Martin & Ors v Harris

Where an arbitration costs award is consequential on the substantive award, it falls with that award when the substantive award is set aside. This applies whether the costs award appears in the same document or in a separate supplementary award. Under section 69(7) of the Arbitration Act 1996, the court’s powers to confirm, vary, remit or set aside an award extend to a consequential costs award forming part of the arbitrator’s overall final award. A separate appeal against the costs award is not required where the court has jurisdiction over the substantive appeal. Any fresh determination of the arbitration costs should ordinarily be remitted to the arbitrator where that is fairer and more economical.

The appellants had successfully challenged the substantive arbitration award, which the court set aside in an earlier judgment, [2019] EWHC 1962 (Ch). The arbitrator had made a separate costs award in favour of the respondent, together with an interim payment on account, while anticipating that the costs position would be revisited if the substantive award were overturned.

The respondent accepted that the substantive award had been challenged but argued that the court had no jurisdiction to set aside or vary the unappealed costs award, or to make a fresh order for the arbitration costs. The central issues were whether a separate appeal was required and whether section 69(7) of the Arbitration Act 1996 extended to the consequential costs award.

1. Jurisdiction. The court had jurisdiction to deal with the costs award. There was no requirement for the appellants to issue a separate appeal or amend the claim form specifically to challenge it. Sections 67 and 68 of the Arbitration Act 1996 were irrelevant, and there was no basis under section 69 to challenge the costs award independently for error of law. The costs award was nevertheless consequential on the substantive appeal.
2. Costs award falling with substantive award. The principle stated in Merkin’s Arbitration Law, and supported by Davis v Witney UDC (1899) 15 TLR 275, was correct. A costs award consequential on the substantive award falls when the substantive award is set aside. The principle applies whether costs are contained in the same instrument or in a separate award. The two documents were properly treated as Parts I and II of one overall final award.
3. Section 69(7). The powers under section 69(7) to confirm, vary, remit or set aside an award extended to the consequential costs award. It was unnecessary to imply a separate ancillary statutory power to make a costs order. The court therefore had power to set aside, vary or remit the costs award.
4. Remittal. The costs award was set aside. The question whether the respondent should pay all or only part of the arbitration costs was remitted to the arbitrator, who was familiar with the arbitration and had deferred detailed assessment. The starting point was that the respondent should pay the appellants’ arbitration costs, consistently with section 61 of the Arbitration Act 1996, subject to submissions and evidence on the proper amount. The costs of the hearing were costs in the case.

The substantive arbitration award was set aside by the same court in [2019] EWHC 1962 (Ch). This judgment determined the consequential issue concerning the arbitrator’s separate costs award. Permission to appeal was not pursued.