Hogan v Byrne & Curtin

• Jurisdiction: Ireland
• Court: High Court
• Judge: Miss Justice Laffoy
• Judgment Date: 03 June 2008
• Neutral Citation: [2008] IEHC 287
• Docket Number: No. 129 MCA/2007
• Date: 03 June 2008

Hogan v Byrne & Curtin

BETWEEEN/

DECLAN HOGAN

PLAINTIFF

AND

THOMAS BYRNE AND HENRY J. CURTIN

DEFENDANTS

[2008] IEHC 287

No. 129 MCA/2007

THE HIGH COURT

Arbitration

Award

Application to set aside or remit award - Agreement for sale of accountancy practice - Dispute regarding consideration payable - Abatement - Dispute resolution mechanisms - Appointment of arbitrator as expert under agreement - Dispute regarding interpretation of expert opinion - Submission to arbitration under Act - Interim award - Methodology to be employed in calculating consideration - Final award calculating consideration and interest payable - Whether arbitrator misconducted arbitration - Whether arbitrator misinterpreted and misapplied provisions of agreement - Whether patent errors on face of award - Whether arbitrator adopted methodology for calculation of consideration outside scope of reference - Failure to challenge interim award - Estoppel - Jurisdiction to set aside arbitral award - Status and effect of interim award - Whether arbitrator functus officio in relation to interim award - Time limit for application to remit or set aside award - Whether obligation to give reasoned explanation as to calculation - Schott schedule - Whether contents of Schott schedule incorporated in final award - Keenan v Shield Insurance Company Ltd [1988] IR 89, Societe Franco-Tunisienne d'Armement-Tunis v Government of Ceylon [1959] 1 WLR 787, Tobin and Twomey Services v Kerry Foods [1996] 2 ILRM 1, McCarthy v Keane [2004] 3 IR 617, Limerick City Council v Uniform Construction Ltd [2007] 1 IR 30 and Bord na Mona v John Sisk & Son Ltd (Unrep, Blayney J, 31/5/1990) considered - Arbitration Act 1954 (No 26), ss 36 and 38 - Application dismissed (2007/129MCA - Laffoy J - 3/6/2008) [2008] IEHC 287

Hogan v Byrne

Facts: The plaintiff sought an order pursuant to ss. 36 or 38 of the Arbitration Act 1954, to set aside or remit the award of an arbitrator in a dispute in respect of the sale of an accountancy practice. The Arbitrator had made an interim award. A dispute arose as to the methodology used by the arbitrator and whether it was inconsistent. The plaintiff contended that the ward had three patent errors on its face and the methodology adopted was outside of the terms of reference of the dispute.

Held by Laffoy J. that the plaintiff had not established errors on the face of the award. The methodology used was derived from the interim award and he plaintiff could not challenge its use at this juncture. The plaintiff had ample opportunity to address the appropriateness or otherwise of the methodology employed by the arbitrator in calculating the consideration due. There was no basis for either setting aside or remitting the final award. The application of the plaintiff would be dismissed.

Reporter: E.F.

ARBITRATION ACT 1954 S38

KEENAN v SHIELD INSURANCE CO LTD 1988 IR 89

SOCIÉTÉ FRANCO-TUNISIENNE D'ARMEMENT-TUNIS v GOVT OF CEYLON 1959 1 WLR 787 / 1959 3 ALL ER 25

MCCARTHY v KEANE & ORS 2004 3 IR 617

ARBITRATION ACT 1954 S36

ARBITRATION ACT 1954 S25

RSC O.56 r4

BORD NA M ÓNA v SISK UNREP HIGH BLAYNEY 31.5.1990 1990/1/104

ARBITRATION ACT 1954 S36

LIMERICK CITY COUNCIL v UNIFORM CONSTRUCTION LTD 2007 1 IR 30

Judgment of

Miss Justice Laffoy

1 delivered on 3rd June, 2008 .

2 In these proceedings the plaintiff seeks either an order under s. 38 of the Arbitration Act,1954 (the Act of 1954) setting aside or, alternatively, an order under s. 36 of the Act of 1954 remitting for reconsideration, an arbitration award made by Timothy Bouchier-Hayes (the Arbitrator) which is described as having been made on 30^th August, 2007. The arbitration arose out of the sale of an accountancy practice by the defendants to the plaintiff and another person who was not a party to the arbitration and is not a party to these proceedings. The defendants were claimants in the arbitration and the plaintiff was the respondent.

3 The agreement for the sale of the accountancy practice which gave rise to the arbitration was dated 29^th July, 1994. The dispute which arose between the defendants, as sellers, and the plaintiff, as one of the purchasers, related to the consideration payable by the plaintiff to the defendants. The provisions of the agreement which bear on the dispute are as follows:

4 · • Clause 3.1, which provided that the consideration was IR£251, 546, of which IR£176, 080 (representing 70% of the consideration) was to be contributed by the plaintiff. Clause 3.1 set out the consideration "as stated in Schedule V". Schedule V disclosed that the consideration was 112% of the total fees payable by clients of the practice listed in Schedule I, which amounted to IR£224, 595.

5 · • Clause 3.3, which set out the time frame for payment of the sum of IR£176, 080 by the plaintiff, which was payable in three tranches as follows:

6 (1) IR£70, 432 was to be paid on 30^th September, 1994, which, in effect, was the closing date provided for in the agreement;

7 (2) IR£52, 824 was to be paid on 30^th September, 1995; and

8 (3) the balance of IR£52, 824 was to be paid on 30^th September, 1996 (Clause 3.3.3).

9 · • Clause 3.4, which deals with the eventuality of Recurring Fees, as defined, not being maintained for the two-year period from 30^th September, 1994. The term "Recurring Fees" was defined in the agreement as follows:

"Fees of the aggregate value from Clients [as listed in Schedule I] who are expected to remain Clients of the business for the foreseeable future in respect of services which are expected to recur annually."

10 Clause 3.4, the interpretation and application of which has given rise to the arbitration, provided as follows in the first paragraph thereof:

"The consideration is based on the assumption that income from Recurring Fees from the Business for 12 months is maintained for year 1 (i.e. year ended 30^th September, 1995) and year 2 (i.e. year ended 30^th September, 1996). If the said Recurring Fee income is not maintained for the said period of 24 months because of delays in performing work for Clients the period shall be extended by 9 months to allow the income from Recurring Fees to arise and the payment due under Clause 3.3.3. above shall be abated pro rata: a final payment shall then be due on 30^th June, 1997 based on the fees raised in the said 9 month period for (sic) clients for whom 2 years income from Recurring Fees was not received in the period to 30^th September, 1996."

11 The second paragraph of Clause 3.4 was in the following terms

"If the said Recurring Fee income is not maintained for the said period of 24 months due to the non-retention of a Client or Clients of the Business then … the amount or amounts of the consideration attributable to such Client or Clients shall not be payable. Any such amount or amounts already paid shall be refunded to the Purchaser or credited against further payment due by the Purchaser at the discretion of the Purchaser but the Purchaser shall pay over to the Seller 50% of the fee actually paid by the Client or Clients for services rendered by the Purchaser."

12 · Clause 4.5, which provided as follows:

"Any amounts owing under this agreement shall bear interest from the due dates to the date of payment at the rate of 8% per annum paid separately."

13 The agreement contained a clause, Clause 22, which was headed "Arbitration" and which provided that any dispute, difference or question which might arise at any time thereafter between the parties concerning the interpretation of any of its provisions or any other matter or thing arising out of the agreement should be "referred to the decision of an expert". Clause 22 went on to provide:

"In arriving at his decision, the decision of the Expert shall (save in the case of manifest error) be final and binding upon the parties hereto. The provisions of the [Act of 1954] shall not apply."

14 The plaintiff made the following payments to the defendants on foot of the agreement:

15 (1) the sum of IR£70, 432 on 30^th September, 1994; and

16 (2) the sum of IR£27, 394 on 30^th September, 1995.

17 The plaintiff paid less than the sum due under the agreement on 30^th September, 1995 and made no further payment on 30^th September, 1996, contending that he was entitled to an abatement or adjustment of the consideration payable by him under Clause 3.4, by reason of the Recurring Fees income not having been maintained for 24 months by reason on non-retention of clients.

18 In February, 1997 the defendants, obviously recognising that the plaintiff was entitled to some abatement of the consideration, claimed that a balance of 1R£56, 539.70 was due to them by the plaintiff.

19 Dispute resolution mechanisms were subsequently invoked by the parties and involved three stages.

20 The first stage was the appointment of the Arbitrator as Expert within the meaning of Clause 22 for the purpose of determining a dispute which had arisen between the parties as to the interpretation of the definition of "Recurring Fees" and the interpretation of Clause 3.4. The Arbitrator gave his opinionqua Expert under Clause 22 on 11^th May, 1999, finding as follows:

21 a "A. The reference to'fees of the aggregate value', as referred to in the definition of Recurring Fees, is of significance. In my opinion the definition of Recurring Fees requires a determination of the total value of the fees received from Clients (as defined), subject only to the qualification that such fees are 'in respect of services which are expected to recur annually'. Accordingly, no reduction from such sum ought to be made of the amount of the original consideration attributable to Clients [who] were not retained by the Business.

22 b B. Pursuant to the definition of Recurring Fees, charges to Clients for services'not expected to recur annually' should not be...