McCarthy v Keane, Éireann International Finance Brokers Ltd
| Jurisdiction | Ireland |
| Judge | Lavan J. |
| Judgment Date | 24 July 2003 |
| Neutral Citation | 2003 WJSC-HC 9498 |
| Court | High Court |
| Date | 24 July 2003 |
2003 WJSC-HC 9498
Lavan J.
BETWEEN
AND
Arbitration - Award - Application to set aside award – Grounds – Misconduct – Whether arbitrator misconducted himself – Bias – Whether plaintiff allowed to allege bias after award given – Whether plaintiff acquiesced in procedure adopted by arbitrator – Whether court should interfere with award – Arbitration Act 1954 (No. 26).
it was agreed that the fourth defendant be appointed arbitrator for the purposes of valuing shares which were to be bought by the third defendant from the plaintiff. This followed an application under section 205 of the Companies Act 1965 by the plaintiff alleging that the affairs of the second defendant, of which he had been a member, had been conducted by the first defendant in an oppressive manner and in disregard of his interests. The plaintiff sought an order setting aside the fourth defendant’s award on the grounds that he had misconducted himself and the proceedings in the manner in which he had decided the valuation of the plaintiff’s shareholding by applying a minority discount thereto.
Held by Lavan J in dismissing the plaintiffs’ claim and upholding the award of the arbitrator that the arbitrator had not misconducted himself and that no mistake of law appeared on the face of the award. Any bias perceived by the plaintiff should have been asserted during the course of the arbitration and not subsequent to the making of the award. All questions of fact are within the sole domain of the arbitrator and only a limited control will be exercised over him in relation to questions of law.
Judgment of Lavan J. delivered the 24th day of July 2003.
The plaintiff was a director and owner of 39% of the shares of the second named defendant and also the owner of 39% of the shares of a number of associated companies of the second named defendant. The first named defendant was a director and owner of 59% of the shares of the second named defendant and the owner of the balance of the shares in the associated companies. It is contended by the plaintiff that he, the plaintiff, and the first named defendant conducted the affairs of the second named defendant (and the associated companies) on the basis of a quasi-partnership. In 2000, the plaintiff instituted proceedings against the first and second named defendants pursuant to s.205 of the Companies Act, 1963, claiming inter alia that the affairs of the second named defendant were conducted by the first named defendant in a manner oppressive to him and in disregard of his interests.
By order of this Honourable Court dated the 24 th October, 2002, it was ordered that a consent be received, filed and annexed as a schedule to the court order, that all further proceedings should be stayed and that pursuant to s.205 of the Act of 1963. Warrantell Limited (the third named defendant) shall purchase the shareholding of the petitioner (the plaintiff) in the manner sent forth in the consent. Having directed the purchase of the plaintiff's shares under s.205 of the Companies Act, 1963, the court left the mechanics of the valuation of those shares to the terms of the settlement which had been appended to the order.
Under the terms of the consent, Mr Des Peelo was requested to act as the accountant to value the shares. By the consent of the parties the terms in Mr Peelo's appointment were varied to appoint him as an arbitrator rather than as an expert. He was to value the shareholding on the basis of a willing seller and a willing purchaser. As appears from the terms of the consent, the valuation was to be based upon audited accounts.
In a side agreement the plaintiff agreed that on making submissions to “the Accountant” no reliance would be placed by him or on his behalf on the fact that the High Court may have made an order pursuant to s. 205 of the Companies Act, 1963, and that no mention was to be made of the fact and that the accountant was not to take this fact into account.
Initially the first, second and third named defendants submitted their submissions based upon a report of Price WaterhouseCoopers. This was unacceptable to the plaintiff and subsequently these submissions were withdrawn and a second set of submissions was furnished based upon the audited accounts of Deloitte and Touche. At the oral hearing that ensued, rejoinders were submitted and read into the record by counsel for the first, second and third named defendants.
The plaintiff seeks an order setting aside the award of the fourth named defendant as arbitrator in the arbitration proceedings between the plaintiff and first, second and third named defendants and for an order removing the fourth named defendant as arbitrator pursuant to ss. 37 and 38 of the Arbitration Act, 1954(as amended) and Order 56 Rule 4 of the Rules of the Superior Courts, and other ancillary reliefs and costs.
These proceedings are based on an allegation that the fourth named defendant (hereinafter "the arbitrator") misconducted himself and the proceedings so that the plaintiff now seeks to set aside the arbitrator's award and requests the High Court to order his removal.
It is alleged that the arbitrator misconducted himself in the manner in which he decided the valuation of the plaintiff's shareholding in the relevant companies and with regard to the legal principles which he applied in arriving at that valuation including the application of a minority discount.
The plaintiff claims that the arbitrator misconducted himself on a number of grounds including a failure and refusal to inform himself as to the terms of the High Court Order of the 24 th October 2000, a failure and refusal to inform himself as to the actual nature of the agreement by which he was requested to value the plaintiff's shareholding, and that he misdirected himself as to the basis upon which he was to value the plaintiff's shares, including the application of a minority discount. It was submitted that the arbitration was conducted in an unreasonable and irrational manner and that it failed to afford the plaintiff due process and fair procedures.
Reliance was placed on the statement of principle in In Re Arbitration Brien and Brien [1910] 2 I.R. 84 where the court stated at p. 90 that "[i]t is not enough to show that, even if there was misconduct on their part, the award was unaffected by it, and was in reality just; arbitrators must not do anything which is not in itself fair and impartial."
The role of the arbitrator is defined in Russell. Arbitration 2 nd ed., para. 4–105. It states that "[a]s part of the tribunal's general duty, it must act fairly as well as impartially between the parties, in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in exercise of other powers conferred on it." In this regard the plaintiff refers to Techno Limited v. Allied Dunbar Assurance plc [1993] 22 E.G.109 where because an arbitrator departed from the agreed assumptions without further reference to the parties, it was held that "the Arbitrator must give an opportunity to both parties to be heard on the issue, and after exercising his discretion… must ensure that in the light of his decision both parties are given the opportunity to present their cases fully".
It was submitted by the plaintiff that the requirements of acting fairly and impartially includes affording a party to the arbitration a reasonable opportunity to deal with the case of the other party. It was further submitted that this means that each party is entitled to know and should have an opportunity to address all evidence and submissions made by the other party. It was also submitted that the plaintiff did not have an opportunity to deal with points of rejoinder delivered to the arbitrator prior to the oral hearing by the first, second and third named defendants and that therefore the arbitrator failed in his duty to act fairly and impartially in failing to afford the plaintiff a reasonable opportunity to deal with the case of the first and third named defendants in relation to the points of rejoinder.
The plaintiff submits that the arbitrator misconducted himself and/or the arbitration by reason of the manner in which he dealt with the points of rejoinder of the 8 th February, 2002, which gave rise to a reasonable perception of bias.
Bord na Mona v. John Sisk and Son Ltd (Unreported, High Court, Blayney J., 31 st May, 1990) approved as appropriate, in the context of an arbitration and an application to set aside an arbitrator's award and to remove an arbitrator, the test of bias as set out by Murphy J. in Dublin and County Broadcasting v. Independent Radio and Television Commission (Unreported, High Court, 12 th May, 1989) where it was stated that:
"[i]f it is shown that there is on the facts circumstances which would lead a right minded person to conclude that there...
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