RAV Bahamas Ltd and another v Therapy Beach Club Inc. (Bahamas)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hodge,Lord Hamblen,Lord Leggatt,Lord Burrows,Lord Stephens |
| Judgment Date | 19 April 2021 |
| Neutral Citation | [2021] UKPC 8 |
| Court | Privy Council |
[2021] UKPC 8
Lord Hodge, Lord Hamblen, Lord Leggatt, Lord Burrows and Lord Stephens.
Privy Council.
Arbitration — Award — Serious irregularity — Substantial injustice — Whether tribunal failed to deal with issue put to it — Whether nature of irregularity inherently likely to cause substantial injustice — Whether tribunal unfairly failed to afford opportunity to make representations before decision — Implicit in application that substantial injustice alleged — No requirement for express allegation and consideration of substantial injustice if substantial injustice established and found — Bahamas Arbitration Act 2009, s. 90.
This was an appeal raising the issue whether s. 90 of the Bahamas Arbitration Act 2009, which was materially identical to s. 68 of the Arbitration Act 1996, required there to be a separate and express allegation, consideration and finding of substantial injustice for a serious irregularity to be established.
The appellants, RAV, leased land in the Bahamas to the respondent, Therapy, for the construction and operation of a beach club. The rent was calculated by reference to Therapy's gross revenue from the beach club. The term of the lease was three years with an option for the lessee, by giving six months' notice, to renew the lease for a further three years ‘subject to the parties agreeing to rents to apply to the renewal term’.
Therapy claimed that RAV's construction of the beach club was never properly completed. RAV brought proceedings against Therapy claiming that the lease was void. Before judgment was delivered RAV demolished the beach club and evicted Therapy from the land. The court subsequently rejected RAV's claim that the lease was void.
The parties' dispute arising out of the demolition of the beach club and the eviction of Therapy was referred to arbitration. The arbitrator held that Therapy had been wrongfully evicted, but rejected Therapy's claim that the lease had been varied to include a nearby restaurant. The arbitrator assessed damages by reference to Therapy's loss of profits for a six-year period, discounted by one-third to reflect the failure of Therapy's restaurant claim and then by a further 15% to reflect the limitations of its expert evidence.
RAV challenged the award on grounds of serious irregularity on the basis that the arbitrator was wrong to award loss of profits for a six-year period: in particular she had failed to deal with RAV's complaints that no notice of renewal had been given and that the option to renew was unenforceable as an agreement to agree.
RAV further complained that the expert evidence did not disaggregate the losses in respect of the restaurant claim which had been rejected and that discounting of the loss of profits was something not canvassed with, or addressed by, the parties and about which RAV had not been given the opportunity to make representations.
The judge found that there had been serious irregularities and remitted the award of damages for loss of profits to the arbitrator.
The Court of Appeal of the Bahamas, by a majority, reversed that decision on grounds that the judge had not expressly and separately considered and found that substantial injustice had been caused to RAV by the irregularities; and similarly that RAV had failed expressly and separately to plead any such substantial injustice. The majority also held that the judge had been wrong to find that the matters complained of were irregularities.
Held, allowing RAV's appeal:
1. It was good practice for an applicant challenging an arbitration award under s. 90 to set out in its notice of motion, or other originating document, both the listed irregularity relied upon and the grounds for contending that there had been such an irregularity and that the irregularity had caused or would cause substantial injustice. It was also good practice for the judge determining the s. 90 application to deal, expressly and separately, with each of the elements of what constituted a serious irregularity. However, the fact that there was no express and separate allegation of substantial injustice was not fatal to an application under s. 90. It was implicit in any s. 90 application that substantial injustice was being alleged. It was not a requirement of s. 90 that there had to be a separate and express allegation, consideration and finding of substantial injustice. It was sufficient that, as a matter of substance, substantial injustice was established and found.
2. The points that notice of renewal of the lease had not been given and that the option to renew was void for uncertainty and unenforceable had been raised before the arbitrator. The lease renewal point was essential and crucial to the determination of Therapy's entitlement to damages as, if accepted, it would mean that it would not be entitled to damages for three years of the six-year claim period. It was accordingly an issue for the purposes of s. 90(2)(d). It had been ‘put to’ the arbitrator because her attention had been drawn to it as an issue which she would reasonably be expected to deal with. The award did not refer to it at all or provide any reasons for its rejection. She accordingly failed to deal with an issue which had been put to her and that was an irregularity under s. 90(2)(d). RAV had asserted that substantial injustice followed from the nature of the irregularity alleged. The nature of the irregularity and failure of due process meant that it was inherently likely that there had been substantial injustice. Failing to deal with an issue which was put to the tribunal which would potentially more than halve the damages award was, on the face of it, obviously unfair and unjust. It might be otherwise if it was shown that the point was not reasonably arguable, but that had not been suggested. As a matter of substance, substantial injustice had been established. There had also been a finding of substantial injustice: by finding that there was a serious irregularity, the judge was necessarily finding that there had been substantial injustice. (Ascot Commodities NV v Olam International Ltd[2002] CLC 277considered.)
3. Therapy's expert evidence only put forward global figures and none were put forward to deal with the position if the arbitrator rejected the restaurant claim. Neither party addressed that possibility and the one-third deduction was not mentioned at the hearing. The first either party knew about it was when it appeared in the award. That was an irregularity. That irregularity was a serious irregularity because substantial injustice had been established by RAV and was found by the judge. It was self-evident that an arbitrary reduction of damages by a third was seriously prejudicial to RAV. Although it would have been good practice to do so, there was no mandatory requirement for the judge to set out, expressly and separately, why substantial injustice was made out. (Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd[1985] 2 EGLR 14; Cameroon Airlines v Transnet Ltd[2004] EWHC 1829 (Comm); [2006] TCLR 1andKazakhstan v World Wide Minerals Ltd[2020] EWHC 3068 (Comm)applied.)
4. The 15% deduction by the arbitrator to reflect the limitations of the expert evidence fell on the other side of the line and was not an irregularity. It should have been obvious to RAV that the evidence was problematic and it had had ample opportunity to address the arbitrator on that matter. The issue was ‘in play’. The arbitrator could not be faulted on procedural grounds for making an impressionistic deduction of 15% and, in essence, any complaint was that she had made an error of law in taking that percentage figure rather than another percentage figure. (Weldon Plant Ltd v Commission for the New Towns[2000] BLR 496andReliance Industries Ltd v Union of India[2018] EWHC 822 (Comm); [2018] 1 CLC 648considered.)
The following cases were referred to in the judgment:
ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 1 All ER (Comm) 529.
Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 (Comm); [2012] 1 Ll Rep 461.
Ascot Commodities NV v Olam International Ltd [2002] CLC 277.
Brockton Capital LLP v Atlantic-Pacific Capital Inc [2014] EWHC 1459 (Comm); [2015] 2 All ER (Comm) 350.
Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd (The Pamphilos) [2002] EWHC 2292 (Comm), [2002] 2 Ll Rep 681.
Cameroon Airlines v Transnet Ltd [2004] EWHC 1829 (Comm); [2006] TCLR 1.
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614.
Kazakhstan v World Wide Minerals Ltd [2020] EWHC 3068 (Comm).
Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2 CLC 1; [2006] 1 AC 221.
Petrochemical Industries Co (KSC) v Dow Chemical Co [2012] EWHC 2739 (Comm); [2013] 2 CLC 864.
Petroships Pte Ltd v Petec Trading and Investment Corp (The Petro Ranger) [2001] 2 Ll Rep 348.
Primera Maritime (Hellas) Ltd v Jiangsu Eastern Heavy Industry Co Ltd [2013] EWHC 3066 (Comm); [2013] 2 CLC 901.
Reliance Industries Ltd v Union of India [2018] EWHC 822 (Comm); [2018] 1 CLC 648.
Ross v Bank of Commerce (Saint Kitts and Nevis) Trust and Savings Association Ltd [2010] UKPC 28; [2011] 1 WLR 125.
Secretary of State for the Home Department v Raytheon Systems Ltd [2014] EWHC 4375 (TCC).
Transition Feeds LLP v Itochu Europe plc [2013] EWHC 3629 (Comm); [2013] 2 CLC 920.
Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm); [2005] 1 All ER (Comm) 303.
Weldon Plant Ltd v Commission for the New Towns [2000] BLR 496; [2001] 1 All ER (Comm) 264.
Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14.
Vernon Flynn QC and Stuart Cribb (instructed by Charles Russell Speechlys LLP) for the appellant.
Krystal D Rolle QC and Wallace I Rolle (instructed by Janes Solicitors) for the respondent.
Lord Hamblen and Lord Burrows: 1. Introduction
1. This appeal concerns the proper interpretation of...
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