Mark Amy Ltd and The Viscount v Olcott Investments Ltd

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: Hamon, Deputy Bailiff and Jurats Blampied and Vibert:
• Judgment Date: 04 November 1996
• Date: 04 November 1996

ROYAL COURT

Hamon, Deputy Bailiff and Jurats Blampied and Vibert:

R.J. Michel for the claimants;

A.D. Robinson for the respondent.

Cases cited:

(1) Demolition & Constr. Co. Ltd. v. Kent River Bd., [1963] 2 Lloyd's Rep. 7, considered.

(2) India (President) v. Jadranska Slobodna Plovidba, [1992] 2 Lloyd's Rep. 274, considered.

(3) La Figueiredo Navegacas S.A. v. Reederei Richard Schroeder K.G., The Erich Schroeder, [1974] 1 Lloyd's Rep. 192, applied.

(4) Le Gros v. Housing Cttee., 1974 J.J. 77, applied.

(5) Le Quesne (Charles) (1956) Ltd. v. T.S.B. Channel Islands Ltd., Royal Ct., September 4th, 1986, unreported.

(6) Matheson & Co. Ltd. v. A. Tabah & Sons, [1963] 2 Lloyd's Rep. 270, applied.

(7) Pallot (L.C.) (Tarmac) Ltd. v. Gechena Ltd., 1996 JLR 241, applied.

(8) Toni, The, [1974] 1 Lloyd's Rep. 489, dicta of Megaw, L.J. considered.

(9) Tramountana Armadora S.A. v. Atlantic Shipping Co. S.A., [1978] 2 All E.R. 870; [1978] 1 Lloyd's Rep. 391, applied.

Additional cases cited by counsel:

Antaios Cia. Naviera S.A. v. Salen Rederierna A.B., [1985] A.C. 191.

Argolis Shipping Co. S.A. v. Midwest Steel & Alloy Corp., [1982] 2 Lloyd's Rep. 594.

BankAmerica Fin. Ltd. v. Nock, [1988] A.C. 1002.

Basden Hotels Ltd. v. Dormy Hotels Ltd., 1968 J.J. 911.

Doherty v. Allman (1878), 3 App. Cas. 709.

Evmar Shipping Corp. v. Japan Line Ltd., [1984] 2 Lloyd's Rep. 581.

Finelvet A.G. v. Vinava Shipping Co. Ltd., [1983] 1 W.L.R. 1469.

G.K.N. (Jersey) Ltd. v. Resources Recovery Bd., 1982 J.J. 359.

Ios I, The, [1987] 1 Lloyd's Rep. 321.

Jersey Contractors Ltd. v. Renoufs Ltd., 1966 J.J. 569.

Jones & Carter's Arbitration, In re, [1922] 2 Ch. 599.

Kent v. Elstob (1802), 102 E.R. 502.

Leif Hoegh & Co A/S v. Maritime Mineral Carriers Ltd., [1982] 1 Lloyd's Rep. 68.

Pioneer Shipping Ltd. v. B.T.P. Tioxide Ltd., [1982] A.C. 724.

Text cited:

Merkin, Arbitration Law, para. 16.53, at 16-28 (Service Issue No. 10, 1991).

Arbitration—award—setting aside—unreasonableness—aggrieved party to show arbitrator's decision so unreasonable no reasonable arbitrator could make it—court not precluded from interfering by principle la convention fait la loi des parties since parties not bound by decision made under error of law

The respondent and the first claimant entered into arbitration following disputes arising from a building contract.

The parties entered into a contract for the construction of a number of buildings. It stipulated, inter alia, that disputes would be settled by arbitration, the result of which would be binding upon them. Disputes arose and an arbitrator was appointed; before the hearing, the respondent wrote to the claimants making an offer of settlement, stating that if it were not accepted by a certain time (which would have elapsed before the date of the hearing), the existence of the offer would be put before the arbitrator for him to consider it when exercising his discretion as to the award of costs.

After allowing the parties to adduce evidence and make submissions and counter-submissions, the arbitrator made an award in favour of the claimants, leaving over the issue of costs. He was notified of the offer and he subsequently made an award of costs largely in favour of the claimants, giving no reasons for his decision but stating that since the offer made to the claimants had lapsed before the date of the hearing, it did not allow the respondent to claim that because it had not been accepted, the claimants ought to bear a greater proportion of the costs.

The respondent made the present representation to the Royal Court for the award of costs to be quashed, submitting, inter alia, that (a) on the evidence before the arbitrator, his decision was so unreasonable that no reasonable arbitrator could have reached it since the claimants' failure to accept its offer meant that they and not the respondent were responsible for all the subsequent costs in the proceedings; (b) because the arbitrator's award had thus been wrong in law, the court should strike it out, even though the parties had agreed that it would be binding; and (c) the award was also vitiated by the arbitrator's failure to give any reasons for his decision.

The claimants submitted in reply that (a) the arbitrator had been right not to consider the effect of the offer because it had lapsed prior to the hearing and it could not therefore be said, having regard to the fact that the substantive award had been made in the claimants' favour, that they had been responsible for throwing away the subsequent costs; (b) since the respondent had failed to show that the arbitrator had erred in law, it was not proper for the court to reconsider the merits of the decision, since la convention fait la loi des parties; and (c) the arbitrator's failure to give specific reasons for his decision was not fatal to the award.

Held, upholding the arbitrator's decision:

The court had no right to interfere with the decision of the arbitrator, either in relation to the substantive award or the consequent award of costs, since the respondent had not shown that the arbitrator's decision had been so unreasonable that no reasonable arbitrator could have made it. The court was not, however, precluded by the principle la convention fait la loi des parties from interfering if he had clearly erred in law, since it could not be said that the parties had bound themselves to his decision in such a situation. In the present case, although an offer had been made and ignored, the arbitrator had been justified in considering that it was not necessarily proper to allow an offer that had been withdrawn before the start of the trial to give the respondent an advantage in the matter of costs. Although it would have been preferable for him to have given reasons for his decision, his failure to do so was not fatal. For these reasons, the representation would be dismissed (page 337, line 19 - page 339, line 15; page 340, line 30 - page 342, line 32).

HAMON, DEPUTY BAILIFF: On August 2nd, 1989, Mark Amy Ltd. entered into a contract in writing with Olcott Investments Ltd. to construct 24 flats in three...