Court should not set inflexible limits on its power to remit arbitrator's decision

In the matter of the Arbitration Acts 1954-1989.

In the matter of an arbitration.

Catherine McCarrick (applicant) v The Gaiety (Sligo) Ltd (respondent).

Arbitration - Remission of award - Lack of fair hearing - Procedural mishap - Whether jurisdiction to remit extended beyond traditional grounds - Arbitration Acts 1954-1989.

The High Court (Mr Justice Herbert); judgment delivered 2 April 2001.

Where a procedural mishap had occurred in an arbitration which had denied the applicant a fair hearing, and the possible injustice which the applicant might suffer if the award was not remitted exceeded any risk of detriment to the respondent, there was no reason which should cause the court to set any permanent inflexible limits to the exercise of the wide power conferred in section 36(1) of the Arbitration Act 1954. Mr Justice Herbert so held in remitting the case for reconsideration of the arbitrator upon certain terms.

Michael Mullooly BL for the applicant; Tara Burns BL for the respondent.

Mr Justice Herbert said that the applicant/ lessee had sought an order pursuant to section 36(1) of the Arbitration Act 1954 ("the Act") which provided for the remission of matters by the court to the reconsideration of the arbitrator or umpire, and that this legislation took as its model the English Acts of 1889 and 1950. This claim arose out of an arbitration to determine, upon rent review, the current market rent of premises held by the applicant under an indenture of lease made in 1991 for a term of 35 years from 20 July 1989, with rent reviews every fifth year. By a notice in 1999 the respondent/ lessor claimed a reviewed rent of £10,000 per annum which was not acceptable to the applicant. The parties failed to agree upon an arbitrator and under the terms of the lease the president of the Law Society of Ireland nominated an arbitrator and he consented to act. Both parties' solicitors attended a preliminary meeting with the arbitrator in June 2000 where, inter alia, it was agreed that the arbitration should proceed without formal hearing, by way of written submissions received from each party and reports from surveyors/ valuers. The arbitrator gave certain directions to the effect that the parties were to prepare a schedule of agreed facts forwarded by 23 June along with the copies of the statements exchanged by that date. It was conceded that while the submissions of the respondent were furnished, the submissions on behalf of the applicant were not exchanged or submitted within that stipulated time.

On 25 July the arbitrator wrote to the solicitors for the applicant advising that he had inspected the premises, and confirming that in the absence of any submissions from them, that he proposed to make an award/ determination in the matter. This letter elicited no response whatsoever. On 2 August the arbitrator notified the solicitors that he had prepared his final award and would submit same upon payment of his fees, costs and outlay as particularised. On 4 August the arbitrator received from the solicitors for the applicant submissions dated 27 July in the form of a report from an auctioneer and valuer. On 22 August the respondent discharged the bill of costs and were furnished with two copies of the final award. Mr Justice Herbert stated that the court was entitled to conclude that the failure to furnish submissions within time, or in any event prior to the making of the final award, and the failure to apply to the arbitrator for an extension of time within which to furnish same, did not arise from a deliberate and conscious decision on the part of the applicant or her advisers not to furnish written submissions, a decision from which it was now sought to resile with a view to having the matter reconsidered and redetermined in the light of the submissions now sought to be made. Mr Justice Herbert referred to King and Another v Thomas McKenna Limited and Another [1991] 1 All ER 653, a decision of the Court of Appeal in England, where it was held that the remission jurisdiction extended beyond the four traditional grounds to any cases where, due to mishap or misunderstanding, some aspect of the dispute had not been considered and adjudicated upon fully, and that it would be inequitable to allow any award to take effect without some further consideration by the arbitrator. It was suggested that there was no reason why self-imposed boundaries to intervention operated by the courts in the past, if that indeed was the case, should continue to be accepted as binding by the courts today. Mr Justice Herbert said that although the language of section 36(1) of the Act was extremely comprehensive, the court must exercise some restraint in exercising the unlimited discretion afforded by it or, "legality" would be preferred to "finality" and the court would become embroiled to a wholly unacceptable degree in the contractual arrangements and agreements of parties. He stated that Keenan v Shield Insurance Company Limited [1988] IR 89 was not authority for the proposition that the High Court should in all cases limit the exercise of its power to remit under section 36(1) of the Act, to one of the following four circumstances; firstly where there was some defect or error patent on the face of the award; secondly where the arbitrator had admittedly made some mistake and desired the award to be remitted to him in order that he may correct it; thirdly where material evidence which could not with reasonable diligence have been discovered before the award was made, had since been obtained; and finally where there had been misconduct on the part of the arbitrator. He said that the court in that case did not purport to determine the question of the general application of section 36(1). Subject to the above mentioned cautions Mr Justice Herbert said he could not see any imperative of policy, reason or justice which should cause the court to set any permanent inflexible and immutable limits to the exercise of the wide power conferred upon it by the Oireachtas in section 36(1) of the Act for the obvious purpose of ensuring justice and fairness between parties within the arbitration framework. He said that the decision in King as applied in later cases, was only a persuasive authority in this court, but one from which he said he should be very slow to differ unless there was a contrary decision of the Supreme Court, High Court or in the House of Lords. He said that the written submissions of the respondent, being the only evidence before the arbitrator, assessed the rent at £8,250 per annum which was also the sum determined by the arbitrator in his award. The valuation which would have formed the submission on behalf of the applicant assessed the rent at £6,600 per annum. Mr Justice Herbert said that the role of arbitrator in these circumstances was delimited by Lord Denning in Fox v P.G. Welfair Ltd (1981) 2 Lloyd's Reports 514, to the effect that his function was to adjudicate upon the evidence given before him and that he could not use his special knowledge to provide evidence on behalf of a party which had not chosen to use it. In the circumstances, Mr Justice Herbert said he could not conclude that the applicant's submissions, had they been before the arbitrator, would not have materially altered the outcome of the arbitration. The arbitrator may well have arrived at the same award but then he might not have. As regards the question of `fault', in the context of an application to remit he said that Sokratis Rokopoulos v Esperia S.P.A. "The Aros" (1987) 1 Lloyd's Reports 456 represented the law in this jurisdiction. In that case it was held that there was no reason why the court should necessarily refuse to assist a party out of a difficulty because he had got into it by his own fault in relation to an application to remit an award.

Mr Justice Herbert referred to Portsmouth Arms Hotel Ltd v Enniscorthy Urban District Council (High Court, 14 October 1994, unreported), where Mr Justice O'Han1on concluded on the evidence, that the basis upon which remission was sought in that case did not fall within any of the four traditional grounds. Mr Justice Herbert said that it was important that Mr Justice O'Hanlon, in his judgment, had not used any expression indicating that the occasions for intervention by the court under the section had been fully and irrevocably determined. Mr Justice Herbert stated that the occasions upon which the court would exercise its discretion to remit matters referred or any of them to the reconsideration of the arbitrator remained open, but very limited and that it was not necessary nor indeed appropriate for the court to put the matter further than this. On the basis of the evidence Mr Justice Herbert said that what occurred in this case was a procedural mishap similar to what had occurred in King and through no fault of the arbitrator or of the respondent, the applicant had not received a fair hearing. He said that the possible injustice which the applicant might suffer now and in the future should the award not be remitted, exceeded any risk of detriment to the respondent. He stated that the determination of the review rent obviously impacted upon, among other things, the viability of the business. The respondent was contractually only entitled on review to the current market rent defined in the lease and not to a "windfall". In addition, the position of the respondent might be protected by strict terms with regard to costs and other matters. Mr Justice Herbert ordered that the matter be remitted for reconsideration of the arbitrator upon the terms that the applicant recoup forthwith to the respondent the sum of £1,094.69 being the whole of the arbitrator's fee in respect of the award or so much thereof as had not already been paid; that the applicant pay the costs of the respondent in and about the remission; that the applicant be responsible for one half of the fees, costs and outlay of the arbitrator in respect of the award made upon reconsideration; and that the applicant pay to the respondent the costs of and concerning these proceedings when same be taxed and ascertained in default of agreement.

Solicitors: Howley Carter & Co (Sligo) for the applicant; Horan Monahan (Sligo) for the respondent.

Gillian Reid Barrister