C Ltd v D & X

Where an arbitration challenge becomes unnecessary because an arbitrator resigns, resignation alone does not establish that the claimant was successful for costs purposes. The court must assess objectively whether the resignation substantially conceded the claim, including the reasons for it.

Where substantive proceedings end without trial and the merits are not tolerably clear, the usual outcome is no order as to costs, subject to all the circumstances, including conduct and settlement offers. Removal of an arbitrator is an extreme remedy. Apparent bias is assessed objectively by asking whether the fair-minded and informed observer would conclude that there was a real possibility of bias, considering the circumstances cumulatively.

C applied under section 24 of the Arbitration Act 1996 to remove X as arbitrator in an LCIA arbitration between C and D. The application alleged that X had misrepresented arbitration experience in a curriculum vitae and had responded misleadingly and defensively when questioned about that experience.

X resigned during the proceedings, after C referred the matter to the Solicitors Regulation Authority. The substantive removal relief was therefore unnecessary, but C pursued costs against X and D, including costs incurred in the prior LCIA challenges. The central issues were whether C was the successful party, whether the section 24 application would probably have succeeded, and what costs order was just.

1. Disposition. C was not the successful party against either defendant. X’s resignation was objectively attributable to the SRA referral and its practical consequences, rather than to the merits of the section 24 application. C’s application for its costs failed.
2. Where proceedings are resolved without trial, the court may determine costs by examining the underlying merits where it is tolerably clear who would have succeeded. Otherwise, and absent a good reason, the appropriate fallback is no order as to costs. The court must consider all the circumstances, including conduct and settlement offers, under CPR 44.2.
3. The section 24 application was unlikely to succeed. Removal is an extreme remedy, likely only in the rarest cases. The test under section 24(1)(a) is whether the fair-minded and informed observer, having considered the facts and relevant arbitral context, would conclude that there was a real possibility of bias. The assessment is objective and cumulative.
4. X’s alleged lack of prior arbitral appointments, the contents of the CV, and the 1 May response did not establish justifiable doubts as to impartiality. Nor did they amount to a failure properly to conduct the proceedings or cause substantial injustice under section 24(1)(d). The court also considered it likely that the LCIA had known of X’s limited prior experience.
5. Section 29 of the Arbitration Act 1996 did not in principle prevent costs being awarded against an arbitrator who opposed a section 24 application, but such awards were extremely rare. This was not an exceptional case comparable to Cofely v Bingham.
6. C had rejected reasonable offers to resolve the matter on a each-party-bears-own-costs basis. Justice was best served by ordering C to pay X’s junior counsel’s costs of the section 24 application, with no other order as to costs.

First-instance decision. No prior appellate decision is stated in the judgment.