constituted by the Rules of Court (Masterton v Thomas Smith & Sons (Kirkoswald) 1998 SLT 699). The subordinate legislation did not apply to arbitrations. An arbiter had no power to grant certification or to allow an additional fee, even if he could select an appropriate scale for the taxation of expenses.

[20] The respondents adopted a different structure in their response. The first part dealt with the award of expenses. The Lord Ordinary was correct to reject the petitioners' contentions for the three reasons he gave. First, he had determined that the finding on expenses did not amount to a part award. It was well settled that an arbiter could make awards of expenses, even in the absence of an express power, by analogy with the powers of the courts (Robertson v Brown (1836) 1 S 199; Ferrier v Alison (1843) 5 D 456, Lord Jeffrey at 460; Pollich v Heatley (supra), Lord President (Dunedin) at 478, 480-2; Grampian Regional Council v John G McGregor (supra), Lord President (Hope) 136 - 138; Lord Hope: "Arbitration" (supra) para 52; Bell: Arbitration para 423). An arbiter could deal with expenses at the time they arose. They did not constitute a part award (Lord Hope: "Arbitration" (supra) para 68; Bell: Arbitration para 502; Irons and Melville: Arbitration 185). Expenses were sui generis.

[21] Secondly, even if the finding on expenses were a part award, that award was competent. It was accepted that there was some doubt about the competency of part awards, but the obiter remarks of three of the judges in Lyle v Falconer (supra) favoured the existence of such a power. These remarks had not been brought to the attention of the court in Taylor Woodrow Construction (Scotland) v Sears Investment Trust (supra). The petitioners had themselves sought a part or interim award.

[22] Thirdly, in any event, the power to make an award had been conceded by the petitioners' counsel at the time and there had been no dispute on this matter until after the taxation. The petitioners had either homologated the existence of the power to make the award by their subsequent actings or had actually agreed at the time that such an award could be made. Parties were entitled to do either (Bell: Arbitration paras 646, 664; Lord Hope: "Arbitration" (supra) paras 93 - 94; North British Railway Co v Barr (1855) 18 D 102, Lord Ordinary (Handyside) at 104, Lord President (McNeil) at 106, Lords Curriehill and Deas at 107; Orrell v Orrell (1859) 21 D 554, Lord Deas at 557 and 558; Duff v Pirie (1893) 21 R 80, Lord Ordinary (Kyllachy) at 84 - 85, Lord President (Robertson) at 88 and 89).

[23] In relation to the elements ancillary to the award of expenses, it had not been argued before the arbiter that Court of Session practice could not be followed. The arbiter applied the Court of Session scale, given that the parties had followed a procedure similar to that of that Court. The arbiter was entitled to determine the basis of the award of expenses (Lord Hope: "Arbitration" (supra) para 52; Irons and Melville (supra) 228; Davidson: Arbitration para 17.08). The arbiter was not trammelled by the Rules of the Court of Session. He could select whatever basis he thought best fitted the circumstances. He was entitled to take the view that the complexities were such that an uplift in the ordinary Court of Session scale was appropriate. He could have fixed the uplift figure himself or, as he did, left it to the Auditor. Equally, he could have allowed the charges of experts himself and fixed the sums due or left that to the Auditor by certifying them as experts at any stage of the process (cf APC v Amey Construction [2007] CSOH 129 under reference to the then terms of RCS 42.13).

[24] There was a limit to the scope of the supervisory jurisdiction as applied to arbitrations. Intra vires errors of law which did not affect the jurisdiction of the court of the arbiter, such as procedural decisions including expenses, were not reviewable (Shanks & McEwan (Contractors) v Mifflin Construction (supra), Lord Cullen at 1129 - 30). The various ancillary decisions were not illegal, irrational and did not amount to procedural impropriety such as would make them susceptible to a successful review (Council of Civil Service Unions v Minister for the Civil Service [1985] 1 AC 374, Lord Diplock at 410). There was nothing in the current Court of Session rule (RCS 42.14) which limited the allowance of an additional fee to the end of the case (cf Masterton v Thomas Smith & Sons (Kirkoswald) (supra) at 701).

[25] The respondents secondly dealt with the arbiter's decision to dismiss the claims. It had been conceded before the Lord Ordinary that an arbiter was entitled to make rulings on relevancy and to dismiss all or part of a claim on that basis. The attack now was that he could not competently do so, as it would amount to a part award. It was clear first that the arbiter's decision was based on relevancy. Secondly, the petitioners were asking the Court to trespass upon the merits of that decision. Thirdly, the arbiter had power to take decisions on relevancy. Fourthly, such a decision was not a part award, but a decision on the way to a final award. Fifthly, if it were a part award, that was competent and, in any event, the parties had accepted that the arbiter could take decisions based on relevancy. Sixthly, the supervisory jurisdiction of the court was excluded by the petitioners' statutory right to require a stated case. Seventhly, there were no grounds made out, which would justify the exercise of the supervisory jurisdiction.

[26] Both parties had preliminary pleas claiming that parts of the case could be disposed of without proof. The parties' Notes of Argument had proceeded on the same basis. No competency point was raised at any stage. The arbiter had recognised the difference between questions of relevancy and questions of fact. The arbiter had been entitled to look at certain documents in reaching his decisions on relevancy. He had done so in order to see if the petitioners' averments could be bolstered by the content of the documents, notably the contract documents, the many volumes of the petitioners' schedules of losses, the petitioners' expert report, and sundry correspondence. All of this had been done, without objection, by both parties in order to avoid taking an overly technical view of the pleadings. The arbiter's decisions had not been based simply on a view of the petitioners' "methodology" of calculating losses, but because he had reached the view that the claims were not relevantly made.

[27] The arbiter had a discretion, on the pleadings presented to him, to exclude part of the case as irrelevant and to dismiss a crave. The utility of being able to do so is obvious. It would be very surprising if an arbiter had to hear evidence about part of a case which he deemed to be irrelevant. He was not obliged to do so unless the issue was simply one of fact (Ledingham v Elphinstone (1859) 22 D 245, Lord Justice-Clerk (Inglis) at 248, 250-1; Holmes Oil Co v Pumphertson Oil Co. (1891) 28 R (HL) 32, Halsbury LC at 53 - 54, Lord Watson at 55; Robert Brown & Son v Associated Fireclay Cos 1937 SC (HL) 42, Lord Thankerton at 44 - 45; Farrans v Roxburgh County Council 1970 SLT 334, Lord Stott at 337; Mowbray v Dickson (1848) 10 D 1102, Lord Justice-Clerk (Hope) at 1110). Thus the arbiter had been entitled to take a decision based on relevancy. But the arbiter had allowed part of the case to proceed to proof and it was open to the petitioners to attempt to introduce a new relevant case by amendment.

[28] Even if the arbiter's decision on relevancy had been wrong, it was not susceptible to judicial review. The contention for the petitioners was that, because the arbiter's decisions on each crave followed a common theme, the decisions amounted to misconduct as the arbiter was truly making decisions of fact and not relevancy. That contention must fail as, first, it did not feature as a ground in the petitioner's pleadings. Secondly, it was not correct that the methodology was a pure question of fact. The arbiter had looked at the matter as one of relevancy. Thirdly, the petitioners had not brought the decision within one of the recognised categories of decisions susceptible to review (viz. a failure to follow nature justice, procedural irregularity or irrationality). Fourthly, judicial review was excluded where a statutory remedy was available (Shanks & McEwan (Contractors) v Mifflin Construction (supra), Lord Cullen at 1127, 1129; Clyde & Edwards: Judicial Review paras 3.10, 8.05). Stated case procedure was available and had been used here. All the questions raised in this case, including procedural matters, could have been raised in the stated case (ERDC Construction v HM Love & Co (supra) at 524) and many were.

[29] Finally, so far as bias was concerned, all that had occurred was that the arbiter had made decisions adverse to the petitioners. There was no material upon which an allegation of bias could be made.

3. Decision

[30] There remains doubt as to whether, as a generality, an arbiter, in a common law arbitration, has the power to make an interim or part award in the absence of an express provision in the submission. Although the distinction between the two types of award has not always been made clear, the former is an award which regulates the subject matter of the submission pending a final resolution of the dispute, and may be subject to adjustment at the time of the final decree arbitral. The latter is an award which exhausts part of the submission and is not thereafter capable of adjustment. There does not appear to be clear authority prohibiting an arbiter from making such awards. However, the dicta of the Inner House judges in Lyle v Falconer (supra) is not authority that an arbiter can do so and the dicta in the Outer House in Taylor Woodrow Construction (Scotland) v Sears Investment Trust (supra) suggests that he cannot. Commentators experienced in this area of legal practice tend to the view that such awards are not competent (Bell: Arbitration 216; Irons and Melville: Arbitration 183; Lord Hope: "Arbitration" (supra) paras 67-68). There is a sound basis for that view, since it might be said that it is implied that an arbiter should resolve all the issues between the parties submitted to him in one final decree arbitral, which may have resulted from an adjustment between competing separate claims (see Pollich v Heatley, (supra) Lord President (Dunedin) at 481). However, this issue does not arise sharply for determination in this case.

[31] An arbiter's finding on expenses is not an "interim" or "part" award. It is not part of the submission made to the arbiter (Pollich v Heatley (supra), Lord President (Dunedin) at 481). It is simply an award ancillary to that on the merits of the submission. Especially in a lengthy and complex arbitration, there may be many steps in the procedure caused unnecessarily by one party. It is reasonable for the arbiter, should he think fit, to make awards of expenses in respect of these steps at the time they occur, since it is then that he will have firmly in mind all the relevant factors. Different considerations may, it seems, apply if the question of expenses is expressly included in the submission (Grampian Regional Council v John G McGregor (Contractors) (supra), Lord President (Hope) at 138). This was not the case here. In any event, all that the arbiter has done is to find the petitioners liable to the respondents in the expenses of a step in the arbitration process, i.e. the amendment process. In due course, that finding requires to be reflected in a decerniture for payment, but, until it is, it is not, on the face of it, enforceable either directly or by decree of implement (Grampian Regional Council v John G McGregor (Contractors) (supra) (Lord President (Hope) at 136, and in "Arbitration" (supra) para 74).

[32] Where an arbiter does decide to make a finding in expenses, it is a matter for him to decide what the level of these expenses might be. He can fix a sum himself, or he can remit the assessment of the appropriate amount, at least in the first instance, to a man of skill, such as the Auditor of the Court of Session, to tax. But in doing that, he requires to advise the Auditor of the basis upon which he is to tax the expenses by reference to a particular scale. Without doing that, the Auditor could not begin his remitted task. It was not disputed that the Court of Session party and party scale could be selected as appropriate, and it was. It was then within the arbiter's discretion to decide whether the scale selected was sufficient, on its own, or whether to apply an uplift to the sums which would otherwise be taxed as reasonable (RCS 42.10). Again, an arbiter can fix the uplift himself, by stipulating a percentage increase or a fixed sum, or he can remit it to the Auditor to assess what a reasonable uplift might be, having regard to certain specified features of a case. There is no reason why a motion for an additional fee should be left until the end of a case. If there were an award of expenses during the currency of a case and, in the normal course, a party had a decerniture for those expenses (RCS 42.1.(1)(b)), he is not obliged to wait until the end of the case before moving for such a fee (cf Masterton v Thomas Smith & Sons (Kirkoswald) (supra), Lord Osborne at 702).

[33] As soon as the Court of Session scale is selected and there are expert witness fees, an arbiter can determine whether the fees of these experts ought to be allowed by certifying the witnesses as skilled. This constitutes a signal to the Auditor that only these witnesses are to be regarded as experts. Otherwise all fees would, in terms of the scale, be payable if the Auditor deemed them to be fair and reasonable (RCS 42.16, Table of Fees, Chapter II, para 1; cf RCS 42.13). Once again, there is no reason why a party should be required to wait until the end of a case before seeking certification. In the Court of Session, under former formulations of the rule (RCS 42.13(2)), certification was only granted where an expert had make investigations to qualify him to give evidence at a prospective proof or jury trial. Thus, it was reasoned in some cases, a proof or jury trial had to have been allowed before certification could be granted (APC v Amey Construction (supra), following Parratt v Ceiling Décor 1998 SC 179). But these formulations have been superseded by a provision that an expert can be certified if it was reasonable for him to investigate or report for any purpose (RCS 42.13.(3)). Even in the Court of Session, therefore, it is possible to apply for certification at any time, where an expert has investigated and reported for whatever reason. An arbiter is not bound by the terms of the Court of Session rules, and he can decide when and if to allow skilled witness fees.

[34] It certainly true that the amount taxed by the Auditor appears to be remarkably high but, until the submission to the arbiter is exhausted, or there has been a decerniture for the amount which has been taxed by the Auditor, it is arguable that the matter of the level of expenses remains before the arbiter for final determination. It may be, therefore, that, if there are objections to the findings of the Auditor upon taxation, a party may be able to air these before the arbiter. But, it the absence of a full argument on this point, the Court's opinion is reserved.

[35] There is another reason why the petitioners' submissions on expenses must fail. This is that the parties agreed that the arbiter could make the award and any necessary ancillary findings. Where parties enter into a submission to an arbiter, they can extend that submission during the course of the arbitration by agreement prior to a decision being taken (Duff v Pirie (supra), Lord President (Robertson) at 88 and 89; North British Railway Co v Barr (supra), Lord President (McNeil) at 106). Furthermore, parties may be barred from objecting to a decision as a result of subsequent actings demonstrating acceptance of the decision (Orrell v Orrell (supra), Lord Deas at 557 and 558). Not only was there no objection to the arbiter dealing with expenses at the time, the petitioners agreed that the arbiter could deal with the expenses of the amendment procedure. There was no objection to his making the general finding on expenses, or the scale of the award, until after the taxation. In all these circumstances, the petitioners cannot now complain about the competency of the award.

[36] It is this last point which also resolves the issue of whether the arbiter was entitled to dismiss the claims upon grounds of irrelevancy. There is no dispute that, if an arbiter has before him a question of disputed fact, he will, if the claim is a relevant, require to hear evidence in order to resolve that question. But an arbiter is also entitled, if he so considers, to reject a claim because it has no sound basis in law; i.e. that it is irrelevant. He does not require to hear evidence on an irrelevant claim, just because that claim contains elements of contested fact (Farrans v Roxburgh County Council (supra), Lord Stott at 337, following Brown v Associated Fireclay Cos. (supra), Lord President (Normand) at 1936 SC 701-2, in turn following Holmes Oil Co. v Pumpherston Oil Co (supra), Lord Watson at 55). Although, as already observed, understanding the arbiter's written reasons is not a straightforward task, it is clear from a reading of them that he did consider the claims to be irrelevant in the legal sense. He was not purporting to decide matters of contested fact without hearing evidence. He did not, for example, have regard to the content of the respondents' experts in order to make his decision. He did not take his decision simply by disapproving of the methodology specified in the petitioners' expert's report. Rather, what he did do was to look, as he was invited to do, at that report to see if it could bolster the content of the petitioners' pleadings, the relevancy of which was concerning him.

[37] At the time of the debate, it was not disputed that the arbiter was entitled to decide matters of relevancy. Both parties had preliminary pleas and both sought to argue them. In that state of affairs, the petitioners cannot now complain that the arbiter did what both parties asked him to do. Even if the decision of 18 May 2007 could be considered to be a part award, it was one which both parties had agreed could be made by the arbiter at the time he made it.

[38] Furthermore, the merits of the arbiter's decision on relevancy cannot normally competently be made the subject of a judicial review. There is a statutory remedy open to the petitioners to challenge the arbiter's proposed decision. That is to apply for a stated case in terms of section 3 of the Administration of Justice (Scotland) Act 1972. The petitioners have used this procedure to challenge the arbiter's decision. Since an effective alternative remedy is available, the Court will not entertain a petition for judicial review to review the merits of that decision (Shanks & McEwan (Contractors) v Mifflin Construction (supra), Lord Cullen at 1129). There are no reasons to do so in this case. The petitioners can raise the various points advanced on relevancy in the hearing on the stated case (see eg ERDC Construction v HM Love & Co (supra)), which is yet to take place.

[39] The petitioners' complaint that the arbiter erred, in "grimly" following Court of Session procedure, cannot be sustained in circumstances in which that is also essentially what he was asked to do. The parties produced elaborate pleadings, incorporating pleas-in-law, which were, in anything, more complex than might be expected in the most formal of Court of Session processes. They were accompanied by extensive written Notes of Arguments and related documents dealing with both substance and procedure. The petitioners themselves invited the arbiter to allow a legal debate on the basis that such a course of action might eliminate the necessity of proof on at least some, if not all, of the claims.

[40] Since, throughout the arbitration, it appears that the arbiter has simply reacted to the requests of both parties, there is nothing in the decisions which he has taken that reveals any form of unreasonableness, procedural impropriety or conduct contrary to natural justice. In so far as the petitioners made complaints about bias, these were not pressed. There is no obvious bias evident in the decisions of the arbiter. The decisions have undoubtedly gone heavily against the petitioners. It may be surprising, stated baldly, for a repudiation of a multi-million pound contract to have caused no relevant loss. But that, of itself, does not demonstrate bias or error. If the arbiter has erred, then he can be corrected in the context of the stated case. For all of these reasons, the reclaiming motion must be refused, although in doing so, it is appropriate that the respondents' first plea-in-law be sustained.