Legal briefing | 06 Mar 2024 |

H1 and another v W and others [2024] EWHC 382 – case briefing

Case Briefing - A sole arbitrator removed on grounds of apparent bias: H1 and another v W and others

In H1 and another v W and others [2024] EWHC 382, the Commercial Court removed a sole arbitrator under section 24 of the Arbitration Act 1996 (the "Act"), on the basis that statements made by the arbitrator regarding the way he would treat expert witness evidence gave rise to justifiable doubts as to his impartiality. The court concluded that the arbitrator gave the firm impression of having already allowed extraneous, illegitimate factors to influence his assessment of evidence which he had not yet heard, whilst not realising that it is an unfair approach to adopt.

Overview of the dispute

This dispute arose between a film company and a film production guarantor (the "Film Company"), and their insurer (the "Insurer"). The Insurer issued an insurance policy to the Film Company, in connection with the filming of a television series. Following an accident whilst filming, the Film Company filed a claim under the insurance policy, which the Insurer rejected.

The Film Company challenged this denial of liability, and the parties eventually proceeded to arbitration in London, before a sole arbitrator nominated by the British Film Institute (the "Arbitrator"). The Arbitrator was described to have expertise in film or television programme production, rather than in law, and did not have any prior experience sitting as an arbitrator.

The parties exchanged witness and expert witness statements in accordance with the Arbitrator's directions. At a procedural hearing prior to trial, the Arbitrator made the following comments with respect to certain of the expert and fact witnesses, which the Insurer relied on in its subsequent application to the Court, for the Arbitrator to be removed:

With respect to the parties' experts, the Arbitrator said to the Insurer's legal counsel:

"… For me, I don’t need to hear any of the expert witnesses. I don’t think they will add any value. I know what they are saying. They are exceptional people in their fields. They are the best, but I don’t need them to say what is normal on a film. I know what is normal on film.

Look, if you want to cross examine the expert witness that is fine by me. but I don’t think we need to listen to them. I know them all personally extremely well on the insured side. I don’t know your expert witnesses. You have an underwriter expert [JY]. But I don’t think he adds much.”

In particular, the Arbitrator made the following comments regarding one of the Film Company's expert witnesses "JJ":

"Three experts [for the insured], [PS] and PR, JJ, I know all three very well, I am extremely good friends with them…

…JJ - in his report states that the role of the stunt coordinator as being in charge of safety on set - he doesn't need to appear. He is one of the top Norwegian producers and what he says is what I will believe but what he says is not how it operates in the rest of the world. He says stunt coordinator is in charge of safety on set in Scandinavia I absolutely believe what he says. But it's not what happens elsewhere in the world. If that's what he said I would accept that.

I will of course reserve my judgement but I have read the statements and I know the professionals. I can say now what I think."

The Arbitrator also made certain comments regarding one of the Insurer's witnesses "JH", which the Insurer also relied on in its application. JH was initially retained by the Film Company to investigate the cause of the accident. At the Insurer's request, JH subsequently provided a witness statement to the Insurer setting out his investigative findings. During the procedural hearing, the Arbitrator asserted to the Insurer's counsel that this witness had inappropriately "switched sides":

"Well look. From my point of view, I believe that his evidence to either party should be disallowed. I don’t think that we should allow it. He cannot change sides half-way through. I think it is absolutely wrong.

Well, when I saw his report I thought it was highly relevant. But I had no idea he is now working for you.

Look, what he said in his statement, his examination, and interviewing after the event is very relevant. But now he has switched sides. I find his action incredible."

The Commercial Court's decision

Mr Justice Calver allowed the Insurer's application, and ordered that the Arbitrator be removed pursuant to s. 24(1) of the Act, with his fees and expenses paid up until the conclusion of the procedural hearing at which the concerning statements were made.

In his judgment, Mr Justice Calver applied the relevant legal test under s. 24(1) of the Act, set out in the Supreme Court judgement Halliburton,[1] the key question being whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.

The Judge agreed that there was an appearance of bias, based on the remarks made by the Arbitrator about the parties' expert witnesses generally, and in particular those made towards the Film Company's expert, JJ. Mr Justice Calver concluded that:

The Arbitrator had remarked that he knew the Film Company's experts extremely well, coupled with the observation that he didn't know the Insurer's expert witnesses. Seen in this context, the Arbitrator's suggestion that it was unnecessary to call any expert witnesses was therefore plainly not an expression of a balanced and impartial view.
A fair minded and reasonable observer would consider that the Arbitrator was saying that he would accept, at face value, the evidence of the Film Company's experts because he knew them to be exceptional in their fields, and that this prejudice in favour of the Film Company's experts would prevent an impartial assessment of the Insurer's expert evidence.
This apparent bias was not cured by the Arbitrator's subsequent, reluctant agreement to the experts being cross-examined.
In particular, the Arbitrator's comments about the Film Company's expert, JJ, would suggest to a fair-minded and informed observer that the Arbitrator did not have an open mind on one of the key issues in dispute, due to the Arbitrator's extraneous view of JJ's reputation as "one of the top Norwegian producers", and that the Arbitrator would believe what JJ says about this key issue "come what may".

On the other hand, Mr Justice Calver did not consider the Arbitrator's remarks about the Insurer's witness JH "switching sides" as capable of leading a fair-minded and informed observer to conclude that there was a real possibility of bias. The Judge agreed that the Arbitrator's remarks undoubtedly "shows the inexperience of the arbitrator", but acknowledged that the Arbitrator ultimately did not exclude JH's evidence based on this supposed switching sides, and concluded that these remarks did not demonstrate any animus against the Insurer, or a closed mind, as opposed to a lack of experience.

        Practical Takeaways
    
Despite the Insurer's successful application under section 24 of the Act, parties to an arbitration should be under no illusions about the prospects of a successful challenge on grounds of bias. Successful challenges are rare, as courts generally take a cautious approach to interfering with the appointment of an arbitrator, who had been appointed pursuant to the parties' arbitration agreement.

There is a high bar to demonstrating bias. The Judge, following existing case law, confirmed that a fair-minded and informed observer would understand that arbitrators in a relatively small industry are likely to have formed acquaintances with others in that same industry, and that parties would take "a fairly robust view" of such matters, and not regard them to impact an arbitrator's ability to act objectively.

On this basis, the Judge concluded that that the Arbitrator's former dealings / relationships with the Film Company's expert witnesses is not a sufficient factor in itself to give rise to any justifiable doubts. It was the Arbitrator's specific comments about how he intended to treat the parties' expert evidence, and his comments about JJ, which gave rise to an appearance of bias.

The Arbitrator's remarks about the parties' expert and fact witnesses, as the Judge pointed out, showed an unfortunate lack of experience and misguidance on legal procedure. The Judge further commented that the Arbitrator's apparent bias "is particularly concerning in a case such as this, where the arbitrator is a sole inexperienced arbitrator (without the tempering influence of two other co-arbitrators), making findings of fact which are not susceptible to appeal (his decision would only be subject to a section 68/69 challenge)".

Whilst arbitrators need not be lawyers (and indeed there may be advantages to appointing an arbitrator with industry knowledge), parties may consider appointing a three-arbitrator tribunal, consisting of co-arbitrators with at least some experience in arbitration or legal practice, in conjunction with an industry expert with little to no experience with legal procedures as an arbitrator.