Arbitration Court Procedure

 

Cases

Gleeson v. Grimes

[2002] IEHC 108 (1 November 2002) Finlay Geoghegan J1.      This is an application brought by the second named defendant for an order pursuant to Order 56 rule 2 of the Rules of the Superior Courts staying these proceedings as against the second named defendant pursuant to the provisions of section 5 of the Arbitration Act, 1980.

2. Section 5(1) of the Arbitration Act provides:-
3. – (1) If any party to an arbitration agreement, or any person claiming through or under him, commences any proceedings in any court against any other party to such agreement, or any person claiming through or under him, in respect of any matter agreed to be referred to arbitration, any party to the proceedings may at any time after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings
4. The plaintiffs oppose the application upon the grounds that a step has been taken in the proceedings and hence the second named defendant is no longer entitled to the order sought. The alleged step is the request made to the Court by the second named Defendant in paragraph 7 of the affidavit grounding this application. Therein the second named Defendant stated
5. The works were intended to be carried out and were in fact carried out by McQ Construction Limited. Payments in respect of the works were made to McQ Construction Limited. In defending these proceedings I will be asserting that I have been wrongfully joined as a Defendant. I am willing to consent to the issue of who the contracting party was being determined at arbitration. However, if the Plaintiffs, wish the issue of whether or not I am the party with whom they contracted to be determined as a preliminary issue to this application, I am willing to consent to this Honourable Court so doing if it is deemed by this Honourable Court to be an issue necessary and consequential to the determination of the application for a stay. In so consenting I am not waiving my right to a stay pursuant to the Arbitration Act, 1980 or taking any step in these proceedings inconsistent with the application for a stay.
6. When the matter came on for hearing before me Counsel for the second named defendant indicated that the second named defendant was no longer seeking to assert that he was not the party to the contract. Quite clearly he could not do so and pursue the application for a stay as the basis of such application is that the proceedings relate to a contract in which there is an enforceable arbitration clause. Counsel for the plaintiffs submitted that it is now too late to withdraw the issue as to whether the second named defendant or McQ Construction Limited was the party to the contract. It was submitted that the second named defendant having sought to invoke the assistance of the Court in paragraph 7 of the affidavit must be regarded as having taken a step in the proceedings and was now precluded from pursuing his application for a stay. Counsel for the plaintiffs made this submission in reliance upon the decision of O’Hanlon J. in MacCormac Products Limited v. Monaghan Co-operative Limited 1988 I.R. 304 where at p. 306 he stated:

“It appears to me to be the clear intention of our legislation on arbitration that a party to an arbitration agreement is put to his election to proceed on foot of that agreement, or to concur in a resort to court proceedings to determine disputes, and if he takes steps which may be regarded as invoking the aid of the court he may well find that he has burned his boots if the other party to the arbitration agreement prefers to retain the matter in court instead of going back to arbitration”.

5. I agree with that statement of principle but do not consider this decision to be of assistance to the plaintiffs in these proceedings. In MacCormac Products Limited the steps taken by the plaintiff therein prior to the application for a stay included the application for and obtaining of interim and interlocutory injunctions. In those proceedings O’Hanlon J. did not have to consider the issue which arises here namely where a party brings an application for a stay and simultaneously with that application may be considered to have alternatively or conditionally sought the assistance of the Court is he precluded from obtaining a stay.
6. Of assistance are the decisions of Jacob J. in the English High Court and the Court of Appeal in Capital Trusts Investments Limited v. Radio Design T.J., A.B. and Others 2001 3AER 756 affirmed on appeal at 2002 2AER 159. Those decisions concerned an application for a stay under similar English Arbitration provisions where the applicant for the stay had also brought an application for summary judgment in the event that the stay application was unsuccessful. It was held that a party who has initiated an application for a stay pending an arbitration has not taken a “step” in the proceedings within the meaning of the relevant U.K. provision if he, either simultaneously or subsequently, invokes or accepts the courts jurisdiction provided he does so only conditionally on his stay application failing.
7. In reaching this conclusion, Jacob J. relied inter alia on a passage in Mustill and Boyd Commercial Arbitration (second edition 1989) p. 474 approved of by Woolf MR in Pattel v. Pattel 2000 Q.B. 551 where the author stated:

“The reported cases are difficult to reconcile, and they give no clear guidance on the nature of the step in the proceedings. It appears, however, that two requirements must be satisfied. First, the conduct of the applicant must be such as to demonstrate an election to abandon his right to stay, in favour of allowing the action to proceed. Second, the act in question must have the effect of invoking the jurisdiction of the court.”

8. Jacob J. also referred to two statements in Merkin Arbitration Law 1991 p. 6-15 approved of by Otton L.J. in Pattel v. Pattel where it is stated:

“The old authorities, which remain good law under the 1996 Act, establish the following propositions…

(e) An act which would otherwise be regarded as a step in the proceedings will not be treated as such if the applicant has specifically stated that he intends to seek a stay… the right to apply for a stay will also be lost if the defendant in the judicial proceedings has expressly or impliedly represented that he does not intend to refer the issues in dispute to arbitration. The matter is determined by the usual rules applicable to estoppel, i.e. has the defendant unequivocally represented that there will be no reference to arbitration, and has the plaintiff conducted his affairs on the basis that the matter will be determined by the court, in reliance on that representation”.

9. The Court of Appeal also relied on these statements of principles and stated at p.175

“In Merkin’s words, approved by Otton LJ, the application made it clear that it was specifically seeking a stay with the result that a step which would otherwise be a step in the proceedings, namely an application for summary judgment s not so treated.”

10. These statements of principle appear to reflect the law in this jurisdiction and are applicable to the facts of this case. The second named defendant in paragraph 7 of the grounding affidavit to this application makes it quite clear that he intends pursuing the application for a stay and it does not appear to me any reasonable interpretation of what is stated therein that it could be found to be conduct which demonstrates an election by the second named defendant to abandon his right to a stay.
11. Accordingly I hold that the second named defendant in making the averments in paragraph 7 of the affidavit grounding the application for a stay cannot be considered as having elected to abandon his right to a stay. In such circumstances it is therefore unnecessary to consider whether the statements made therein have the effect of invoking the jurisdiction of the court as required to constitute a step in proceedings.
12. Counsel for the plaintiffs also sought in oral argument to raise an issue as to whether or not the agreement relied upon by the second named defendant as incorporating the arbitration clause was the agreement which governed the works in respect of which the claim is sought to be made in these proceedings. The grounding affidavit of the second named defendant clearly identifies the contract alleged to have been entered into as being a contract executed on the 8th of July, 1999 and incorporating the RIAI conditions from the 1996 edition. The replying affidavit from the first named Plaintiff does not dispute this and on the contrary at paragraph 5 refers to the execution of the RIAI conditions on the 8th of July, 1999. Having regard to those facts it does not appear to me open to Counsel for the plaintiffs to seek to raise any such argument at the hearing of this application.
13. Accordingly I grant the order sought pursuant to Order 56 rule 2 of the Rules of the Superior Courts staying the within proceedings as against the second named defendant pursuant to the provisions of section 5 of the Arbitration Act, 1980.

 

 

 

Redahan v. Minister for Education and Science & Ors

[2005] IEHC 271 (29 July 2005)JUDGMENT of Gilligan J. delivered the 29th day of July, 2005.

 

This matter comes before the court by way of a notice of motion in which the thirteenth named defendant, Michael MacNamee, seeks the following reliefs.

 

1. An order discharging the thirteenth named defendant from these proceedings.
2. Further or in the alternative an order pursuant to O.19, r.28, striking out the plaintiff’s claim against the thirteenth named defendant herein for damages in negligence on the ground that the plaintiff has no such cause of action against the said defendant and the said claim is frivolous and vexatious.
3. Further or in the alternative an order pursuant to O. 34, r.2 directing that there is a question of law arising in the plaintiff’s proceedings against the thirteenth named defendant herein which should be tried as a preliminary issue or raised for the opinion of this Honourable Court by way of special case or as otherwise directed and that the within proceedings against the thirteenth named defendant be stayed pending the outcome.
4. Further or other relief.
5. An Order providing for the costs of and incidental to the proceedings and the application herein.
6. Factual Background

 

The thirteenth named defendant who is a Barrister-at-Law was appointed arbitrator in relation to a matter involving the appointment of a school vice principal pursuant to an agreement as reflected in a circular letter, generated by the first named defendant, known as CL15/97 which said circular letter regulates the appointment of teachers to posts of responsibility in community and comprehensive schools, prescribes the means by which appointment are to be made, and sets out strict criteria as the basis of assessment of candidates. CL15/97 also provides for an appeal procedure whereby an unsuccessful candidate is permitted to challenge the decision of the selection committee to appoint a successful candidate. Such appeals are referred to an arbitrator who is jointly appointed by the teachers and management unions and whose terms of reference are set out in CL15/97.

 

The plaintiff in these proceedings was the successful applicant for the position of Assistant Principal at Moyne Community School. The appointment was made on the 21st October, 1999, subject to the approval and sanction of the first named defendant and there being no successful appeals against the decision of the selection committee. There were appeals by the unsuccessful candidates and the thirteenth named defendant was appointed as arbitrator pursuant to CL15/97 to decide on those appeals and the appeals were allowed.

 

In accordance with CL15/97, the first named defendant instructed the Board of Management to terminate the provisional appointment of the plaintiff who then instituted the within proceedings in February, 2001. The plaintiff obtained an order that the thirteenth named defendant be joined to the proceedings on 15th February, 2002, but the proceedings were not served on the thirteenth named defendant until some time after the 15th January, 2003. The motion grounding these proceedings was instituted on 22nd October, 2003.

 

2. Preliminary Issue – Delay

 

The thirteenth named defendant contends that notwithstanding that the plaintiff obtained an Order that he be joined to the proceedings on 15th February, 2002, the amended proceedings were not served upon him nor was he notified of their existence by the plaintiff or his legal advisers, until the 15th January, 2003. While the progress of these proceedings has not been entirely satisfactory, I do not consider that the general background circumstances would merit an order being made on this ground to the effect that the proceedings be struck out as against the thirteenth named defendant. The thirteenth named defendant has accepted in his affidavit that he was aware of the proceedings as he had been informally advised that the matter was in for hearing and had arranged for counsel to maintain a watching brief in respect of the matter.

 

3. Principal Issues

 

The plaintiff’s claim, as sought as against the thirteenth named defendant, is for a declaration that he exceeded his jurisdiction as arbitrator, a declaration that his decision was without jurisdiction and/or ultra vires, an order remitting the said appeal to arbitration pursuant to CL15/97, and damages against the thirteenth named defendant for negligence and/or breach of duty. The plaintiff’s principal complaint is the thirteenth named defendant accepted appeals outside what it is claimed is a mandatory time limit provided by CL15/97 and that such appeals were considered at an oral hearing at which the plaintiff was not allowed participate. The plaintiff thus claims that the decision to exclude him from the oral hearing was in breach of his contract of employment, natural justice and his constitutional rights.

 

This application by the thirteenth named defendant arises from the plaintiff’s claim for declaratory relief and injunctive relief and for damages in negligence as against the thirteenth named defendant. The thirteenth named defendant seeks an order discharging him from these proceedings and an order striking out the plaintiff’s claim for damages in negligence as against him on the ground that the plaintiff has no such cause of action. Further and in the alternative, if unsuccessful in seeking these reliefs, the defendant seeks an order that there is a question of law arising in the plaintiff’s proceedings which should be tried as a preliminary issue.

 

Order 56, r. 4 or the Rules of the Superior Courts, 1986, provides:-

 

“An application by any party to a reference under an arbitration agreement –

(a) to appoint an arbitrator or umpire, or

(b) to remove an arbitrator or umpire, with or without an application to appoint another person in his place, or

(c) to remit an award to an arbitrator or umpire, or

(d) to direct an arbitrator or umpire to state a special case for the Court, or

(e) to set aside an award, or

(f) to enforce an award in pursuance of section 41 of the Arbitration Act, 1954, may be made by special summons, to which the other party to the reference, and (in the case of an application under paragraph (b) or paragraph (d)) the arbitrator or umpire, shall be defendants. An application to remit or set aside an award shall be made within six weeks after the award has been made and published to the parties, or within such further time as may be allowed by the Court.”

Having regard to the language of O.56, r. 4, it seems clear that the Rules of the Superior Courts envisage that an arbitrator should only be joined as a defendant to proceedings where the plaintiff is making an application for the arbitrator to be removed under para. (b) or for the arbitrator to state a special case for the Court under para. (d). The plaintiff in the present proceedings is not seeking either of these reliefs and thus joining him to the proceedings would appear to be inconsistent with the Rules of the Superior Courts.

 

While O. 124, r. 1 empowers the High Court to deal with proceedings in non-compliance of the rules as it sees fit and there may be room for the argument that as procedural tools, the rules must be flexible, O.56, r.4 specifically names who “shall” be the defendant in the six situations listed and any other interpretation of this rule would certainly seem to be the more radical one.

 

Support for the more conservative interpretation of O. 56, r.4 can be found in the common law doctrine of functus officio. An explanation of this doctrine can be found in McClatchy Newspapers v. Central Valley Typographical Union No. 46, 686 F. 2d 731, 733-34 (9th Cir.), 459 U.S. 1071 (1982):

 

“It is [a] fundamental common law principle that once an arbitrator has made and published a final award his authority is exhausted and he is functus officio and can do nothing more in regard to the subject matter of the arbitration. The policy which lies behind this is an unwillingness to permit one who is not a judicial officer and who acts informally and sporadically, to re-examine a final decision which he has already rendered, because of the potential evil of outside communication and unilateral influence which might affect a new conclusion.”

It has also been held in this jurisdiction that the doctrine of functus officio applies to an arbitrator once he has made his award. In Hogan v. St. Kevin’s Co. [1986] I.R. 80 Murphy J. stated:

 

“There is authority for the proposition that the court will not direct an arbitrator to state a case after he has made his final award. This follows from the fact that on the making of such an award the arbitrator is functus officio.”

This was also held in McStay v. Assicurazioni Generali S.P.A. [1980] I.R. 248 where Carroll J. stated:

 

“The power of the Court to direct a special case for the decision of the Court must be exercised before the award is pronounced. After that the arbitrator is functus officio.

In Arbitration Law and Procedure, (Dublin, 1994), Forde states “[o]nce a final award is made then, generally, the arbitrator becomes functus officio and no longer has any authority to deal with the matter”.

 

Consequently I take the view that if proceedings are to be brought pursuant to s. 36 or s. 38 of the Arbitration Act, 1954, as amended (remit, set aside, an award) the arbitrator should not be joined as a party to the proceedings. Not only would it appear to be inconsistent with the procedure that is envisaged by O.56, r.4, but it is also in conflict with the doctrine of functus officio.

 

I am satisfied, having regard to the relevant provisions of O.56, r.4, that it is not necessary for the thirteenth named defendant to be a party to these proceedings for the purposes of the relief as claimed in paragraphs (a) (b) and (f) of the general endorsement of claim as set out in the plenary summons herein being the reliefs for (a) a declaration that the thirteenth named defendant exceeded his jurisdiction as arbitrator, (b) that his decision was without jurisdiction and/or ultra vires, and (f) the order remitting the said appeals to arbitration pursuant to circular 15/97. These reliefs in my view can be obtained against the remaining defendants without the necessity of the thirteenth named defendant in his capacity as arbitrator being a party to these proceedings.

 

The plaintiff further sues the thirteenth named defendant for damages for negligence and/or breach of duty. The two issues that arise in this regard are as to whether or not the arbitration agreement is such that it is governed by the provisions of the Arbitration Act, 1954 as amended and as to whether the arbitrator being the thirteenth named defendant is immune from suit at common law.

 

4. Is the arbitration agreement an ‘arbitration’ within the Arbitration Act, 1954, as amended?

 

The plaintiff contends that this agreement is an industrial relations type agreement and not an arbitration agreement governed by the provisions of the Arbitration Act, 1954 as amended.

 

Section 2 of the Arbitration Act, 1980 states that “arbitration agreement” is “an agreement in writing (including an agreement contained in an exchange of letters or telegrams) to submit to arbitration present or future differences capable of settlement by arbitration.”

 

An agreement in relation to the appointment of teachers to posts of responsibility in community and comprehensive schools was made between the teachers unions and the management union representing the community and comprehensive sector which is reflected in CL15/97. This circular letter regulates the procedure for appointments and provides for an appeal procedure whereby the appeal of an unsuccessful candidate is referred to an arbitrator appointed jointly by the teachers and management unions. The factual situation is that CL15/97 incorporated an arbitration agreement and by applying for the position which was to be regulated by CL15/97, the plaintiff agreed to submit future differences to arbitration.

 

In Sweeney v. Mulcahy [1993] I.L.R.M. 289 O’Hanlon J. expressly recognised the concept of arbitration clauses being binding by way of incorporation. The facts were that the defendant wrote to the plaintiff confirming that he would act as architect subject to the conditions laid down by the Royal Institute of Architects of Ireland. The plaintiff subsequently contested an application for an order staying proceedings on the grounds that there was no written agreement as required by s. 2 of the Arbitration Act, 1980 and further contended that if the arbitration agreement contained in the RIAI had been incorporated into the contract, it must be signed by both parties to be brought within s. 2 of the Act of 1980. O’Hanlon J. held that although both parties had not signed an express arbitration agreement, an express reference in a valid and binding contract to a written arbitration clause is sufficient to incorporate the arbitration agreement into the contract.

 

On the facts of this matter the plaintiff agreed to submit any difference to arbitration pursuant to CL15/97 and the arbitration clause contained in CL15/97 does satisfy s. 2 of the Arbitration Act, 1980 and thus is governed by the provisions of the Arbitration Act, 1954 as amended.

 

5. Is an arbitrator immune from suit?

 

It appears there is a degree of uncertainty as to whether s.12(1) of the Arbitration (International Commercial) Act, 1998 applies only to arbitrators in international commercial arbitrations. The section states:

 

“An arbitrator shall not be liable for anything done or omitted in the discharge or purported discharge of his or her functions as arbitrator unless the act or omission is shown to have been in bad faith.”

An argument can be advanced that s.3 of the Act, providing for interpretation, only defines ‘arbitration agreement’ as an ‘arbitration agreement concerning international commercial arbitration’ and is silent with regard to a similar definition for arbitrators. However, the approach favoured by Stewart in Arbitration Commentary and Sources (Dublin, 2003), that s.12(1) applies only to international commercial arbitrations, appears to me to be the correct approach. In support of this approach is the fact that the provision is contained in an Act dealing with international commercial arbitration and is not included in part III which deals with amendments to the domestic Arbitration Acts, 1954 and 1980.

 

In these circumstances it is necessary to consider whether arbitrators are immune from suit at common law. There appears to be no Irish authority dealing with this issue but in this regard, almost without exception, arbitral immunity from suit has been found to exist in other common law jurisdictions. Counsel for the plaintiff concedes that there is no allegation of bad faith on the part of the thirteenth named defendant in his capacity as arbitrator.

 

Many of the decisions from other common law jurisdictions have stated that the arbitrator performs duties of a judicial character and, as a result, enjoys quasi-judicial status. Thus many of the policy arguments underlying the immunity conferred upon judges can be, and have been, applied to arbitrators. For example, in Sirros v. Moore [1975] Q.B. 118, Lord Denning stated at p. 136 that “each [judge] should be able to do his work in complete independence and free from fear. He should not have to turn the pages of his books with trembling fingers, asking himself: ‘if I do this, shall I be liable in damages?'” This rationale for judicial immunity is equally applicable to arbitrators. Further, parties usually enter into arbitration agreements with the objective of obtaining a private, efficient and final decision on their dispute. Exposing arbitrators to liability at common law would risk damaging these primary objectives of arbitration as a method of the effective resolution of disputes.

 

With regard to principles of public policy, Russell On Arbitration, 22nd Ed, (London, 2003) states the following at p. 154:

 

“There are several irreconcilable principles of public policy as regards to immunity of arbitrators. First, arbitrators should be answerable for the consequences of their actions and omissions, and, in particular, arbitrators should be answerable to the parties for their professional negligence like most other professionals. When considering the issue in the 1970s, the House of Lords stated, obiter, that arbitrators were immune, but only as a secondary rule of public policy, the primary rule being the duty of care to others. The second public policy principle is that arbitrators should be immune from suit, like judges, and they should not be discouraged from accepting appointments by the threat of personal liability. The third principle is that disputes should be settled conclusively the first time and not be reheard as part of secondary actions against arbitrators. The DAC were firmly of the view that arbitrators should have a degree of immunity, on the grounds of both the second and the third public policy considerations. Immunity is necessary, in their view, to enable the arbitrator to perform to perform an impartial decision making function. They were concerned that, unless a degree of immunity were afforded, the finality of the arbitration process could be undermined. They viewed “with dismay” the prospect of a losing party attempting to re-arbitrate the issues on the basis that a competent arbitrator would have decided them in favour of that party. They believed that what became the Arbitration Act 1996 provides adequate safeguards to deal with cases where the arbitral process has gone wrong. Apart from the bad faith exception to an arbitrator’s immunity, those safeguards include a definition of the duties of a tribunal and the court’s right to order repayment of fees and expenses by the arbitrator on the his removal or resignation.”

In support of following the well-established common law approach is the fact that the Supreme Court have described arbitrators, albeit in the context of property arbitrators under the Acquisition of Land (Assessment of Compensation) Act, 1919, as exercising functions ‘quasi-judicial in nature’. In Manning v. Shackleton [1996] 3 I.R. 88 Keane J. considered an arbitrator under the Acquisition of Land (Assessment of Compensation) Act, 1919 and stated at p. 94 of his judgment that:

 

“It is not in dispute that the respondent, in conducting an arbitration under the provisions of the Act of 1919, was bound to act in accordance with well established principles of natural justice and fair procedures. One can indeed go further and describe his functions under the relevant legislation as quasi-judicial in nature.”

The situation in the United Kingdom is that, having regard to the statutory immunity provided by s. 29(1) of the Arbitration Act, 1996, it is clear that “an arbitrator is not liable for anything done or omitted in the discharge or purported discharge of his functions as arbitrator unless the Act or omission is shown to have been in bad faith.”

 

However, immunity had previously been found to exist at common law. In Sutcliffe v. Thackrah [1974] A.C. 727 the House of Lords obiter stated that arbitrators were immune and emphasised that the root of such immunity lay in the fact that an arbitrator’s functions are of a judicial nature. Lord Reid at p. 735 states:-

 

“The argument for the respondents starts from the undoubted rule, based on public policy, that a judge is not liable in damages for negligence in performing his judicial duties. The next step is that those employed to perform duties of a judicial character are not liable to their employers for negligence. This rule has been applied to arbitrators for a very long time. It is firmly established and could not now be questioned by your Lordships. It must be founded on public policy but I am not aware of any authoritative statement of the reason for it. I think it is right but it is hardly self-evident. There is a general rule that a person employed to perform duties of a professional character is liable in damages if he causes loss to his employer by failure to take due care or to exercise reasonable professional skill in carrying out his duties. So why should he not be liable if the duties which he is employed to perform are of a judicial character?

The reason must, I think, be derived at least in part from the peculiar nature of duties of a judicial character. In this country judicial duties do not involve investigation. They do not arise until there is a dispute. The parties to a dispute agree to submit the dispute for decision. Each party to it submits his evidence and contention in one form or another. It is then the function of the arbitrator to form a judgment and reach a decision.

 

In other forms of professional activity the professional man is generally left to make his own investigation. In the end he must make a decision but it is a different kind of decision. He is not determining a dispute: he is deciding what to do in all the circumstances. He may go wrong because he has at some stage failed to take due care and that may not be difficult to prove. But coming to a wrong but honest decision on material submitted for adjudication is rarely due to negligence or lack of care, and it is seldom due to such gross failure to exercise professional skill as would amount to negligence. It is in the vast majority of cases due to error of judgment and there is so much room for differences of opinion in reaching a decision of a judicial character that even the most skilled and experienced arbitrator or other person acting in a judicial capacity may not infrequently reach a decision which others think is plainly wrong.

 

But a party against whom a decision has been given that is generally thought to be wrong may often think that it has been given negligently, and I think that the immunity of arbitrators from liability for negligence must be based on the belief — probably well-founded — that without such immunity arbitrators would be harassed by actions which would have very little chance of success. And it may also have been thought that an arbitrator might be influenced by the thought that he was more likely to be sued if his decision went one way than if it went the other way, or that in some way the immunity put him in a more independent position to reach the decision which he thought right.

 

But whatever be the grounds of public policy which have given rise to this immunity of persons acting in a judicial capacity, I do not think that they have anything like the same force when applied to professional men when they are not fulfilling a judicial function.”

 

Lord Morris of Borth-y-Gest at p. 744 states:-

 

“I think that it must now be accepted that an action will not lie against an arbitrator for want of skill or for negligence in making his award. The reason for this may be that the public interest does not make it necessary for the courts to exercise greater powers over arbitrators than those which they possess, such as the power of removing for misconduct or of correcting errors of law which appear on the face of an award. Furthermore, as a matter of public policy it has been thought to be undesirable to allow an action against an arbitrator (for lack of care or skill) for the reason that his functions are of a judicial nature.”

In Arenson v. Casson Beckman Rutley & Co. [1977] A.C. 405 the House of Lords confirmed that the immunity of judges and arbitrators was exceptional to the general rule of liability for negligence. Lord Fraser of Tullybelton stated:

 

“It has long been established in both England and Scotland that judges are immune from actions for negligence in the performance of their duty. The reason no doubt is that public policy requires that they should not be liable to harassment for actions by disappointed litigants; “… otherwise no man but a beggar, or a fool, would be a judge” (Stair, Institutions of the Law of Scotland, IV. 1.5.). Immunity against actions for negligence is enjoyed by arbitrators for much the same reason; in Lingood v. Croucher (1742) 2 Atk. 395 Lord Hardwicke L.C. quoted, at p. 396, a dictum by Lord King L.C. that if arbitrators were liable to be sued that “… would effectually discourage persons of worth from accepting of being arbitrators;…” But the immunity of judges and arbitrators forms an exception to the general rule that a person who professes special skill or knowledge is liable for negligence if he fails to show such knowledge and skill and to take such care and precautions as are reasonably expected of a normally skilled and competent member of the profession or trade in question.”

In the United States of America the authorities also confirm that an arbitrator enjoys immunity from suit at common law. In Cahn v. International Ladies’ Garment Union, 311 F.2d 113, 114-15 (3rd Cir. 1962) the Third Circuit held that an arbitrator is immune from suit for all acts which he performs in his capacity as an arbitrator. The court stated that an arbitrator has an immunity analogous to judicial immunity because he performs a quasi-judicial function. In Corey v. New York Stock Exchange 691 F.2d 1205; (6th Cir. 1982) Kennedy J. stated: –

 

“It is clear that immunity does not depend upon the source of the decision-making power but rather upon the nature of that power. Accordingly, the limits of immunity should be fixed in part by federal policy. The functional comparability of the arbitrators’ decision-making process and judgments to those of judges and agency hearing examiners generates the same need for independent judgment, free from the threat of lawsuits. Immunity furthers this need. As with judicial and quasi-judicial immunity, arbitral immunity is essential to protect the decision-maker from undue influence and protect the decision-making process from reprisals by dissatisfied litigants.”

In the recent Australian case of Mond & Anor v. Berger & Ors [2004] VSC 150 the Supreme Court of Victoria cited Lendon v. Keen [1919] KB 994 where it was recognised that, given the quasi-judicial position of an arbitrator, an award of costs against an arbitrator in proceedings to set aside the award for misconduct will ordinarily be inappropriate, unless the arbitrator becomes a participant in the litigation or is guilty of collusion or dishonesty.

 

I take the view that the thirteenth named defendant was acting as an arbitrator in an arbitration governed by the Arbitration Act, 1954 as amended and that he was acting in a quasi judicial capacity sufficient to attract immunity from suit at common law in the absence of having acted in bad faith, which is conceded not to have been the case.

 

In these circumstances the plaintiff does not satisfy the court that he has a valid cause of action against the thirteenth named defendant in his capacity as arbitrator in respect of the reliefs as sought by him and it follows accordingly that the thirteenth named defendant is entitled to an order discharging him from these proceedings.

 

Approved: Gilligan J.

 

 SJW Facades Ltd -v- Bowen Construction Ltd & Anor

[2009] IEHC 49 (03 February 2009) Mac Menamin J

Legal principles in arbitration law applicable to this case

1. a) The desirability of finality

 

5. It has been frequently observed that finality is a keystone principle in the law of arbitration. The dictum of McCarthy J. in the Supreme Court in Keenan v. Shield Insurance [1988] I.R. 89 at p. 96 is so well known as to almost require no repetition;

 

 

“Arbitration is a significant feature of modern commercial life.…It ill becomes the courts to show any readiness to interfere in such a process; if policy considerations are appropriate as I believe they are in a matter of this kind, then every such consideration points to the desirability of making an arbitration award final in every sense of the term.”

 

6. This dictum has been applied by the High Court repeatedly, most recently by Kelly J. in Irish Golf Design Ltd v. Kelcar Developments Ltd. [2007] I.E.H.C. 468 and by Laffoy J. in Clancy and Kehoe v. Nevin & Ors. [2008] IEHC 121. In the former decision, Kelly J. characterised the task of a party seeking to set aside an arbitrator’s award as “an uphill struggle”.
7. b) The construction of arbitral awards and reasons

 

7. The second principle relates to the manner of the construction of arbitration awards in general. They are not to be minutely parsed or analysed but to be seen from the overall point of view so as to observe whether the arbitrator has properly dealt with the issues before him.

 

8. In Limerick City Council v. Uniform Construction Ltd. [2007] 1 IR 30, Clarke J. observed at p. 59:

 

 

“The approach to construing an award of an arbitrator by the courts is illustrated by Stillorgan Orchard Ltd. v. McLoughlin and Harvey [1978] I.L.R.M. 128, where Hamilton J. came to the conclusion that an award of an arbitrator will be sustained although the arbitrator may have omitted in his award to notice some claim put forward by a party if according to a fair interpretation of the award it is to be presumed that the arbitrator is taking the claim into consideration in making the award. The overall principle is that it is not appropriate to parse and analyse an arbitrator’s award but rather to consider from an overall point of view whether it may be said that the arbitrator has dealt properly with each of the matters referred to him.” [Emphasis added]

 

9. There is little dispute between the parties as to the principles applicable to a consideration of whether an arbitral award can be set aside. It may be challenged only in limited circumstances, those of misconduct or improper procurement of an award. These general principles are set out in s. 38 of the Arbitration Act 1954 (“The Act of 1954”). It is unnecessary to consider the courts’ common law jurisdiction to set aside an award as no such challenge is made by the applicant.
10. These principles have recently been summarised by McMahon J. in the case of Galway City Council v. Kingston & Anor. (Unreported, High Court, McMahon J., 17th October, 2008). As that judge points out, s. 38 of the Act of 1954 provides for the setting aside of an award where “an arbitrator or umpire has misconducted himself or the proceedings, or an arbitration or award has been improperly procured…”

 

11. The term “misconduct” has a special meaning. As outlined by Jenkins L. J. in London Export Corporation Ltd. v. Jubilee Coffee Roasting Co. Ltd. [1958] 1 W.L.R. 661 at p. 665, misconduct is “used in the technical sense in which it is familiar in the law relating to arbitrations as denoting irregularity, and not any moral turpitude or anything of that sort” (see also Williams v. Wallis & Cox [1914] 2 K.B. 478).

 

12. However it is apposite to emphasise the manner in which the misconduct threshold is expressed in recent Irish authority. In McCarthy v. Keane & Ors. [2004] 3 IR 617, Fennelly J. observed at pp. 626-7:-

 

 

“Not surprisingly, cases in which arbitral awards have been set aside for misconduct are few and far between. We can leave aside obvious or extreme cases of financial misbehaviour or personal misconduct, such as simple neglect of the arbitrator to perform his task. Real cases of misconduct may arise in the conduct of the arbitration, where the arbitrator acts unfairly either by clear acts of favouritism towards a party or adopts procedures which place one or other party (perhaps even both) at a clear disadvantage.”

 

The judge continued:-

 

“It seems to me that the standard or test of misconduct of such a nature would be something substantial, something that smacks of injustice or unfairness. In re Arbitration between Brien and Brien [1910] 2 I.R. 84 there is an example of an arbitrator inspecting the farm he was to value in the presence of one party and in the absence of the other party or of any representative of the other party. This was considered by Wright J. (at p. 93 of the report) to be ‘improper and inconsistent with the judicial character of an arbitrator”’.

 

But he concluded:-

 

“There is a sharp distinction between acts committed in the course of the arbitration and its result. Mere error is not misconduct. Parties submit disputes, including disputes as to the law, to arbitration. They expect the arbitrator to rule on all matters in dispute, but they do not have any guarantee that the arbitrator will reach the correct result. An arbitrator may err in his interpretation of the law or of the facts, without being guilty of misconduct”. [Emphasis added]

 

The applicable test therefore is that the conduct impugned must be substantial, indicative of real injustice or unfairness, or such that one or other party or both have been placed at a clear disadvantage.

13. English authorities in which the courts have seen fit to intervene include cases where the arbitrator in effect “gave evidence himself” (Société Franco-Tunisienne d’Armement-Tunis v. Government of Ceylon [1959] 3 All E.R. 25;) where the arbitrator took a view on the law as applied to the facts which involved a radical departure from the cases as presented by the parties; or where an arbitrator actually gave evidence in contradiction of the evidence given by expert witnesses (Fox v. Wellfair [1981] 2 Lloyd’s Rep. 514.). A fortiori a court might intervene where an arbitrator proceeded to make an award in circumstances such as those outlined above, when, in addition to such impugned conduct, there was also substantial evidence which could, or should have been laid before him. (Pacol Ltd. v. Joint Stock Co. Rossakhar [2000] 1 Lloyd’s Rep. 109).

The relief claimed

14. S.J.W. submits that were it to succeed, the relief granted should be the removal of the arbitrator and his substitution (now after the nine day hearing) with a replacement. While counsel for S.J.W. refined his position on this point so as to countenance the possibility of a remittal to the present arbitrator, if the Court were persuaded there had been misconduct it is apposite to outline the reasons for the stance originally adopted. These were first, that the plaintiff had lost confidence in the arbitrator in the light of the award (and the statement of reasons therefor) and second, that the arbitrator was by now aware of the fact that Calderbank letters had been exchanged which might have a bearing on the issue of costs.

 

15. The judgment will also consider the extent of the application to this case of the decision of Herbert J. in McCarrick v.The Gaiety (Sligo) Ltd [2001] 2 IR 266. There the court remitted an award back to an arbitrator because the subject of the reference had been ruled upon without the benefit of submissions from both sides and where it was held that it would have been inequitable to allow the award to stand. I turn to the next legal principle.

 

1. c) Can a court look to reasoning separate from the award?

 

16. In this case the arbitrator’s award was accompanied by a separate document, issued on the same day headed “Reasoning for my award”. Can a court have recourse to this document in construction of the award or in ascertaining whether there has been serious irregularity which might justify a finding of misconduct?

 

17. This issue was considered by the High Court in Uniform Construction Ltd. v. Cappawhite Contractors Ltd. [2007] IEHC 295, where Laffoy J. made a number of observations as to the manner in which a court should approach such a separate statement of reasons when a question of misconduct arises. Laffoy J. stated:-

 

 

“More recently the question whether, and, if so, and in what circumstances, a party to arbitration proceedings who seeks to challenge the award may rely in support of his application on reasons published by the arbitrator separately from the award and expressly on terms that no use shall be made of them in any proceedings relating to it, was considered by the Queen’s Bench Division (Commercial Court) in Tame Shipping Ltd. v. Easy Navigation Ltd. (The “Easy Rider”) [2004] 1 Lloyd’s Rep. 626. The question was considered in the context of an application under s. 68 of the [U.K.] Arbitration Act, 1996 to set aside an award for serious irregularity. In dealing with that question, Moore-Bick J. stated as follows (at p. 634):

‘The principle of party autonomy in relation to arbitration proceedings is clearly recognised by the Act and it is both consistent with that principle and with the general public interest in securing finality in arbitration proceedings that arbitrators should be free to publish reasons that do not form part of the award if the parties to the proceedings so agree. On the other hand, it is difficult to see what public interest there could be in allowing either arbitrators or the parties themselves to suppress evidence of serious irregularities, whether that evidence is to be found in the arbitrator’s reasons or elsewhere.”’

18. The relief claimed by the applicant is statutory, pursuant to s. 38 of the Arbitration Act, 1954. No claim is made at common law. I conclude from the observations of Laffoy J. that having regard to the public interest in ensuring that justice is seen to be done, a court may look to an award made separately in order to ensure that no serious irregularity affected the award, whether to be found in the arbitrator’s separate reasons or elsewhere. This conclusion must be seen in light of the overarching principle that it is not open to a court to parse or analyse an arbitrator’s award. The test must be confined to ascertaining whether there are irregularities, as illustrated by Fennelly J. in McCarthy v. Keane, such as might provide a basis for a finding of misconduct. The exercise must not become an excuse for a form of “appeal” necessitating minute consideration of the evidence – itself a matter for the arbitrator.

The works in question

19. S.J.W. specialises in cladding works (known as terracotta rainscreen cladding) carried out by clipping terracotta tiles to an aluminium frame and fixings which are attached to the elevation of a building. The main contract was subject to the normal Royal Institute of the Architects of Ireland’s (“R.I.A.I.”) conditions.

 

20. S.J.W. was invited to quote for the cladding works as a nominated sub-contractor. This invitation was issued by the architect Derek Tynan & Associates by letter dated 12th September, 2003, with enclosed specifications and other documents.

 

21. On 26th September, 2003, S.J.W. submitted a tender to Victoria Hall Developments Ltd. (“the employer”) in the sum of €1,481,191.51. After clarifications to the tender, the architect appointed S.J.W. as nominated sub-contractor by letter dated 19th November, 2003.

 

22. Thereafter Bowen sent S.J.W. a “letter of intent” dated 22nd December, 2003, and the cladding works proceeded on the basis of this document. The letter of intent contained an arbitration clause, (clause 9) as follows:-

 

 

“any dispute or difference arising between the parties to this letter of intent shall be and as hereby, refer to the arbitration and final decision of such persons as the parties hereunto may agree to appoint as arbitrator or failing agreement as may be nominated on the request of either party by the president for the time being of the Royal Institute of Architects of Ireland and the award of such arbitrator shall be final and binding on the parties. The arbitrator shall have the power to open up, review and revise any opinion, decision, requisition or notice and to determine all matters in dispute which shall be submitted to him and of which notice shall have been given as aforesaid in the same manner as if no such opinion, decision, or requisition or notice had been given and every or any such reference shall be deemed to be submitted to arbitration within the meaning of the Arbitration Acts 1954 and 1998 or any Act amending any of them.”

 

23. S.J.W. claimed that extra works and variations were ordered by Bowen and that completion was delayed and disrupted by the latter as a result. In total S.J.W. claimed in the arbitration €464,726.93 in respect of unpaid works; €500,508.00 in respect of a delay to the start of the works; the identified claim for €406,300.00 in respect of delay and disruption during the execution of the works and €37,575.00 in respect of extra design costs. These amounted to a total of €1,409,109.93, almost equivalent to the overall contract price of €1,477,000.00. Bowen counterclaimed in the sum of €164,531.87 based on S.J.W.’s alleged failure to perform the works and the necessity for Bowen to provide labour to S.J.W. in order to complete the contract.

Preliminary steps in the arbitration

24. S.J.W. was the claimant and Bowen the respondent in the arbitration. The second defendant was appointed by the president of the R.I.A.I. in December, 2005. The arbitration took place over nine days between 5th February, and 31st March, 2008. Both sides were represented by solicitors and counsel experienced in the field of arbitration.

 

 

The award

25. On 21st May, 2008, the arbitrator made his interim award no. 1 (“the award”). He also furnished a separate document to the parties headed “Reasoning for my award”. These reasons were not part of the award itself. However in reliance on the authorities cited earlier, I conclude that a court may look to the separate reasons in order to see whether serious irregularities arose in the course of the arbitration which would be sufficient to justify the removal of an arbitrator. The court will not parse and analyse the award, still less put itself in the position of criticising an arbitrator in his assessment of the evidence.

S.J.W.’s case in these proceedings

26. In pursuance of its unfair procedure point S.J.W. fundamentally relies on the proposition that the arbitrator relied on 28 identified documents in the course of his reasoning. It contends that these documents (letters, minutes and memoranda exchanged in the course of the work) were appended to a report of Mr. O’Leary an expert witness for Bowen which were not “in evidence” in the arbitration as they had not been produced by the authors thereof. They say that the facts in the documents were not validated in evidence, nor was there agreement that the documents were evidence of the facts stated in them. S.J.W. claims that even if “bundles” of documents were “agreed” for the arbitration, which bundles included these documents, this was so only for the purpose of potential production or reference in the arbitration hearing not as evidence. The plaintiff says that it was inappropriate and wrong for the arbitrator to rely on anything in a document not specifically referred to in evidence to support any deferral by Bowen of culpable delay by S.J.W. in the delay and disruption claim.

How the issue of delayed disruption was pleaded

27. To place these contentions in context it is necessary first to consider the manner in which the issue of delay and disruption came before the arbitrator. S.J.W.’s plea in the statement of claim was headed “Delays and Disruption caused to the Claimant’s works by the Respondent”. It states:-

 

 

“17. The work which the claimant had to do pursuant to the letter of intent was delayed and disrupted by four critical events namely:-

(i) The piecemeal handover of work areas by the respondent to the claimant.

 

(ii) The structural steel frame of the main contract works being out of tolerance.

 

(iii) The failure of the respondent to properly allow for deflection on the installed cantilever section of the Main Contract Building causing it to sag when the claimants’ terracotta Rainscreen Works were being installed.

 

(iv) Inadequate provision by the respondent of hoisting and access facilities for the claimant.

 

18. Each of the above events is dealt with separately below. The claimant contends that the said events were factually interlinked in such a way that it is not possible to allocate costs individually to each, but that taken together the effect of all four was to significantly extend the claimant’s cost and expenses.”

 

 

28. S.J.W. contended that the extent of the interlinking between the four issues was such that it was not possible to allocate costs individually under each heading; instead these four headings were to be taken together as a “global claim”. Bowen pleaded in their defence:-

 

“30. It is denied that any such delay or disruption occurred. If, however, such delay or disruption did occur (which is denied), the claimant was wholly responsible for, or in the alternative contributed to any loss sustained by it. Further, and or, in the alternative if the claimant did sustain any loss as a result of the alleged delays in or disruption to construction (which loss delay and disruption are denied by the respondent) the claimant failed to mitigate the said loss by its actions and omissions. Accordingly the respondent denies that it is responsible for any claim arising in this respect whether on the basis of the claim advanced in the statement of claim or at all.”

 

29. There followed particularised pleas and defences in relation to each of the four headings. Bowen also denied that the claimant was entitled to make any claim on a quantum meruit basis. In fact no such claim was made in relation to these four headings by the plaintiff.

Procedural hearing and directions

30. The arbitrator held a number of preliminary hearings to deal with procedural matters. On foot of these he made a series of what are called “orders for directions”.

 

31. On 20th December, 2007, he directed that witness’ statements and experts’ reports should be exchanged. This was done. He expressly stipulated that those experts’ reports which had been exchanged should stand as evidence-in-chief. He directed that experts of like discipline should meet two weeks before the hearing to agree a note of the facts and opinions on which they concurred and those upon which they did not. A copy of each note was to be exchanged and delivered to the arbitrator one week before the hearing. The arbitrator made a further order which falls for close consideration. His order no. 9 stated:-

 

 

“The parties shall agree a bundle of documents for use at the hearing and a core bundle of those documents perceived as likely to be most frequently referred to. The bundle or bundles of documents are to be delivered to the arbitrator no later than seven days before the hearing and each party is to inform the arbitrator as to which documents they require the arbitrator to read before the hearing.” [Emphasis added]

 

The terms “for use” and “likely to be most frequently referred to” are consistent with his approach to the admissibility of material in evidence generally.

32. It will be helpful here to briefly summarise what lies at the centre of the applicant’s complaint. One of the witnesses brought to the arbitration by Bowen Construction was a Mr. David O’Leary B.S.C., A.S.C.S., M.R.I.C.S., A.C.I.R.B., Barrister-at-law. He furnished a report of some 78 pages, the last 28 of which consisted of two appendices. The first appendix dealt with a review of the claim for construction phase delay and disruption, the second, dealing with delays and inefficiencies alleged against S.J.W. on the progress of the works. Counsel for S.J.W. says now that Mr. O’Leary’s report dealt with both issues of liability and quantum, and that the arbitrator ruled (as he did) that he was to be seen as a witness to quantum only and that “liability issues”, although dealt with by Mr. O’Leary in his report, were in fact matters for the arbitrator.

 

33. At the heart of this case is the plaintiff’s contention that these reports and memoranda were effectively “adopted” by the arbitrator from the second appendix to Mr. O’Leary’s report and that the arbitrator thereby “gave his own evidence”, in effect, by relying on the documents appended by Mr. O’Leary as evidence without any opportunity being given to deal with these documents.

 

34. There is no doubt that if all of the documents so referred to by Mr. O’Leary were adopted, recited and relied on without notice to the parties, S.J.W.’s argument would have considerable substance. However, on analysis, I find the true position to be considerably more nuanced.

The origin of the documents

35. There are four preliminary points. First, to say simply that the documents “came from Mr. O’Leary’s report” would suggest they had no other provenance within the arbitration. But this was not so. In fact all the documents in question were already before the arbitrator. They were comprised in bundles prepared in accordance with his order no. 9. The bundles so compiled were prepared by S.J.W.’s solicitors.

 

36. Second, the issue of the evidential status of certain documents, in the delay and disruption claim was raised on more than one occasion in the arbitration. In particular, the arbitrator considered whether the admission of other quite different documents was proof of their contents. The way in which he dealt with this issue is of significance. He indicated to counsel that he considered that such documents were accurate in so far as he was concerned unless somebody said that they were not accurate and that were there an issue in relation to the accuracy of the contents of a document the matter might be dealt with on re-examination. This point arose on more than one occasion. The arbitrator outlined his approach in similar terms. I consider that this placed a specific onus on the parties to indicate whether the contents of any documents referred to were in dispute or not.

The arbitrators stance in these proceedings

37. Third, the stance of the arbitrator in these court proceedings is consistent with his approach in the arbitration. The arbitrator himself did not participate at this hearing. However he was represented by a solicitor who made no submissions but was in attendance throughout. Through him I requested that the arbitrator indicate to the Court what he said was the evidential status of the witness statements (and ipso facto the O’Leary reports and appendices). The Court was informed that he took the view that the witness statements, and the accompanying documents submitted to him were “in evidence”. I allowed counsel to make any additional submissions that they might wish in the light of this indication.

On whom did the onus lie to object?

38. Fourth, the arbitration was by no means a “paper” arbitration. Expert witnesses were cross-examined in some detail in relation to the statements which they submitted as evidence-in-chief. At no stage did either party seek an overarching ruling in relation to the evidential status of the expert reports or the appendices. Thus the onus of objection to admissibility remained on the parties, the arbitrator having made his approach clear.

 

39. In my view this onus was the higher in the light of the order for directions no. 9. There the arbitrator had clearly indicated the type of documents which were to be in the bundles. They were clearly those to which reference would frequently be made. If any party had a difficulty with these there was surely a higher onus on that party to make that clear. Such a duty of clarification applied a fortiori in the circumstances where the arbitrator had outlined his general approach to reports as outlined. No such objection to admissibility was made in relation to the appendices of Mr. O’Leary’s report.

Was there misapprehension?

40. Finally, though it was not submitted in these proceedings, it may be that some misapprehension arose as to whether certain parts of Mr. O’Leary’s evidence were, in fact, in relation to liability or quantum. Insofar as it related to liability his report was ruled out by the arbitrator. But the proof of causation is not confined to liability; it goes to quantum. Consequently if Mr. O’Leary’s evidence was relevant and admissible as to quantum (as the arbitrator held it was) there was an onus upon any party seeking to dispute any evidential material relied on in relation to proof or negation of quantum in the course of cross-examination. To take the simplest example by analogy, even in a personal injury action where the issue of liability is abandoned, the onus remains upon the plaintiff to prove that the injuries and losses which he suffered were attributable to the accident. A defendant may hotly dispute this issue of causation. But this is not a dispute on liability. The evidential nexus between cause and effect must be established in quantum – as well as in liability. But proof of loss was not a liability issue.

 

41. Thus the arbitration ruling as to the status of Mr. O’Leary’s evidence did not absolve S.J.W. from disputing his evidence as to causation of the loss. It was the evidence on liability which had been ruled inadmissible not quantum. Thus insofar as S.J.W. wished to dispute this evidence, or raise any question as to reliance on documents relating to quantum the onus was on it to do so. Even if there had been misapprehension on this point I do not consider that it would constitute misconduct on the part of the arbitrator. I do not consider that such a possible misapprehension would constitute a form of procedural mishap either.

Consideration of the documents

42. Even at risk of transgression into the realm of the arbitrator I have examined the way in which the documents were referred to by the arbitrator and Mr. O’Leary. The plaintiff faces a more fundamental problem. Having considered the documents in some detail I find that the plaintiff’s contentions are as a matter of fact fundamentally flawed.

 

43. To carry out an analysis of the content of the 28 documents would be to go beyond the jurisdiction of this Court in an application of this type. I have however carried out an analysis of the manner in which Mr. O’Leary on the one hand refers to the documents in the appendix as compared to the way in which the arbitrator deals with them in his statement of reasons.

 

44. In fact the arbitrator’s quotations from the letters, correspondence and memoranda are different. They are very much the fuller. The arbitrator simply could not have relied on quoting the documents which in fact were only briefly summarised in the “O’Leary report”. The fuller nature of the arbitrator’s quotations shows, at the very minimum, it would have been necessary for him to go back to the original documents in the bundles in order to quote from them in the manner he did in his statement.

 

45. Next, if the arbitrator had engaged in a process of adoption one might assume that the documents would have appeared in the same sequence in the statement of reasons as in Mr. O’Leary’s report. In fact they appear in a quite different sequence. Were there substance in the plaintiff’s case, one would expect a total correlation or overlap between each document referred to in the report and those in the arbitrator’s statement. This is not so. The arbitrator refers to a significant number of documents which are not referred to in the appendices to the O’Leary report at all. Of the total of twenty eight letters and minutes referred to by the arbitrator, in fact just fifteen are referred to in the second appendix of the report. A lesser number are also referred to in the first appendix to Mr. O’Leary’s report but this is not the focus of the plaintiff’s complaint.

 

46. A small point is perhaps the most revealing. The arbitrator refers to a letter from S.J.W. to Stanta, a firm engaged in external insulation systems on the project. In his “statement of reasons” he refers to this letter as having been dated 10th May, 2004. This was an incorrect date. In fact the letter was dated 11th May, 2004. But in the appendix to Mr. O’Leary’s report the letter is correctly dated, that is to say, 11th May, 2004. If a document was simply copied or “adopted” then one would expect that an error contained in one document would be carried on into the other.

 

47. For these reasons, I cannot conclude that S.J.W.’s central allegation is made out at all. The allegation made against the arbitrator is a serious one. It is a matter of procedural bias. But it is not supported by the facts.

Decision on the first issue

48. I do not consider the fact that there may have been a procedural misapprehension as sufficient basis for a court to intervene on the grounds of misconduct. Certainly there is nothing here redolent of an arbitrator inspecting a subject property in the presence of one party and in the absence of another. I am unable to find evidence of the arbitrator having acted unfairly by any clear act of favouritism. The evidence does not bear out the contention that the arbitrator adopted a procedure which placed one party at a clear disadvantage. Had there been some apprehension of bias in the course of an arbitral hearing one would envisage that counsel would have insisted that reasons be given as part of the award. No such application was made. I do not consider that this facet of the case has been made out therefore. I turn to the second main point.

S.J.W.’s claim of entitlement to a finding in its favour in the delay and dispute claim

49. Alternatively S.J.W. says that there occurred a procedural mishap. It contends that it was “entitled” to findings in its claim for delay as there had been no real challenge to its evidence. S.J.W. refers to four witness statements served by it in the arbitration which dealt with the claim for delay and disruption. These were witness statements of Shay Wheelock, Isaac Wheelock, Slawomir Jnkoviak (the plaintiff’s foreman) and Kenneth O’Connor (the plaintiff’s quantum expert). It is very difficult to avoid the conclusion that this point would be a question for an “appeal” rather than the basis of setting aside an arbitral award. As a preliminary, I find that it is not an issue which should fall for consideration at all in the light of the authorities cited. A question of “entitlement” to a finding is one for the arbitrator and for his determination. Even if that were not so I would find as follows.

 

50. S.J.W. says that Bowen did “little” to contradict the weight of their evidence on the delay issues. It contends that there was “minimal” cross-examination on the specific detail of the evidence. It suggests that in particular the evidence of its quantum expert, Kenneth O’Connor should effectively have “bound” the arbitrator. 51. But Mr. O’Connor stated that the plaintiff had correctly priced his tender, that there had been no increases in labour costs, no failings or inadequacies on the part of management which would have affected labour costs and that the costs of delay and disruption were €409,000.00, a figure in excess of the pleaded figure of €406,300.00. But that was all he said. The plaintiff says that it is at a loss to comprehend how the arbitrator made no findings on the plaintiff’s case as to why and how much it was delayed and disrupted and the cost of that delay and disruption. S.J.W. suggests that the arbitrator should have made findings concerning the claim and should have stated and demonstrated that it was significant and sensibly discounted the value of this against the plaintiff’s proven costs in order to arrive at a proper amount to be awarded to the plaintiff in respect of this claim. These claims too, must be seen in the light of the submission that the arbitrator not give reasons.

 

52. One cannot even consider these contentions without having regard to the role of a court in dealing with an arbitration. The clear line of demarcation which has been established repeatedly in case law is applicable here. It is not for a court to engage in any form of minute mandatory supervision of an arbitrator or as to the manner in which he carries out his function. The issue is whether there was irregularity amounting to misconduct.

 

53. Even were this not the case, in fact the “statement of reasons” explains the arbitrator’s approach. The arbitrator considered the 28 letters to which reference has been made earlier. A substantial number of these were between Bowen and S.J.W. None of the documents therefore came “out of the blue”. They were part of the documents which had been submitted by S.J.W.’s solicitors to the arbitrator. The letters concerned delay by S.J.W. in carrying out the work. They also raised issues involving other parties in the performance of the contract. It is not for this Court to weigh this evidential material. The point is whether there was misconduct.

 

54. A significant number of the letters involved disputes between Bowen, S.J.W. and Stanta about the rate at which the work was being done. Bowen said that S.J.W. were simply not devoting sufficient labour resources to the performance of the contract. In a letter of 8th April, 2004, it was said that the S.J.W. site team allocated to Bowen had been taken to “a more important” job in Killarney which had a higher priority than the Victoria project. Bowen said that S.J.W. appeared not to have a full appreciation of the high priority nature of the contract for them. Fifteen of the letters and memoranda emanated from S.J.W. themselves. All of them were documents adduced by S.J.W. and within their possession or procurement.

 

55. For the reasons I have outlined earlier it cannot be said either that the documents lay outside the parameters of the arbitrator’s consideration. They were before him: no application was made to rule them out. No application was made to place in dispute the contents of these documents which related to causation of loss, not liability.

 

56. In dealing with the construction stage delay and disruption, the arbitrator identified the four different events pleaded in the statement of claim before him. He commented that “no attempt is made to quantify the costs” against any particular item or event. It was in effect therefore a global claim.

 

57. What then was his duty? It was to direct himself as to how such a claim should be dealt with in accordance with decided authority. That is what he did. He adverted to two legal authorities in relation to how a global claim should be approached. These were to the effect that to establish a global claim a claimant must identify first the existence of one or more events for which the employer is responsible, second, the existence of loss or expense suffered by the contractor and third, a causal link between the event or events and the loss and expense. He said that normally individual causal links must be demonstrated between each of the events for which the employer is responsible with particular items of loss and expense. However, frequently such loss and expense result from delay and disruption and may be caused by a number of different events in such a way that it is impossible to separate the consequences of each of the events. In that case, the events for which the employer is responsible may interact with one another in such a way as to produce a cumulative effect. If however, the contractor is able to demonstrate that all of the events on which he relies are in law the responsibility of the employer, it is not necessary for him to demonstrate causal links between individual events and particular heads of loss. In such a case because all the causative events are matters for which the employer is responsible, any loss and expense that is caused by those events and no others must necessarily be the responsibility of the employer. The arbitrator further directed himself that if a global claim were to succeed, whether or not it is a total cost claim or not, the contractor must eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer.

 

58. Having referred to these principles and the correspondence, he observed:-

 

 

“It would appear to me from all this correspondence that there are a myriad of reasons for the delays…”

 

He identified a number of parties as being the potential cause. He found that manpower was clearly a problem. This was evidenced by the correspondence. He commented:-

 

“This could not be laid at the door of Bowen”.

 

59. He commented that the disruption claim of €406,300.00 was to be seen in the context of a total contract price of only €1,477,000.00, which is 27.5% of the cost. He found that no direct causal link had been established by S.J.W. between the losses claimed and the delays. He added:-

 

“Also no proof was produced as to what the effect of any delay was on the cost of the product apart from the quantity surveyor for the plaintiff.”

 

60. The arbitrator referred to the evidence of Mr. Kenneth O’Connor, the quantum expert of S.J.W. He found that Mr. O’Connor calculated the loss by:-

 

“comparison between the original tender labour allowance and the actual labour costs incurred in completing the works. In my opinion this method is an accurate way to assess the cost of delay and disruption which has already been proved to have occurred.”

 

But he found this statement was insufficient to prove the claim. That evidence did not establish events for which the employer was responsible or any causal link between such events and any loss.

61. The arbitrator referred to documents with regard to manpower. This was in the context of S.J.W.’s claim for acceleration of the works. He referred to a letter of the 17th February, 2004, from S.J.W. requesting an extension of time and stating the number of persons who S.J.W. had identified as being necessary for the works at that stage, that is “one site manager, one engineer, one supervisor, six fitters and two labourers”. He commented:-

 

 

“The actual manpower used, was way in excess of this and it would appear to suggest that S.J.W. underestimated the demands of such a product with such a tight programme.”

 

62. In fact the arbitrator’s award makes clear the rationale for his decision. It was simply that S.J.W. had not made out its global claim for loss on the evidence. The legal authorities to which he referred clearly establish the necessity to identify the existence of one or more events for which the employer was responsible; the existence of loss and expense suffered by the contractor; and a causal link between the event or events and the loss and expense. He warned himself that if a global claim was to succeed whether or not it is the total claim, the contractor must “eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer”. It is clear that he concluded that this is precisely what S.J.W. had failed to do in the course of the arbitration.
63. I do not accept that it was incumbent on the arbitrator to make findings concerning each heading of delay or that it was significant, or that there was an obligation upon him to discount the value against the plaintiff’s proven cost.

 

64. In fact what he actually did was to find that the chain of causation between the alleged quantum of the global claim had not been established and therefore he disallowed it. I consider that this was entirely within his remit, whether or not there was a quantum meruit claim made by S.J.W. under this heading. There was therefore no obligation on him to put some, or any, value on the remainder of the claim.

 

 

The counterclaim

65. In the light of these findings one may easily discern why the arbitrator decided who should succeed in that counterclaim based on S.J.W.’s failure to perform the works in accordance with the contract. It was found necessary that Bowen assign labour to achieve completion which caused loss as found in the “statement of reasons”.

Result

66. This aspect of the claim cannot succeed. I do not consider any basis has been established to remit the claim to the arbitrator. I cannot find that there was any procedural mishap. If the arbitrator committed an error I do not consider it comes within the realm of those which would justify the removal of an arbitrator for misconduct. The central factual contention relied on by the plaintiff fails. The subsidiary point in “entitlement” to a finding fails also.

 

67. I would add finally that relief under s. 38 of the Act of 1954 is a discretionary remedy. The manner in which the arbitrator approached this task was clearly outlined by him at the outset of his hearing. He stated that he intended to furnish an award and would furnish his reason on a separate document. In fact counsel for S.J.W. specifically requested at the conclusion of the hearing that the arbitrator not furnish reasons at all for a number of objectives which he outlined, including the necessity for a speedy award and the desirability for finality and the avoidance of mischief which might be caused by a statement of reasons which might in turn become the subject matter of proceedings being brought to court. One might be forgiven for observing that these submissions now have an ironic ring.

 

68. In the light of the arbitration clause, I consider that S.J.W. and Bowen are bound by the award. On the ninth day of the case, counsel for S.J.W. submitted that even if a court were to disagree with the arbitrator’s finding on a legal point it would not make any difference as “the law is quite clear that unless the arbitrator says something completely outrageous which goes against every common law convention we hold dear, we have made our bed and must lie in it and whatever finding on the law we must live with”. Of course this submission was not binding on S.J.W. But however informally put, one cannot help but note the contrast between those sentiments expressing a fundamental principle and the basis of this application, brought now with the benefit of hindsight.

 

69. For the reasons outlined, I consider this application fails.

 

 

 

[1996] 1 I.L.R.M. 252

Thomas and Elaine Doyle v. Kildare County Council and; John Shackleton

 

 

Hamilton CJS. 37 of the Arbitration Act 1954 permits the court to remove an arbitrator who has misconducted himself or the proceedings and s. 38 enables the court to set aside an award when:

(a) an arbitrator has misconducted himself or the proceedings, or

(b) an arbitration or award has been improperly procured.

In this case, there is no claim or suggestion made by the plaintiffs that the appellant misconducted himself or the proceedings or that the award has been improperly procured.

Consequently, the provisions of ss. 37 and 38 of the Arbitration Act 1954 have no application to this case.

1. 36(1) of the Act provides that:

In all cases of reference to arbitration, the court may from time to time remit the matters referred or any of them to the reconsideration of the arbitrator or umpire.

In the course of his judgment in Keenan v. Shield Insurance Co. Ltd [1988] IR 89 at p. 95, the late McCarthy J stated:

1. 36 would appear to be the procedure appropriate, for example, to a case of a patent mistake in monetary calculation, in the giving or not giving of a particular credit, in an award that is on its face ambiguous or uncertain, in a case where the arbitrator, himself, seeks to rectify some error and, perhaps, where fresh evidence has become available subject to the standard rules of an appellate court in such cases.

In the course of his judgment in this case the trial judge stated that:

In my opinion there is prima facie evidence of an inconsistent basis of calculation of the market value of certain parts of the lands subject to acquisition or effective sterilisation. In my opinion this inconsistency is sufficient to invalidate the mathematical calculation of the appropriate amount of the award and the award is accordingly invalid.

Having expressed such opinion the learned trial judge then stated:

The question therefore arises should the matter be:

(a) remitted to the second named defendant for assessment, or

(b) should the award be set aside and the parties directed to apply to the Acquisition of Land (Reference Committee) for the appointment of another arbitrator.

He decided to adopt the course set forth at (b) viz . to set aside the award and direct an application for the appointment of another arbitrator.

The fundamental question for determination by this Court is whether, in the circumstances outlined herein, the learned trial judge had jurisdiction to set aside the award, because if he had no such jurisdiction, he obviously had no jurisdiction to direct an application for the appointment of another arbitrator.

It is clear that as there were no findings that the appellant had either misconducted himself or the proceedings or that the award had been improperly procured, there was no statutory basis for an order removing the arbitrator or setting aside the award.

Though the order made by the learned trial judge was expressed to have been made pursuant to s. 38 of the Arbitration Act 1954 it would appear from the terms of the judgment that the learned trial judge actually made the order in exercise of the inherent jurisdiction of the court.

In the course of his judgment in McStay v. Assicurazoni Generali SPA [1991] ILRM 237 at p. 242, the former Chief Justice, Finlay CJ stated that:

A fundamental ingredient of the concept of arbitration, as contained in the common law, is the finality of the decision of the arbitrator, subject, of course, to certain qualifications and precautions. Broadly speaking, however, as one might expect, the law appears to acknowledge that where two parties agree to refer a particular question which is in dispute between them to the decision of a particular individual by way of arbitration, they are taken to have abandoned their right to litigate that precise question.

To that broad principle, qualifications and exceptions have developed, both in the common law and in statutory provisions which protect a party against injustice.

Many of such qualifications and exceptions have already been referred to in the course of this judgment.

In McStay’s case one of the issues which had been referred to the arbitrator for decision was a question of law and in this regard the then Chief Justice stated at p. 244:

I am, therefore, driven to the conclusion that the decision so clearly expressed by the arbitrator as being a decision on a question of law, namely, the jurisdiction vested in him under law to award interest prior to the date of the award is a decision which cannot be interfered with by way of setting aside or remitting the matter to the arbitrator by reason of the fact that it is established to be erroneous.

This statement clearly illustrates the reluctance of the courts to interfere with the finality of an arbitrator’s award when the matter has been referred to him or her, when there has been no misconduct or impropriety on the part of the arbitrator even when he or she is wrong.

The arbitration in that case was a consensual one and it has been submitted on behalf of the plaintiffs that the principles applicable to consensual arbitrations should not apply to arbitrations rendered necessary by statute.

The arbitration in the instant case was subject to the provisions, inter alia , of the Acquisition of Land (Assessment of Compensation) Act 1919 , s. 6 of which provided that:

The decision of an official arbitrator upon any question of fact, shall be final and binding on the parties, and the persons claiming under them respectively.

It does not appear that any question of law arose for determination during the course of the proceedings before the arbitrator and there was no request made to the arbitrator to state a case for the opinion of the High Court.

I agree with the statement made by Murphy J in Power Securities Ltd v. Daly , High Court 1984 No. 11Sp (Murphy J ) 27 February 1984 and referred to by him in the course of his judgment in Hogan v. St. Kevin’s Co. [1986] IR 80 ; [1987] ILRM 17 where he stated at pp. 88/24 that:

The courts should be slow to usurp the functions of the chosen tribunal by intervening, whether by way of setting aside an award, remitting an award or directing a case to be stated.

When dealing with the allegations made by the plaintiffs that the award made by the appellant was so low as to be perverse and irrational, the learned trial judge accepted that the fact that the appellant opted to apparently follow, in part at least, valuations which were effectively 90% less than those tendered by the plaintiffs’ advisers in no way established that such a course was unreasonable, irrational or perverse if the premises on which the second named defendant’s valuation were arrived at commended themselves more to him than those of the plaintiffs’ advisers.

He accepted the fact that the alleged disregard by the appellant of the evidence tendered by the plaintiffs’ experts on market value was clearly within the ambit of the appellant’s discretion and jurisdiction and refused to set aside the award on that ground.

The plaintiffs have appealed against this part of the judgment of the learned trial judge on the grounds set forth in their notice of appeal and set out earlier in the course of this judgment.

The plaintiffs’ main contention was:

(1) That the learned trial judge erred in law, having found as a fact that the case made by the plaintiffs was given scant consideration and having found as a fact that the arbitrator must have virtually disregarded the evidence tendered by the plaintiffs’ experts on market value, in refusing to hold that the award was so low as to be perverse and irrational.

(2) That the learned trial judge erred in fact and in law, in failing to accept the plaintiffs’ submissions that certain portions of the plaintiffs’ lands (apart from the residual surface value of land actually acquired, referred to in the second part of the judgment of Flood J) were not compensated by the arbitrator and that accordingly this in itself was sufficient ground to set aside the said award.

It is clear, in this case, that there was a very considerable divergence of opinion between the experts called on behalf of the plaintiffs and the county council, respectively, with regard to the compensation to which the plaintiffs were entitled. The fact that the appellant, the arbitrator, preferred the evidence adduced on behalf of the county council does not render the award invalid.

The learned trial judge stated that:

In my opinion, having considered the expert testimony tendered on behalf of the second named defendant, there is an ample case to warrant, in principle, the arbitrator’s decision and accordingly I would refuse to grant the relief under this heading.

Having regard to the fact that the evaluation of the evidence adduced at the hearing before him was a matter for the appellant and there being evidence before him to justify the award, the learned trial judge was correct in refusing to set aside the award on this ground and the plaintiffs’ appeal in this regard must be dismissed.

The ground upon which the learned trial judge ultimately set aside the award made by the appellant, was that he was of the opinion that there was prima facie evidence of an inconsistent basis of calculation of the market value of certain parts of the land subject to acquisition or effective sterilisation.

He stated that:

In my opinion, this inconsistency is sufficient to invalidate the mathematical calculation of the award and the award is accordingly invalid.

On that basis, he made an order setting aside the award.

Under the provisions of the Arbitration Act 1954 , the learned trial judge had no jurisdiction to set aside the award in the absence of any finding that the appellant had misconducted himself or the proceedings.

At common law, a court has jurisdiction to set aside an award where an error of law appears on the face of the award.

This is a jurisdiction which should only be exercised sparingly and where an award shows on its face an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged.

In the course of his judgment in Keenan v. Shield Insurance Co. Ltd the late McCarthy J stated at p. 96:

Arbitration is a significant feature of modern commercial life; there is an International Institute of Arbitration and the field of international arbitration is an ever expanding one. It ill becomes the courts to show any readiness to interfere in such a process; if policy considerations are appropriate as I believe they are in a matter of this kind, then every such consideration points to the desirability of making an arbitration award final in every sense of the term. Church and General Insurance Co. v. Connolly and McLoughlin (High Court , Costello J , 7 May 1981 ) itself is an example of the type of fine-combing exercise which courts should not perform when it is sought to review an arbitration award. There may be instances in which an award which shows on its face an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged.

Apart altogether from the statement of McCarthy J of the desirability of making an arbitration award final in every sense of the word, s. 6 of the Acquisition of Land (Assessment of Compensation) Act 1919 provides that the decision of an official arbitrator on any question of fact shall be final and binding on the parties.

The award made by the appellant on 26 July 1991 does not disclose on its face any error of law which would justify a court in interfering with the award.

Basically what is sought by the plaintiffs in these proceedings is a complete re-hearing of the arbitration and an opportunity to re-argue the merits of the evidence with regard to the compensation to which they claim to be entitled. Unfortunately perhaps, for them, they are not entitled to such relief and the appellants and the county council’s appeal must be allowed and the plaintiffs’ appeal dismissed.

 

 

Winthorp Engineering & Contracting Ltd -v- Cleary & Doyle Contracting Ltd

[2011] IEHC 249 (22 June 2011)Judgment of Miss Justice Laffoy delivered on 22nd day of June, 2011.

 

 

1. The application

1.1 On this application, which was initiated by an originating notice of motion dated 16th March, 2011, the respondent claims various reliefs but the substance of the relief is an order pursuant to Order 56, rule 3 of the Rules of the Superior Courts 1986, (the Rules), as amended, and Article 16(3) of the Model Law that Mr. John F.F.F. O’Brien (Mr. O’Brien) does not have jurisdiction to act as arbitrator or to determine the dispute existing between the parties herein in an arbitration. Alternatively, an order is sought, invoking the same jurisdiction, that there is no binding arbitration clause governing the dispute between the parties.

 

1.2 Since the application was initiated, a question has arisen as to whether the issue between the parties falls to be resolved in accordance with the Arbitration Act 2010 (the Act of 2010), which became operative on 8th June, 2010, or the legislation it replaced, the Arbitration Acts 1954 – 1998. A proposed amended notice of motion was put before the Court. I will return to that question later.

 

 

2. The factual background

2.1 The respondent was the main contractor in relation to a housing development at the rear of Ailesbury Road in the City of Dublin (the development works) under a building agreement dated 11th November, 2002 made between Aildev Ltd., as employer, of the one part and the respondent of the other part (the main contract). The main contract was in the standard form RIAI 2002 edition (Revision 1, Print 1) contract.

 

2.2 On 21st November, 2002 the architects named in the main contract, Crean Salley (the architects), instructed the respondent to enter into a sub-contract with the claimant for the supply and fitting of mechanical works at the development. On foot of that instruction a sub-contract dated 10th January, 2003 made between the respondent, as contractor, of the one part and the claimant, as sub-contractor, of the other part (the sub-contract) was entered into. The sub-contract was in the standard form Construction Industry Federation (CIF) sub-contract (for use with the RIAI Main Contract Form) 5th Ed., October 1989.

 

2.3 The sub-contract contained an arbitration clause (clause 26) which, insofar as is relevant for present purposes, was in the following terms:

 

“In the event of any dispute or difference between the Contractor and the Sub-Contractor, whether arising during the execution or after the completion or abandonment of the Sub-Contract Works or after the determination of the employment of the Sub-Contractor under the Sub-Contract (whether by breach or in any other manner), in regard to any matter or thing of whatsoever nature arising out of this Sub-Contract or in connection therewith, then either party shall give to the other notice in writing of such dispute or difference and such dispute or difference shall be and is hereby referred to the arbitration of such person as the parties hereto may agree to appoint as Arbitrator or failing such agreement as may be appointed on the request of either party by the President for the time being of the Construction Industry Federation and in either case the Award of such Arbitrator shall be final and binding on the parties.

PROVIDED …

 

AND provided further that in any such arbitration as is provided for in this Clause any decision of the Architect/Engineer which is final and binding on the Contractor under the Main Contract shall also be and be deemed to be final and binding between and upon the Contractor and Sub-Contractor.

 

Every or any such reference shall be deemed to be a submission to arbitration within the meaning of the Arbitration Acts 1954 … or any Act amending the same … .”

 

2.4 No other contract in writing was entered into by the respondent with the claimant in relation to the development works.

2.5 The claimant commenced the works required under the sub-contract in early 2003 and the works were completed in June 2004. During the works the claimant submitted payment applications to the respondent in the manner prescribed in the sub-contract, which were subject to certification by the architects. On 21st December, 2004 the architects certified a final account in the sum of €545,935.13 for the claimant and that sum was duly paid to the claimant on 21st January, 2005. The final retention moiety was paid to the claimant on 31st March, 2006, whereupon, the respondent contends, the sub-contract ended.

 

2.6 The dispute which has arisen between the parties relates to a claim made by the claimant to the respondent on 23rd October, 2008 seeking the following sums:

 

(a) the sum of €68,856 in respect of “direct works”; and

(b) the sum of €81,865.89 in respect of “extension of contract”.

 

The position adopted on behalf of the respondent in response to that claim was that it was understood between the parties that all matters had been concluded between the parties in March 2006. The respondent, nevertheless, sought copies of any contract or agreement upon which the claimant was relying in respect of the claim. The reply on behalf of the claimant, by letter dated 20th May, 2009, in essence was that the matter was covered by the sub-contract. Further information was furnished by letter dated 12th June, 2009, including information to which the respondent attaches significance, namely, that the claimant received written instructions from the respondent to replace damaged electrical panels in four houses and that all other items were “verbally instructed”. In the letter of 12th June, 2009 the claimant imposed a deadline of 17th July, 2009 “for full resolution”, after which the claimant would be requesting the appointment of a conciliator or arbitrator, depending on the wishes of the respondent.

2.7 Apparently, from the respondent’s perspective, what happened next was that it received a letter from the CIF dated 19th March, 2010 appointing Mr. O’Brien as arbitrator pursuant to the sub-contract at the request of the claimant. The respondent’s position is that the claimant unilaterally procured the appointment of Mr. O’Brien as arbitrator.

 

2.8 The respondent then adopted the position that there was no arbitration agreement in relation to the matters in dispute between the parties and contended that Mr. O’Brien had been incorrectly appointed as arbitrator in relation to the dispute. A stream of correspondent ensued. Eventually, by letter dated 17th June, 2010 Mr. O’Brien sought a detailed submission from the respondent “explaining precisely why it does not accept arbitration is the correct forum to resolve this matter” and a detailed response from the claimant. That was duly done. The claimant’s response was dated 8th August, 2010. There is one particular paragraph in the response to which the respondent attaches significance, which is in the following terms:

 

“[The claimant] submitted their final proposed ‘domestic claim’ to [the respondent] in October 2004. This was separate to the claim for the nominated works which was agreed and recommended by the mechanical consultant … on the 30th August, 2004 … . Variation 27 dealing with the claim for extension of time along with some other variations were deemed by [the mechanical consultant] not to be within his remit. These items along with any further variations considered to be a ‘domestic type variation’ was referred to [the respondent] domestic account currently requested. [The respondent] were fully aware of this. This submission in October 2004 to [the respondent] included all remaining items which required agreement and this included our claim for extension of time costs. We were told by the mechanical consultant that all domestic variations and extension of time claims were to be dealt with by the main contractor under a separate agreement. This approach was considered reasonable at the time as [the mechanical consultant] would not have had the authority or knowledge to agree the remaining domestic variations or extension of time claim.” (Emphasis added).

The significance attached by the respondent to the words to which emphasis has been added in that quotation is that it is contended that it is a recognition by the claimant that the “domestic” claim, which is synonymous with “direct works” claim, and the extension of time claim were advanced by the claimant not under the sub-contract but under a separate agreement.

2.9 On 20th August, 2010 Mr. O’Brien issued a determination specifically addressing the matter of whether arbitration “is the correct forum to resolve the dispute between the parties”. It was a reasoned determination on what he referred to as an “interlocutory matter”. He made the following determination:

 

“(i) I determine that Arbitration is the correct forum to resolve the dispute between the parties under the Arbitration Clause in the Sub- Contract and I am satisfied that the parties agreed to the provisions of Clause 26 at the time of the Contract.

(ii) I also determine that my appointment by the CIF to act as Arbitrator in this matter is valid.”

 

 

3. The jurisdiction invoked by the respondent: procedural issues

3.1 Article 16(3) of the Model Law is to be found in the text of the UNCITRAL Model Law on International Commercial Arbitration set out in Schedule I to the Act of 2010. Article 16 deals with the competence of an arbitral tribunal to rule on its own jurisdiction. Sub-Article (1) provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. Sub-Article (2) covers the pleas which may be raised, namely, that the arbitral tribunal does not have jurisdiction and that the arbitral tribunal is exceeding the scope of its authority. Sub-Article (3) provides:

 

“The arbitral tribunal may rule on a plea referred to in paragraph (2) of this Article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.”

3.2 Order 56, rule 3(1), as now in force, sets out the procedure for initiating various applications to Court concerning arbitrations, including, an application “to decide on a plea that the arbitral tribunal does not have jurisdiction pursuant to Article 16(3) of the Model Law (provided that the application is made within the period prescribed in that Article)”.

3.3 Section 3(1) of the Act of 2010 provides as follows:

 

“This Act shall not apply to an arbitration under an arbitration agreement concerning an arbitration which has commenced before the operative date but shall apply to an arbitration commenced on or after the operative date.”

The process initiated by the appointment of Mr. O’Brien by the CIF is either an arbitration or it is not, depending on whether the parties have given him jurisdiction to conduct the process or not. If it is an arbitration, it commenced before the operative date, that is to say, 8th June, 2010 and the Act of 2010 and, as a result, the provisions of the Model Law have no application to it. The consequence is that, if it is an arbitration, it is governed by the Arbitration Acts 1954 – 1998. The repeal of those Acts by the Act of 2010, in broad terms, is without prejudice to and does not affect existing accrued rights. Therefore, the core procedural question is what, if any, power is conferred on the Court to determine the type of issue which arises on this application, namely, whether an arbitration agreement exists and Mr. O’Brien has jurisdiction to arbitrate the dispute between the parties in this case. I can find nothing in those Acts analogous to the provisions of Article 16 of the Model Law. In the proposed amended notice of motion, while the Act of 1954 is invoked, there is no reference to any specific section or provision thereof. However, the Court’s inherent jurisdiction is also invoked in the proposed amended notice of motion.

3.4 There is long established authority in the United Kingdom that the Court has an inherent power to make a declaration that the arbitrator has no jurisdiction to hear or determine a claim, but the exercise of the power is discretionary. A similar inherent jurisdiction has been recognised in this jurisdiction. As is pointed out in Dowling-Hussey and Dunne on Arbitration Law (Thomson Round Hall 2008) at para. 9 – 24, outside the Arbitration Acts 1954 – 1998, the High Court has jurisdiction to grant declaratory and injunctive relief in respect of the arbitration process, but applications for declaratory and injunctive relief are properly brought by way of the plenary summons procedure. In relation to the jurisdiction to make a declaratory order, the authors point out (at para. 9 – 26) that there are several grounds upon which an arbitrator would lack jurisdiction to decide the dispute between the parties, for example, there may not be an arbitration agreement between the parties, or the arbitration agreement might not have been incorporated into the main contract between the parties. They cite a decision of the High Court (Gilligan J.) in Anglo-Irish Banking Corporation v. Tolka Structural Engineering [2005] IEHC 239 as a recent example of a case in which a party successfully applied for a declaration that the arbitrator lacked jurisdiction to decide a dispute.

 

3.5 In this case, the respondent’s position is that Mr. O’Brien has no jurisdiction to arbitrate the dispute between the parties and, in the proposed amended notice of motion, the Court’s inherent jurisdiction for an order to that effect, which, in essence, would be a declaratory order, is invoked. While I am satisfied that the Court has inherent jurisdiction to make the type of order sought in an appropriate case, I consider that it is doubtful that procedure by way of originating notice of motion under Order 56 is the appropriate procedure to invoke that jurisdiction. In short, the application should have been brought by way of plenary summons. On 9th June, 2011 the parties were apprised of the Court’s concern that the appropriate procedure had not been adopted in seeking what is, in substance, declaratory relief. Since then the Court has been informed that the parties are in agreement that the Court should determine the issue which arises, not withstanding the manner in which the application has come before the Court. It is on the basis of that agreement that I will now deal with the substantive application.

 

 

4. The substantive application: the factual issues

4.1 The respondent contends that Mr. O’Brien does not have jurisdiction to determine the dispute referred to him on a number of grounds.

 

4.2 First, it is contended that the works in respect of which the claimant seeks payment were outside the nominated works covered by the sub-contract and, accordingly, the sub-contract, and the arbitration clause in it, do not apply to them. As regards practice in the building industry in relation to “domestic” or “direct” works carried out by a nominated sub-contractor, Joe McNabb, in the grounding affidavit sworn on behalf of the respondent on 15th March, 2011, has averred as follows:

 

“I say and believe that in the context of a building project the expression ‘domestic work’ refers to works carried out by a subcontractor for a main contractor under a private agreement between the parties and the same is not subject to any involvement of any other party, including the main contractors, Employer, or the Employer’s agents, as would be the case in a nominated sub-contract situation. I say and believe that the majority of main contractor/subcontractor relationships on most building projects will be ‘domestic’ in nature and, in those circumstances, the parties are obviously free to arrange their own contractual relationship as they see fit. In some instances this will involve the execution of written agreements containing a binding Arbitration clause or, as in the present case, not executing a formal agreement at all.”

Mr. McNabb relied on the passage from the submission of the respondent to Mr. O’Brien dated 8th August, 2010 quoted at 2.8 above as being wholly consistent with the respondent’s position that the claim being made by the claimant is made under a separate agreement and not under the sub-contract. It is contended by the respondent that the claimant is attempting to “piggy-back” on the arbitration clause in the sub-contract in relation to the dispute in issue here and that it is not entitled to do so. That primary ground – that there is no arbitration agreement in existence – clearly raises an issue on which the Court may adjudicate under its inherent jurisdiction.

4.3 However, it seems to me that other arguments advanced in support of the respondent’s contention that Mr. O’Brien does not have jurisdiction to arbitrate are not really matters which go to jurisdiction, but rather are matters which would be determined by Mr. O’Brien, if he had jurisdiction, or which would be relied on as defences to any action brought by the claimant against the respondent. One such argument is that the element of the claimant’s claim in relation to delay and disruption has already been determined by an expert appointed under the main contract in a manner which is final and binding upon the claimant by virtue of the second proviso in clause 26 of the sub-contract quoted earlier. Even if it were possible to express a view on that argument, I think it would be inappropriate to do so. Another such argument is that, under clause 6 of the sub-contract in relation to variations, varied instructions and variations which the claimant was obliged to comply with and carry out were required to be given in writing or confirmed in writing, whereas there were no written instructions by the respondent to the claimant in relation to the items in respect of which the claimant seeks payment, apart from the one written instruction to which I have alluded earlier. Again, if Mr. O’Brien has jurisdiction, in my view, the relevance or otherwise of clause 6, and, if it is relevant, whether it has been complied with, would be a matter for Mr. O’Brien to determine in his capacity as arbitrator.

 

4.4 The final objection made by the respondent is that sometime after 7th August, 2009, the CIF at the request of an agent acting on behalf of the claimant, appointed a person other than Mr. O’Brien to act as arbitrator, and, without the respondent being notified of the appointment, the claimant withdrew the matter from the arbitration procedure, according to the CIF, “due to incorrect identification of the parties in the first instance”. The respondent’s argument is that, on the claimant’s withdrawal from the process, the arbitration process was spent. While that argument would probably go to jurisdiction if interpreted as an argument that the arbitration has not been validly commenced, on the evidence, in my view, there is no factual basis to support the argument as so interpreted.

 

4.5 A short affidavit sworn by James Brophy, a director of the claimant, has been filed in response to the respondent’s application. Mr. Brophy identifies the two elements in the claim of the claimant, namely, payment for works carried out at the specific request of the respondent (the “domestic works” or the “direct works”) and compensation for losses due to delay. The primary position of the claimant is that the domestic works were carried out to the development works pursuant to the directions of the respondent’s employees under the sub-contract, and were required for or in support of the successful completion of the contracted works.

 

4.6 The alternative position of the claimant is that, if the claimant is wrong in contending that the direct works were carried out pursuant to the sub-contract, and were in fact the subject of a new contract which was agreed between the parties, the arbitration clause should, nonetheless, be regarded as applying thereto because, as Mr. Brophy averred, –

 

“… the use of arbitration agreements is so widespread in the construction industry that I believed at all times that we agreed that any disputes between the parties would be referred to arbitration.”

Mr. Brophy further averred that both the claimant and the respondent are parties which have extensive, if not exclusive, previous general experience of trading under contracts which contain arbitration clauses.

 

5. The law

5.1 Counsel for the claimant referred the Court to a decision of the Queen’s Bench Division of the English High Court in A & B v. C & D [1982] 1 Lloyds Law Reports 166. The facts in that case were very complex. However, the aspect of the decision of Mustill J. to which the Court was referred arose from the fact that C had entered into an agreement with X (the predecessor of the plaintiffs, A and B) in 1972 in connection with the construction of a liquefied natural gas plant in Qatar. That agreement related to the provision by C of planning and supervisory services in relation to the construction of the plant. A year later, in 1973, C entered into a further agreement with X to furnish advice and services with regard to the provision of personnel, the training of personnel and the operation and maintenance of the plant. After the plant entered into service, there was a breakdown in 1976. At that stage C offered the services of their tank inspector. There was an issue between the plaintiffs and C as to the basis on which the work in 1976 was performed by C. The plaintiffs contended that there was a new and separate agreement under which C was obliged to supply advice and services which lay outside the scope of its obligations under the existing contracts. C, on the other hand, maintained that the work was carried out pursuant to the second agreement. For the purposes of his judgment, Mustill J. found it convenient to assume that there was a separate agreement and to refer to it as the third agreement. In any event, the tank failed again in 1977 and the plant was destroyed. The issue between the plaintiffs and C, which is of relevance for present purposes, and his decision on it, is set out by Mustill J. in the following passage of his judgment (at p. 172):

 

“The question is therefore whether the plaintiffs’ claim is within the scope of the identical clauses in the first and second contracts. The plaintiffs argue that it is not since it is founded on the third agreement. In my submission this argument is unsound for three reasons: –

 

(i) I am far from convinced that there ever was a third agreement. The parts of the second agreement relating to voluntary services were wide enough to cover the advice and inspection which C in fact supplied. There is no sign in the documents of any distinct contract to cover these particular services nor, so far as I can see, any practical reason why the parties should have troubled to make one. The reference to art. 13 of the second agreement is perfectly well explicable as an act of caution, and does not unequivocally recognise that the work lay outside the scope of the existing agreements.

(ii) Even if there was a third agreement, I consider that a claim relating to a breach of it would, in the particular circumstances of this case, be connected with both the previous agreements. The services related to the investigation and repair of work done under the first agreement, and were governed by exactly the same terms regarding liability as applied to both agreements.

 

(iii) The plaintiffs’ claim in respect of the second agreement is founded variously on the first, second and third agreements. Precisely the same facts will be relevant to the claims under each agreement, and the liabilities arising from those facts will be precisely the same whichever agreement is applied.

 

 

Accordingly, I consider that the plaintiffs’ claim does lie within the agreements to arbitrate … .”

That decision, in my view, turned on the proper construction of the agreements which X and C had entered into.

5.2 An alternative strand of jurisprudence relied on behalf of the claimant relates to the question whether an arbitration agreement has been incorporated into the contract which the parties acknowledge existed. In particular, the decisions of the High Court in Lynch Roofing Systems v. Bennett & Son Ltd. [1999] 2 IR 450 and in McCrory Scaffolding Ltd. v. McInerney Construction Ltd. [2004] 3 I.R. 592 were relied on.

 

5.3 In the earlier case, while there was no written contract between the plaintiff and the defendant in respect of roofing works sub-contracted by the defendant main contractor to the plaintiff sub-contractor, the defendant claimed that at the time of negotiation of the contract, the price and the fact that the standard conditions of contract RIAI (April 1998 Edition), which contained an arbitration clause, would apply to the sub-contract were agreed between the parties. A letter was sent to the plaintiff confirming the contract as agreed and specifying that it was subject to a written receipt of acceptance of terms, which incorporated the standard conditions of contract RIAI, and stipulating that failure to respond would be reviewed as acceptance of the conditions. No response was received from the plaintiff, who contended that, during the negotiations, the existence of the arbitration clause was not brought to its attention. Morris P., in granting a stay pursuant to s. 5 of the Arbitration Act 1980 to the defendant, stated (at p. 453):

 

“…two issues therefore appear to me to arise in this case. Firstly, did the parties habitually trade under contracts which incorporated arbitration clauses so that a court would be forced to conclude that the parties expected and knew that this clause would govern their contract. …

In the present case I am satisfied that each party was sufficiently familiar with the trade so as to lead a court to conclude that, as Denning L.J. put it in British Crane Hire v. Ipswich Plant Hire [1975] 1 Q.B. 303, the defendants would be understood and presumed to say ‘of course that is quite understood’. I would find it hard to believe that a large roofing contractor would undertake this contract without the benefit of a building contract.”

 

Later, (at p. 454) Morris P. observed that, in his view, it would be extremely unlikely that experienced contractors contemplated a roofing sub-contract would be performed otherwise than being governed by an appropriate building contract.

5.4 The passage from the judgment of Morris P. quoted above was quoted and approved of by Peart J. in McCrory Scaffolding Ltd. v. McInerney Construction Ltd. On the facts of that case, Peart J. stayed proceedings on the ground that an arbitration agreement formed part of the scaffolding contract between the parties, notwithstanding the fact that a written agreement was never entered into. In so doing, he attached significance to the fact that the parties were commercial entities and experienced in the trade and that each had previous general experience of trading under contracts that included arbitration clauses.

6. Application of the law to the facts

6.1 It seems to me that, irrespective of the strand of jurisprudence one applies to the facts of this case, one must conclude that it was intended that the dispute which has been referred to Mr. O’Brien would be the subject of the arbitration clause in the sub-contract. That dispute is eminently suitable for resolution through the arbitral process.

 

6.2 The arbitration clause is drafted in very broad terms. It is made clear that a dispute or a difference between the parties may be referred to arbitration during the execution of the works or after determination of the employment of the claimant howsoever arising. Moreover, it is made clear that any dispute or difference in regard to any matter or thing of whatsoever nature “arising out of” or “in connection [with]” the sub-contract may be submitted to arbitration. The works in respect of which the current dispute arises were executed by the claimant while the claimant was on site for the purposes of executing the nominated works specified in the sub-contract. Those works, to the extent that they did not directly arise out of the nominated works, on any common sense view of the matter must be seen as being connected with the nominated works and the claimant’s contractual obligations under the sub-contract. Therefore, as a matter of construction of the arbitration clause, in my view, the dispute in relation to those works must be regarded as arising out of or in connection with the sub-contract. Any other interpretation flies in the face of good commercial sense.

 

6.3 Alternatively, by analogy to the decisions referred to at 5.2 above, it must be presumed that it was the intention of the parties that any works requested by the respondent which the claimant agreed to do while on the site for the purposes of fulfilling its obligations under the sub-contract would be subject to the provisions of the sub-contract. The argument that the claimant was a nominated sub-contractor and that the respondent submitted payment applications received from the claimant in respect of the nominated works, which were specifically the subject of the sub-contract, to the architects and, when certified, the respondent received payment from the employer under the main contract, does not, in my view, preclude the conclusion that the intention of the parties was that the arbitration clause in the sub-contract would apply to the works agreed to be executed by the claimant at the request of the respondent to the development works which were outside that payment process. The important factor, in my view, is that the contractual relationship which existed under the sub-contract was between the claimant and the respondent and the contractual relationship in relation to the works not specified in the sub-contract was between the claimant and the respondent. In those circumstances it is reasonable to presume that it was intended by the parties that the arbitration clause would apply to all works executed by the claimant at the site at the request of the respondent.

 

6.4 Accordingly, I find that the dispute which was referred to Mr. O’Brien is a dispute which is subject to the arbitration clause in the sub-contract.

 

 

7. Order

7.1 The notice of motion will be amended to include an application for a declaration, under the Court’s inherent jurisdiction, that no binding arbitration clause exists governing the dispute between the parties. The order will record that the parties agreed to the Court determining whether such a declaration should be made in the proceedings as constituted.

 

7.2 On the basis of the finding recorded earlier that the dispute between the parties is governed by clause 26 of the sub-contract and that an arbitrator appointed in accordance with that clause has jurisdiction to determine the dispute, there will be an order dismissing the application.

 

7.3 For the avoidance of doubt, no view is expressed in this judgment as to whether Mr. O’Brien was properly appointed in accordance with clause 26.

 

 

Deluxe Art & Theme Ltd -v- Sheffs Ltd [2014] IEHC 695 (16 July 2014)JUDGMENT of Mr. Justice Gilligan delivered on the 16th day of July, 2014

1. The applicant seeks an order pursuant to O. 56, r. 3(1)(i) of the Rules of the Superior Courts and pursuant to Article 34 of Schedule 1 of the Arbitration Act 2010 setting aside an arbitration award (“the Award”). The Award is dated 22nd July, 2013, and is in favour of the applicant as against the respondent in the sum of €60,427.58, inclusive of V.A.T., plus interest on such sum at the rate of 8% per annum from 24th August, 2009, until payment is made.

 

2. The applicant and the respondent to this notice of motion entered into a contract in April, 2009. The applicant agreed to provide and install Fit-Out works identified in the Contract Drawings for a consideration in the sum of €1.2m. A dispute arose between the parties in relation to this contract. The dispute was sent to arbitration under the terms of the contract. Mr. Jude O’Loughlin was appointed by the President of the Royal Institute of Architects of Ireland as arbitrator and delivered his award on 22nd July, 2013. The applicant had sought a declaration that it was entitled to exercise a lien over unfixed materials or goods on the respondent’s premises to the value of €75,536.72 which it said it benefited from under the terms of Clause 34(b) of the contract which provides that:

 

“In addition to all other remedies the Contractor upon the said determination may take possession of and shall have a lien upon all unfixed materials and goods intended for the Works which may have become the property of the Employer under this Contract until payment of all money due to the Contractor from the Employer.”

In the alternative the applicant sought an award in the sum of €60, 427.58 inclusive of VAT in respect of the contract works which was due and owing.

3. At paras. 4.13-4.14 the award the arbitrator stated:

 

“4.13. On this basis I would be of the view that the [Applicant] is effectively estopped from invoking Clause 34(b) by his own actions in handing over possession of the site and the disputed loose fixtures and fittings and accepting that the outstanding monies would be paid by the Respondent out of the projected cash-flow.

4.14. Accordingly I will not therefore grant the Declaration sought. I will grant an award of the said €60, 427.58 inclusive of VAT plus interest at the rate of 8% per annum from 24th August, 2009, until payment is made.”

 

4. The respondent company is in receivership and in liquidation and, therefore, the monetary award made by the arbitrator is, in real terms, of little or no value to the applicant. The lien over goods however, would be of value. The applicant submits that the award made by the arbitrator and, in particular, his finding that the applicant was estopped from invoking Clause 34(b) of the contract which allowed it to exercise a lien, is incorrect and ought to be set aside by the court. The applicant submits that this alleged estoppel was at no stage raised by the respondent either in its Statement of Defence or during the course of the hearing which took place on 25th April, 2013. No evidence was adduced in support of this contention and no opportunity was given to the applicant to make submissions in regard to it. The applicant submits that the decision was therefore unsupported by oral testimony or submissions of the parties and the award was therefore improperly procured. The respondent submits that this is not the case and that, in effect, the arbitrator, though he used the word “estopped,” was not actually referring to the distinct doctrine of estoppel as it is known to contract law but rather was using the term in the sense which is usually attributed to it in common parlance i.e. “precluded from” or “not entitled to” carry out some action or other.
5. This arbitration commenced after the operative date of the Arbitration Act 2010, namely, 8th June, 2010, and therefore it is the provisions of this legislation rather than the Arbitration Act 1954 which shall apply.

Submissions

6. Pursuant to s. 6 of the Arbitration Act 2010 the UNCITRAL Model Law governing arbitrations has force of law within the State. The applicant makes this application under Art 34 of the Model Law which sets out the grounds which a court may have regard to in setting aside an arbitral award. Art 34(2) of the Model Law provides:

 

“(2) An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that:

 

 

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

 

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

 

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or

 

 

(B) the court finds that:

 

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.”

 

The applicant relies, in particular, on Article 34(2)(a)(ii), Article 34(2)(a)(iii) and Article 34(2)(b)(ii) of the Model Law.

7. The applicant claims that it has been, in effect, denied an element of procedural fairness in the conduct of the arbitration by the arbitrator’s failure to give it the opportunity to adequately present its case in relation to the issue of estoppel. Counsel on behalf of the applicant submits that this is also in breach of Article 18 of the Model Law which provides that “the parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.”

 

8. Counsel submits that though the words “otherwise unable to present his case” used in Article 34(2)(a)(ii) are not clearly defined they introduce the notion of fair procedures and natural justice which are associated with the requirement that an arbitrator not misconduct himself during the proceedings. The finding of “estoppel” is the central element of the Award and the applicant should have been given the opportunity to make submissions in this regard. Counsel submits that the arbitrator was in breach of the audi alteram partem principle in this regard. The case law in relation to misconduct of an arbitrator under the previous legislative regime, the Arbitration Acts 1954-1980, was submitted by counsel for the applicant to be relevant to this issue. Counsel relied on the decision of the Supreme Court in Galway City Council v. Samuel Kingston Construction Ltd and Anor [2010] IESC 18 where it was held by O’Donnell J. that a court should set aside an award where the offending matter is so substantial or so fundamental that it would be clearly unjust to allow the award to stand. Examples of such misconduct included refusing to hear evidence on a material aspect of the dispute, adopting procedures which place one party at a clear advantage, acting with a clear level of favouritism towards one of the parties or deciding a case on a point which was not put to the parties. The conduct of the arbitrator in this instance, in relation to his finding of an estoppel, was clearly unjust within the meaning of that case. The High Court of England and Wales has also reached a similar conclusion in Cameroon Airlines v. Transnet Limited [2004] EWHC 1829 (Comm) in which a dictum of Bingham J. in Zermalt Holdings SA v. Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14 was cited. Bingham J. stated at p. 15 of that decision that:

 

“If an arbitrator is impressed by a point that has never been raised by either side, then it is his duty to put it to them so that they have an opportunity to comment. If he feels that the proper approach is one that has not been explored or advanced in evidence or submission then again it is his duty to give the parties a chance to comment. If he is to an extent relying on his own personal experience in a specific way then that again is something that he should mention so that it can be explored. It is not right that a decision should be based on specific matters which the parties have never had the chance to deal with, nor is it right that a party should first learn of adverse points in the decision against him.”

9. In addition, it is submitted that by addressing an issue which was not raised by the parties to the arbitration the arbitrator strayed beyond the scope of the terms of the arbitration and therefore breached Article 34(2)(a)(iii).
10. Counsel for the applicant also suggested that the alleged procedural unfairness is in conflict with the public policy of the State and therefore this was further grounds for setting aside the award. However, it was accepted at the hearing of this motion that the limitation period under s. 12 of the Arbitration Act 2010 (56 days from the making of the award) for the bringing of such a claim had, in fact, expired.

 

11. Counsel for the respondent submits that no question of procedural unfairness arises since the award made by the arbitrator is based on an interpretation of the contract and this issue was fully debated at the hearing. Though the word “estopped” was used in the Award the decision made by the arbitrator was not actually based on the doctrine of estoppel but on an interpretation of the contract alone. Counsel on behalf of the respondent also submits that the arbitrator had sufficient jurisdiction to decide the question before him in regard to the contractual lien. The respondent accepts, however, that the issue of estoppel was neither pleaded nor raised at the arbitral hearing.

 

12. Counsel for the respondent submits that the autonomy of the parties is central to the arbitration regime in Ireland and that the High Court has, in the words of Laffoy J. at para. 31 of her decision in Snoddy v Mavroudis [2013] IEHC 285, only a “very limited jurisdiction” to set aside an arbitral award. This may only be done for a reason specified in Article 34 of the Model Law.

 

13. Counsel for the respondent submits that the Award must be construed as a whole, with the word “estopped” being interpreted in its proper context. The word appears only once in the Award as part of the expression “effectively estopped.” This is not a technical legal usage of the term but amounts to a synonym of words like “prevented.” None of the essential ingredients of an estoppel such as a representation, a voluntary promise or detrimental reliance are mentioned or discussed in the Award. The Award is, in fact, concerned with the proper interpretation of Clause 34(b) of the contract which was an issue fully ventilated at the arbitration hearing. Therefore no question of unfairness of procedures arises on the facts of this case. The applicant is, in effect, requesting that the court examine the substance of the arbitrator’s award rather than any question of procedural fairness, something which is not permitted by the legislative scheme governing arbitration.

 

14. Counsel also submits that the arbitration agreement, contained in Clause 38 of the contract, is clear in its terms and that the arbitrator had jurisdiction to assess the correct interpretation of Clause 34(b) of the contract. There is also a “strong presumption…that a tribunal acts within its mandate” as held by Laffoy J. in Snoddy v Mavroudis [2013] IEHC 285 at para. 32. The application made in this instance is, it is submitted by counsel for the respondent, a misconceived attempt by the applicant to request that the court examine the merits of the Award made by the arbitrator, which is impermissible.

 

15. In response to these submissions counsel for the applicant submitted that there is sufficient evidence from the text of the Award that the arbitrator had concluded that a specific form of estoppel, estoppel by conduct, had arisen from the behaviour of the applicant and that this was inappropriate since no opportunity to address this claim had been given to the parties. Counsel for the respondent submitted in response that the elements of an estoppel by conduct were not discussed or mentioned anywhere in the Award and therefore it was not possible to see this factor as having any influence on the decision actually made by the arbitrator.

Conclusion

16. The question which the Court must determine on this application is whether or not the word “estoppel” as used by the arbitrator in the Award made on 22nd July, 2013, was used in its legal sense or was used in a more general fashion.

 

17. The jurisdiction of the court to set aside an order made by an arbitral tribunal, as submitted by counsel and as stated by Laffoy J. in Snoddy v Mavroudis [2013] IEHC 285, is very limited. The grounds for such an order are clearly set out in Article 34 of the Model Law.

 

18. It is also clear that the doctrine of estoppel is a complex and technical element of the law of contract and the law of equity which has given rise to considerable judicial comment. It is not necessary for the court to enter into a discussion as to whether or not estoppel actually arose on the facts of this case, as it is not for this Court to examine the merits of the Award. Nor is it the role of this Court to examine in detail the complex jurisprudence relating to the doctrine of estoppel in its various forms.

 

19. However, according to Murdoch’s Dictionary of Irish Law, Henry Murdoch, 4th Ed., (Dublin, 2004) at p. 410 estoppel is defined as:

 

“A rule of evidence which precludes a person from asserting or denying a fact, which he has by words or conduct led others to believe in. If a person by a representation induces another to change his position on the faith of the representation, he cannot afterwards deny the truth of this representation. Estoppel must be pleaded to be taken advantage of; it provides a shield not a sword and consequently it cannot create a cause of action.”

This is, in effect, a précis of the well established jurisprudence from which the primary elements of the doctrine of estoppel, namely, representation by word or conduct and detrimental reliance, have emerged such as Amalgamated Property Co. v. Texas Bank [1982] 1 Q.B. 84, Taylor Fashions Ltd v. Liverpool Victoria Trustee Co. Ltd. [1982] QB 133 and, in Ireland, Ryan v Connolly [2001] 2 ILRM 174. It is not necessary for this Court to examine the different manifestations of the doctrine of estoppel, whether by conduct, by representation or by record (res judiciata).

20. A similar legal definition of the term estoppel can be found in Jowitt’s Dictionary of English Law, Greenberg, 3rd Ed., (London, 2010) at p. 838:

 

“The precluding of a party, in certain circumstances, from proving in litigation particular facts or matters which, if proved, would assist him to succeed as plaintiff…or defendant in an action”

The author then continues to examine some of the more specific forms of the doctrine of estoppel such as estoppel by conduct, by record or by representation.

21. However, it is clear that the word “estoppel” may also be used in non-legal contexts and may have other, similar but not technically the same, meanings attributed to it. The Oxford English Dictionary, Simpson and Weiner, 2nd Ed., (Oxford, 1989) for example states at p. 412 that the noun estoppel can mean

 

“1. An obstruction (to a watercourse) whether natural or artificial….

2. Law. An impediment or bar to a right of action arising from a man’s own act, or where he is forbidden by law to speak against his own deed…

 

 

1. stoppage, prohibition. Obs.”

The term “Obs” after the last recorded meaning for estoppel is an abbreviation for “Obsolete.” However, The Oxford English Dictionary also states that the word in its verb form, “estop,” can also mean “to stop with or as with a dam or plug”, to stop, bar or preclude in a legal action or “b. gen. To stop, prevent. rare.” This last recorded general meaning, similarly to the position with the noun “estoppel” is described as “rare.” However, though the usage of the word “estoppel” in the general sense of “prevent” may be rare, it is not unheard of.

22. It is also clear that the elements of the doctrine of estoppel are not discussed or even mentioned at any other stage of the Award. There is no, even implicit, examination of the factors which would allow the arbitrator to have reached a conclusion that an estoppel had occurred. Other legal submissions were made to the arbitrator on other matters of contract law. It would be unusual for an arbitrator to have used the word estopped in the strict legal sense without examining the complex jurisprudence which surrounds the application of this doctrine in its many different contexts. It is clear that in this instance the arbitrator engaged in a comprehensive interpretation of Clause 34(b) of the contract in the context and scheme of the contract as a whole and reached the conclusion that the applicant could not exercise the contractual lien provided therein, as it did not meet, or no longer met, the conditions required by the provision for the exercise of that power.

 

23. It is of some significance that the applicant sought not only a declaration that it was entitled to exercise a lien over the unfixed materials or goods to the value of €75,536.72 which it maintained it benefited from under the terms of Clause 34(b) of the contract, but in the alternative sought an award in the sum of €60,427.58 inclusive of VAT in respect of the contract works which was due and owing.

 

24. This Court also has to have regard to the views as expressed by O’Donnell J. in Galway City Council that a court should set aside an award where the offending matter is so substantial or so fundamental that it would be clearly unjust to allow the award to stand. The examples as given by O’Donnell J. were misconduct, including refusing to hear evidence on a material aspect of the dispute, adopting procedures which place one party at a clear advantage, acting with a clear level of favoritism towards one of the parties or deciding a case on a point which was not put to the parties.

 

25. In my view on the basis that Clause 34(b) of the contract was argued in full before the arbitrator, the fact that he used the term “estopped” and that this is the offending matter is not so substantial or so fundamental that it would be clearly unjust to allow the award to stand. I do accept that it was unfortunate that the arbitrator chose to use a word with distinct legal connotation having regard to the reliefs as sought but it is clear that Clause 34(b) of the contract was argued in full by both sides, and the use of the term “effectively estopped” in my view does not bring about a sufficient injustice to accede to the relief as sought herein on the applicant’s behalf.

 

26. Furthermore, I do not consider that by the use of the term “effectively estopped”, the applicant can bring itself within the provisions of Article 34(2)(a) or (b) of the Model Law.

 

27. Accordingly, the application to set aside the award is dismissed.

 

Clancy & Anor -v- Nevin

[2008] IEHC 121 (25 April 2008)RESPONDENTS

Judgment of Miss Justice Laffoy delivered on 25th April, 2008.

 

The proceedings

This judgment deals with the following proceedings:

(1) An application initiated by originating notice of motion dated 4th March, 2008 (Record No. 2008 35 MCA) in which David Clancy and Aveen Kehoe (the Claimants) seek against James Nevin (Senior) (the Contractor) the following orders:

(a) an order pursuant to s. 41 of the Arbitration Act, 1954 (the Act of 1954) and O. 56, r. 4(f) of the Rules of the Superior Courts, 1986 (the Rules) giving the Claimants leave to enforce in the same manner as a judgment or order the award of Ms. Joan O’Connor (the Arbitrator) made on 11th July, 2007;

(b) leave to enter judgment for the sum of €508,027.36, being the total amount found by the Arbitrator due and owing to the Claimants from the Contractor, together with interest on the said sum from 11th July, 2007; and

(c) leave to enter judgment for the sum of €64,885.16 (including VAT) against the Contractor, being the Arbitrator’s fees as paid by the Claimants to the Arbitrator.

(2) An application initiated by originating notice of motion dated 4th March, 2008 (Record No. 2008 36 MCA) in which the Claimants seek relief similar to the relief referred to at 1(a) and (b) above in respect of the sum of €220,033.34, being the claimants’ costs of the reference to arbitration as taxed by the Arbitrator on 5th December, 2007.

(3) An application initiated by originating notice of motion dated 26th March, 2008 (Record No. 2008 43 MCA) wherein the applicant seeks the following orders:

(a) an order pursuant to O. 56, r. 4 of the Rules to extend the time in which to apply to set aside the arbitration award made by the Arbitrator on 11th July, 2007 and the taxed award of costs; and

(b) an order pursuant to s. 38 of the Act of 1954, as amended, and O. 56, r. 4(e) of the Rules to set aside the said arbitration award and the said taxed award of costs.

Initially, the Claimants sought the reliefs referred to at (1) and (2) above by way of two special summonses, the first of which was issued on 12th November, 2007 and was returnable before the Master on 18th January, 2008. The Claimants’ solicitors entered an appearance to that special summons on 23rd March, 2007. The relief sought at (3) above was originally claimed by way of special summons which issued on 1st February, 2008, but was not served. It is common case that the incorrect procedure had been adopted by the moving party in each of the applications initially and that the correct procedure was by way of originating notice of motion.

 

Outline of factual background

By a building agreement dated 3rd March, 2003, the Contractor agreed to execute certain building works for the Claimants, that is to say, extensions and alterations to a coach house for conversion to a dwelling house with associated site works at Kellystown House, Kellystown, Slane, County Meath, at the price of €602,411.74 (including VAT). The agreement provided for completion in March, 2004. The Claimants had hoped to move into the property, which was to be their home, in the summer of 2004. It was not to be. A dispute as to the performance by the Contractor of his obligations under the contract arose. Notice of the dispute was served by the Claimants on 4th May, 2005. The Claimants sought to have the dispute referred to conciliation. under the terms of the agreement. Conciliation did not produce a resolution and the dispute was referred to arbitration. The Arbitrator’s appointment was by nomination of the President of the Royal Institution of Architects of Ireland by letter dated 11th January, 2006. The terms on which the Arbitrator accepted the nomination, which were agreed by the Claimants and the Contractor, provided, inter alia, that the costs of the reference and the award should be at the discretion of the Arbitrator and that she might tax or settle the amount of costs to be paid or any part thereof and that she might make interim orders for security for any party’s own costs and/or to secure all or part of any amount in dispute in the arbitration.

It is not necessary to refer to the rather tortuous and contentious process which led to the intended hearing date of 16th May, 2006. Following a pre-hearing meeting on 16th May, 2006, there were discussions between the Claimants and the Contractor and their respective legal advisers and a settlement agreement was executed. The settlement agreement also involved an architect (the Architect) who had been employed by the Claimants to supervise the building works and against whom the Claimants were pursuing a claim arising from alleged breach of contract and negligence. The terms of the settlement agreement were as follows:

1. That the Architect would pay the Claimants the sum of €232,500 on or before 26th May, 2006, in full and final settlement of any and all claims by the Claimants against him. That sum was duly paid.
2. That the Contractor would pay to the Claimants no later than 27th June, 2006, the net sum of €207,500, which, subject to the proviso in clause 3, would constitute full and final settlement of all claims arising between the Claimants and the Contractor.
3. That in the event that payment was not made by the Contractor, the Claimants should remain entitled to pursue their claims in the arbitration and to notify the Arbitrator accordingly without prior reference to the Contractor.
4. The Contractor agreed to discharge the Arbitrator’s fees in the arbitration up to and including 16th May, 2006.

It was further provided that unless payment was made by the Contractor in accordance with clause 2, the Claimants reserved all rights, including those arising at common law, as against the Contractor.

Following the settlement agreement the Arbitrator furnished a fee note to the solicitors for the Contractor in the sum of €17,000 inclusive of VAT. The Contractor paid neither the sum due to the Claimants under the settlement agreement nor the Arbitrator’s fees. By letter dated 28th June, 2006, the Claimants’ solicitors wrote to the Arbitrator intimating that the arbitration was proceeding and seeking an expeditious hearing date. A copy of the settlement agreement was furnished to the Arbitrator with that letter. The Arbitrator fixed 26th July, 2006 as the date for the hearing. This led to the following correspondence to the Arbitrator, each item of which was copied by the sender to the opponent:

(a) A letter of 19th July, 2006 from the Contractor’s solicitors. Three issues were raised in the letter. First an adjournment of the hearing was requested. Secondly, the solicitors repeated their “grave concerns” as to the manner in which the arbitration had proceeded and the “clear bias” which it was alleged the Arbitrator had exhibited in favour of the Claimants. Reference was made to previous correspondence in which those concerns were voiced. The solicitors requested that the Arbitrator withdraw immediately from the arbitration. The stance adopted on behalf of the Contractor before the court was that correspondence in relation to the conduct of the arbitration prior to July, 2006 is irrelevant to his current application to set aside the Arbitrator’s award, which is based on the disclosure of the contents of the settlement agreement to the Arbitrator and the conduct of the arbitration following the disclosure. Thirdly, the Claimants’ solicitors complained that the Claimants were seeking to “cherry pick” certain parts of the settlement agreement and disregard other parts thereof and submitted that the Claimants were not entitled to enforce certain parts of the settlement agreement and disregard other parts thereof. There was no complaint that the terms of the contents of the settlement agreement should not have been disclosed to the Arbitrator.

(b) The Claimants’ solicitors wrote to the Arbitrator on 31st July, 2006, referring to the letter at (a) above and suggesting that the Contractor should be required to make an application to court under s. 39 of the Act of 1954 seeking the Arbitrator’s removal on the grounds of bias.

(c) Following an informal meeting of the parties and the Arbitrator on 26th July, 2006, the Contractor’s solicitors wrote again to the Arbitrator on 3rd August, 2006 reiterating their request that she step down forthwith from the arbitration, referring again to the pre-July, 2006 correspondence and raising a matter which was “a cause for even greater concern”. That was the fact that the Claimants’ solicitor had furnished the settlement agreement to the Arbitrator and had advised the Arbitrator of the Contractor’s failure to comply with its terms. It was submitted that on any objective analysis it would not be possible for the Arbitrator to continue to arbitrate the dispute in an impartial and unbiased manner. It was suggested that the Arbitrator should take legal advice.

(d) The reaction of the Claimants’ solicitors was to suggest again, in their letter of 8th August, 2006, that, if the Contractor wished to remove the Arbitrator, an application should be made to the High Court.

No such application was made and the arbitration proceeded. A preliminary meeting was held on 22nd November, 2007, which was attended by the solicitors for the Contractor. The Arbitrator recited in her award that, at the time, the solicitors for the Contractor did not intend to seek a court revocation of her appointment. Subsequent to that meeting the solicitors for the Claimants sought, inter alia, an interim order for security of the Claimants’ costs. On 27th February, 2007 the Arbitrator made an order that the Contractor pay an amount of €45,000 into an escrow account by way of security for the Claimants’ legal costs. Although the escrow account was set up, the Contractor never made any payment into it and gave no security for the Claimants’ legal costs. In May, 2007 the Arbitrator fixed 11th June, 2007 and the following day for the hearing of the arbitration and notified the parties. Prior to that, the solicitors for the Contractor had, by letter of 2nd May, 2007, informed the Arbitrator that they had not been able to obtain any instructions whatsoever from the Contractor for a long time and were unsure whether or not any of the witnesses would be in attendance but the solicitor and counsel would be available to attend. Subsequently, by letter dated 15th May, 2007, the solicitors for the Contractor reiterated what had been stated in their letter of 2nd May, 2007.

The hearing commenced at 11 a.m. on 11th June, 2007. Following the opening of the case by the solicitor for the Claimants, at 12.55 p.m. counsel for the Contractor requested an adjournment on the basis of a bereavement in the Contractor’s family which prevented him from attending. When, following a recess of one hour, counsel for the Contractor was unable to provide the information sought in relation to the bereavement, the Arbitrator decided to proceed with the hearing. She heard legal argument from counsel for the Contractor. As appears from the summary in the award, one of the arguments advanced was that the Arbitrator’s knowledge of the terms of the settlement agreement prejudiced her role as Arbitrator, so that she could consider only the amount of the settlement agreement and the points of claim as of May, 2006. In a further submission, after the solicitor for the Claimants had responded, counsel for the Contractor submitted that the settlement agreement must be construed in its entirety and that, if the Arbitrator were to make an award in excess of €207,000, the award would be invalid and open to challenge in that such an award would prejudice the Contractor. The award also records that counsel for the Contractor, in concluding his argument, requested clarification as to whether the Arbitrator could proceed with the arbitration in the knowledge of the terms of the settlement agreement. The Arbitrator decided to proceed with the arbitration on the basis that she had yet to assess liability and quantum. Counsel for the Arbitrator acknowledged that the Arbitrator was not biased in the matter but that there would be a probable perception of bias in the circumstances. Thereupon, counsel and the solicitor for the Contractor intimated their intention to withdraw from the hearing, stating that their instructions were to make legal arguments only, witnesses for the Contractor would not be called, the Claimants’ witnesses would not be cross-examined and the settlement agreement was not an admission of liability. Finally, counsel for the Contractor formally requested the right to address the Arbitrator on the matter of costs at a separate hearing and then withdrew. The hearing proceeded in the absence of legal representation of the Contractor.

On 11th July, 2007 the Arbitrator wrote to the solicitors for the Claimants and the solicitors for the Contractor indicating that she had made her award on that day, and that it was available for collection on receipt by her of the costs of the award in the sum of €64,885.16 inclusive of VAT and expenses. The Contractor did not pay or contribute to the costs of the award. The Claimants raised the money and paid the costs, whereupon, on 11th October, 2007 the Arbitrator sent the award to the solicitors for the Claimants and the solicitors for the Contractor. In the award, the Arbitrator awarded the sum of €508,027.36 to the Claimants, together with further interest at the rate of 5% from 11th July, 2007. She directed that the Contractor pay the sum of €64,885.16 being the costs of the award and she further directed the costs of the reference should be paid by the Contractor and that the Claimants’ costs were “recoverable on a solicitor and client basis, i.e. based on actual costs incurred but without any unreasonable claims”.

Following the hearing and prior to the making of the award, the solicitors for the Contractor, by letter dated 14th June, 2007, requested that a separate hearing on costs be held. As the award records, on 27th June, 2007, the Arbitrator advised the parties as follows:

“… the award of costs is in my discretion which I will exercise judicially and according to settled principles: the dominant principle is that, in the absence of circumstances justifying some other order, costs should follow the event. As part of the arbitral process, I must consider the outcome of the proceedings to decide what the event is which costs should follow.”

The Arbitrator indicated that there would be no separate hearing on the issue of liability for costs but she reserved the jurisdiction, on application, to tax costs, if costs cold not be agreed between the parties. On 5th December, 2007 the Arbitrator assessed the Claimants’ costs, including VAT, in the sum of .€220,033.34.

Contractor’s claim for an extension of time

Order 56, r. 4(e) of the Rules, which is invoked by the Contractor, requires that an application by a party to a reference under an arbitration agreement to set aside an award be made by originating notice of motion to which the other party or parties to the reference shall be respondent and goes on to provide:

“An application to remit or set aside an award shall be made within six weeks after the award has been made and published to the parties, or within such further time as may be allowed by the court.”

The first question which arises on the Contractor’s application for an extension of time is when was the award “made and published to the parties” within the meaning of the rule. A similar question was considered recently in this Court by Kelly J. in an ex tempore judgment delivered on 19th December, 2007 in Kelcar Developments Ltd. v. M.F. Irish Golf Design Ltd. [2007] IEHC 468. Kelly J. stated that the matter is dealt with succinctly in the 19th edition of Russell on Arbitration and he quoted the following passage:

“‘Publication to the parties’ of an award (as distinct from ‘publication’ of it simply) entails both completion of the award, so that the arbitrator has finally adjudicated and retains no power of altering it, and also notice to the parties that this has been done. It is immaterial, however, whether or not the parties are then made acquainted with the contents of the award or receive copies of it.”

Kelly J. observed that two authorities dating from 1840 and 1844 respectively are cited as authority for that proposition and concluded that it is plain that publication of an award to the parties arises when the Arbitrator makes his award and notifies the parties of that fact.

On that basis, in this case the award of the Arbitrator was made and published to the parties on 11th July, 2007. Therefore, the six weeks period within which the Contractor should have initiated his application to set aside the award commenced on 11th July, 2007.

The next question which arises is what test should the court apply in determining whether to grant an extension of time. In Bord na Mona v. John Sisk & Son Ltd (the High Court, Unreported, 31st May, 1990) Blayney J., having commented that the provision in rule 4(e) was difficult because the criterion to be applied is very general, went on to quote the following passage from the judgment of Mustill J. in Citland Ltd. v. Kanchan Oil Industries PVT Ltd. [1980] 2 Lloyds Reports 274 on the question of granting an extension of time for setting aside an award:

“The reported cases show that the period can in appropriate circumstances be enlarged. It is often convenient, for the purposes of discussion, to extract from these decisions a list of factors which are relevant to the question whether an extension of time should be granted. Such a list does not lay down a rigid test. The only criterion is whether the interests of justice require that the time should be enlarged, and the weight to be given to each factor will depend on the circumstances of the case.”

Blayney J. then went on to quote the list of factors to which Mustill J. referred, which were detailed in Commercial Arbitration, (2nd edition), which Mustill J. co-authored with Boyd, (at p. 568) as follows:

“1. The desirability of adhering to time limits prescribed by rules of court.

2. The likelihood of prejudice to the party opposing the application if time is extended.
3. The length of delay by the applicant.
4. Whether the applicant has been guilty of unreasonable or culpable delay.
5. Whether the applicant has a good arguable case on the merits.”

Blayney J. stated that, in the case before him, the weight to be given to each of the factors varied greatly, with the most weight being given to the last factor, whether the applicant had a good arguable case on the merits.

Before applying the foregoing principles to the facts of this case, it is necessary to consider what transpired after the award was made and published to the parties on 11th July, 2007 in greater detail. As I stated, following the discharge of the costs of the award by the Claimants in early October, 2007, the Arbitrator sent the award to the solicitors for the Claimants and the solicitors for the Contractor. On 16th October, 2007 the Contractor’s solicitors sent him a copy of the award and, having stated that it might be open to challenge the award, asked for instructions. By letter dated 8th November, 2007, which was in response to a letter of 5th November, 2007 which has not been exhibited, the Contractor stated that he supposed that the only option was “to appeal this unjust decision”. An appearance was not entered to the Claimants’ proceedings, albeit procedurally incorrect proceedings, to enforce the award until 23rd January, 2008 and the Contractor’s first proceedings, again procedurally incorrect, to set aside the award were not initiated until 1st February, 2008. The Contractor has sought to justify and excuse the delay on the following grounds:

(a) That until he received a letter of 10th December, 2007 from

his solicitors sending him a copy of the Arbitrator’s letter of 5th December, 2007 setting out the Arbitrator’s assessment of the Claimants’ costs, he was not aware of “the amount of the final award”;

(b) that due to personal circumstances and, in particular, family illness, of which particulars were not set out, he was not able to instruct his solicitors further in the matter until January, 2008, resulting in their being “a relatively short period of delay” since he received a copy of the award and a copy of the taxed award of costs, which he suggested is not unreasonable in the circumstances, and

(c) that the Claimants are not prejudiced by that period of delay, pointing out that there was “a delay of three months” on their part in taking up the award.

 

Returning to the factors listed by Blayney J. in Bord na Mona v. John Sisk & Son Ltd., I find as follows:

(1) On the desirability of adhering to time limits, in the Kelcar case Kelly J. quoted the oft cited passage from the judgment of McCarthy J. in Keenan v. Shield Insurance Ltd. [1988] I.R. 89, in which “the desirability of making an arbitration award final in every sense of the term” is emphasised and expressed the view that, insofar as arbitration is concerned, it is of general importance to seek to ensure that time limits are adhered to. I agree.

 

(2) It is clear on the evidence that the Claimants have been severely prejudiced by the conduct of the Contractor to date and that prejudice will be compounded if time is extended. The property the subject of the agreement was to be the Claimants’ family home. The Claimants have been endeavouring to have their dispute with the Contractor resolved since May, 2005. Just short of two years ago the Contractor compromised with the Claimants but failed to honour the compromise. Under the terms of the compromise, the Claimants, as they were entitled to do, demolished the works and started reconstruction. The home they had planned for themselves and their three young children, the oldest of whom is three years of age, is not yet completed. It is absolutely clear on the evidence that, because of the delay in implementing the resolution of the dispute, the Claimants have been under severe personal strain and a huge financial burden.

 

(3) On the length of the delay, three matters fall for consideration.

The first is that, as I have already found, the award was made and published to the parties on 11th July, 2007. The fact that the measurement of the costs did not take place until December, 2007 does not render the award of 11th July, 2007 less than final. On the making of the award the Arbitrator was functus officio, except in relation to taxation of costs.

 

Secondly, both the Claimants’ legal advisers and the Contractor’s legal advisers overlooked the procedural changes which the amendment of O. 56 of the Rules brought about when S.I. No. 109 of 2006 came into operation on 31st March, 2006. While it is true that the Claimants were not under a six-week time limit in relation to the initiation of the application to enforce the award, nonetheless, I think it appropriate to take a benign view, as Kelly J. did in the Kelcar case, and regard the Contractor’s application to have commenced on 1st February, 2008 when the Contractor’s special summons was issued.

 

Thirdly, I consider that on the facts this case is distinguishable from Vogelaar v. Callaghan [1996] 1 I.R. 88. Therefore, I do not think that the justice of the situation requires that the limitation period should run from the date on which the parties received copies of the award or became aware of its contents. The distinguishing feature is that the judgment of Barron J. in Vogelaar v. Callaghan records (at p. 91) that, having received notice of the making of the award, both parties sent a moiety of the Arbitrator’s costs to the Arbitrator. On the basis that the award was taken up jointly on a date when the six weeks period had already run, Barron J. held that it would be unfair to enforce the rule, since this would have required the issue of proceedings before it would have been known whether or not there was a need to do so. In this case, it was the Contractor who was constrained by the six weeks limitation period. Despite that, the Contractor did not take the step necessary, the payment of the costs of the award, as a precondition to the taking up of the award. On the contrary, the Contractor left it to the Claimants to take the necessary step, which necessitated the Claimants having to raise finance in circumstances in which it would have been obvious that it was the Contractor who would be liable for all or part of the costs of the award, having regard to the fact that it was made clear to the Arbitrator on 16th May, 2006 that it was the Contractor who was liable for the costs of the arbitration up to that date.

Having regard to the foregoing factors, in my view, the delay in this case was a delay of in excess of six and a half months from 11th July, 2007 to 1st February, 2008.

(4) On the facts of this case, I have no doubt that the Contractor was guilty of both unreasonable delay and culpable delay. The only reasonable inference which can be drawn is that the Contractor, who reneged on the settlement agreement over a year earlier, was prepared to sit back and allow the Claimants to take the necessary step to take up the award and to initiate the proceedings to enforce the award. In my view, it is reasonable to infer a deliberate policy on the part of the Contractor not to move until he had to. Even after he became aware of the contents of the award it took him in excess of three and a half months to initiate the procedurally incorrect proceedings to set the award aside.

 

(5) The conduct of the Contractor since the award was made and published to the parties on 11th July, 2007 is not suggestive of any real belief on his behalf that he has a good arguable case for setting aside the award. The case made on his application is that the award was the result of misconduct on the part of the Arbitrator for the following reasons and ought to be set aside:

(a) The Arbitrator proceeded to hear the reference in circumstances where the terms of the settlement agreement had been disclosed to the Arbitrator by the Claimants’ solicitors, she had been informed that the Contractor had defaulted in his obligations thereunder, and she had been made aware that the Contractor had failed to discharge her fees. It was contended that those facts gave rise to the appearance of partiality on the part of the Arbitrator or the conclusion that there was a real likelihood of bias on her part.

(b) The absence of proper control of the arbitration procedure by the Arbitrator made it impossible for the Contractor to properly present his case, gave rise to the appearance of partiality on the part of the Arbitrator and was contrary to the requirements of natural justice.

(c) The Arbitrator failed to exercise her discretion in relation to costs judicially. In particular, it was asserted that the failure of the Arbitrator to allow the Contractor to make submissions in relation to the issue of costs was in breach of natural justice and that the award of costs was improperly made.

Dealing with each of those grounds in turn I make the following observations and findings:

(a) The existence of the settlement agreement was made known to the Arbitrator by both sides. She was told by counsel for the Contractor on 16th May, 2006 that her fees to that date were for settlement by the Contractor. She furnished a fee note but received no payment. It was a matter of basic deduction that the Contractor was in default. It may be that it would have been preferable if the amounts which the Contractor and the Architect respectively agreed to pay to the Claimants had not been disclosed to the Arbitrator. It is the case that a deduction was going to have to be made for the amount which was actually paid by the Architect but a mechanism could have been agreed to postpone that until after the award was made.

The issue which has been raised about the disclosure of the terms of the settlement agreement is analogous to the sealed offer issue considered in Tobin and Twomey Services Ltd. v. Kerry Foods Ltd. [1999] 3 IR 483. In my judgment in that case I quoted from Handbook on Arbitration Practice by Bernstein and Mees (2nd Ed.), where guidelines were suggested for dealing with a situation in which an offeror requests the arbitrator to resign because the offeree has disclosed to the arbitrator the content of a without prejudice offer. The guidelines suggested that, if one party to the arbitration requests the arbitrator to resign, but the other opposes that, the arbitrator should give each an opportunity of making submissions on the matter. The guidelines continued:

“In the light of those submissions he should consider whether the information has created a serious risk that he will be unable to approach the substantive issues in the arbitration with an open mind. For example, if the substance of the arbitration is the assessment of damages, and the arbitrator is told by the claimant of a substantial offer made ‘without prejudice’ by the respondent, the arbitrator may think that it will be impossible for him not to be influenced by the offer when arriving at his figure; and moreover that the respondent will not be able to believe that he has not been influenced by it.”

In my judgment (at p.526) I expressed the view that those guidelines accord with principle and are in line with the policy considerations set out in Keenan v. Shield Insurance Company Limited referred to earlier.

The most recent edition of Bernstein’s Handbook of Arbitration and Dispute Resolution Practice (the 4th edition) replicates the first sentence in the passage quoted above and continues (at p. 268):

“But arbitrators should be robust. Obviously parties try to settle arbitrations for very good reasons, which have to do with the uncertainty, risk and cost of the process. The mere fact that the arbitrator is told by the claimant of a substantial offer made ‘without prejudice’ by the respondent, ought not to mean that the arbitrator cannot put the matter to one side in formulating his award, as in most cases the arbitrator should be able to disregard the knowledge of the actual amount when reaching a decision, considering as he must all the evidence and the weight to be given to it.”

In my view, the more robust approach advocated in that passage still accords with principle and the jurisprudence in this jurisdiction.

In this case, of course, there was a concluded agreement between the parties, not merely a without prejudice offer by the Contractor. The Arbitrator had been apprised by counsel for the Contractor of the existence of the agreement and of the liability of the Contractor for the Arbitrator’s costs to date. After the full terms of the settlement agreement were disclosed, the issue as to whether the Arbitrator could come to the arbitration with an open mind was raised by the solicitors for the Contractor. Subsequently, the Arbitrator was apprised of the views of each side on whether she should proceed with the arbitration. She decided she should. The issue was regurgitated from time to time on behalf of the Contractor and finally it was raised in the submissions of the Contractor’s counsel at the hearing on 11th June, 2007, as I have already outlined. In her comprehensive award the Arbitrator stated as follows:

“In making my award I have disregarded the Settlement Agreement and the [Contractor’s] failure to honour his obligations thereunder, save insofar as the Claimant has advised that he is happy to discount the sum received from [the Architect] from the amount of his claim.”

As regards the quantum of the Contractor’s liability, the fact that the amount awarded by the Arbitrator against the Contractor is almost twice the sum the Contractor agreed to pay under the settlement agreement is corroborative of that statement.

The jurisprudence to set aside an award under s. 38(1) arises where the arbitrator has misconducted himself or the proceedings or the award has been improperly procured. As Fennelly J. said, speaking on behalf of the Supreme Court, in McCarthy v. Keane [2004] 3 IR 617 (at p. 627), the standard or test of misconduct of such a nature as to justify setting aside an award would be “something substantial, something that smacks of injustice or unfairness”. I have no hesitation in concluding that the Contractor does not have a good arguable case on the merits by reference to that standard.

(b) The allegation of the absence of proper control of the arbitration procedure by the Arbitrator does not stand up to scrutiny. It is true that after the Contractor failed to honour the settlement agreement the solicitors for the Claimants adopted a very trenchant approach to the prosecution of the arbitration proceedings. However, on the evidence before me, I am of the view that the Arbitrator acted properly and within the authority conferred on her by the arbitration agreement in dealing with procedural matters including applications on behalf of the Claimants for interim relief. In fact, the only interim order made by the Arbitrator after the settlement agreement broke down was the order for security of the Claimants’ costs. That order was totally ignored by the Contractor.

(c) The allegation that the Arbitrator failed to exercise her discretion in relation to costs in a manner consistent with natural justice does not stand up to scrutiny either. The Arbitrator considered the request of counsel for a separate hearing on costs and, having elicited the Claimants’ views, decided not to hold a separate hearing on the issue of liability but indicated the basis on which she would approach the award of costs, stating her understanding of the dominant principle, namely, that, in the absence of circumstances justifying some other order, costs should follow the event. Counsel for the Contractor referred to a passage from the judgment of Donaldson J. in Tramountana v. Atlantic Shipping [1978] 2 All E.R. 870 (at p. 879) to the effect that, although a determination of what “the event” is is the usual rule, it may only be the starting point. Quite frankly, having regard to the conduct of the Contractor in this case, it is difficult to see what considerations other than “the event” the Arbitrator should have had regard.

In my view, the Contractor has not demonstrated that he has a good arguable case on the merits that the award should be set aside on any of the grounds advanced.

 

Conclusion on the extension of time application

Having considered the individual factors which one is entitled to have regard to in determining whether time should be extended for the initiation of an application to set aside the award of the Arbitrator, I conclude that it should not. When I consider the sole criterion on which the court should act, that is to say whether the interests of justice require that the time should be enlarged, I am strongly of the view that, having regard to the conduct of the Contractor in relation to the resolution of the Claimants’ dispute, it should not. The Contractor was given every opportunity to make his case in the arbitral process. He was even invited to initiate proceedings to remove the Arbitrator, but did not do so. I think it is not unreasonable to infer that his whole approach was, as the saying goes, to “put off the evil day”. I consider his application for an extension of time to be wholly unmeritorious.

 

Orders

The Contractor’s application for an order extending the time to set aside the arbitration award will be dismissed.

The Claimants will be granted the reliefs they seek on their applications for orders under s. 41 of the Act of 1954 and for leave to enter judgment.