The Gazette 1991

GAZETTE

NOVEMBER 1991

1988 upholding the High Court

decision of Blayney J. and the

arbitrator's award was delivered by

McCarthy J. He concluded with

lines which are often quoted by

judges, practitioners and students:

"Arbitration is a significant feature

of modern commercial life;.

the

field of international arbitration is

an ever expanding one.

It ill

becomes the Courts to interfere in

such a process;

if policy considera-

tions are appropriate, as I believe

they are in matters of this kind,

then

every such

consideration

points to the desirability of making

an award final in every sense of the

term."

Keenan -v- Shield,

the insurance

company repudiated liability on the

basis of alleged misrepresentation

of fact and non-disclosure of

information. The arbitrator's award

found against the insurer on those

allegations but decided that the

insured was not entitled to recover

under the policy. Challenges to the

award failed in the High Court and

on appeal to the Supreme Court.

McCarthy J. in his judgment also

made the following points:

(1) It was t oo late for the

arbitrator to state a case under s.35

of the 1954 Act after he had made

his award and became

functus

officio.

(The case-stated procedure

has in general not been abused in

the Irish jurisdiction. In England &

Wales, which have Arbitration Acts

d i f f erent f rom Scotland and

Northern Ireland, a restricted

appeal system has replaced the

case-stated procedure).

(2) At common law, the Court can

either remit or set aside an award

if there is an error on its face. Policy

considerations point to the

desirability of making an arbitration

award final in every sense of the

term. Therefore, McCarthy J. did

not approve of courts fine-combing

an award unless it showed on its

face an error of law so fundamental

that the courts could not stand

aside and allow it to remain

unchallenged.

Keenan -v- Shield

was not such a case. The learned

judge was critical of fine-combing

by Costello J. in a previous case

Church & General Insurance -v-

Connolly & anor.

Comment

The jurisdiction to set an award

aside because of an error of law on

its face is often criticised as

anomalous.

It was abolished in

the English Arbitration Act, 1979

which also introduced (a) a new

appeal procedure with specific

restrictions, (b) statutory recognit-

ion of parties' rights to reasoned

awards. There is a strong case for

similar reforms in Irish law so that

arbitrators in line with international

trends may give reasons for awards

without perceived fears of undue

court interference.

McStay

-v-

Assicurazione

Genera/i & Maguire,

known as

the

McStay case,

the Supreme

Court in November, 1990 upheld

the arbitrator's award and dis-

missed the p l a i n t i f f 's appeal

against a High Court challenge to

the award. This was also an

insurance case. The plaintiff/

appellant, John McStay as receiver

of Hotel Holyrood Ltd. pleaded

inter

alia

in the High Court for an order

remitting to the second defendant,

Peter Maguire SC, for reconsidera-

tion part of his award in which the

arbitrator had decided that he had

no jurisdiction to award interest for

the period

prior

to the award.

Chief Justice Finlay's judgment in

McStay

endorsed the arbitral

process and made the following

points:

(1) A fundamental ingredient of

arbitration as contained in the

common law is the finality of the

arbitrator's decision subject to cer-

tain qualifications and precautions.

Parties acknowledge when agree-

ing to refer a particular question in

dispute to an arbitrator's decision,

that they have abandoned their

right to litigate that precise

question.

(2) Exceptions to the finality as

outlined at (1) above arise at

common law and in statutory

provisions:

(a) The arbitrator has power to

state any question of law arising

in course of a reference or

award, as a special case for the

High Court's decision. The Court

may, on application, direct an

arbitrator to state such a case -

s.35, 1954 Act.

(b) The Court may remove an

arbitrator for misconduct -

s.37, 1965 Act.

(c) The Court may set aside an

award where an arbitrator has

misconducted himself or an

award has been improperly

obtained - s.38, 1954 Act.

(d) The Court may revoke an

arbitrator's power because he

may be partial.

(e) At common law, where an

arbitrator decides a question of

law

where that precise question

has not been referred to him for

decision,

the Court may intervene

in its discretion and in particular

cases where the decision is

clearly wrong on its face by re-

mitting the matter to the arbi-

trator in the interests of justice.

The Chief Justice emphasised in

McStay

that a decision made by an

arbitrator on a specific point of law

referred to him for decision, was

not covered by any of the

exceptions listed above even if the

award appears on its face to be

erroneous.

Finlay C.J. referred to an

English case

Abso/om -v- Great

Western London Garden Village

Society

Lord Russell of Killowen

succinctly set out the law:

" I t is essential to keep the case

where disputes are referred to an

arbitrator in the decision of which

a question of law becomes mater

ial, distinct from the case where a

specific question of law has been

referred to him for decision . . . The

authorities make a clear distinction

between the two cases . . . in the

former case the Court can interfere

if and when any error of law

appears on the face of the award,

but in the latter case no such

interference is possible . . . "

362