Referee retained in DCC Brickkiln row

A BID to remove a highly-respected arbitrator in a dispute between Derry City Council and local firm Brickkiln over a disputed waste contract has been thrown out by the High Court.

Professor Stephen Willetts was brought in to try to settle differences between the two parties last May.

The Council has stopped paying Brickkiln to collect and dump the city’s waste under a contract the waste firm won in 2007.

It claims third party waste was being dumped whilst incorrectly labelled municipal waste.

Now the High Court has thrown out an application to remove Professor Willetts as arbitrator in the ongoing dispute.

Back in April 2007, Brickkiln Ltd. won a contract to set up a facility for the receipt of municipal waste and thereafter transfer the waste to a landfill site.

Differences arose, however, in the summer of last year when Strabane District Council “allegedly alerted DCC to a discrepancy in the delivery of waste to the landfill site, which had been billed to SDC when it should have been billed to DCC.”

Lawyers for Derry City Council claimed “it received information that waste was being delivered to the landfill site marked as belonging to the applicant DCC, when in fact it belonged to a third party.”

Derry City Council claimed it was being charged for the transfer and disposal of this third party waste.

The High Court was told that the Council retained accountants to review the contract and contended that the “effect of the report was that waste, not belonging to DCC, was being delivered to the landfill site incorrectly on the basis that it was the waste of DCC.” All of these allegations are denied by Brickkiln Ltd.

Despite this a letter was sent to the waste firm just over a year ago “setting out the areas of concern and stopping payments to it thereafter.”

But according to Derry City Council, Brickkiln said that because it did not operate an overdraft policy with its bank “the delay in payment was causing a serious problem particularly in relation to a payment to HMRC.”

There followed what was referred to as an “impugned payment” from Derry City Council to Brickkiln.

The Council paid over £100k to the company but claimed it did so under protest and only to protect services to the public in Londonderry.

It also claimed it intended to claim back the money at a future date.

The High Court was told that on April 11 this year Derry City Council wrote to Brickkiln outlining its position concerning this “the impugned payment.”

“Further to your request by letter dated 5 April 2012, I would advise that Derry City Council is willing to make a further payment on account of £100,366.89 plus VAT of £20,073.38 making a total of £120,444.27 which will be paid into your bank account on Friday 13 April 2012,” the Council wrote.

But it added the proviso that the payment was being made “completely without prejudice to the outstanding issues between the parties, and without any admission of liability by the Council.”

Equally, “the Council reserves the right to recoup these monies and would like to make it clear that this payment is only being made strictly under protest to ensure that the service to the general public is not interrupted.”

Brickkiln contended that on April 11, 2012, a sworn affidavit was received from Brickkiln and more especially from the accountants of Brickkiln indicating that the VAT liability to HMRC as of April 2, 2012 was £151,365.69.

In May 2012 Professor Willetts was appointed as an arbitrator and provided a detailed letter confirming his instruction and issuing certain directions.

One of the directions included the applicant providing a Statement of Case and such a statement was provided on June 21, 2012.

In the course of disclosure, Brickkiln revealed the impugned payment and thereafter the letter of April 11, 2012 to the arbitrator.

Last month Derry City Council applied to the High Court to remove Professor Willetts as arbitrator apparently because he knew about the payment from the Council to Brickkiln and that this could somehow prejudice his judgement.

Amongst the Council’s arguments were that “the arbitrator would, even subconsciously, doubt the veracity of DCC’s witnesses” and that “knowing that a substantial payment had been made to Brickkiln, would be suspicious as to whether or not DCC intended to contest the matter fully and be more inclined to reach a compromise.”

Lawyers on behalf of Brickkiln contended that Derry City Council’s “articulation of a lack of confidence in the arbitration is unduly subjective and falls a considerable way short of the legal threshold.” They also referred to Professor Willetts’ wealth of experience and qualifications.

The High Court Judge presiding largely agreed with counsel for Brickkiln and threw out the application, stating: “I am not satisfied that the fair-minded and informed observer would have concluded that there was a real possibility of Professor Willetts being biased in this case as a result of the impugned correspondence.”

The Judge stated that the correspondence between the Council land Brickkiln “makes it crystal clear that DCC is not only paying this money under protest, but is doing for the sole purpose of ensuring that the service to the general public is not interrupted.

“Not only is this a noble motivation which if anything would prejudice an arbitrator in favour of DCC but could not cause any informed arbitrator to consider that the money was being paid for any other reason or that it represented a concession on the part of DCC.

“Far from being a lodgement which could influence the question of costs in the event of a decision less than the money proffered it expressly states that the monies must be used solely for the payment to HMRC and that the council reserves the right to recoup these monies.

“It is inconceivable that the fair minded observer reading this correspondence could ever have conceived of the arbitrator construing this as a lodgement much less any admission of a liability to pay.”

The Judge also referred to Professor Willetts’ experience and expertise, stating: “The fair minded observer would note that Professor Willetts is a highly experienced well qualified arbitrator according to the affidavit evidence and would conclude that he would have no difficulty grasping the motivation which generated this sum paid.

“Any conscious or subconscious view formed by him that somehow it acknowledged a liability to pay Brickkiln would be perverse. In any event any arbitrator is bound to contemplate the possibility of offers being made even in instances where liability is hotly contested for the purpose of saving costs in the long run and for buying off a risk however remote that might be.”