1. The
first named Defendant, hereafter referred to as "Kerry", is a limited company
incorporated in the United Kingdom which was formerly incorporated under the
name W.L. Miller & Sons Limited. Kerry is a subsidiary of Kerry Group
Plc., hereafter referred to as "the Plc.", a public limited company
incorporated in this jurisdiction. In January 1992 Kerry entered into a
contract with the Plaintiff to carry out certain electrical works at Kerry's
factory at Poole, Dorset in the United Kingdom. The contract incorporated the
Articles of Agreement and Conditions of Contract (1977 Edition) published by
the Royal Institute of Architects of Ireland. The contract price was
STG£133,418.60 or such other sum as should become payable under the
contract. The works, which commenced on 6th February, 1992, were to be
completed within six weeks. However, the Plaintiff, at the request of Kerry,
carried out additional works in consequence of which the Plaintiff was engaged
in works on the factory at Poole until November 1992.
2. Following
completion of all of the works, a dispute arose between the Plaintiff and Kerry
as to the amount due to the Plaintiff in respect of the works. That dispute
was not resolved and eventually the Plaintiff and Kerry agreed to the
appointment of the second named Defendant, hereafter referred to as "the
Arbitrator", of the firm of Dermot C. Coyle & Partners, Chartered
Engineers, to arbitrate on the dispute. The Arbitrator accepted the
appointment and in August 1994 an Arbitrator's Appointment Form, hereafter
referred to as the "Appointment Form", which dealt, inter alia, with the
remuneration of the Arbitrator, was executed on behalf of the parties to the
arbitration.
3. The
Arbitrator held a preliminary meeting on 30th August, 1994 and subsequently
issued directions in relation to pleadings, discovery and such like. A
procedural meeting was held on 20th February, 1995. The arbitration commenced
on 22nd May, 1995.
4. At
the outset an issue arose as to whether the contract which had been executed in
January 1992, which will be referred to hereafter as "the electrical services
contract", covered the additional works or whether the additional works were
subject to separate contracts. After four days argument as to how the matter
should proceed, it was agreed that the Arbitrator should hear a preliminary
issue to determine the scope of the electrical services contract. The hearing
of the preliminary issue, at which evidence was led by each party, lasted for
seven days from 26th May, 1995 to 9th June, 1995. The Arbitrator gave his
decision on the preliminary issue in an interim award dated 14th June, 1995
(the Interim Award) in which he found that four categories of work did not form
part of the electrical services contract and that each category was the subject
of a separate contract, the categories being:-
6. While
the parties were awaiting the making and publication of the Interim Award the
arbitration had continued on 13th June, 1995 on the substantive dispute between
the parties arising from the electrical services contract only and continued
after the publication of the Interim Award. Between 13th June, 1995 and 18th
July, 1995 there were sixteen hearing days during which Mr. James Tobin, the
managing director of the Plaintiff, was testifying. On 20th July, 1995 the
Plaintiff issued a plenary summons in this Court in a matter entitled "Tobin
& Twomey Services Limited -v- Kerry Foods Limited and Kerry Group Plc."
(Record No. 1995 No. 5698P) in which the main reliefs claimed by the Plaintiff
were as follows:-
7. Contemporaneously,
the Plaintiff issued a notice of motion seeking interlocutory orders to the
same effect as the relief sought on the plenary summons.
8. On
21st July, 1995 the Arbitrator refused to accede to an application made on
behalf of the Plaintiff that the arbitration be adjourned pending the outcome
of the proceedings in this Court. The cross-examination of Mr. Tobin continued
on 21st July, 1995 and for a further three hearing days until 27th July, 1995,
when the arbitration was adjourned pending the outcome of the proceedings in
this Court. At that stage there had been thirty-one hearing days.
9. On
6th October, 1995, Carroll J. delivered judgment in this Court on the
Plaintiff's motion, refusing all the reliefs sought. The Plaintiff appealed
against that decision to the Supreme Court, but the appeal was confined to two
issues, namely, the refusal of an order under Section 36 of the Act of 1954 and
the refusal to grant a Mareva injunction. The judgment of the Supreme Court,
which is reported as
Tobin
& Twomey Services Limited -v- Kerry Foods Limited
,
(1996) 2 I.L.R.M. 1, was delivered on 6th March, 1996 by Blayney J.. In his
judgment, to which I will refer in greater detail later, Blayney J. held that
there was an error patent on the face of the Interim Award - the error made by
the Arbitrator in concluding that, because the additional works did not form
part of the subject matter of the electrical services contract, the dispute in
regard to them had not been referred to him for decision - and that the matter
should be remitted to the Arbitrator to be dealt with in accordance with the
findings set out in his judgment. The Plaintiff's appeal against the refusal
of a Mareva injunction was dismissed. That judgment was followed by an Order
of the Supreme Court made on 11th March, 1996, in which it was ordered that the
appeal be allowed insofar as it related to the arbitration issue and that the
matter be remitted to the Arbitrator to be dealt with in accordance with the
judgment of the Court. The order of the High Court in respect of the costs
thereof, which awarded costs to Kerry and the Plc. against the Plaintiff, was
affirmed and the Plaintiff was awarded its costs of the appeal against Kerry
and the Plc..
10. Following
the judgment and order of the Supreme Court, on 27th May, 1996 the Arbitrator
made and published an amended interim award (the Amended Interim Award) in
which he repeated his findings that the four categories of work itemised in the
Interim Award did not form part of the electrical services contract. However,
he went on to find that the whole of the works were within his jurisdiction.
11. I
propose outlining in detail later in this judgment what transpired between the
parties to the arbitration, and the parties, on the one hand, and the
Arbitrator, on the other hand subsequently. For the purpose of this outline
suffice it to say that the Arbitrator did not meet with the legal advisors of
the parties until February 1997, when two procedural meetings were held, on 7th
February and 25th February respectively. The outcome of those meetings was
that it was agreed that the arbitration would resume on 7th April, 1997, at
which time Counsel for the Plaintiff would be permitted to present an
application that Kerry pay the Plaintiff's costs of the first eleven days of
the arbitration, that is to say, up to the conclusion of the hearing of the
preliminary issue. It was anticipated that this application and Kerry's
response to it would take over a day and it was envisaged that the hearing of
the substantive claims (the Plaintiff's claim and Kerry's counterclaim) in the
arbitration would be resumed on 14th April, 1997. On 7th April, 1997 the
Plaintiff sought an indefinite adjournment of the arbitration on grounds which
I will outline later. The matter was adjourned until 14th April, 1997. Three
further adjournments were granted at the behest of the Plaintiff, in
circumstances which I will outline later: from 14th April, 1997 to 12th May,
1997; from 12th May, 1997 to 16th June, 1997; and from 16th June, 1997 to 7th
July, 1997. On 7th July, 1997, in circumstances which I will outline in detail
later, the Plaintiff withdrew from the arbitration. On 18th July, 1997 these
proceedings were initiated by special summons.
12. In
the intervening period between the order of the Supreme Court of 11th March,
1996 and the Plaintiff's withdrawal from the arbitration on 7th July, 1997,
this Court's jurisdiction was invoked in two separate sets of proceedings
initiated by the Plaintiff. The ultimate source of the dispute which gave rise
to those proceedings was the provision which was made as to costs in the order
of the Supreme Court of 11th March, 1997. Following the making of that order,
Kerry and the Plc. set about having their High Court costs taxed. On the
taxation before the Taxing Master it was conceded by Kerry and the Plc. that
their liability to the Plaintiff for the costs of the appeal should be dealt
with by way of deduction or set-off in accordance with Order 99, Rule 37(14) of
the Rules of the Superior Courts. The High Court costs awarded to Kerry and
the Plc. taxed at £62,303.91 and on 23rd May, 1996, having refused an
application by the Plaintiff to stay the issue of the certificate of taxation,
the Taxing Master signed the certificate. Subsequently, on 23rd July, 1996,
the Plaintiff's costs of the appeal were taxed.
13. Prior
to the taxation of the Plaintiff's costs of the appeal but following the
taxation of their High Court costs, on 24th June, 1996, Kerry and the Plc.
demanded payment of the sum of £62,303.91 from the Plaintiff and
threatened, in default of payment within twenty-one days, that a Petition would
be issued for the winding-up of the Plaintiff by this Court. On 16th
September, 1996 a Petition was issued by the Plc. pursuant to the Companies
Acts, 1963-1990 seeking an order that the Plaintiff be wound-up, on the basis
that the Plaintiff was indebted to the Plc. in the sum of £24,004.75,
being the balance due to Kerry on foot of the certificate of taxation dated
23rd May, 1996, having allowed credit to the Plaintiff for the sum of
£38,299.16 in respect of the costs of the appeal. The Petition provoked
the initiation of the following proceedings:-
14. Both
sets of proceedings were resolved in this Court on 17th June, 1997. The Taxing
Master not having opposed the Plaintiff's application, an order of certiorari
quashing the Taxing Master's certificate of 23rd May, 1996 and an order of
mandamus directing the Taxing Master to hear the Plaintiff's objections to the
allowance of items in the bills of costs of Kerry and the Plc. were made. The
plenary proceedings became defunct in that the Plc. withdrew the Petition to
wind-up the Plaintiff.
15. In
these proceedings which, as I have stated, were initiated by special summons
which issued on 18th July, 1997, the relief which the Plaintiff claims is as
follows:-
16. It
is convenient at this juncture to set out the various provisions of the Act of
1954 invoked by the Plaintiff.
17. Subsection
(2) of Section 24 provides that an arbitrator who is removed by the Court under
Subsection (1) shall not be entitled to receive any remuneration in respect of
his services.
18. Subsection
(2) of Section 40 provides as follows:-
19. As
I have already indicated, in his judgment, Blayney J. held that there was an
error patent on the face of the Interim Award and that the matter should be
remitted to the Arbitrator to be dealt with by him in accordance with the
findings set out in the judgment. Before outlining the conduct of the
arbitration subsequent to the order of the Supreme Court, I think it would be
useful to record the passage from the judgment of Blayney J. in which he
considered the issues with which the Arbitrator was concerned. He said:-
20. On
27th May, 1996 the Arbitrator made and published an Amended Interim Award in
the terms which I have outlined above. Prior to making the Amended Interim
Award the Arbitrator had written to the Solicitors for the Plaintiff and the
Solicitors for Kerry on 15th May, 1996 intimating that he intended to make such
an award shortly. The Plaintiff's Solicitors apparently did not receive the
letter addressed to them. The inference I draw from the evidence is that it
must have gone astray. On 11th June, 1996 Kerry's Solicitors apprised the
Arbitrator that Kerry was ready to proceed with the arbitration. At this time
the Plaintiff was not evincing any eagerness to resume the arbitration. On 4th
September, 1996, the Arbitrator issued an order for directions to the parties
ordering that a procedural meeting be held without further delay to discuss and
agree a calendar for the completion of the hearing. On 2nd October, 1996
Kerry's Solicitors wrote to the Arbitrator indicating a willingness to comply
with the order for directions but requesting that the question of a preliminary
meeting be deferred for a period of one month until this Court should have
adjudicated upon the Plc.'s Petition to wind-up the Plaintiff, which had just
been presented. By letter dated 5th November, 1996, Kerry's Solicitors
apprised the Arbitrator of the existence of the injunction restraining the Plc.
from publishing or proceeding with the Petition and indicated that Kerry was
prepared to resume the arbitration. By letter dated 12th November, 1996, the
Plaintiff's Solicitors notified the Arbitrator that the Plaintiff would be
available for a procedural meeting on 27th November, 1996, a date suggested by
Kerry's Solicitors in their letter of 5th November, 1996. This was the first
communication from the Plaintiff's Solicitors to the Arbitrator since the
making and publication of the Amended Interim Award on 27th May, 1996. The
date suggested did not suit the Arbitrator who suggested that any date in the
week commencing 2nd December, 1996 be agreed by the parties.
21. By
letter dated 26th November, 1996 to the Arbitrator, the Plaintiff's Solicitors
made suggestions about dates and the venue for the procedural meeting and
suggested that the meeting should commence at 11.00 a.m. to allow adequate time
for all the matters to be dealt with and went on to state as follows:-
22. In
response, by letter dated 2nd December, 1996 the Arbitrator indicated that the
matters raised by the Plaintiff's Solicitors should await the resumption of the
hearing.
23. The
first mutually convenient date for the procedural meeting was 7th February,
1997. At that meeting, Brendan Kilty, B.L., instructed by Burke O'Riordan
& Company Solicitors, appeared on behalf of the Plaintiff and John Gordon,
S.C., instructed by O'Flynn Exhams & Partners, appeared for Kerry. There
is no transcript of the meeting but the Arbitrator's contemporaneous note has
been put in evidence and I accept it as an accurate reflection of what
transpired. Mr. Kilty raised the matters raised in the letter of 26th
November, 1996, including the question of a further interim award. The
Arbitrator's position was that a further interim award was not called for. Mr.
Kilty also made the point that during the earlier hearings he had asked the
Arbitrator to identify into which contract each of the items of work fell and,
while the Arbitrator acknowledged that such was the case, he stated that he had
not agreed to issue an interim award on these matters. He asked that the
parties endeavour to agree where the items of work fell and, in default of
agreement, he would adjudicate on these matters. This was agreed and a further
procedural meeting was arranged for 25th February, 1997. It was also arranged
that the arbitration would resume on 7th April, 1997, when the Plaintiff's
application for costs would be dealt with.
24. At
the meeting on 25th February, 1997 the Plaintiff was again represented by Mr.
Kilty, as was Kerry by Mr. Gordon. There is no transcript of the meeting but
the Arbitrator's note has been put in evidence and I accept it as an accurate
record of what transpired. The Arbitrator was told that a meeting had been
held on 21st February, 1997 at Macroom, County Cork at which a very good
discussion had taken place concerning the classification of the variations and
these had been allocated to the various contracts, the electrical services
contract, the transformer contract and so forth. It is clear from the evidence
that these discussions were between the Plaintiff's quantity surveyor and
Kerry's engineer. A further meeting was envisaged and it was hoped that
further agreement could be reached, which would reduce the Arbitrator's volume
of work. Both parties agreed that the hearing on 7th April, 1997 to deal with
the Plaintiff's application for costs should proceed. It was suggested that
the hearing of the substantive claims should recommence on 14th April, 1997.
The Arbitrator queried whether there were transcripts for the earlier hearings
and indicated that he would like copies of the transcripts which he did not
already hold.
25. Following
that meeting, on 5th March, 1997 Kerry's Solicitors wrote to the Plaintiff's
Solicitors on the question of transcripts of the hearings which had taken place
in the summer of 1995. Kerry's Solicitors stated that they had transcripts for
eight days of hearings only, which, because of a copyright reservation in
favour of the court reporters who had made the transcripts, they were not free
to photocopy. However, they offered the transcripts on loan to the Plaintiff's
Solicitors, or, as an alternative, suggested that the Plaintiff's Solicitors
could take up copies from the court reporters on payment of a small fee, Kerry
having paid to have the transcripts written up. Kerry's Solicitors suggested
that the Plaintiff and Kerry should share the cost of taking up the transcripts
for the balance of the hearings which took place in the summer of 1995. There
was no response whatsoever to any of the suggestions contained in the letter
from the Plaintiff's Solicitors.
26. By
letter dated 7th March, 1997 the Plaintiff's Solicitors raised an issue which
is of importance in these proceedings. In that letter to Kerry's Solicitors
the Plaintiff's Solicitors sought written confirmation that neither the
Arbitrator nor his firm, Dermot C. Coyle & Partners, had previously acted
in any arbitration involving the Plc. or any of its subsidiaries or had
received fees from the Plc. or any of it subsidiaries prior to the commencement
of the arbitration between the parties. Kerry's Solicitors responded by letter
dated 20th March, 1997 confirming that the Arbitrator had previously acted as
Arbitrator in two related arbitrations which took place in 1990 involving
claims between a third party and Kerry Agri Business Limited and between the
Plc. and the third party and that the Arbitrator had been an agreed arbitrator
in relation to both matters. It was also confirmed that the Arbitrator had no
commercial connection with Kerry or with any subsidiary of the Plc. and
reference was made to a letter dated 17th June, 1994 from Martin O'Donoghue,
the "in-house" Solicitor for the Plc., who was then acting for Kerry. In that
letter Mr. O'Donoghue stated as follows:-
27. The
Arbitrator was one of three persons who had been nominated by the Plaintiff for
appointment as arbitrator prior to 17th June, 1994.
28. Following
receipt of the letter of 20th March, 1997 the Plaintiff's Solicitors sought all
relevant documents in relation to the previous arbitrations, which the
Plaintiff's Solicitors declined to furnish, pointing out that the Arbitrator
had acted as an independent arbitrator between the parties in the earlier
arbitrations and that he had no other connection with Kerry or the Plc. By
letter dated 3rd April, 1997 to the Arbitrator, the Plaintiff's Solicitors
sought an adjournment of the hearing which was due to be held on 7th April,
1997 until such time as they should receive clarification from Kerry in
relation to the matters raised in the Plaintiff's Solicitors' letter of 7th
March, 1997 to Kerry's Solicitors. The Arbitrator responded by letter dated
4th April, 1997, refusing the adjournment sought and stating as follows:-
29. Another
topic canvassed in the correspondence between the parties subsequent to the
order of the Supreme Court, which became an issue in these proceedings, was the
question of the Arbitrator's remuneration. In the Appointment Form, the
Plaintiff and Kerry jointly and severally agreed to pay the Arbitrator's fees,
costs and expenses in connection with the arbitration at the rates quoted in
the Schedule thereto. The Schedule stipulated certain half-hourly, daily and
hourly rates of charge and provided for reimbursement of all expenses and
outgoings and then stipulated, in paragraph e, the time scale for payment of
the fees as follows:-
30. The
references to the Claimant in the quoted provisions were references to the
Plaintiff. The Plaintiff duly paid the sum of £200. Thereafter, the
history of the Arbitrator's remuneration was as follows:-
32. Against
the foregoing background the arbitration proceedings resumed on 7th April,
1997. Mr. Kilty, instructed by Burke O'Riordan & Co., appeared for the
Plaintiff and Mr. Gordon, instructed by O'Flynn Exhams & Partners, appeared
for Kerry. At the outset, Mr. Kilty sought an adjournment and he did so on
three grounds, namely:-
33. It
was emphasised that the application for an adjournment was being made without
prejudice to any other action that might be considered by the Plaintiff. From
reading the transcript of the proceedings on 7th April, 1997, it is clear that
the application, in effect, was for an adjournment sine die. The application
was opposed by Kerry. The Arbitrator refused to grant an adjournment on the
grounds that the Plaintiff could not be specific about when the arbitration
might be resumed and he indicated that the matter would proceed on 14th April,
1997, either on the question of costs or on the substantive claims.
34. On
14th April, 1997 Mr. Burke of the firm of Burke O'Riordan & Co. appeared
and requested that his firm be allowed come off record in the arbitration
proceedings. The Arbitrator acceded to the request. Mr. Tobin, the Managing
Director of the Plaintiff, then sought an adjournment to enable him to instruct
another firm of solicitors. The Arbitrator adjourned the matter until 12th
May, 1997. The reason advanced by Mr. Burke for seeking to come off record was
that a conflict had arisen between the Plaintiff and his firm and he felt it
would be in the best interest of the Plaintiff and they would be better served
by instructing another firm of Solicitors. By letter dated 28th April, 1997,
in response to an inquiry from Kerry's Solicitors, Burke O'Riordan & Co.
intimated that they would remain on record for the Plaintiff in the Judicial
Review proceedings and the plenary proceedings referred to earlier, which were
then pending in this Court.
35. On
12th May, 1997 the Plaintiff was represented by a new legal team, Edmund
Honohan, S.C. instructed by Arran, Solicitors. Mr. Gordon appeared for Kerry.
Mr. Honohan had only just been retained and he sought an adjournment to prepare
for the resumed hearing. He told the Arbitrator that his instructions from Mr.
Tobin were that Mr. Tobin was anxious to get on with the case and to have it
brought to conclusion. The Arbitrator granted an adjournment until 16th June,
1997.
36. Following
the proceedings on 12th May, 1997, Kerry's Solicitors wrote to Arran, the
Solicitors who had come on record for the Plaintiff, on three occasions
endeavouring to make arrangements in relation to the resumption of the
arbitration proceedings on 16th June, 1997 - on 15th May, 1997, on 3rd June,
1997 and on 9th June, 1997. There was no response from Arran to any of those
letters. However, on 9th June, 1997 Arran wrote to the Arbitrator advising him
that they no longer acted for the Plaintiff and would not be in the position to
provide representation for it at the forthcoming hearing.
37. On
16th June, 1997 Mr. Tobin appeared without legal representation and applied for
an adjournment to enable him to instruct another firm of Solicitors. Kerry
opposed the application. The Arbitrator granted an adjournment until 7th July,
1997. It is quite clear from the transcript that the adjournment was granted
on the basis that the substantive claims in the arbitration would be resumed on
that day, with the cross examination of Mr. Tobin being resumed. It is also
clear that Mr. Tobin was in full agreement with the course proposed. On no
less than three occasions, Mr. Tobin told the Arbitrator that it was not his
intention to "mess about" the arbitration. He also joined in, apparently
enthusiastically, in exchanges as to the days on which the Arbitrator would sit
to finalise the matter. The Arbitrator expressly stated that there would be no
more adjournments because the arbitration had to finish and Mr. Tobin confirmed
that he accepted that.
38. When
the matter resumed on 7th July, 1997 Mr. Kilty once again appeared for the
Plaintiff, this time instructed by Eames & Co., Solicitors. Mr. Gordon
appeared for Kerry. Immediately the proceedings opened, Mr. Kilty intimated to
the Arbitrator that he was there to make an application for the costs of the
Interim Award and the Amended Interim Award. Mr. Gordon requested the
Arbitrator not to hear the application for costs but to resume the arbitration.
The Arbitrator ruled that the arbitration was to continue, although he
recognised the Plaintiff's right to apply for costs but not at that moment. A
similar position was adopted by Mr. Gordon on behalf of Kerry, in that he
submitted that there was no reason why the arbitration could not proceed
forthwith and on a later date, which suited everybody, time could be set aside
to deal with the application for costs. When the Arbitrator had ruled against
the Plaintiff, Mr. Kilty intimated that he was leaving the arbitration and
would be seeking his remedies elsewhere. Mr. Gordon then indicated that Kerry,
on notice of the Plaintiff, would be seeking that a date be fixed to enable it
to make an application for a final award dismissing the Plaintiff's claim and
to hear evidence on Kerry's counterclaim.
39. It
is clear from the transcript of the proceedings of 7th July, 1997 that the
Plaintiff's reason for withdrawing from the proceedings was that the Arbitrator
would not accede to the request to hear the application for costs of the
preliminary issue forthwith. The complaints made by the Plaintiff on 7th
April, 1997 were not reiterated. There was no question of inability on the
part of the Plaintiff to prosecute the application for costs by reason of the
failure of Kerry to furnish copies of the transcripts. There was no expression
of concern that, having regard to the manner in which he had pursued the
recovery of his own fees, the application for costs might not be heard in a
fair and unbiased manner by the Arbitrator. There was no suggestion that
justice might not be seen to be done by non disclosure of the documents that
passed between the Arbitrator and the Plc. and its subsidiary in the previous
arbitrations, as had been suggested by Mr. Kilty on 7th April, 1997. On the
hearing in this Court, Mr. Gordon submitted that the stance adopted by the
Plaintiff on 7th July, 1997 was entirely at odds with the stance adopted in
these proceedings. On 7th July, 1997 no reference was made to perceived or
actual bias. On an objective analysis of the uncontroverted facts, it was
submitted, the Court could not be satisfied that the Plaintiff had a bona fide
complaint at the time these proceedings were commenced, that is to say, on 18th
July, 1997.
41. Kerry
filed a replying Affidavit sworn by Patrick O'Neill on 5th January, 1998. In
his Affidavit Mr. O'Neill outlined the entire course of the dealings between
the Plaintiff and Kerry and exhibited:-
42. At
the end of his Affidavit Mr. O'Neill set out the stance being adopted by Kerry
in these proceedings: Kerry had made a sealed offer upon which it proposed to
rest and wished the arbitration to proceed to ultimate conclusion.
43. One
averment in the Affidavit of Mr. O'Neill was relied on by the Plaintiff in
support of its claim for relief in these proceedings. In his Affidavit, Mr.
Tobin had averred that on 12th September, 1994 the Plaintiff's advisers had
visited the factory in Poole and that Kerry's advisers were there at the same
time and that this opportune time had not been availed of by Kerry "to agree
figures as figures or facts as facts". In response Mr. O'Neill averred as
follows:-
44. The
Arbitrator also filed an Affidavit in reply to the Plaintiff's claim, which was
sworn by him on 24th November, 1997. This Affidavit was parsed and analysed in
depth by Counsel for the Plaintiff, who sought to bolster his submissions in
reliance on it and on two averments in it in particular. In paragraph 26, the
Arbitrator averred as follows:-
46. The
multiplicity of issues identified by Counsel for the Plaintiff, in my view, can
be conveniently subsumed into the following questions:
47. The
Plaintiff did not advance any basis on which the Arbitrator's order of 7th
July, 1997 should be remitted. The whole thrust of the Plaintiff's case was
that the arbitration agreement should cease to have effect, so that the
Plaintiff might litigate its claim in this Court, or that a substitute
arbitrator should be appointed. In fact, Counsel for the Plaintiff strongly
urged that remission would not be appropriate. Accordingly, although remission
was one of the reliefs claimed in the special summons, it is not now an issue
for the Court.
48. During
the course of the hearing a problem arose in relation to a sealed offer which
had been made by Kerry to the Plaintiff on 23rd February, 1995. This raises a
separate issue which I propose considering having considered the other issues.
50. First,
in his Affidavit, Mr. Tobin deposed in fifty-four sub-paragraphs to "instances"
which he averred have led the Plaintiff to have no confidence "in the conduct
of this reference by this Arbitrator and no confidence that justice is being
done or that justice is being seen to be done", or "in the ability of the
Arbitrator..... to..... bring the matters in dispute to a conclusion in a
prompt expeditious fair manner". The first twenty-seven sub-paragraphs relate
to matters which arose prior to the determination of either this Court or of
the Supreme Court of the issues in the earlier proceedings between the parties.
I have come to the conclusion that, insofar as it is the Plaintiff's case that
these matters constituted misconduct on the part of the Arbitrator, the
Plaintiff is estopped from pursuing these allegations at this juncture given
that in the earlier proceedings no allegation of misconduct was made against
the Arbitrator and, in fact, the Plaintiff sought to have the matter remitted
to the Arbitrator and was successful in that claim.
51. Secondly,
in his submissions, Counsel for the Plaintiff contended that the Interim Award
was ambiguous and lacking in certainty and that to allow the ambiguity and lack
of certainty to remain is active misconduct. No case was made in the earlier
proceedings that the Interim Award was ambiguous or lacked certainty and, in my
view, the Plaintiff is estopped from making that case now.
52. Thirdly,
in considering the issues which arise in this case, this Court must have regard
to the policy considerations which the Supreme Court has identified as being
appropriate when the Court is concerned with issues arising in the course of or
out of arbitrations. In
Keenan
-v- Shield Insurance Company Limited
,
[1988] I.R. 89, McCarthy J. stated at page 96:-
53. While
the foregoing remarks were made in the context of a claim to set aside an
arbitrator's award, they must apply with equal force, and I would suggest with
greater force, where the arbitral process has not been completed because one
party has unilaterally withdrawn from it.
54. In
support of his contention that these proceedings lack bona fides and are
unmeritorious, Counsel for Kerry outlined the course of the dealings between
the parties to illustrate the manner in which, as he contended, what started
out as a relatively modest claim escalated into a major claim over a period of
eighteen months. He also analysed the evidence, including exhibits, put before
the Arbitrator in the early stages of the arbitration in relation to the
classification of the works according to contract and the various stances in
relation to such classification adopted by the parties and their respective
technical advisers from the outset up to the end of February 1997 to illustrate
what he contended was eventual consensus between the parties as to
classification. In my view, it would not be proper for this Court to express
any view on the merits of the claims before the Arbitrator, either directly or
indirectly, and I express no view on these matters.
55. At
the core of the Plaintiff's contention that the Arbitrator has failed to give
effect to the judgment of the Supreme Court was the assertion that he was
required by that judgment and, in particular, by the passage from that judgment
which I have quoted above, to publish a further interim award dealing with the
scope of the electrical services contract and its relationship with the other
contracts. Moreover, it was submitted, unless the Arbitrator defined by way of
a further interim award into which of the five contracts the discreet items of
work fell, the Plaintiff could not deal with the delay and disruption element
of its claim, which is a significant element of its claim. The Plaintiff, by
its Solicitors' letter of 26th November, 1996, had requested that a further
interim award be published and had repeated that request at the procedural
meeting on 7th February, 1997, but the Arbitrator refused to accede to the
request and this refusal, it was alleged, constituted misconduct.
56. Further
complaints were made by the Plaintiff as to the manner in which the Arbitrator
reacted to the Supreme Court judgment and order. First, it was submitted that
it was misconduct to make and publish the Amended Interim Award without first
convening a hearing and hearing submissions from the parties. Secondly, a
remark made by the Arbitrator at the hearing on 12th May, 1997 querying whether
the Plaintiff's claim had to be resubmitted or changed in any way as a result
of the Supreme Court ruling was cited as evidence that the Arbitrator did not
appreciate the consequences of the Supreme Court ruling.
57. During
the hearing Counsel for the Plaintiff developed a further argument that the
Arbitrator had misconducted the proceedings in failing to make a further
interim award defining the parameters of the electrical services contract and
the other four contracts, which argument was founded on the averments contained
in the Arbitrator's replying Affidavit and, in particular, paragraphs 26 and
28, which I have quoted above. This argument proceeded on the assumption that
the proper inference to be drawn from the Arbitrator's averment that he did not
consider it necessary, when preparing the Interim Award, to list the variations
applying to each of the five contracts and was of the opinion that it should be
left for the final award, was that not later than 11th June, 1995 the
Arbitrator had all the ingredients at his disposal and was capable of defining
the parameters of each of the five contracts. The argument was premised on a
further assumption, namely, that it is to be inferred from the averments in the
Arbitrator's Affidavit that he had in fact determined the parameters of each of
the five contracts. On the basis of these assumptions the Plaintiff advanced
two further grounds of misconduct. First, it was contended that it was
misconduct on the part of the Arbitrator to fail to impart information to the
parties, that is to say, his conclusion as to the parameters of each of the
five contracts. On this element of his argument Counsel for the Plaintiff
relied on the decision of the Court of Common Pleas in
Thomson
-v- Millar
,
(1867) I.R.C.L. 90, in which it was held that when a reference is made to a
single arbitrator, it is not sufficient to constitute a valid award that the
arbitrator has made up his own mind as to what the award is to be on the
matters referred, unless that mental determination is manifested by some
external act. The second contention was that in requesting the parties to
agree the matters raised in the letter of 26th November, 1996, which request
was made at the procedural meeting of 7th February, 1997, the Arbitrator was
burdening the parties with an additional unnecessary layer of costs, because
the Arbitrator had already determined what he had asked them to agree.
58. The
grounds of complaint against the Arbitrator outlined above are founded on the
proposition that the Arbitrator was obliged at law to determine the issues
arising between the parties piecemeal; that he was obliged to make a further
interim award determining the matters set out in the Plaintiff's Solicitors'
letter of 26th November, 1996, and, in particular, to determine into which of
the five contracts each of the items of work fell, before proceeding to make a
final award in which he valued the items of work and assessed the compensation
due to the Plaintiff for delay and disruption. This proposition is
unsustainable.
59. The
Plaintiff's argument, however, is not based on the general law but on the
assertion that the judgment and order of the Supreme Court directed the
Arbitrator to make a further interim award before proceeding to his final
award. No such direction is to be found in the judgment of the Supreme Court.
The ratio decidendi of the Supreme Court was that the Arbitrator was in error
in directing in his interim award that the additional works be excluded from
the reference and that, as that error was patent on the face of the interim
award because it was inconsistent with a recital in the interim award, the
matter should be remitted to the Arbitrator for reconsideration. These were
the findings by reference to which the Arbitrator was enjoined by the Supreme
Court to deal with the matter. In the passage from the judgment which I have
quoted above, the Supreme Court outlined the issues which confronted the
Arbitrator in relation to the additional work, namely, whether the terms and
conditions of the electrical services contract applied to them and, in the
light of the decision on that question, what sum, if any, was due to the
Plaintiff in respect of the additional work. The first issue arose because
there were conflicting claims: the Plaintiff claiming that the terms and
conditions of the electrical services contract did apply and Kerry claiming
that the works were the subject of separate and distinct contracts. The point
made in the judgment was that the existence of the issue was not inconsistent
with the clear intention of both parties that the disputes in regard to all the
works were being submitted to the Arbitrator. In remitting the matter to the
Arbitrator to be dealt with in accordance with the findings set out in the
judgment, the Supreme Court was directing the Arbitrator to proceed with the
reference in relation to matters in respect of which the parties had given him
jurisdiction, that is to say, all the work, including the additional works.
While the Supreme Court identified the broad issues which arose between the
parties, the Supreme Court did not give any direction to the Arbitrator as to
how or when he should determine those issues, and, in particular, the Supreme
Court did not direct him to make any further interim award on the first issue
identified.
60. In
the Amended Interim Award the Arbitrator corrected the error on the face of the
Interim Award, in that he found that the whole of the works was within his
jurisdiction. The Amended Interim Award was no more than an acknowledgement by
the Arbitrator of the error found by the Supreme Court and the rectification of
that error in a formal manner. Nothing further was required in the Amended
Interim Award and there was no necessity to convene a hearing or to elicit
submissions from the parties before the Amended Interim Award was made. In
short, there was nothing further to be said. Moreover, it is manifest on the
face of the Amended Interim Award that the Arbitrator fully understood the true
import of the judgment and order of the Supreme Court.
61. The
arguments which the Plaintiff has concocted out of the averments in the
Arbitrator's Affidavit are wholly unsustainable. It is implicit in the
arguments that the Arbitrator went some way toward giving effect to the
requirements of the Supreme Court judgment contended for by the Plaintiff, the
assumption underlying the arguments being that the Arbitrator has actually
classified the items of work according to the various contracts. The complaint
is that he did not communicate the classification to the parties. The
Plaintiff has not established any factual basis for the assumption. The
Arbitrator did not aver in his Affidavit that he had made any such
classification or that he had listed the variations, nor can it be inferred
from his Affidavit that he did so. Even if there was evidence that the
Arbitrator had made up his mind about such classification or listing or any
other issue of fact during the course of the arbitration, there is no basis in
law for the proposition that the Arbitrator was under an obligation to
communicate his conclusions to the parties as soon as he had reached them. How
he goes about evaluating the evidence and reaching conclusions thereon and the
point at which his deliberations have resulted in a determination which can be
published as an interim award or a final award are matters solely for the
Arbitrator. It is no function of this Court to scrutinise his deliberative
process.
62. The
main strand in the Plaintiffs submission that the manner in which the
Arbitrator went about securing his fees constituted misconduct was that the
timing of his requests for interim payments was inappropriate. The timing of
the initial fee note dated 14th August, 1995 was inappropriate because it was
sent to the Claimant, the Plaintiff, who at that time was challenging the
Interim Award in this Court. The timing of the fee note dated 6th January,
1997, which was sent to Kerry's Solicitors, was also inappropriate and it was
also improper and it amounted to misconduct on the part of the Arbitrator to
address it to the Plc., when the Arbitrator knew that the Plc. at that time was
petitioning to have the Plaintiff wound up. The demands for payment made by
the letters dated 21st February, 1997 and 24th March, 1997 were also
inappropriately timed, in that they were made when the Arbitrator well knew
that the Plaintiff was seeking to be heard on the question of the costs of the
first eleven days of the Arbitration and at a time when the Plc was petitioning
to have the Plaintiff wound up. Those demands put the Plaintiff in an inferior
position. If the Plaintiff's application for costs had been successful Kerry
would have become indebted to the Plaintiff, which would have put the Plaintiff
in a position to deal with the claim of the Plc. and get rid of the Petition.
Being made in this context, the Arbitrator's demands disadvantaged the
Plaintiff, it was argued.
63. Other
strands were interwoven with the main strand of the Plaintiff's argument. It
was contended that communication by the Arbitrator to one party without copying
the communication to the other party, as happened in the case of the letters
dated 6th January, 1997 and 21st February, 1997 to Kerry's Solicitors,
constituted misconduct. A source of significant annoyance and embarrassment to
the Plaintiff, it was contended, was the letter of 21st February, 1997 in which
the Arbitrator referred to the necessity to consider his position and seek
legal advice, which the Plaintiff only became aware of when it was referred to
by Counsel for Kerry at a meeting with the Arbitrator. It was also contended
that the receipt by the Arbitrator without comment, criticism or reprimand, of
various items of correspondence from Kerry's Solicitors, for instance, the
letters dated 19th July, 1996, and 2nd October, 1996, constituted misconduct.
It was also submitted that it was misconduct for the Arbitrator to accept his
fees from one party, when the other party was not paying. Addressing the fee
note dated 6th January, 1997 to the Plc., which was not a party to the
Arbitration, was also misconduct it was submitted, and amounted to allowing the
Plc. into the Arbitration. It was emphasised that the Plc., to whom the fee
note was addressed, was capable of destroying the Plaintiff's capacity to
arbitrate by prosecuting the Petition to have the Plaintiff wound up. It was
also submitted that the evidence did not establish whether the Arbitrator's
fees were in fact paid by Kerry or the Plc. and that point should have been
clarified by the Arbitrator.
64. I
did not understand the Plaintiff to contend that Kerry did not have liability
under the Appointment Form for interim payments on account of the Arbitrator's
fees. The Plaintiffs complaint goes to the manner in which the Arbitrator
secured payment. There was another mechanism open to him, it was suggested:
he could have required payment from both parties as a precondition of the
publication of the Interim Award or the Amended Interim Award and relied on his
lien for costs and fees. Such approach, it was suggested, would have avoided
any perception of bias.
65. In
support of his various arguments on the issue of the Arbitrator's fees, Counsel
for the Plaintiff relied on the decision of the Court of Appeal in
Turner
-v- Stevenage Borough Council
[1997] 3 WLR 309.
66. In
responding to the foregoing arguments, Counsel for the Arbitrator submitted
that the Arbitrator's conduct must be assessed by reference to the respective
rights and obligations of the Arbitrator and the parties in relation to the
Arbitrator's fees and costs under the Appointment Form. He pointed to certain
salient features discernible on a literal interpretation of the appointment
form. While it provides that both parties are jointly and severally liable for
payment of the Arbitrator fees, costs and expenses, nonetheless it envisages
payment by one party only - payment of the initial fee and any interim payment
by the Plaintiff - and it envisages a demand for an interim payment being made
on one party only. The interim payments envisaged are merely payments on
account of outstanding fees and expenses. The Arbitrator is entitled to make a
demand for interim payment at any time and from time to time after the
expiration of six months from the date of appointment; more than one interim
payment is clearly envisaged and there is nothing in the Appointment Form to
link a demand for an interim payment to the making of an interim award.
67. In
construing the Appointment Form, it was submitted, the intention of the parties
must prevail and the following statement of Lord Wilberforce in
Reardon
Smith Line Limited -v- Hansen - Tangen
[1976] 3 ALL ER 570 at page 574, which was quoted with approval in the judgment
Griffin J. in
Rohan
Construction -v- I.C.I
(1988) I.L.R.M. 373, should be applied in the construction of the Appointment
Form:-
68. It
was also submitted that the Appointment Form being a commercial document, it is
open to the Court to consider its commercial purpose so as to give it a
business like interpretation. The following passage from the judgment of Lord
Diplock in
Antaios
Cia Naviera S.A. -v- Salen Rederierna A.B.
[1985]
A.C. 191, quoted in Lewison on
Interpretation
of Contracts
69. Reading
the Appointment Form as a whole, it was submitted, it is clear that the
objective intention must have been to permit the Arbitrator to demand an
interim payment from Kerry in the event that the Plaintiff had failed to comply
with such a demand previously made on it.
70. Counsel
for the Arbitrator submitted that, having regard to the terms of the
Appointment Form, acceptance of payment by the Arbitrator from one party only
could not constitute misconduct. Moreover, he submitted that the timing of the
demands for the interim payments was not inappropriate. The initial demand
made on 14th August, 1995 was made at a point in time which was significantly
prior to the presentation of the Petition to wind up the Plaintiff by the Plc..
The subsequent demands were made after the Arbitrator had been apprised by
Kerry's Solicitors that this Court had restrained the further prosecution of
the winding-up Petition. Furthermore, it was submitted, in the event of the
breach of terms of the Appointment Form in relation to payment of his fees, the
Arbitrator was entitled to regard himself as discharged from further
performance of the agreement to act as arbitrator and he was entitled to
enforce the parties' obligations by threat of resignation if they did not
comply, as he did in his demand of 24th March, 1997. Whether or not to
reprimand Kerry's Solicitors on account of the content of their communications
to the Arbitrator was a matter entirely within the discretion of the
Arbitrator. It was pointed out as being noteworthy that, in fact, the
Plaintiff had never sought that the Arbitrator reprimand or adversely comment
on any communication from Kerry's Solicitors. Finally, it was submitted that
no right-minded person would interpret the fact that the fee note of 6th
January, 1997 was addressed to the Plc. as showing bias or as allowing a third
party into the arbitration. Even if the Arbitrator's fees were discharged by
the Plc., there was nothing reprehensible about this; it was merely an example
of a parent company discharging the liability of a subsidiary - the vicarious
performance of a contractual obligation - as referred to in Chitty in
Contracts,
27th Edition, at page 987.
71. Counsel
for Kerry adopted the Arbitrator's submissions on the fees issue. He
emphasised that under paragraph e(ii) of the Schedule to the Appointment Form,
while primary responsibility for making interim payments is on the Plaintiff,
ultimately both parties are jointly and severally responsible for the
Arbitrator's fees. The Arbitrator is entitled to look to Kerry, in the event
of default by the Plaintiff. The liability of Kerry arises not just at the end
of the arbitration, but during the course of the Arbitration. If Kerry was not
jointly and severally liable with the Plaintiff for interim payments throughout
the currency of the reference, the result would be absurd. The Plaintiff could
wilfully refuse to make an interim payment secure in the knowledge that Kerry
could do nothing about it. This could bring about a situation, such as the
situation which almost arose in the instant case - that the Arbitrator would
regard both parties as being in breach of contract and would retire. If the
Plaintiff was unhappy with the course of the arbitration, it could wilfully
wreck the arbitration by not paying on foot of a legitimate demand and thus
leaving it open to the Arbitrator to retire. This could produce a grave
injustice and manifestly it was not the intention of the parties. Kerry was
constrained to make the interim payments it made to ensure that the arbitration
would continue. It could not risk letting the entire process be wrecked,
given its huge investment in time and money in it.
72. On
this aspect of the Plaintiff's case, in my view, three questions fall for
consideration, namely:
73. As
to the first question, under the Appointment Form the fundamental basis of the
liability of the parties to the Arbitrator for his fees, costs and expenses is
joint and several liability, which means that both parties or either of them,
at the option of the Arbitrator, may be sued for the fees, costs and expenses.
The Schedule to the Appointment Form regulates the measurement of the fees,
costs and expenses and the time for payment thereof. The fees are to be
measured in accordance with the rates stipulated in the Schedule and the costs
and expenses are to be measured on a reimbursement basis. As to the time for
payment, paragraph e(ii) provides for interim payments on account of fees and
expenses, but only after six months have elapsed from the date of appointment.
What triggers off the entitlement to an interim payment is a demand by the
Arbitrator on the Plaintiff. Such a demand can be made any time, and more than
once, after the expiration of the six months period and it is not linked to the
making of an interim award.
74. The
crucial question for present purposes is what is the entitlement of the
Arbitrator if the Plaintiff fails to comply with a demand for an interim
payment properly made on it? Is he entitled to call on Kerry to meet the
demand? There is no express provision in paragraph e(ii) of the Schedule
conferring such an entitlement on him. Therefore, the question which arises is
whether it is an implied term of the agreement embodied in the Appointment Form
that he should be so entitled. In my view, it is. Given that the fundamental
basis of the liability of the Plaintiff and Kerry to the Arbitrator is joint
and several liability, and given that express provision is made for interim
payments on account, on an objective construction of the Appointment Form it
cannot have been the intention to deprive the Arbitrator of the entitlement to
have recourse to Kerry for interim payments in the event of default on the part
of the Plaintiff. It is true that under paragraph e(ii), the primary
obligation to meet a demand for an interim payment lies on the Plaintiff. If a
demand is made on the Plaintiff, it is clearly open to the Plaintiff to look to
Kerry for a contribution to the interim payment. Indeed, there is a certain
logic in providing that during the currency of the reference the Arbitrator may
trigger an entitlement to an interim payment by a demand on one party and that
that party should be the Plaintiff, the claimant in the reference, the claimant
being the party most likely to be eager to prosecute the arbitration. It is
obviously desirable that during the currency of the reference interplay between
the parties in relation to interim payments on account of the Arbitrator's fees
and expenses should be, to adopt the metaphor used by Counsel for the Plaintiff,
"
off
the field
".
However, if the Plaintiff defaults in its primary obligation, there must be an
entitlement on the part of the Arbitrator to direct the demand to Kerry and a
secondary obligation on Kerry to meet the demand. Otherwise, the Arbitrator
would be bereft of a remedy, other than regarding himself as discharged from
his appointment, in the face of a wilful breach of contract by the Plaintiff
during the currency of the arbitration and Kerry would not be in a position to
prevent the Arbitrator regarding himself as discharged, with possible
consequential prejudice to Kerry.
75. Under
the Appointment Form it was expressly provided that the Arbitrator should be
entitled to receive an interim payment on account of his fees from one party
only, namely, the Plaintiff. As I have indicated, I consider that the
Arbitrator is impliedly entitled to demand and receive an interim payment from
Kerry, in the event of default by the Plaintiff in compliance with a demand on
it. Accordingly, in my view, the acceptance by the Arbitrator of interim
payments from Kerry solely was not improper conduct, given that that conduct
was sanctioned by the agreement as to the terms of his appointment between the
Arbitrator and the parties.
76. I
am also of the view that there was nothing inappropriate about the timing of
the demands made by the Arbitrator. On the contrary, it seems to me that the
initial demand made by the Arbitrator on 14th August, 1995 was made at the most
appropriate time since his entitlement to make a demand had accrued, because it
was made after the cessation of the arbitration hearings at the behest of the
Plaintiff. The renewal of the demand in July 1996 was also appropriately
timed, because, in consequence of the Supreme Court judgment and order, the
Arbitrator had seisin of the dispute between the parties once again, but
hearings had not resumed. The third request for an interim payment in January
1997 was also appropriately timed, in my view, because the resumed arbitration
hearings were imminent.
77. As
to the second question, it follows from what I have said above that the
Arbitrator did not exceed his entitlement in receiving payments on account of
his fees from Kerry alone. However, the methods he engaged to enforce his
entitlement were inappropriate in two respects. First, in my view, the fee
statement dated 6th January, 1997 should not have been addressed to the Plc..
In his replying Affidavit the Arbitrator averred that he had been requested on
receipt of the first tranche of the interim payment from Kerry's Solicitors in
November 1995 to issue a VAT invoice and that he had addressed the VAT invoice
to the Plc. because he was unaware of the VAT arrangements within the Kerry
group of companies. Kerry was the party to the arbitration, not the Plc., and
the demand for the interim payment should have been addressed to Kerry. This
is a small point, however, and, in my view, there is no justification for the
assertion that thereby the Arbitrator was allowing the Plc. into the
arbitration. Indeed, it is perhaps worth commenting that it was the Plaintiff
who unsuccessfully embroiled the Plc. in the issues between the Plaintiff and
Kerry in the earlier proceedings. Secondly, while the annoyance and
frustration of the Arbitrator at the failure of the Plaintiff's Solicitors to
respond to his requests for payments on account and reminders in relation to
fees is understandable, in my view, it was inappropriate for the Arbitrator to
send the fee statement dated 6th January, 1997 to Kerry's Solicitors solely.
That fee statement, which claimed an additional interim payment which had not
already been demanded from the Plaintiff, should have been directed to the
Plaintiff first and, in the event, of non-compliance by the Plaintiff, the
demand could have been directed to Kerry, the Plaintiff being simultaneously
notified that a demand was being made on Kerry. Moreover, the letter dated
21st February, 1997, which contained the reference to the possibility of the
Arbitrator seeking legal advice, should have been addressed to both parties.
78. As
to the third question, in my view, those errors on the part of the Arbitrator
do not constitute misconduct of an order that the Court should exercise its
discretionary power to remove the Arbitrator. The basis on which the English
Courts exercise their jurisdiction under the provision of the Arbitration Act,
1950 which corresponds to Section 37 is explained in the following passage from
Mustill and Boyd on
The
Law and Practice of Commercial Arbitration in England
,
2nd Edition, 1989 at page 530:
79. The
approach adopted by the English Courts is in line with the policy
considerations which the Supreme Court in
Keenan
-v- Shield Insurance Company Limited
indicated should inform interference by the Courts in this jurisdiction in an
arbitral process and, in my view, is an approach which should be adopted in
implementing Section 37.
80. The
errors made by the Arbitrator, in my view, are not serious errors. Moreover,
they must be viewed in the context that over a period of almost a year and a
half the Plaintiff had flagrantly and persistently refused to honour its
contractual obligations to the Arbitrator. On the evidence I am satisfied that
the Arbitrator has not shown actual or potential bias. Viewed objectively, his
conduct has not given serious grounds for destroying the confidence of either
party in his ability to conduct the reference properly. Moreover, on the
evidence, the only reasonable inference which can be drawn is that subjectively
these actions did not destroy the confidence of the Plaintiff in the ability of
the Arbitrator to adjudicate fairly on the issues. Even as late as 7th July,
1997, the Plaintiff wanted to move its application for the costs of the
preliminary issue before the Arbitrator and it was only when it did not get its
own way in dictating the future course of the arbitration that it withdrew.
81. The
gravamen of this aspect of the Plaintiff's case is that it was misconduct on
the part of the Arbitrator not to disclose at the outset that he had acted as
arbitrator in two arbitrations involving associated companies of Kerry and in
not giving the Plaintiff an opportunity to reject his appointment on that
account. The Arbitrator's error was compounded, it was submitted, by his
failure to disclose in a proper way the information sought of him by the
Plaintiff. The facts give rise to a perception of bias and the Court should
intervene to remove the Arbitrator.
82. In
an unreported reserved judgment delivered on 31st May, 1990 in
Bord
na Mona v. John Sisk and Son Limited and Others
,
Blayney J. considered the correct test as to the existence of bias in an
arbitration context. Translating the test which Blayney J. applied in that
case to the instant case, the question which arises for consideration here is
whether the Plaintiff has established that a right-minded person with full
knowledge of the facts would have been led to conclude that there was a real
likelihood of bias in the Arbitrator acting in the arbitration between the
Plaintiff and Kerry. The relevant facts are set out in the letter dated 17th
June, 1994 from Kerry's then Solicitor to the Plaintiff's Solicitors, the
letter dated 20th March, 1997 from Kerry's Solicitors to the Plaintiff's
Solicitors and the Arbitrator's letter dated 4th April, 1997 to the Plaintiff's
Solicitors. The facts are that prior to accepting his appointment, the
Arbitrator had no commercial connection with Kerry or any of its associated
companies. Even though in every arbitration one or other of the parties to the
arbitration ultimately bears the arbitrator's fees, costs and expenses, that
circumstance of itself does not create a commercial connection between the
arbitrator and the parties to the reference before him. The factual position
is that the only connection, using that word in its very broadest sense,
between the Arbitrator and Kerry is that on two occasions in the past the
Arbitrator had acted as an independent arbitrator in disputes between an
associated company of Kerry and a third party. In my view, there was no duty
on the Arbitrator to disclose such a connection. To hold otherwise would be to
imply that the Arbitrator did not perform an independent role on the previous
occasions. Moreover, in my view, no right-minded person would conclude that
such a connection could give rise to a real likelihood of bias on the part of
the Arbitrator in dealing with the reference at issue here.
83. As
in the case of the fees issue, the evidence indicates that the fact that the
Arbitrator acted as arbitrator in previous references involving associated
companies of Kerry had not subjectively destroyed the confidence of the
Plaintiff in the Arbitrator's ability to conduct the reference fairly and
competently up to the point in time when the Plaintiff unilaterally withdrew
from the arbitration on 7th July, 1997. The issue of the Arbitrator's previous
involvement was canvassed in correspondence in March and April 1997 and it was
raised at the hearing on 7th April, 1997. However, it was not raised again
until these proceedings were initiated and, significantly, at all of the
hearings subsequent to 7th April, 1997, including the final hearing on 7th
July, 1997, the Plaintiff's representatives evinced an unambiguous resolve to
continue and complete the arbitration before the Arbitrator. Therefore, the
averments in Mr. Tobin's affidavit as to his loss of confidence in the
Arbitrator, which I have quoted in part above, must be viewed with scepticism.
84. In
the course of the submissions on behalf of the Plaintiff a plethora of
allegations was made against the Arbitrator of other conduct which it was
contended constituted actual bias or gave rise to a perception of bias. Much
emphasis was laid on the decision of the Supreme Court in
The
State (Hegarty) -v- Winters
,
[1956] I.R. 320 and the statement in the judgment of Maguire C.J. at page 336
that the fundamental rule is that in an arbitration it is necessary not alone
that justice be done, but that it must be seen to be done. Having considered
the various allegations made, some of which I have already referred to, such as
the contention that the Arbitrator misconducted himself in failing to reprimand
Kerry's Solicitors for alleged improper suggestions made by them in
correspondence, and others, which I consider it unnecessary to outline in
detail, such as allegations that the Arbitrator made improper remarks during
the course of the hearings, I have come to the conclusion that it has not been
established that the Arbitrator conducted himself in a manner which would
"reasonably give rise in the mind of an unprejudiced onlooker to the suspicion
that justice was not being done" - the test posited in
The
State (Hegarty) -v- Winters
.
85. The
Plaintiff's contention that the Arbitrator failed to proceed with the reference
with reasonable dispatch is based on the inferences which the Plaintiff
contends are to be drawn from the averments in the Arbitrator's Affidavit, in
particular, the averments in paragraphs 26 and 28. It was contended that the
Arbitrator made no helpful suggestions to move the arbitration along. In
failing to list the variations, it was contended, he had failed to crystallise
the issues in the arbitration, to communicate his conclusions, to manage the
arbitration expeditiously and to bring matters to a resolution as quickly as
possible.
86. Having
found that the Arbitrator was under no obligation to make a further interim
award or to classify the various items of work according to the contract they
fell into, or to list the variations in advance of making a final award, it
follows that a charge of delay and lack of expedition predicated on the
Arbitrator's failure to do those things must fail. Apart from this, the
evidence clearly establishes that the Arbitrator did his utmost to get the
parties to resume the arbitration after the order of the Supreme Court. The
evidence also shows that the Arbitrator got little co-operation from the
Plaintiff, who did not request a procedural meeting until eight months had
elapsed and who did not protest the alleged inadequacy of the Amended Interim
Award until six months had elapsed from the making of the Amended Interim
Award. Even allowing that the issue of the taxation of the costs of Kerry and
the Plc. in the earlier proceedings and the presentation of the Petition to
wind up the Plaintiff by the Plc. were distractions and provocations, the
Plaintiff displayed an extraordinary lack of urgency about resuming the
hearings and it ill-behoves the Plaintiff to allege delay on the part of the
Arbitrator. The conduct of the Plaintiff between 7th April, 1997 and 7th July,
1997, when considered over that whole span of time, was wholly unreasonable and
I would even go so far as to say that it was bizarre. It was certainly at
variance with the oft-repeated statement of Counsel for the Plaintiff in this
Court, that what the Plaintiff, a small company looking for the money which it
considered due to it, wanted was expedition in a private arbitration.
87. The
Plaintiff has made out no case of delay, let alone culpable delay of the type
which would justify his removal without remuneration, against the Arbitrator.
Accordingly, the claim under Section 24 of the Act of 1954 fails.
88. The
basis of the Plaintiff's contention that it is entitled to relief under Section
39 of the Act of 1954 is that the averment in the Affidavit of Mr. O'Neill,
which I have quoted above, is tantamount to an allegation of fraud against the
Plaintiff. That being the case, it was argued, the Plaintiff has a right to
vindicate its good name in open Court.
89. Counsel
for Kerry stood over the averment contained in Mr. O'Neill's Affidavit and
pointed out that in its Points of Defence delivered in February 1995 Kerry had
pleaded that as follows -
90. An
allegation that a claim on foot of a building contract is exaggerated or
inflated or is based on contrived calculations or methodology, it was submitted
on behalf of Kerry, is not an allegation that a party has been guilty of fraud
within the meaning of Section 39. If it were, an arbitration agreement could
be easily defeated.
91. The
decision of this Court in
Winterthur
Swiss Insurance Company v. ICI
[1990] I.L.R.M. 159 was relied on by the Plaintiff in support of its contention
that the Court's jurisdiction under Section 39(2) has arisen. In that case, in
which a defendant against whom allegations of fraud were being made was seeking
to stay proceedings pending arbitration and the plaintiffs were seeking leave
under Section 39(2) of the Act of 1954 to revoke the authority of the
arbitrators who had been appointed, O'Hanlon J. stated that the general
approach adopted by Wolfe L.J. in the following passage from his judgment in
Cunningham-Reid
v. Buchanan-Jardine
[1988] 2 All ER 438 represents the correct approach in giving effect to the
provisions of Section 39(2) and (3) of the Act of 1954:
92. As
to the suggestion that the party opposing a stay on legal proceedings must
establish a prima facie case of fraud against his opponent, O'Hanlon J. said he
preferred the approach adopted by the Irish Queen's Bench Division in the case
of
Workman
-v- Belfast Harbour Commissioners
,
[1899] I.R. 234 where Kenny J. expressed himself as follows:-
93. The
question which the Plaintiff's invocation of Section 39(2) raises is whether an
issue has arisen in the arbitration that the Plaintiff has been guilty of
fraud. No authority was cited as to the meaning of the word "fraud" in the
context of Section 39(2). In my view, it must connote behaviour of the type
which constitutes fraudulent conduct under the law of contract and the law of
tort - knowledge or recklessness as to falsity. An allegation that a claim
under a contract is exaggerated or inflated, without a further plea that the
claimant in making the claim is being knowingly or recklessly false or
dishonest, is not an allegation that the claimant guilty of fraud. Similarly,
an allegation that, in the formulation of the claim, spurious and contrived
calculations and methodology are being employed is not an allegation that the
person making the claim is guilty of fraud, without a further plea that in
making the claim that person is being knowingly or recklessly dishonest, even
ascribing the most sinister meaning to the words "contrived" (fabricated) and
"spurious" (false). Moreover, Kerry's position is that, while it is standing
on its contention that the Plaintiff's claim is exaggerated and based on a
false premise, it has not used the word fraud and it is not alleging fraud on
the part of the Plaintiff. Therefore, both objectively and subjectively, Kerry
is not alleging that the Plaintiff has been guilty of fraud. There being no
allegation of fraud, the Plaintiff cannot invoke Section 39(2).
94. This
is the second occasion on which the Plaintiff has unsuccessfully sought to have
the arbitration which it instigated aborted on the ground that it involves a
question as to whether a party has been guilty of fraud. As regards these
proceedings, the Plaintiff's bona fides must be questioned, given that on this
occasion the source of the only allegation of fraud contended for by the
Plaintiff was an affidavit sworn almost six months after these proceedings were
initiated. I am constrained to conclude that it is the suggestion that an
allegation of fraud exists that is a sham.
95. The
Plaintiff's Counsel developed another argument out of the judgment of O'Hanlon
J. in the
Winterthur
case. He referred to the following summary of one aspect of the judgment in
the head-note in the report:-
96. It
was submitted on behalf of the Plaintiff that, because of the manner in which
the arbitration was conducted, a situation has arisen which was not in the
contemplation of either party, that is to say, delay in resolving the dispute,
and, therefore, litigation is the appropriate form of proceeding in the events
which have happened. This submission is misconceived. In the case of delay,
the Court can intervene and remove an arbitrator under Section 24 of the Act of
1954 but only where it has been established that the arbitrator has failed to
use all reasonable dispatch in entering on and proceeding with the reference
and making an award. I have already decided that that jurisdiction does not
arise in this case. The Court has only jurisdiction to order that an
arbitration agreement shall cease to have effect and to give leave to revoke
the authority of the arbitrator under Section 39(2) where an issue of fraud
arises. The relevant passage in the judgment of O'Hanlon J. at p. 171 does not
suggest that it is otherwise.
98. Having
held that there is no basis for the removal of the Arbitrator under Section 24
or Section 37 and that the Plaintiff is not entitled to invoke Section 39(2),
the question of granting relief under Section 40 does not arise.
99. As
I have indicated, remission was not pursued as an issue at the hearing and, in
any event, nothing emerged at the hearing which gave rise to the necessity to
remit any matter to the Arbitrator for reconsideration under Section 36.
100. Therefore,
the decision on the proceedings is that they will be dismissed, thus clearing
the way for the resumption of the arbitration.
101. As
I have already mentioned, amongst the documents exhibited in the Affidavit of
Mr. O'Neill filed by Kerry was the whole range of inter partes correspondence
between the Plaintiff and Kerry in chronological order, with communications
from the parties to the Arbitrator and communications from the Arbitrator to
the parties interspersed chronologically. The correspondence filled two
ring-binders and ran to 528 pages. Prior to the commencement of the hearing in
this Court, Kerry's Solicitors furnished copies of the correspondence to the
Arbitrator's Solicitors, McCann Fitzgerald.
102. On
the second day of the eleven day hearing in this Court, when Counsel for the
Plaintiff was opening the Plaintiff's case, the correspondence opened in Court
in the presence of the Arbitrator included the following:-
103. Contending
that the amount of the sealed offer had been communicated to the Arbitrator and
that he had either actual or constructive knowledge of the amount of the offer,
the Plaintiff sought on that account an order that the arbitration agreement
should cease to have effect and that the authority of the Arbitrator should be
revoked. It was submitted that the Arbitrator had been put in an invidious
position and this was particularly unfair to a lay arbitrator. Irrespective of
the amount of the Arbitrator's award ultimately, the fact of disclosure of the
amount of the sealed offer might reasonably give rise in the mind of an
unprejudiced onlooker to suspicion that justice was not being done. Moreover,
the ultimate award would be open to the bona fide suggestion from either party
that it could have been influenced by either actual knowledge or constructive
knowledge of the amount of the sealed offer, thus rendering the award
potentially uncertain and not final.
104. The
stance adopted by the Arbitrator in relation to this issue was that it was an
issue with which he was not involved. No submissions were made on his behalf,
so that he could maintain his neutral stance.
105. Counsel
for Kerry sought leave to adduce oral evidence as to the circumstances
surrounding the inclusion of the letter of 24th February, 1995 in the
correspondence exhibited in the Affidavit of Mr. O'Neill and the manner in
which McCann Fitzgerald dealt with this exhibit. The application was made
under Order 38, Rule 8 of the Rules of the Superior Courts 1986. I allowed the
evidence be adduced. Arising out of the evidence, I make the following
findings of fact:
106. The
position of an arbitrator to whom a without prejudice offer has been disclosed
and, in particular, whether he should resign is addressed in the "Handbook of
Arbitration Practice" by Bernstein and Mees, 2nd Edition, at page 121 in the
following passage:-
107. The
case referred to in the above passage is now reported as
Brown
-v- CBS (Contractors)
,
[1987] 1 Lloyd's Law Reports 279. That case concerned an application to remove
an arbitrator on the ground, inter alia, that matters were put before him which
should not have been placed before him, namely, matters alleged to have been
agreed between the parties' surveyors at a meeting which it was contended was a
"without prejudice" meeting. Judge Hawser Q.C. concluded that privileged
matters had been put before the arbitrator. He went on to say (at page 282):-
108. Having
also found that the arbitrator had not given one of the parties any proper
opportunity of making submissions on the matter prior to reaching a decision
adverse to that party, as he should have done, Judge Hawser went on to say:-
109. The
approach adopted in
Brown
-v- CBS (Contractors)
and the guidelines suggested by Bernstein and Mees accord with principle and
are in line with the policy considerations set out in
Keenan
-v- Shield Insurance Company Limited
.
110.
The basis on which Kerry made the offer of 23rd February, 1995 to the
Plaintiff was that, while the fact of the making of the offer was being made
known contemporaneously to the Arbitrator, the amount of the offer was to
remain secret. Therefore, as regards its amount, the offer was made on a
"without prejudice" basis and it was not open to either party to disclose the
amount to the Arbitrator. Even if he had become aware of the amount of the
offer through the medium of the documentation exhibited in these proceedings,
such awareness not being attributable to any misconduct on his part, it would
be for the Arbitrator to decide whether he should continue to act as
arbitrator, having elicited the views of each party and having entertained
submissions from each party. Having regard to the manner in which the parties
have signalled their views during the hearing in this Court, such submissions
would in all likelihood address the question of the potential significance of
the sealed offer to the award of costs following the decision on liability and
quantum, given the unusual circumstance which the views signalled indicate,
that it would be the offeree who wished to remove the dispute from the
Arbitrator's jurisdiction, not the offeror.
111. It
was argued by Counsel for the Plaintiff that the letter of 1st March, 1995 from
Kerry's Solicitor anchored the offer to the Rules of the Superior Courts 1986
and in support of this argument he also relied on the decision of the Queen's
Bench Division (Commercial Court) in
Tramountana
-v- Atlantic
,
[1978] 1 Lloyd's Reports 291 in which Donaldson J. stated at page 397 that the
position of a "sealed offer" in an arbitration has to be considered against the
background of the law relating to payments into Court. That is an argument to
be made to the Arbitrator to whom the parties have entrusted the conduct of the
resolution of their dispute and who has a discretion as to where the burden of
the costs of the arbitration should ultimately lie, in the event that he
becomes aware of the amount of the sealed offer. It is not a matter in which
the Court has any function at this juncture.
112. The
letter dated 24th February, 1995 should not have been exhibited in an Affidavit
in these proceedings without the amount of the offer having been masked. The
fact that it was, however, is not a basis on which the Court could order that
the arbitration agreement should cease to have effect and that the authority of
the Arbitrator should be revoked, even if it had resulted in the Arbitrator
acquiring knowledge of the amount of the offer.