|Medium Neutral Citation:||Lieschke v Lieschke (Costs)  NSWSC 92|
|Hearing dates:||On the papers|
|Date of orders:||16 February 2023|
|Decision date:||16 February 2023|
|Jurisdiction:||Equity – Commercial Arbitration List|
|Catchwords:||COMMERCIAL ARBITRATION — costs of failed arbitration — s 33D, Commercial Arbitration Act 2010 (NSW) – principles at - – both parties responsible to some extent — costs to be their respective costs in the new arbitration.|
|Legislation Cited:||Commercial Arbitration Act 2010 (NSW) s 33D|
|Cases Cited:||Downer EDI Rail Pty Ltd v John Holland Pty Ltd  NSWSC 581 Traynor v Panan Constructions Pty Ltd (1988) 7 Aust Construction LR 47 Du Toit v Vale (1993) 9 WAR 138 Giustiniano Nominees Pty Ltd v The Minister for Works (Unreported, Full Court of Supreme Court of Western Australia, 1 December 1995) Mond v Berger  VSC 150|
|Parties:||Errol Lieschke (Plaintiff)|
Malcolm Lieschke (First Defendant)
Michelle Lieschke (Second Defendant)
John McGruther (Third Defendant – submitting appearance)
Mr G Burton SC / Mr J O’Sullivan (Plaintiff)
Dr CJ Birch SC / Mr J Mack (First and Second Defendants) Solicitors:
Jarratt Webb & Barrett (Plaintiff)
Walsh Blair (First and Second Defendants)
- HER HONOUR: In Lieschke v Lieschke  NSW 1705, I found in favour of the plaintiff, Errol Lieschke, and set aside an arbitral award pursuant to section 34(2) of the Commercial Arbitration Act 2010 (NSW). The parties sought to be heard in respect of the costs of the arbitration. I have since received written submissions from the plaintiff and the first and second defendants, Malcolm and Michelle Lieschke. The third defendant, being the arbitrator, filed a submitting appearance.
- Malcolm and Michelle accepted that they should pay Errol’s costs of these proceedings. The remaining issue is what order, if any, should be made concerning the costs of the arbitral proceedings. The active parties were amenable to this issue being determined on the papers.
- Section 33D of the Commercial Arbitration Act 2010 provides:
33D Costs of abortive arbitration
(1) Unless otherwise agreed in writing by the parties, if an arbitration is commenced but for any reason fails, the Court may … make such orders in relation to the costs of the arbitration as it thinks just.
(2) For the purposes of this section, an arbitration is taken to have failed if: …
(b) an award made is wholly set aside by the Court. …
There is no equivalent to this section in the Model Law.
- The functions conferred by section 33D of the Act are to be performed by this Court: section 6(1). There is no doubt that the Court has power to make an order as to the costs of the arbitration: Downer EDI Rail Pty Ltd v John Holland Pty Ltd  NSWSC 581 per Stevenson J at .
- Reported cases where such orders have been made are few in number. Traynor v Panan Constructions Pty Ltd (1988) 7 Aust Construction LR 47 applied the identical provision in the earlier Commercial Arbitration Act 1984 (NSW). There, the arbitrator had engaged in serious misconduct. The plaintiff owner sought an order that the defendant builder pay his costs of the failed arbitration by reason of the part played by the builder in the arbitrator’s misconduct. Hunt J declined to make such an order, where the “part played by the builder was, in my view, a very minor one… The part played by the builder himself, although deserving of censure, nevertheless, was not the prime cause of the misconduct on the part of the arbitrator”: at 49.
- In Du Toit v Vale (1993) 9 WAR 138, a builder and a subcontractor participated in an arbitration. The arbitrator did not disclose that he had previously sat on a disciplinary board which had suspended the builder’s licence. The builder did not initially recognise the arbitrator as a member of the board but, following publication of the award, sought to set aside the award on the grounds of bias. The arbitrator actively defended the proceedings. While the builder was successful in setting aside the award on the ground of bias, he failed on other issues.
- In deciding what should happen with the costs of the arbitral proceedings, Scott J took into account that the primary responsibility for the failed arbitration was the arbitrator’s failure to promptly disclose his previous involvement with the builder. However, had the builder questioned the arbitrator’s identity when his suspicions were first aroused at the preliminary conference, the investigations which uncovered the identity of the arbitrator and which were undertaken after publication of the award may have prevented the matter from continuing as it did. The subcontractor had done nothing to contribute to these unfortunate circumstances. In the result, Scott J ordered the arbitrator to pay the subcontractor’s costs of the arbitration, but not the builder’s costs: at 148. As Dodds-Streeton J noted in Mond v Berger  VSC 150; (2005) 21 BCL 125, Scott J’s reasoning suggests that he took the view that responsibility for the failure of the arbitration was the primary criterion for liability to pay its costs: at .
- In Giustiniano Nominees Pty Ltd v The Minister for Works (Unreported, Full Court of Supreme Court of Western Australia, 1 December 1995), an arbitrator was removed where there was a reasonable apprehension of bias. The conduct of the parties to the arbitration was not such as to justify a departure from the normal rule that, where a retrial is ordered, the costs of the original trial should be the costs in the cause on the retrial; “If there was fault, that fault was essentially that of the arbitrator”: page 5. The court also considered it highly improbable that the entirety of the costs had been thrown away, where the parties would be able to avail themselves of that work and refine and limit the outstanding issues. Similarly, in Downer EDI Rail, the costs of arbitral proceedings followed the event in parallel court proceedings: at –.
- In short, section 33D(1) confers a wide discretion on the Court in respect of the costs of the arbitration. The case law suggests, unsurprisingly, that this discretion is exercised having regard to similar considerations as those which pertain when making an order in respect of the costs of proceedings in this Court. In particular, why was the award set aside, to what degree are the parties before the Court responsible for the events which led to the award being set aside, what is likely to happen from here, and to what extent are the costs of the failed arbitration wasted?
- The history of the arbitration is traversed in my principal judgment at –. Relevantly, the matter was referred to arbitration in June 2019. On 10 December 2020, the arbitrator made an interim award in Malcolm and Michelle’s favour on a discrete issue, being whether Errol had transferred various farms to Malcolm as a gift or on trust for a farming partnership between Errol, Malcolm and Michelle. Errol did not cavil with the interim award, which stands. The arbitrator stated in the interim award, “As this is an Interim Determination, the question of any order as to costs is reserved (including the cost of this arbitration thus far)”: Interim Award at .
- Following the interim award, the arbitration embarked on a ‘second phase’, being to take an account of the partnership. The parties had already engaged accounting experts and exchanged expert reports before the interim award. From January to March 2021, the parties progressed towards a final award, including by instructing the accounting experts to revise their reports in light of the interim award.
- Self-evidently, Errol was unhappy with the interim award and retained a new solicitor and counsel, who wished to change the scope of the ‘second phase’ of the arbitration, in particular, by critiquing the historical partnership accounts. As recorded in my primary judgment, on 13 May 2021, Errol’s new solicitor, Robert Jarratt, wrote to the arbitrator requesting an adjournment until after 11 June 2021, as Errol was considering whether to challenge the enforceability of the interim award or, failing that:
… then the Interim Award appears to have overlooked the question as to whether in allocating a beneficial interest in any land to any party, this should carry with it a proportionate share of the burden of owning such land, being liability for loans secured by mortgages used to finance purchase of the lands.
- At the preliminary conference on 14 May 2021, Errol’s new counsel advised that the partnership’s accounts needed to be revisited. The arbitrator regarded this with some scepticism, noting in his letter to the parties:
(Stated at its briefest) Mr O’Sullivan’s reference to “new information on instructions” touching upon contended antecedent Partnership accounts histories (including antecedent to the subject Partnership here) suggested to attract “revisiting”, including in the stated emphasised context of a potential Account resolution. I merely note, but do not necessarily (procedurally or otherwise) accept this very late reference.
- As the arbitrator later recorded in the final award, Malcolm and Michelle’s solicitor “immediately strongly and validly objected to [Errol’s] more recent suggestions of the potential intrusion of purported “new accounting material”: Final Award at . In any event, the preliminary conference was adjourned by consent to 26 July 2021.
- In advance of the preliminary conference on 26 July 2021, Errol’s counsel circulated proposed directions which envisaged Errol issuing subpoenas to solicitors, accountants and bookkeepers. Errol proposed that the parties provide discovery of financial records since inception of the partnership. The arbitrator declined to make these directions. Instead, the arbitrator directed: (emphasis in original)
In the light of, and in the context of, all of their Accounting Reportage in this Arbitration to date each of the Accountants, specifically Messrs Gardner Brown and Vincents (Haley) are to confer, meet and/or liaise to discuss any material differences in their final dissolution of Partnership Accounts/Reports, in particular as and since and arising from the Interim Determination herein of 10 December 2020, with every good faith and strident endeavour to agree or concur on the figures that can be reasonably arrived at (in respect of any such material differences), and having regard to:
• re-adjusted accounts as at the date of dissolution, namely 28 February 2018;
• as at 30 June 2020; and
• any accrued/accruing re-adjustments as may, or may not, be applicable post 30 June 2020.
- That is, there would be no re-opening of the partnership accounts. Rather, adjustments would be made to the existing partnership accounts strictly along the lines anticipated by the existing experts in their existing reports and in light of the interim award.
- Errol’s solicitors continued their efforts to analyse the partnership accounts and instructed a further accounting expert, Guy Hammond. By 18 August 2021, Mr Hammond had prepared a draft opinion, which identified significant errors in the partnership accounts. On 24 August 2021, Errol’s existing accounting expert, Mr Haley, participated in a telephone conference with Mr Hammond. Mr Haley said that if any of the issues raised by Mr Hammond were true and correct, then Mr Haley’s interim report provided to the arbitrator was incorrect and the accounts of the partnership would need to be re-done from inception as all of the assumptions in the financial records and reports were incorrect and could not be relied upon.
- On 25 August 2021, Malcolm and Michelle’s solicitor advised that their accountant, Mr Brown, had contacted Mr Haley in accordance with the arbitrator’s directions. Mr Haley had advised that he was not able to discuss the differences “which he agreed were not substantial, because he had been awaiting another accountant’s report.” This was said to be not in accordance with the arbitrator’s directions; objection would be taken to any other accountant’s material being relied upon by Errol. It was suggested that Errol comply with the arbitrator’s directions. The arbitrator also promptly replied to the parties:
My Directions of 30 July specifically facilitated and directed that only the Accountants Gardner Brown and Vincents (Haley) were to liaise and report as set out in items 2 and 5 of those Directions.
Those Directions did not and do not encompass any liaison with them, at the behest of either party, from any third or other accountant.
Accordingly no “other accountant” report is to be submitted to or discussed with Mr Haley (or Gardner Brown). Any such (if submitted) is to be ignored by them for the purposes of the Directions as made.
Accountant’s material and liaison are singularly confined to the mutual contributions of Gardner Brown and Vincents (Haley) in accordance with the Directions referred to.
- Errol’s solicitor forwarded the arbitrator’s email to Mr Haley and advised him to comply with the arbitrator’s further directions but did so “under protest” where Errol did not intend to submit a further report from Mr Hammond but, rather, for Mr Haley to consult with Mr Hammond for the purposes of preparing to confer with the other expert. The arbitrator was asked to reconsider the direction to Mr Haley so as to permit him to consult with Mr Hammond. The arbitrator did not agree, responding on 26 August 2021: (emphasis in original)
My Direction 2 of 30 July is and remains for the Accountants, namely Gardner Brown and Vincents (Haley) only, to discuss/liaise themselves mutually, and quite specifically, in the context of “…all of their Accounting Reportage in this arbitration to date.” Further, this clear Direction (and its related Direction 5) were made after full discussion was had at the Teleconference, including your counsel’s then referring to your party obtaining a new “forensic accountant’s report”. As a unilaterally announced measure, it was immediately objected to by the other party and, then and now, declined by me as Arbitrator.
To reiterate, the above is clear and inherent within the Directions as specifically made.
Further for abundant completeness, in the immediate context of this matter, respectfully, the proposition expressed in your second last sentence commencing “In our view…” is incorrect and runs counter to specific Arbitral Directions. In brief, the nominated Accountants as above are to move ahead with their designated mutual exercise as per Directions, and in which exercise I express continued appreciation. They are to do so without any intervention or interposition of any third or other party.
I do not propose to communicate further on this topic …
- On 27 August 2021, the parties attended a preliminary conference. An extension of time was granted to permit Mr Haley and Mr Brown to confer in accordance with the arbitrator’s directions already made. In the arbitrator’s letter to the parties, he recorded:
2. The submission (by counsel for [Errol]) for Mr Haley (in the above exercise) to be approachable by, or for any contribution by, a third or other party, (accountant or other) was objected to by [Malcolm and Michelle]. The submission was and is declined.
3. For abundant certainty … no third or other party or intermediary (accountant or other) is to interpose, liaise with, report to, or make contact with either of the directed Accountants, nor vice versa.
- A further preliminary conference took place on 17 September 2021, at which the arbitrator adjourned the matter to permit the completion of Mr Haley’s report. In his report to the parties on the conference, the arbitrator stated: (emphasis in original)
2. The conjoint exercise of the Accountants remains for completion, specifically and only, namely that of Gardner Brown and of Vincents (Haley) as singularly and specifically prescribed within items 2 and 5 of my Directions of 30 July 2021, and as within Directions 1-6 of my Directions of 30 August 2021, other than for the extensions of time as to that exercise herein granted. The specific parameter of that exercise from each Accountant, and as to their joint report, as inherent within the above antecedent Directions is again emphasised.
- On 13 October 2021, Mr Haley and Mr Brown signed a joint report based on the financial statements for the partnership that had been provided to them. Essentially, the experts agreed that the differences between them were immaterial and it was reasonable to adopt the mid-point. Mr Haley noted that he had been provided with a letter of 7 September 2021 from Mr Jarratt, which asked him to consider various items not properly accounted for in the financial statements. Mr Haley had also been provided with Mr Hammond’s opinion as to the incorrect accounting in the preparation of the financial statements. Given the arbitrator’s direction that no other accountant’s report was to be submitted or discussed with Mr Haley, the experts noted that their reports had been prepared on the financial statements of the partnership and no consideration had been given to the validity of the issues raised by Mr Hammond or in Mr Jarratt’s letter of 7 September 2021.
- On 20 October 2021, the parties participated in a preliminary conference with the arbitrator. The following directions were made: (emphasis in original)
1. Each party is to submit to me in writing within twenty one (21) days of this date (17 November 2021) brief submissions:
(a) on what Orders or Award, in clearly expressed terms, should be made in the final determination as an Award in the matter based singularly and only on the Joint Accountant’s Report; and
(b) that those submissions, including as to the clearly expressed terms of a final Award, be cast singularly upon the Joint Accountant’s Report (“Partners Capital Accounts”) position as at 30 June 2021 ( as set out within paragraph 2.4 of that Report); …
- Malcolm and Michelle’s solicitor expressed concern as to the potential breach of arbitral directions. The arbitrator later noted in the final award that the suggestion of any intrusion by a third party into the joint expert report “validly met with immediate protest” from Malcolm and Michelle’s solicitor: Final Award at . The solicitor’s concern was shared by the arbitrator.
- On 2 November 2021, Malcolm and Michelle’s solicitor provided final submissions, submitting that the partnership accounts be calculated in accordance with the joint expert report such that Errol was obliged to pay the partnership $1,034,686 whilst Malcolm was to pay $416,735. In addition, Errol should pay Malcolm and Michelle’s costs of the arbitration.
- On 19 November 2021, Errol provided his final submissions. Errol submitted that the arbitration had miscarried and the arbitrator should decline to make any orders. Under protest, Errol submitted that if the arbitrator was to make orders or an award based only on the joint expert report, then the orders proposed by Malcolm and Michelle, including as to costs.
- On 28 January 2022, the arbitrator delivered his arbitral award. The arbitrator was highly critical of Errol’s attempt to challenge the partnership accounts more broadly than had been considered by the experts retained before the interim award; “This was against significant and repetitive Respondent objection, and against my own sustained Directional warnings that any such purported “new material” was not to be introduced …”: Final Award at . The arbitrator noted, “as the Respondents accurately submit”, that the joint expert exercise had now been “precisely down as directed now to conclusion”: at . The arbitrator also noted that Errol’s “last-minute” approach “drew strident and immediate protest from the Respondents, and in fact also why it drew my specific, and necessarily repeated, Directions against any such attempt”: Final Award at .
- On 28 January 2022, the arbitrator made final orders in the form sought by Malcolm and Michelle. The arbitrator ordered that Errol pay their “…costs of and incidental to the Arbitration on the ordinary basis as agreed or assessed”: Final Award at . Where the costs of the interim award had stood reserved, those costs were now to be paid by Errol.
- I ultimately concluded that Errol was not given a reasonable opportunity to present his case such that the award ought be set aside. The arbitrator did not consider the practical injustice that may be occasioned if Errol instructed a new expert or was precluded from relying on such evidence, how that injustice could be remedied, or whether the views of a new expert came too late such that Malcolm and Michelle could not meet it. Nor did the arbitrator appear to have taken into account that “disputes are best determined on their true merits”. I declined to suspend the final award to permit the arbitrator to continue the arbitral process, where no reasonable person in Errol’s position could expect that the arbitrator would treat him fairly.
- As neither party sought any relief in respect of the interim award in these proceedings, the plaintiff submitted that there should be no order as to costs with respect to the arbitral proceedings up to the date of that award, being 10 December 2020. The plaintiff sought an order that the defendants pay his costs of the arbitral proceedings from 11 December 2020 on, where the arbitral proceedings were said to have miscarried at the behest of the defendants. Following the making of the interim award, the arbitral proceedings were “fully occupied with gathering the Accountants/Joint Accountants report material together” (Final Award at ) and the matters reserved for determination by the final award were “The residual accounting or other adjustment factors…” (Final Award at –, ). The defendants opposed the plaintiff’s expert consulting with a further accounting expert. The defendants thereby led the arbitrator into error and reinforced the arbitrator’s continuance in that error by strongly urging him to deny the plaintiff a reasonable opportunity to present his case, as recorded in the Final Award at , , ,  and . Had the defendants not so acted, the arbitration would not have miscarried for the reasons it did.
- The defendants opposed the costs order sought by the plaintiff and sought, instead, that the costs order made by the arbitrator in the final award be varied as follows: (amendments marked)
The Applicant, Errol Wayne Lieschke, is to pay the Respondents, Malcolm Jade Lieschke and Michelle Joy Lieschke, costs of and incidental to the interim award dated 10 December 2020
Arbitration on the ordinary basis as agreed or assessed and all other costs of the Arbitration be reserved to any new arbitrator appointed pursuant to cl 24 of the Partnership Agreement.
- The defendants submitted that, while the arbitrator had reserved the question of costs of the interim award until the final award, he then determined costs pursuant to section 33B of the Commercial Arbitration Act 2010 (NSW) for the whole of the arbitration, which included those costs of and incidental to the interim award. As such, the costs of and incidental to the interim award had already been determined and were the subject of an arbitral order (which, I note, has been set aside). For this determination to be disturbed, this Court would have to displace the costs order, at least insofar as that order concerned the costs of and incidental to the interim award. As neither party sought to disturb the interim award, the costs of and incidental to the interim award should not be disturbed. Where the defendants were successful in the interim award, there was no just reason for the defendants not to have their costs of the interim award.
- The defendants submitted that the costs after the interim award should be reserved to the new arbitrator as there had been “no event” relating to the second part of the arbitral proceedings. Rather, the arbitration simply failed. It was too early to say whether the plaintiff would do any better in the new arbitration on the accounting phase of the arbitration. It would be premature for this Court to award the plaintiff its costs of their new expert, Mr Hammond. Fundamentally, the arbitration failed due to a procedural error made by the arbitrator.
- Unlike the authorities reviewed at the outset, there is no question of misconduct by the arbitrator in this case. Nor, for that matter, did either party seek an order that the arbitrator pay the costs of the failed arbitration.
- Rather, as I noted in my principal judgment, Errol’s expanded attack on the partnership accounts sought to be advanced after the interim award was obviously not welcomed by the arbitrator. Nor was it welcomed by Malcolm and Michelle, where they had been the successful parties under the interim award, could soon expect finality with a substantial payment from Errol and where Errol’s new case was unlikely to advance their interests. In the result, the arbitrator held Errol to the course directed at earlier stages of the arbitration.
- The responsibility for failing to conduct the arbitral proceedings in accordance with the requirements of the Act is, of course, that of the arbitrator. But it is apparent from the history of the arbitration that the arbitrator, in many ways, did not act alone but in response to Malcolm and Michelle’s submissions and requests. Those submissions appear to have been put in most emphatic terms, if the arbitrator’s description is to be accepted. As the arbitrator noted in the final award, Errol’s “last-minute” approach “drew strident and immediate protest from the Respondents, and in fact also why it drew my specific, and necessarily repeated, Directions against any such attempt”: Final Award at .
- On two occasions, where Malcolm and Michelle’s solicitor considered that Errol was persisting in his efforts to analyse the partnership accounts more extensively, including by retaining Mr Hammond, Malcolm and Michelle’s solicitor brought the matter to the attention of the arbitrator. As a result, further directions were made confirming the arbitrator’s insistence on the course which the parties were permitted to take. At the time, this was no doubt in the interests of Malcolm and Michelle (at least in the short term). However, overall, I consider that their stance contributed to the problems which led to these proceedings and the award being set aside.
- It would have been an easy matter for Malcolm and Michelle’s legal representatives to turn their mind to what would actually be involved in meeting the more expansive case which Errol wished to pursue and to make a more considered submission to the arbitrator as to the appropriate way forward to resolve the dispute between the parties, including further issues which had since come to light. In that event, the arbitrator may well have dealt with Errol’s request by having regard to the relevant factors to be taken when considering, in effect, an application to amend one’s case. But all defendants remained in ‘lock step’ on this subject to the end of the arbitration.
- As such, I consider that Malcolm and Michelle bear some responsibility for what happened. It may be appropriate in those circumstances for them to contribute to Errol’s wasted costs of the second stage of the arbitration. As far as I can tell, the problem began at the preliminary conference on 14 May 2021 and continued until the final award. Where the consultation by accounting experts did not then proceed in a manner which may otherwise have been the case if Errol had been permitted to advance additional subjects for consideration, their consultation and reports have been wasted.
- Nor do I accept Malcolm and Michelle’s submission that these costs should be determined by a new arbitrator, depending on whether Mr Hammond’s views are ultimately accepted. It will be a matter for the new arbitrator to decide how to progress the arbitral process, and I expect that Mr Hammond’s draft opinion will be substantially overtaken by subsequent events. More importantly, I do not wish to leave a new arbitrator to determine this matter where I am not apprised of the relevant considerations. I would prefer that the new arbitrator starts with a ‘clean slate’.
- I am also mindful that the manner in which Errol’s new solicitor and counsel sought to advance his case may have contributed to the problem. As is apparent from my principal judgment and the final award, this may have contributed to the arbitrator taking a particularly dim view on requests made on behalf of their client and led to additional cost when, for example, it became apparent that Mr Hammond’s report had been inadvertently forwarded to Mr Haley, notwithstanding the arbitrator’s direction.
- Overall, I consider it “just” in the circumstances that the parties’ costs of the arbitration from 14 May 2012 on be their respective costs in the cause in the new arbitration such that, if they are successful in the new arbitration, they are entitled to those costs from the other. The problem, however, is to define a measure of success in the new arbitration where – win, lose or draw – one party will be paying money to the other following the accounting process. I consider that an appropriate measure of success is an improvement on one’s position from the amounts the party was required to pay in the arbitral award which I have set aside. If Errol does better, then Malcolm and Michelle should pay his costs of this regrettable chapter in the arbitral process. If Errol does no better, then he should pay Malcolm and Michelle’s costs where, despite the upsets and travails of his expanded attack on the partnership accounts in the second ‘phase’ of the arbitration, it was for nought.
- So far as the costs of the interim award are concerned, it is difficult to see why Errol will not be obliged to pay Malcolm and Michelle’s costs of that award. There may, however, be matters which Errol may wish to put to the new arbitrator as to why a different result should pertain, for example, non-acceptance of a commercial offer more favourable than the ultimate result. I do not know, but consider that the costs of the interim award should remain reserved for determination by the new arbitrator at the conclusion of the arbitral process.
44. For these reasons, I make the following orders:
- Order the first and second defendants to pay the plaintiff’s costs of these proceedings.
- NOTE that the costs of the Interim Determination remain reserved to any new arbitrator appointed pursuant to clause 24 of the Partnership Agreement.
- Pursuant to section 33D(1) of the Commercial Arbitration Act 2010, order the parties’ costs of the arbitration from 14 May 2021 to 28 January 2022 be their respective costs in the cause in any new arbitration:
- to be paid by the plaintiff in the event that the final award in any new arbitration is no more favourable to him than the award set aside on 16 December 2022; and
- to be paid by the first and second defendant in the event that the final award in the new arbitration is more favourable to the plaintiff.