| Judgment Title: Dunnes Stores -v- Holtgen LtdNeutral Citation: 2011 370 MCA High Court Record Number: 2011 370 MCADate of Delivery: 03/27/2012 Court: High Court
Composition of Court: Judgment by: Kelly J. Status of Judgment: Approved
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Neutral Citation Number: [2012] IEHC 93
THE HIGH COURT
COMMERCIAL 2011 370 MCA
IN THE MATTER OF THE ARBITRATION ACTS 1954 – 1998 AND
IN THE MATTER OF THE ARBITRATION ACT 2010, SECTION 4 AND IN THE MATTER OF AN ARBITRATION BETWEEN DUNNES STORES
APPLICANT
AND
HOLTGLEN LIMITED
RESPONDENT
JUDGMENT of Mr. Justice Kelly delivered on the 27th day of March, 2012 2. The arbitration arose on foot of a development agreement of 13th June, 2007 (“the agreement”), which was made between Dunnes, Holtglen and a company called Deerland Construction Limited as surety. The agreement was in respect of works that were to be carried out in Co. Kilkenny on a premises now know as the Ferrybank Shopping Centre (the centre). 3. Included in the centre was a site that was purchased by Dunnes for the purpose of establishing an anchor store there. The works to be performed under the agreement included the construction of that store. 4. Dunnes contended that Holtglen had breached the agreement in a number of ways and had not remedied those breaches. Thus, it was argued, it was entitled to terminate the agreement. Holtglen defended that claim and counterclaimed for monies due to it under the agreement. 5. On 15th June, 2001, the arbitrator made a determination which upheld in large part Dunnes claims concerning Holtglen’s breaches of the agreement. However, he found that the breaches had been remedied and accordingly, Dunnes were not entitled to terminate the agreement. That determination of the arbitrator is not challenged in these proceedings. 6. In September 2011, the arbitrator embarked upon the hearing of Holtglen’s counterclaim and made the award in favour of Holtglen on 7th October, 2011. 7. The arbitrator determined that Dunnes were liable to pay Holtglen the sum of €20,269,732.81 pursuant to clauses 17.1.5, 17.1.6, 17.1.8 and 17.3 of the agreement. He also ordered Dunnes to pay €15,905.55 pursuant to clause 12 of the agreement. He made ancillary orders dealing with costs and the payment of interest. Dunnes now seek to set the award aside. They do so on the grounds that there is a fundamental error of law upon the face of the award. 8. Before I consider the merits of the application, I ought to deal with the jurisdiction of the court and the criteria applicable to it. Jurisdiction “(1) In all cases of reference to arbitration, the Court may from time to time remit the matters referred or any of them to the reconsideration of the arbitrator or umpire.(2) Where an award is remitted, the arbitrator or umpire shall, unless the order otherwise directs, make his award within three months after the date of the order.” 10. This section provides a mechanism for the remittal of an award. It does not specify the grounds upon which an award may be remitted. The section enables the court to make the order contemplated but the grounds for so doing are to be found in common law. Quite apart from this statutory provision, there is, in any event, a common law jurisdiction to remit or set aside an award if there is an error of law on its face. This is clear from the judgment of Costello J. in Church and General Insurance Co. v. Connelly and McLaughlin (Unreported, 7thMay, 1981) where he said that:-“…there is no doubt that at common law the court can either remit or set aside an award if there is an error of law on its face…in my view the court’s jurisdiction to set the award aside in such circumstances is given by the common law.”11. Nowadays most, if not all, applications of this nature are brought pursuant to the provisions of section 36.12. This jurisdiction, according to McCarthy J. in Keenan v. Shield Insurance Company Limited [1988] I.R. 89 at 96, is limited to “an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged”. 13. This approach was followed by Clarke J. in Limerick City Council v. Uniform Construction Limited [2007] 1 I.R. 30 at p. 43 where he said the jurisdiction is “limited and arises only where the error is ‘so fundamental’ that it cannot be allowed to stand (Keenan v. Shield Insurance Co. Limited [1988] I.R. 89) or ‘clearly wrong’ (McStay v. Assicurazioni Generali SPA)”. 14. In recent years, the task of convincing a court that it ought to intervene and remit or set aside an arbitrator’s award has become quite onerous. This much is clear from the observations of O’Donnell J. in Galway City Council v. Samuel Kingston Construction Limited [2010] 3 I.R. 95, where he said at p. 106:- “If the grounds for remittal are matters of common law, then a number of consequences follow. Firstly, the grounds may at least in theory be capable of expansion, as indeed was recognised by Fennelly J. in McCarthy v. Keane [2004] IESC 104, [2004] 3 I.R. 617. By the same token however, the existing grounds can also be developed and if considered appropriate, made more rigorous. Indeed, this in my view is how recent Irish case law should be understood.In Keenan v. Shield Insurance Co. Ltd. [1988] I.R. 89, McCarthy J. stated in unmistakeable and trenchant terms the policy considerations that he considered should guide the court particularly in the aftermath of the Arbitration Act 1980, and perhaps more generally in the light of the development of arbitration, both domestic and international. At p. 96 of the judgment he stated:- 15. That final paragraph summaries the standard that has to be achieved by an applicant for an order of this type. Such an applicant must demonstrate not merely error on the face of the record but an error so serious and so substantial or so fundamental that it smacks of injustice and the court cannot permit it to remain unchallenged.16. As is clear from a later passage in the judgment of O’Donnell J., this approach of the courts is not to be regarded or described as some form of “deference” or “curial deference” to an arbitrator. As he says:- “If there is deference, it is not to the arbitrator, but to the parties’ choice of a process which values certainty and speed above technical correctness, and which recognises that correctness is itself the matter upon which courts and judges might reasonably differ. The scheme thus created (and chosen by the parties) has a relatively high tolerance for matters which upon close inspection might be revealed to be errors of procedure, fact, evidence or law.”17. Finally, O’Donnell J. issues a cautionary reminder at p. 108 of the judgment where he says:-“I would suggest that it is important that the courts in considering challenges to arbitral awards should firstly remind themselves of the high tolerance that the system of arbitral review has for arbitral error and furthermore should seek to articulate as fully as possible the consideration of law and policy, and the analysis of the individual proceedings, which lead the court to conclude that in any given case a substantial error has or has not been established which is so fundamental that the proceedings cannot be allowed to stand.”18. The approach which I take to this application is that identified in the passages from which I have just quoted. 20. The agreement provided that Holtglen was to construct and complete the store for the amount specified in the agreement. 21. Clause 17 required Dunnes, subject to compliance by Holtglen and/or the surety if applicable with the provisions of the agreement, to pay €37,250,000 together with VAT thereon and a further €1,025,000 together with VAT thereon to Holtglen in the manner prescribed under clause 17. In essence, that clause provided for stage payments to be made on foot of architect’s certificates. The first four such payments were to be made on the date of commencement of works, the completion of the ground floor slab, the completion of the roof of the store and completion of the first floor slab of the store. These payments were made and thus were not in issue before the arbitrator. 22. It was the payments prescribed at clauses 17.1.5, 17.1.6 and 17.1.8 that were in dispute. They provided for 20% of the sum to be paid on the date of store practical completion; 20% of the sum to be paid on the date of centre practical completion; and 2.5% of the sum to be paid twelve calendar months after the date of store practical completion. Store practical completion occurred on 10th June, 2009. Centre practical completion occurred on 28th July, 2009 and so the final sum became payable on 10th June, 2010 being twelve months after the date of store practical completion. 23. he only other provision of clause 17 which is relevant is 17.6 where it is stated:- “The Developer (Holtglen) warrants that sufficient funds including bank finance are in place and approved for this purpose and all terms and conditions of such finance will be complied with prior to commencement of and during the construction of the building works.”24. Clause 22 of the agreement is the other clause of relevance. It deals with default and termination. It provides as follows:-“22.1 It is hereby agreed that the company (Dunnes) shall have full right liberty and power (without prejudice to any other right or remedy and without being obliged so to do) in case:- (c) The Centre Opening Date or the Date of Centre Practical Completion is not achieved within the Development Period. 22.3 If this agreement shall be determined under the provisions of clause 22.1, and if a Notice of Substitution is not validly and properly given in accordance with the provisions of clause 22.2 prior to the expiry of the Company’s Notice, the licence herein granted to the Developer in respect of the Site shall also determine and the Company may without prejudice to any other right or remedy resume possession of the Store and the Store Building Works together with all buildings, erections, materials and things thereon with power to hold and dispose thereof as absolute owner as if this Agreement had not been entered into and without making to the Developer any compensation or allowance for the same and without being liable to make any further payment to the Developer.” (i) Holtglen’s failure to use “all reasonable endeavours” to procure Centre Practical Completion by 31st October, 2008 as required by clause 9.4 of the agreement;(ii) Holtglen’s failure to use “reasonable endeavours” to let retail units in the centre and to have as many retail units open on the Centre Opening Date as was reasonably possible as required by clause 13.11 of the agreement; (iii) Holtglen’s delay in achieving Store Practical Completion so as to defer the twenty week period within which the centre had to be open for trade to the public as provided for in clause 9.7 of the agreement; and (iv) Holtglen’s failure to have sufficient funds including bank finance in place and to comply with the terms and conditions of such finance as required by clause 17.6 of the agreement. 27. It is not necessary to set out in detail the arbitrator’s findings in respect of these complaints save to record, as I have already done, that the bulk of them resulted in a finding in favour of Dunnes. But the arbitrator found that such breaches had been remedied and therefore Dunnes was not entitled to terminate.28. His findings in respect of the complaint concerning the breach of clause 17.6 bear examination. In that regard, he said as follows at paras. 87, 88 and 90 of his first award:- “87. The obligations of Holtglen under clause 17.6 can be broken down as follows. First, there is an obligation to have sufficient funds in place and approved for ‘this purpose’, which in context must mean for the purpose of meeting architect’s certificates. Secondly, there was an obligation to ensure that all terms and conditions of bank finance would be complied with prior to commencement of and during the construction of the building works.88. From in or about mid July 2008, or possibly slightly earlier, Holtglen did not have sufficient funds in place for the purpose of enabling it to meet architect’s certificates. This continued to be the position as and from the date of service of the notice of 28th October, 2008. On the other hand, the only breach of a term or condition of bank finance that can realistically be alleged is the failure on the part of Holtglen to meeting the loan value ratio covenant in the facility letter of 13th July, 2007. The evidence did not establish that there was, on the balance of probabilities, such a breach. It amounted at the most to an expression of a perception on the part of Bank of Ireland that there may have been such a breach. Nevertheless, I was satisfied on the evidence that there had been a breach of clause 17.6 from mid July 2008 or perhaps somewhat earlier and that that was continuing as of 28th October, 2008, because Holtglen did not in fact have at that time sufficient funds in place for the purpose of enabling it to meet architect’s certificates. Furthermore, this was a material breach, if only because of the length of time for which it had continued, and because it had the serious consequence of bringing work on the development almost to a halt. 90. However, while Holtglen was in material breach of contract as of the 28th October, 2008, the evidence discussed above establishes clearly that it remedied that breach by the 22nd December, 2008. By that time, there were sufficient funds in place for the purpose of enabling it to meet architect’s certificates. That is within the period of 60 days permitted by clause 22.1. That being so, Dunnes Stores is not entitled to rely upon this breach in order to justify termination of the Development Agreement.” 31. The evidence which was led in respect of these claims on behalf of Holtglen was not subjected to any cross examination. That being so, the arbitrator expressed himself as satisfied that the various requirements that had to be met by Holtglen under the relevant clauses had been met. 32. Thus, at that stage of the arbitration hearing, Dunnes had failed in their claim and Holtglen had satisfied the arbitrator of its entitlement to recover the monies on foot of its counterclaim. 33. Dunnes then raised a further issue in defence of the principal sums claimed by Holtglen in the counterclaim. Dunnes relied upon a contention that Holtglen was insolvent and sought to argue that that insolvency constituted a failure on Holtglen’s part to comply with the provisions of the agreement having regard to the meaning of certain introductory words to clause 17. The consequence of that, argued Dunnes, was that Holtglen was precluded from claiming the monies due. Dunnes contended that this insolvency argument was sufficiently encompassed in the original pleadings but Holtglen disagreed. 34. Dunnes maintained its contention that it was not necessary to amend its pleadings so as to raise this issue of insolvency but, notwithstanding that, made an application on the opening day of the hearing on the counterclaim for liberty to make an amendment to the reply and defence to counterclaim. The arbitrator heard argument on that issue on 7th September, 2011, and delivered his ruling on 7th October, 2011. 35. The parties agreed that the question of whether the proposed amendment would, if factually established, benefit Dunnes was entirely a matter of construction of the agreement. They also agreed that such was a question of law which could be decided on a ruling just as well as it could following the making of an amendment and the receipt of evidence. Thus, the arbitrator records this led the parties:- “…during the course of argument, to adopt the entirely sensible approach of agreeing that I should determine on the legal merits the question of whether the proposed amendment would, if factually established, preclude Holtglen from claiming the sums due or any of them. Thus, the question on the ruling was not the one that might normally arise on an amendment application, namely that of whether there was a statable argument that the amendment could assist the party seeking it, but rather as a matter of law it would actually do so.If that question was decided against Dunnes Stores, then there was no need to go any further, because nothing could have been gained by permitting the amendment. If it was decided in favour of Dunnes Stores, that it would have been necessary to go on to consider the other arguments that were raised in favour of and against permitting the amendment. It was therefore logically the first issue that fell to be considered.” 36. That extract from the arbitrator’s award makes it clear that although he was technically deciding upon an application for an amendment to the pleadings he was, by the agreement of the parties, deciding on whether such an amendment could be of any benefit to Dunnes having regard to the true construction of the agreement.37. It is quite clear, therefore, that the task undertaken by the arbitrator was to discern the proper construction of the relevant parts of the agreement. Dunnes Case on Insolvency “(a) Under clause 22.1(b) of the Development Agreement, Dunnes Stores was entitled to terminate the Development Agreement in the event of Holtglen falling insolvent. Its entitlement in that regard was subject to the provisions of clause 22.2, providing for service of a step-in notice.(b) With the exception of a relatively small claim under clause 12, Holtglen was advancing its claim pursuant to the provisions of clause 17, but entitlement to payment under that clause was subject to the proviso in its opening words. (c) While it accepted that it was not expressly provided that the insolvency of Holtglen was a breach of the Development Agreement, Dunnes Stores argued that the Development Agreement must be interpreted to mean that such insolvency is to be treated within the meaning of clause 17, as being a failure by Holtglen to comply with the provisions of the Development Agreement. Furthermore, it contended that this failure is in context, a highly material one. It argued that it followed that insolvency on the part of Holtglen was therefore such as to disentitle it from obtaining payments to which it might otherwise be entitled under clause 17. (d) Dunnes Stores argued that there is nothing illogical about an interpretation whereby insolvency gives rise to a right to terminate but provides certain protections against that consequence for Holtglen, while also giving rise to an entitlement to refuse to make payments that it might otherwise have been obliged to make. The consequences of termination under clause 22 on the one hand, and entitlement to refuse to pay under clause 17 on the other hand, were quite different. (e) Dunnes Stores pointed out that this approach made commercial sense in the context of the Development Agreement. It argued that there were numerous continuing contractual obligations that would remain to be fulfilled by Holtglen in the future where the Development Agreement had not been terminated. If Holtglen was in fact insolvent, then Dunnes Stores could be faced with the prospect of making very substantial payments to Holtglen, under circumstances where it is very likely indeed that Holtglen would not be able to fulfil its obligations in the future.” (c) Holtglen suggested that, in arguing on these grounds that it was entitled not to make payments which clause 17 provides, Dunnes Stores was seeking to obtain advantages that would not have been open to it if it had simply terminated for insolvency in accordance with clause 22.1(b). Holtglen argued that, following termination under clause 22, the consequence of clauses 22.3 and 22.4 was that Dunnes Stores would have been entitled to avoid making any further payments, but it would have remained liable to make payments that had already fallen due under clause 17 as of the date of termination. Furthermore, if there had been an attempt to terminate under clause 22.1(b) for insolvency, it was likely that the Funder would have exercised its right to set in (sic). Holtglen pointed out that Dunnes Stores had accepted that it could not refuse to pay under clause 17 in reliance on material but cured breaches but at the same time sought to rely for present purposes on breaches that might not even be material without giving any opportunity to cure. (d) Holtglen argued that the Development Agreement deals expressly in clause 17.6 with the circumstances in which funding issues would give rise to a breach. That being so, it was suggested, the Development Agreement could not be interpreted so as to apply to funding issues other than those specifically addressed in clause 17.6. (e) Holtglen argued that, if one accepts that insolvency could be a failure to comply within the meaning of clause 17, then the logical consequence of the argument that had been advanced by Dunnes Stores was that any breach would entitle it to refuse to pay, no matter how minor the breach, unless perhaps it was de minimis. It was suggested that that could not be the proper interpretation of clause 17, which, it was suggested was intended merely to preserve the right of Dunnes Stores to counterclaim for breaches rather than simply to refuse to pay in the event of a breach. Emphasis was laid on the fact that Dunnes Stores had neither sought to terminate nor claimed damages in respect of loss suffered by it as a consequence of the alleged breaches, and on the fact that Dunnes Stores was intending to hold Holtglen to the continuing obligations imposed on it under the Development Agreement while at the same time arguing that it was not obliged to make any payments thereunder. (f) Finally, Holtglen argued that, even if insolvency was a breach of contract that could give rise to an entitlement to avoid payment only if the contract could be interpreted as requiring entire performance as a condition precedent to payment. It suggested that this would be a commercially absurd result, and reliance was placed in that regard on Analogue (sic) Devices B.V. v. Zurich Insurance Co. [2005] 1 I.R. 274 as demonstrating that contracts should not be interpreted so as to give words meaning which the parties could never have intended that they should have. More importantly, reliance was placed on Hoenig v. Isaacs [1952] 2 All E.R. 175 as demonstrating that the courts would not easily interpret contracts so as to provide that entire performance was a condition precedent of payment.” (c) It was emphasised that Dunnes Stores did not argue that every failure to comply gave rise to an entitlement to avoid payments for which clause 17 might otherwise provide. However, if a failure to comply was material and not trivial then there was such a right. (d) Finally, it argued that the proper interpretation of clause 22.3 and 22.4 meant that, following termination for insolvency, Holtglen would be a great deal worse off that it would be under the interpretation of clause 17 put forward by Dunnes Stores. In the same way, there was no relevance to the fact that there was an opportunity to cure a breach on which reliance was placed upon clause 22.1(a), because the consequences of termination were different from those of non-payment of sums due under clause 17.” (c) Thirdly, there are the provisions of clause 22, upon which both parties had laid considerable emphasis. If it were not for the fact that clause 22.1(b) provided for a right of termination following insolvency, there was really nothing in the Development Agreement to which Dunnes Stores could point as suggesting that insolvency should be treated as a failure to comply with its provisions. However, it seems to me that clause 22 is of quite the opposite tenor. It draws a specific distinction between failures to perform or observe covenants or agreements contained in the Development Agreement on the one hand which were addressed in clause 22.1(a), and insolvency on the other hand which is addressed in clause 22.1(b). They are addressed in different sub-clauses, and have different consequences. One must therefore assume that it was intended to draw some distinction between the two. There is nothing necessarily illogical or commercially senseless about providing that insolvency will give rise to a right to terminate, but it is not otherwise to be treated as a failure to comply so as to give rise (if such is the case) to a right to claim damages or to refuse to perform other obligations for which the Development Agreement provided. In any event, it did not seem to me that one could successfully rely upon a clause that drew a specific distinction between failures to perform on the one hand and insolvency on the other hand as being a reason to argue that the latter must be treated as being the former. 25. Secondly, I indicated that I was conscious that Dunnes Stores had put forward its amendment application only as a fallback to its argument that it was not obliged to seek such an amendment, because the issue was already sufficiently covered in the existing pleadings. I had not decided that issue, on the assumption that, in practical terms, the decision that the amendment could not avail Dunnes Stores meant that it equally could not profit from advancing the argument on the basis of un-amended pleadings. I indicated, however, that I was willing to decide that issue, if Dunnes Stores wished me to do so. It was indicated that Dunnes Stores did not require that matter to be decided. 26. In the light of that ruling, it was indicated on behalf of Dunnes Stores that there was no evidence that it wished to call. If the ruling had been to the opposite effect, it intended to call evidence from Liam Grant, Accountant, whose statement had been provided to the other side on 31st August, 2011.” 42. The arbitrator then dealt with a number of matters which have no relevance to this case and held that Holtglen was entitled to succeed. He then dealt with an interest claim and the question of costs. The award concludes with the determination in favour of Holtglen for the amounts already indicated. 44. There is no real dispute between the parties as to the appropriate principles of construction which govern such an exercise. 45. All contractual construction has as its object the discernment of the intention of the parties to the contract. This is done by the interpretation of the terms of a written agreement in the context of its surrounding circumstances. This was succinctly described by Keane J. in Kramer v. Arnold [1997] 3 I.R. 43, where he said:- “In this case, as in any case where the parties are in disagreement as to what a particular provision of a contract means, the task of the court is to decide what the intention of the parties was, having regard to the language used in the contract itself and the surrounding circumstances.”46. That approach was further endorsed by the Supreme Court in Igote Limited v. Badsey Limited [2001] 4 I.R. 511.47. In Analog Devices v. Zurich Insurance [2005] 1 I.R. 274, Geoghegan J. quoted with approval the principles set out by Lord Hoffmann in Investors Compensation Scheme Limited v. West Bromwich Building Society [1998] 1 WLR 896 as follows:- “(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be next mentioned, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them. (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must for whatever reason, have used the wrong words or syntax: see Mannai Ltd. v. Eagle Star Ass. Co. Ltd. [1997] A.C. 749. (5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:- “In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.”50. Lord Steyn’s views having been approved of in this jurisdiction by Clarke J. in BNY Trust Company (Ireland) Limited v. Treasury Holdings [2007] IEHC 271.51. The question of commercial commonsense has most recently attracted the attention of the United Kingdom Supreme Court in Rainy Sky S.A. v. Kookmin Bank [2011] 1 WLR 2900. The defendant bank sought to avoid payment on foot of advance payment bonds. It did so in circumstances where it claimed that the bonds true construction did not encompass the instalments in respect of which repayment was sought. Simon J. in the Commercial Court held that the construction contended for by the bank would give rise to a non-commercial result. His decision was reversed by a majority in the Court of Appeal. His order was restored by the Supreme Court. It held that where parties have used unambiguous language, irrespective of the question of commercial sense, the unambiguous language must be applied. If, however, there is an ambiguity then the court is entitled to construe the contract in the more commercially sensible manner. 52. Lord Clarke said:- “The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.”53. Finally, in the particular context of this case, there is a passage from Chitty on Contracts (30th Ed: 2008) at para. 22-048 which is apposite. The author states:-“The parties may expressly provide in their contract that either of them or one of them is to have an option to terminate the contract. This right of termination may be exercisable upon a breach of contract by the other party (whether or not the breach would amount to a repudiation of the contract) or on the occurrence of a specified event other than a breach or simply at the will of the party upon whom the right is conferred in principle.”54. The principles enunciated above are the ones which the arbitrator was obliged to apply in making his award.55. The thrust of the criticism made against him appears to be that he declined to interpret the agreement as containing or implying an obligation on the part of Holtglen to be and remain solvent. It is also suggested that the arbitrator’s construction which led to the award failed to make business commonsense. 56. It is in this context that I turn to a consideration of these criticisms and my findings in respect of them. Criticisms and Findings 58. It was submitted to the arbitrator that this consequence flowed from the opening words of clause 17. Those words provide as follows:- “Subject to compliance by the Developer and/or Surety if applicable with the provisions of this Agreement the Company shall pay the Sum and the Further Sum to the Developer or the Surety if applicable in the following manner…”59. Clause 17 is headed “Payments by the Company” i.e. Dunnes.60. The argument made by Dunnes is that it has no liability to make the payments specified under clause 17 because of the insolvency of Holtglen. It’s insolvency is alleged to amount to a failure by Holtglen to comply with the provisions of the agreement. The difficulty with this submission from the point of view of Dunnes is, as was pointed out by the arbitrator, the agreement does not place any obligation on Holtglen to remain solvent. As was also pointed out by the arbitrator, the agreement could easily have provided in a positive manner for there to be such an obligation. Equally, it could have provided that a failure to maintain solvency was a breach. But the agreement did neither. The arbitrator pointed out that in a negotiated agreement, such as this one, one should be wary of unwarranted inference or implication. In my opinion, he was perfectly correct on these issues. 61. The arbitrator also pointed out, as a matter of particular significance, that the agreement in clause 17.6 imposed obligations of a financial nature on Holtglen, but did not address the issue of solvency. That issue could have been addressed in that clause but, as he pointed out, it was not. 62. In my view, no justifiable criticism can be made of the approach taken by the arbitrator as demonstrated at para. 22(a) and (b) of his award. I do not there perceive any error on the face of the record still less one which could be regarded as so fundamental to warrant this Court’s intervention. 63. The arbitrator then proceeded to deal with clause 22 of the agreement. He, in my view correctly, pointed out that were it not for the fact that clause 22.1(b) provided for a right of termination following insolvency, there was nothing in the agreement which Dunnes could point to as suggesting that insolvency should be treated as a failure to comply with its provisions. The arbitrator then carefully analysed clause 22 and pointed out the specific distinction which is drawn in that clause between failures to perform or observe covenants or agreements contained in the agreement on the one hand, which are addressed in clause 22.1(a), and insolvency which is addressed in clause 22.1(b). As these are addressed in different sub-clauses and have different consequences, he pointed out one must assume that it was intended to draw some distinction between the two. He also pointed out that there is nothing necessarily illogical or commercially senseless about providing that insolvency will give rise to a right to terminate, but that it is not otherwise to be treated as a failure to comply so as to give rise to a right to claim damages or to refuse to perform other obligations for which the agreement provided. He went on to point out that one cannot successfully rely upon a clause that draws a specific distinction between failures to perform on the one hand and insolvency on the other as being a reason to argue that the latter must be treated as being the former. 64. Clause 22.1(a) deals with the breach by Holtglen of its obligations under the agreement. It provides what is to happen in such event. Clause 22.1(b) and (c) specify other circumstances which do not involve a breach of the agreement but where Dunnes is given an entitlement to terminate. 65. It is, I believe, quite clear that clause 22.1(a) deals with breaches by Holtglen whereas 22.1(b) and (c) do not. Under clause 22.1(a), a notice may be served whereby Holtglen is given a period within which to remedy the breach. It is only if it fails to remedy the breach that the right to terminate can be exercised. By contrast, the entitlement of Dunnes to terminate for insolvency under clause 22.1(b) arises upon the occurrence of an event of insolvency with no opportunity being made to cure that defect. It is because insolvency is not a breach of the agreement that no provision is made for that to be remedied by Holtglen. It is, however, to be noticed that in the event of Holtglen’s insolvency, termination of the agreement is precluded in the event that the funder exercises its right of substitution. 66. As I have already pointed out in the passage from Chitty on Contracts, parties to a contract may agree that circumstances that do not involve any breach or default on the part of one of them can provide grounds for termination. The agreement here is a good example of such an exercise. But there is no necessary correlation between the existence of a ground for termination and a failure to comply with the provisions of a contract. 67. I am of the view that clause 22.1(b) is directed towards providing Dunnes with an entitlement to terminate in the event of an insolvency event. This enables Dunnes to avoid incurring any future liabilities to Holtglen. But it does not and cannot provide a means by which Dunnes can escape any liabilities previously incurred. 68. This view is, I believe, supported by the fact that the entitlement to terminate in the event of insolvency is not an absolute one. The funder may step in thus avoiding termination. This suggests that the whole object of the clause is to protect Dunnes against the consequences of insolvency into the future. It cannot have been intended to give Dunnes an entitlement to avoid paying for services provided and work done by Holtglen prior to its insolvency. 69. In my view, the criticisms made by Dunnes of the arbitrator are without foundation. The construction sought to be placed upon the agreement by Dunnes, amounts to the conflation of an entitlement to terminate under clause 22.1 and a defence to a claim for payment under clause 17 of the agreement. Clause 22.1 enables Dunnes to avoid incurring future liabilities to an insolvent Holtglen. It does not provide a route for Dunnes to escape liabilities previously incurred. 70. I am unable to accept the criticism made of the arbitrator that he either misinterpreted or had no regard for the commercial purpose underlying the agreement and flouted business commonsense in his award. He did neither. 71. The agreement required Holtglen to construct an anchor store for Dunnes. It did so. It was certified as practically complete as long ago as 10th June, 2009, but Dunnes have only paid a fraction of the sum due for this work. Holtglen’s claim is in respect of monies owed for work done as long ago as 2008 and 2009. The logical outcome of Dunnes’ argument is that it is not required to pay a sum of in excess of €20m even though all of the work the subject of the claim has been carried out and completed. That result is wholly unattractive from the point of view of business commonsense or commercial reality. If Holtglen was to be deprived of payment for the work done by it then very clear contractual language would have to be used to bring about such a result. There is nothing in the agreement supporting such an outcome. 72. In my view, the arbitrator has not been guilty of any error of law in the approach which he took to the construction of this agreement. Even if he erred, there is per O’Donnell J. a “high tolerance for arbitral error” on the part of the court and if there is such an error, it is not one so fundamental that the award cannot be allowed to stand. Events Post Award 74. On the evening of 13th February, 2012, (being the day before the original listing of this matter for hearing) National Asset Loan Management Limited (NALM) (a subsidiary of NAMA) served a notice of substitution pursuant to clause 22.2 of the agreement. The notice is in the following terms:- “Holtglen Limited (‘Holtglen’)/Deerland Construction Limited (‘Deerland’)Development Agreement dated 13th June, 2007 between (1) Dunnes Stores; (2) Holtglen (Developer); (3) Deerland (the Surety)(hereinafter referred to as the ‘Development Agreement’) Ferrybank Shopping Centre, Ferrybank, Co. Kilkenny Notice of Substitution issued pursuant to clause 22.2 of the Development Agreement Dear Sirs We refer to your letter dated 9 January 2012 address (sic) to the Governor and Company of the Bank of Ireland (‘the Funder’). The credit facilities afforded by the Funder to Deerland and Holtglen and all related security rights, assets and interests have transferred to National Asset Loan Management Limited (‘NALM’), being a subsidiary of the National Asset Management Agency pursuant to the National Asset Management Agency Act 2009 (the ‘NAMA Act’) and are hereby certified by NALM in accordance with section 108 of the NAMA Act as being ‘acquired bank assets’ for the purposes of the NAMA Act. The Funder has consequently passed to NALM a copy of your letter of 9 January 2012. Having acquired the said bank assets, NALM is entitled to exercise all rights and powers of the Funder arising pursuant to the Development Agreement. Accordingly as successor to the Funder and by virtue of section 99 of the NAMA Act, we hereby give notice pursuant to clause 22.2 of the Development Agreement substituting NALM for Holtglen as Developer under the Development Agreement. Please note: (c) All obligations of Holtglen to Dunnes Stores under the Development Agreement whether in respect of matters arising before or after the giving of this Notice of Substitution shall be deemed to be obligations of NALM as if it had at all times been a party to the Development Agreement in place of Holtglen. 75. Given the late service of that notice, I was asked to adjourn the hearing of this application so as to enable Dunnes to consider the implications of it. I did so and the matter proceeded to hearing on 17th February, 2012.76. I am of the view that having regard to that notice and in particular what is contained at sub-paragraph (c) thereof that the whole question of the insolvency of Holtglen has now become an irrelevance. It also means that any concerns that Dunnes may have in relation to future obligations not being honoured have evaporated. Despite that, Dunnes insisted that the issues raised by them in this challenge to the award should proceed. 77. I have considered that challenge on its merits and without reference to the events which took place subsequent to the award being published. Dunnes have failed in that challenge. 78. Even if they had succeeded, I would have ordered the matter to be remitted for further consideration by the arbitrator. Were that to have occurred, it is clear from the terms of the NALM notice of 13th February, 2012, that no factual or practical issue of insolvency could arise for consideration by the arbitrator. Result |
Tag: Arbitration
Annual report of Chairman of CIArb Ireland.
Chartered Institute of Arbitrators (Irish Branch)
Chairman’s Annual Report 2011 2012 (Edited)
(My term of office as Chairman came to an end on May 16th 2012. Thanks to all for a great honour and a most fulfilling experience)
Introduction
The year under review, like a great deal else in Ireland in recent times has been dominated by issues arising from or the fallout of the recession.
It affected participation in branch events, take up on training and other events and on membership itself. And yet paradoxically as business strives for improved ways of avoiding and resolving disputes the services we offer may come in to their own.
My purpose in this report is twofold.
The first is to give members of the Institute in Ireland a picture of what their committee has been doing for the last year.
The second is to offer my own brief assessment of where the Irish branch is going after my three years of very close involvement with the institute.
The Committee
The committee of the branch held eleven ordinary meetings and one special meeting. Attendance at meetings is excellent with an average attendance of 10 meetings.
Events & Training
The following is a brief list of the main events undertaken by the committee in the course of the year since the AGM 2011m Transnational Mediation, Belfast, September, International Young Arbitrators event, Distillery Building, Dublin November,International Commercial Arbitration Course, Malahide, 9th May 2011 , Introduction to Mediation Engineers Ireland May, Accredited Mediation Training, Stillorgan, June 2011, Debt mediation seminar IPA Dublin June, Evening at Hugh Lane Gallery (with CPLA) July, Award Writing (with the Law Society) Blackhall Place September, ADR in Australia; lessons for Ireland, Doug Jones Radisson Hotel Dublin November, Introduction to Arbitration (Ethiopia) February, Workplace Mediation Training (x 2) Lynn House Dublin, 2010 Arbitration Act Mason Hayes & Curran Dublin March (Young Members Group), Marketing your Mediation Practice April Lynn House April.
Annual Golf competition, Greystones, June, Annual Dinner, Westbury Hotel November
In pipeline
Accredited Mediator course June 7th (confirmed)
Kenneth McQuillan lecture (advanced, due May)
YMG Event Arthur Cox April 30th
YMG event Coolock July 2nd
It is worth highlighting the two major conferences; on transnational mediation with the NI Chapter in Belfast and an International Young Arbitrators event at which delegates from 20 countries attended. The attendance at the Belfast event was disappointing but the event was excellent with a high quality panel of speakers including Mr Justice John Gillen, judge of the N.Ireland High court.
It is hoped that the Chapter will hold a regular event in the future and one is currently under planning.
I wish to record a special word of thanks to members of the branch who are not on the committee who assisted with these events.
Especially to Arran Dowling-Hussey for his contribution to the Young Member’s conference in November and the YMG events. To John O’Brien for the golf and to all members of sub committees
Legislation Issues
The Main issues on which the Branch was engaged were the Construction Contracts Bill and latterly the scheme for Mediation Bill. Submissions were made on both matters; to the Minister in the first case and to the Oireachtas committee on Justice, who we will be meeting on May 9th
The Construction sub committee has been giving consideration to how we should best respond to the enactment of the Adjudication Bill and a detailed submission was sent to the Minister in January.
Again the input of committee members and others into both these documents should be acknowledged.
Both submissions are available on the website
Communications
Regular press statements were issued during the year; in relation to various events and also on the Construction Contracts and Mediation legislation.
Our new website, while it receives quite a lot of traffic is not delivering on its potential for a reason that is common to much of the deficits on our work; lack of manpower resources to update and market it. Nonetheless, it remains a vital tool.
Despite living in the digital age we continue to get requests from members for something in hard copy and did produce one issue of our newsletter during the year; the first since 2010 and a second is imminent.
Appointments
The number of appointments made fell somewhat on the previous year but that was unusually high compared to previous years.
I return below to the issue of building the Institute as the point of ‘first call’ for ADR users in Ireland which is the real issue.
The Dublin Dispute Resolution Centre
Beginning in the term of office of my predecessor Terence O’Keeffe an idea was under discussion to create a Dublin Dispute resolution centre which would provide a focal point for arbitrations, mediation etc in Ireland and also offer a launch pad for the campaign to develop Dublin as a seat for international arbitrations.
I am very happy to report that following an input of very considerable time and effort by many people this project is reaching fruition.
It involves a significant refurbishment of the Arbitration centre in the Distillery building and the creation of a new joint venture between CIArb and the Bar Council to manage and develop the project which is soon to be finalised.
There will be an investment by both parties in the venture and it will be directed and run by a new company with the two bodies as joint shareholders.
Our discussions have involved a rigorous review of the proposed business plan for the project and the application of the considerable planning and architectural talent at our disposal on, and via the committee on the refurbishment.
We have taken, or are still in the process of taking independent business and legal advice on all relevant aspect of the projects and it has the strong support of the committee.
This is more than a commercial venture. It brings the Institute into a strategic alliance with the Bar and allows us to promote and position CIArb as the prime independent centre for dispute resolution.
CIArb is being challenged on its flanks on one side by CEDR and in the mediation space by MII. We need to respond to this in the way any business would.
This falls within the strategy we have been evolving to extend our reach into the business community and the professions, and for example to become the preferred supplier of training and CPD in alternative dispute resolution.
The option of relocating the branch office to the Distillery building is also under discussion.
Looking to the future
Fellow members,
I have spent my career working for membership organisations. I understand well the mix of factors that determine why a person will join, remain a member and in some cases leave.
It is rarely a simple financial calculation, although this depends. But at some point the question as to whether, in the very broadest sense it is ‘value for money’ arises.
I offer the following thoughts on the direction ahead I see for the branch.
They fall under three headings.
We need to develop our capacity for the highest level training we can on this island, what we refer to as our faculty. Some progress was made during the year but more is needed.
Next, how we build the brand and the services of CIArb. Can this be done on the basis of our existing governance model.
Or do we examine greater professionalisation of our management and the marketing of our suite of services to Irish business and the professions
Our strengths lie in a diverse membership of people hugely interested in ADR and who possess enormous expertise in the subject. They have a huge commitment to the brand that is CIArb.
The opportunity presented now as ADR goes ‘mainstream’ is to push CIArb to the forefront of the organisations in the field and it is there for the taking. Indeed, I would say that our ambition in this regard is limited only by a lack of resources which even the most dedicated committee of volunteers will have trouble bridging.
I see no reason why the appointments being made by future Chairmen should not be in the hundreds. Business organisations in the main, but solicitors and others are the key here. Communicating the message that ADR is good for business and that CIArb is a logical partner in delivering those outcomes requires no new science to bring it to fruition.
As we move into partnership in the Dispute Resolution project; a professional business, we need to consider professionalising other aspects of our work including marketing; developing a commercial focus, making a real impact with Irish business and delivering on the value for money I spoke about earlier and which members expect and are entitled to expect.
These then are the questions. Some of the answers are fairly obvious although agreeing and implementing them will require careful thought and may pose some fairly fundamental questions about how the branch is resourced in Ireland within the overall CIArb family.
As Chairman I tried within the limits of an honorary, if onerous role to lead the Institute in the direction of building new partnerships, promoting the message that ADR is good for business and that CIArb is good for ADR.
Regarding our membership of the global brand that is CIArb this is a huge advantage to us. However, there are aspects of how the relationship with London works that need to be reviewed.
The decision to increase membership subscriptions in the middle of a recession and the manner it was done showed some detachment from reality, to be frank. We have a new Director-General now Mr Anthony Abrahams to whom I send our best wishes and urge him to join us in ironing out some of these issues.
While our paper membership remains at just under 750, those members are proving very slow to renew this year. Increasing their subscription was hardly a help.
CIArb in Ireland is a well of such potential to current and future members that some of the things I have referred to are vital for the future prosperity of the branch and its members, and more importantly of alternative dispute resolution in Ireland.
In conclusion, I wish to thank all who made my term in office enjoyable; my immediate predecessors in the Chair, and on whose committees I served and learned, the current committee members and sub committee members.
Also to Kate our administrator a big thank you.
It has been a privilege to serve as your Chairman that I will always treasure.
Pat Brady
Chairman
CIArb presentation on Mediation Bill to Oireachtas joint ctte on Justice
Remarks by CIArb Chairman, Pat Brady
Mr Chairman, Deputies and Senators,
Thank you for inviting us here today.
As you will have seen the CIArb is a worldwide body and the largest of its kind solely dedicated to alternative dispute resolution, (ADR) including here in Ireland.
While we have outlined our comments on the Bill, which in general we welcome and will be happy to answer any questions I thought it might be helpful to the committee to make some general comments on alternative dispute resolution which might provide context and also indicate the opportunity represented by the Mediation Bill.
ADR including mediation has a long tradition, some would say back to Solomon, the Romans had an arbitration system known as the compromessum, Chaucer refers to a mediator in the Canterbury Tales (appropriately named Prudence) and the first arbitration board in history, some say, was set up in Dublin in 1705, the Ouzel Galley Society.
And surveying the current landscape there is increasing acceptance of the potential of ADR as a means of providing effective, quick and cheap solutions to problems arising in business, in the workplace, and elsewhere.
Just looking briefly at some recent, and some imminent developments.
In 2010 we had a new Arbitration Act. This strengthened the power of the arbitrator, and therefore the arbitration and limited the extent of court intervention and supervision.
The Construction Contracts Bill which had its second reading in the House on May 3rd aims to provide rapid, binding, if interim solutions to disputes arising in the construction sector.
We have transposed on both parts of the island, here in the Republic in 2011 the EU Directive on transnational mediation.
Somewhat outside this process the government is radically overhauling the disputes resolution machinery in relation to employment rights and disputes.
One of our members, Bill Holohan, produced a comprehensive document in relation to ADR in Ireland entitled “ADR in Ireland, 2010 and Beyond”, for the benefit of the Diploma Programme of the Law Society, and we will leave a copy of that with you, which will give you a complete overview.
In the context of EU developments it is also worth noting that by January 2015 two further measures are proposed to give consumers access to alternative dispute resolution ‘vehicles’ as the papers refer to it, in relation to complaints one of these specifically related to on-line purchases. Of course, this in addition to existing statutory protections.
And indeed this is the point. There is a recognition in all these initiatives that traditional legal remedies are insufficiently effective, either because they are too cumbersome or too costly. (The EU estimates that unresolved customer complaints cost 0.4% of EU GDP).
While the Oireachtas Committee must understandably address the detail in the Bill and we will turn to that briefly in a moment, we have concerns that the great potential represented by this movement may fail to realise its potential for the want of public awareness of its availability and potential.
Part of the mission of CIArb is to promote ADR and in meetings with a wide cross section of business, trade union and other players the overwhelming reaction to the thought that effective ADR clauses might be an insurance policy against litigation is incredulity, even among legal practitioners, who ought to know better. This is obviously in the context of sectors where it has not been tradition to use ADR, which is most of them.
In November 2012 we held an event with the World President of CIArb Professor Doug Jones on the topic “ADR in Australia; lessons for Ireland.” The biggest lesson to emerge from this was that in Australia ADR, mediation, arbitration is primarily client driven. Clients tell lawyers they want mediation or other ADR vehicles, not the other way around. We believe that that is the way things should be, and we should move towards educating the public who will inform the lawyers.
The welcome provisions in this bill requiring lawyers to inform clients of the ADR option and mediation in particular are only one half of the picture. Business organisations, consumer groups, citizens advice services, the trade union movement need to be brought up to a point where they clearly and fully understand the potential of this Bill to make their lives easier when disputes arise.
When the Automatic Referral to Mediation Pilot Scheme was introduced at London Central County Court research (by Prof Hazel Genn, 1998*) showed that in approximately 80% of cases one or both parties objected to it.
“Other research shows that people are not as enthusiastic about mediation as the government, the judges and the mediation community think they ought to be’ Paul Randolph, New Law Journal April 2010
I now invite my colleague Bill Holohan to comment further
I am a practising solicitor and I have been for almost 30 years and a Fellow of the Chartered Institute of Arbitrators. However, I appear before you today, so to speak, as a repentant solicitor and arbitrator.
Having spent many years engaging in litigation, and having studied Sun Tzu’s “The Art of War” with a view to becoming effective in legal battles, and having also learned one of the lessons of Machiavelli that one should never leave a wounded prince on the battlefield, I came to the conclusion about five years ago that there had to be a better way.
Padraig Pearse said that education was the murder machine. He was wrong. Litigation and the legal system is the murder machine. I’ve seen people bitterly divided as a result, not just of the issues that drive them to litigation in the first instance, but because of the litigation process itself and I have seen this in the areas of family disputes, commercial disputes, partnerships, franchisors, neighbours, the voluntary sector, etc.
Having had a Pauline conversion, I became an Accredited Mediator five years ago, and a strong advocate of mediation in particular, as the preferred ADR method. I was one of the founders of the www.commercialmediators.ie Group and since being elected to the Committee of the Chartered Institute have worked on mediation issues in particular.
If I can headline one aspect of the Bill, in particular, it would be this.
We need to ensure that clients are fully informed, not only about the ADR option and mediation in particular, but more particularly, how effective it can be, and the benefits of it in terms of savings on legal costs, time, energy, and emotion that could be better directed elsewhere.
Consequently, it would not be enough simply to have a provision in the bill requiring that a solicitor certify that they had “discussed with” or “informed” the client about the ADR option, as is the situation in family law, legislation, for example.
The client should be required to swear an affidavit, confirming that not only have they considered the ADR option, but they have discounted/disregarded it for specified reasons, and that should ultimately be taken into account, in the event of the matter proceeding to litigation. You cannot force the horses to drink, but there should be ample opportunity for the horses to linger by the lakeside and appreciate the opportunity.
(Anne-Marie Blayney then addressed some of the specific points on the Bill in our submission as outlined in previous blog)
*“The Central London County Court – Pilot Mediation Scheme Evaluation Report”, Lord Chancellor’s Department Research Series No. 5/98
Mediation Bill; CIArb submission to Oireachtas joint ctte on Justice
Chartered Institute of Arbitrators (Irish Branch)
What we are; an introduction.
- A worldwide, organisation founded in 1915. Head Office; London. Irish Office 27, Merchant’s Quay, Dublin 8
- Approx 12,000 members worldwide and 750 in Ireland, multi-disciplinary membership.
- In ireland, an all island organisation with a Northern Ireland Chapter
- Main disciplines are arbitration, adjudication and mediation, but also expert determination, conciliation and other third party neutral interventions.
- Three separate membership grades Associate, (full) Member, Fellowship Member. Also Chartered Arbitrator
- Members conduct subject to a Code of Professional Conduct and regulated by a Professional Conduct Committee.
- Operate a series of Professsional Practise Guidelines in relation to Mediation (and other ADR disciplines)
- Our mission statement:
‘To promote and facilitate worldwide in a financially self-sustaining manner, the determination of civil and commercial disputes by arbitration, mediation and other alternative means of private dispute resolution through the support of a duly qualified, growing, active and highly regarded membership’.
- In Ireland we work with other professional bodies (legal profession, engineers, architects, surveyors etc.) business organisations and trade unions etc. on matters of common interest and in relation to:
– Promoting Alternative Dispute resolution (ADR) in general
– Promoting CIArb as the national centre for dispute resolution
– Organising training courses meetings, lectures and social events
The Mediation Bill
The CIArb (Irish Branch) gave a warm welcome to the publication of the outline of the Mediation Bill. This followed the Law Reform Commission Report in 2010 and commitments in the Programme for Government to improving dispute resolution and reducing legal costs to which we fully subscribe.
In a statement we commented;
This is an important day for Irish business. It would be easy to underestimate the significance of the statutory underpinning of mediation as a means of resolving disputes throughout the economy, in family and employment matters also.
Professional mediators, such as our mediator members, deploy a range of skills and techniques which, in the vast majority of cases, aid parties in dispute to resolve their differences in a positive way, that not only keeps them out of the courts and away from crippling legal costs, but which can sometimes avoid the negative destruction of relationships. Many judges have spoken strongly in favour of mediation, not simply as an alternative to the legal system but increasingly as a vital part of it in achieving justice for those involved.
We welcome the provision for lawyers and the courts to encourage parties into mediation, (with a possibility of financial consequences if they do not).
Pat Brady, Chairman, CIArb (Irish Branch)
We especially welcomed the requirement that mediators have high level and specialised training and operate under a code of conduct and we noted.
‘CIArb accredited mediators are trained to an international standard and operate under the Institute’s Code of Conduct and its Charter, and we provide additional training in workplace mediation for example.’
In relation to the deliberations of the Oireachtas Committee our key concerns are;
- That Mediation should not be seen (in the words of the Law Reform Commission) as ‘second class justice’.
- Therefore, there should be clear criteria governing use of the term ‘Accredited Mediator’. This could take the form of approving organisations which currently provide training to this level, or specifying a number of hours training requirement for ‘Accreditation’.
- To be successful, public awareness of its availability and potential needs to improve. In Australia, for example where mediation and related dispute resolution techniques are deeply embedded it is driven by consumer demand. Accordingly, enactment of the legislation should be accompanied by a major public information campaign to promote the benefits of mediation as an effective dispute resolution technique and an alternative to litigation.
Pat Brady FCIArb
Chairman, CIArb (Irish Branch)
A commentary on the Bill for further consideration now follows.
The Mediation Bill 2012
Additional Memorandum from
The Chartered Institute of Arbitrators (Irish Branch)
To the Oireachtas Joint Committee on Justice, Equality & Defence.
- Head 4(1) (b) (i) & (ii) – “Mediation services” – Section 4 (1) (b) (i) should be amended to read “(i) information concerning mediation services provided by accredited and licensed mediators“,
And
Section 4 (1) (b) (ii) should be amended to read “names of persons who are accredited and licensed mediators or organisations of such persons, qualified to provide mediation services.”
Head 4(1) (b) (ii) – “insofar as is possible” – It is always possible, even if somewhat imprecise. The words “insofar as it is possible” should be deleted. Section 68 of the Solicitors Act 1994, for example, imposes an absolute obligation on a solicitor, as soon as is practicable, to give written estimate as to costs, (even though it does not set out the implications of default).
Head 4(1) (b) (ii) – “where practicable” – It is always practicable, even if somewhat imprecise. The words “where practicable” invite failure to comply and should be deleted. (Perhaps the words “as soon as is practicable” could be used).
- Head 4 (2) (i) (a) – a party’s declaration re consideration of mediation to be provided. In family law legislation, for example, a solicitor’s certificate that they have advised the parties as to counselling / mediation is provided for. This declaration of a party is better and is to be welcomed. However, this should go further than just stating it has been considered and should state why mediation has not been adopted or have failed of as a dispute resolution mechanism. Otherwise it may simply become formulaic. Furthermore, this declaration can then be taken into account and can be considered by the court when considering the question of costs under section 19.
- Head 5 – Barrister’s duty to advise on mediation – Again, there should be a requirement for the client to acknowledge the advice, in writing, and again state why the option of mediation was not pursued. The “double whammy” of a declaration under section 4 and an acknowledgement of counsel’s advices under section 5, will ensure that the client is fully informed as to the mediation options, and has made a fully informed choice not to proceed, cognisant of all the implications (including implications as to costs) of failing to avail of the mediation option.
- Head 6 (2) b – the mediator’s Code of Practice – this provides that parties and mediator sign an agreed statement and makes it an obligation on the Mediator to state the code of practice, (if any), to which he/she adheres. It should be mandatory for Mediators to declare the Code of conduct they practice under – therefore remove the words ‘if any’. The Minister should have the power to publish a (default) code of practice, and recognise called of practice published by recognised bodies (such as the Chartered Institute).
- Head 6 (4) – the Mediator to state reasons for withdrawal – The parties may withdraw without explanation, but a mediator may not. There is a potential for breach of confidentiality in imposing an obligation on the mediator to state the reasons for their withdrawal. The mediator should be free to withdraw without having to state a reason. Indeed, the LRC report recommended as much. It should be an option, not an obligation. The explanatory notes refer to the nature of the “policy perspective” which allegedly requires this disclosure, but the nature of the “policy perspective” is not stated. As previously mentioned, it could involve compromising if not prejudicing the confidentiality of the parties, that the mediator states reasons. One would have thought that it was undesirable from a policy perspective, that confidentiality would be breached.
- Head 6 (6) – participation of non-parties – allows for one or more non-party participants to be present and assist a party during the mediation process. This should be “where the parties and the mediator agree … one or more non-party participants may be present and may assist” etc…. The LRC report page 41 states: “on the issue of non-party participants the Commission recommends that parties may agree that a non-party participant be allowed to participate in the mediation.” This provision in the draft Bill omits the agreement option. It is the job of the mediated minutes the mediation process and the presence of a non-party may inhibit that management, and may inhibit agreement. Accordingly, the admission of a non-party to the mediation should be where the parties and the mediator agree.
- Head 7 (2) (a) – the mediator must ensure the parties have the capacity, at all stages of the mediation. – How is this to be achieved? It would be better that, having established at the outset that the parties had capacity, there would be a presumption that such capacity continues, unless and until the mediator is made aware that they may no longer have such capacity.
- Head 7 (2) (e) – mediator must ensure the parties understand any mediated agreement – in circumstances where the parties are legally represented/advised, the mediator can rely upon the parties representative/advisor to so advise them and to ensure that the party understands the implications of the mediated agreement. Where the parties are not legally advised at the time of mediation, the question then arises as to how the mediator is to “ensure” the parties understand any mediated agreement? It is to be suggested that in the absence of a party being legally advised that the time of entry into a mediation agreement, the mediator should be entitled to make a statement as to their understanding of the nature, purpose and effect of the mediated agreement, which statement is to be regarded as a statement for the purposes of section 19.
- Head 7 (3) and (4) – Mediator’s suggestions for settlement – Rather than a mediator suggesting terms after mediation has failed, (when there is a danger that the parties would become intransigent) it should be made clear that the mediator is free, with the agreement of the parties, to suggest terms for settlement at any point during the mediation.
- Head 8(1) requires Mediator to give details of experience. – Mediators should be accredited and licensed. It may be that there is a trained & accredited mediator, who lacks experience, or an experienced accredited mediator who had no training (apart from accreditation training). The LRC Report recommended this provision with a view to ascertaining knowledge and experience of ‘screening’ in family law cases. It is recommended that the head would be amended to require disclosure of mediators “training and/or experience”.
- No attempt whatsoever is made at regulating the profession, the training of mediators, and the administration of the profession or any other method of quality control of the mediator’s profession. It is particularly surprising that there is no reference to minimum training requirements or standards (especially in the case of family disputes, when the same draft legislation contains a broadly drafted provision facilitating and encouraging the participation of children in mediation).
- The approach taken by the draftsmen in this regard is broadly in line with that of the Law Reform Commission, though surprisingly does not follow its recommendation in relation to specialist training. There should be a statutory provision providing for the licensing, regulation and supervision of the mediation profession, such as statutory scheme providing for the licensing regulation and supervision of trained and qualified and accredited mediators, accredited by recognised bodies. Otherwise, “cowboys” can simply label themselves as “mediators” and potentially cause havoc, at the parties’ expense, thereby injuring the reputation of mediation and professionally trained and accredited mediators. An example would be former “money managers” who would now seek to market themselves as “debt mediators”.
- Head 8 (2)(b)&(c) – provision of details regarding continuing professional development – as part of statutory provisions providing for the licensing, regulation and supervision, CPD should be mandatory – remove “if any” and likewise remove ”if any” in 8(2) (b) and 8(2) (c).
- Head 9 (1) (a) – Minister publishing a Code of Practice – There could be a general / default Code of Practice promulgated, but allowance made for specific approved Codes, such as the Code of Practice from the Chartered Institute of Arbitrators.
- Head 9 (8) – TO BE INSERTED: – “(8) A mediator shall, prior to the commencement of the mediation process, provide to the parties, in writing, details of the (published or approved) code of practice to which he or she adheres, which code of practice shall be deemed to form part of the terms on which the mediator is engaged by the parties.” – This would make the published or approved code part of the contract of engagement.
- Head 12 (1) (b) (ii) – attendance at information sessions – Obligatory attendance at an information session on mediation (and its advantages), (as distinct from obligatory participation in dispute resolution through the mechanism of mediation), will not detract from the overall voluntary nature of mediation. Such a provision would ensure the parties are fully informed in their choices as to whether to proceed with the option of mediation, or not. At the moment, a major difficulty in promoting mediation is the fear of lawyers that it will adversely affect their litigation practice income, (i.e. reduce the amount of costs they could hope to receive in relation to acting on behalf of the client (as compared to fees that might accrue during litigation)) and there is a tendency to “water down” any mention of mediation. There should be provision for the Minister to specify by statutory instrument, approved bodies, such as CIArb who would provide such information sessions.
- 17. Head 12 (5) – the Court’s consideration of costs – ADD TO THE SECTION: – “In the absence of evidence to the contrary, it shall be presumed that mediation has a reasonable prospect of success”. This would make clear that it is the obligation of a party to litigation who chose not to avail of mediation, to explain why it would have no “reasonable prospect of success.”
- Head 13 (1) – Mediator’s report to Court – this requires a mediator to prepare a report for court. The neutral nature of this report should be emphasised, as recommended in the LRC report.
Chartered Institute of Arbitrators (Irish Branch)
LRC announces new ‘Early Resolution’ (mediation) pilot scheme
(This is the statement from the LRC, slightly edited)
The Labour Relations Commission is offering a new pilot Early Resolution Service to employers and employees to assist them in resolving issues in dispute without the need for a formal adjudication or inspection. This is a voluntary, conciliation/mediation type service which will be provided by Case Resolution Officers.
Currently all claims/referrals to the Rights Commissioner Service, to the EAT, or to NERA, are centrally logged in a Central Portal Unit. It is the intention during the pilot phase of ERS to offer an early intervention in a representative selection of these claims/referrals. When the pilot scheme gets underway cases will be forwarded to the ERS and cases considered suitable for early intervention will be allocated to a Case Resolution Officer. Where the parties decline to use the service or where the attempt at settlement is unsuccessful within an agreed period of time, the claim/referral will be forwarded to the relevant service to arrange a formal hearing or inspection.
The Case Resolution Officer will:
- Contact the claimant in the first instance, explain the process leading, hopefully, to agreement by both sides to become involved.
- Help establish the facts at issue and discuss the options open.
- Help each party to understand how the other side views the case and explore with them how it might be resolved without a formal hearing/inspection.
- Explore the issues involved and try to help settle differences in a way that is acceptable to all parties concerned but will not impose solutions.
- Discuss any proposals that either side has for a settlement.
The Case Resolution officer will not:
- Represent either the employer or the employee, take sides or help either side prepare their case.
- Give legal advice.
- Give an explicit opinion on the merits of a claim or advise on tactics, or how to win at a formal hearing.
- Make a judgement on the case, or the likely outcome of a formal hearing/inspection.
- Advise on whether or not to accept any proposals for settlement.
- Pressurise people to settle or abandon a case.
Key Features of the service
The service is confidential.
- Information will not be passed to other parties without your agreement.
- What you say during discussions with the Case Resolution Officer cannot be used or referenced as evidence at a hearing.
The service is independent.
- It is entirely separate from the Rights Commissioner Service, the EAT and NERA and if a settlement is not reached, a claim/referral can still be pursued.
- The service does not delay the EAT, Rights Commissioner or Inspection processes.
The service is free.
- Saves time and money. Preparing or responding to a formal hearing can take a great deal of time, and could have associated representational costs.
- Minimises stress. Almost everyone finds the process of pursuing or defending a case difficult, and appearing at a formal hearing can be a stressful experience.
- Quick Solution. Cases can be dealt with in a few telephone calls or in exceptional cases via tripartite meetings with agreed settlements implemented very soon afterwards.
- Win-Win Outcome. In a formal hearing situation one party usually loses and even the ‘winner’ will not always get what he or she wants from the process. The singular advantage of the ERS is that it can achieve a “win-win” situation if the parties wish to reach a settlement.
- Control. Settlements are reached by agreement on terms that suit the parties. Innovative and creative solutions are possible which will allow the parties to reach a settlement that meets their particular needs.
- Avoids Formality. Although any of EAT or Rights Commissioner hearing processes are somewhat less ‘formal ’ and legalistic than most court processes they contain standard procedures with which most people are unfamiliar and uncomfortable.
FAQ’s
- What happens if I settle the claim through the ERS?
- If you settle the claim through the ERS, the terms of the agreement will be recorded on an agreed form to be signed by both sides as proof of the agreement.
- What happens if something is agreed but one party reneges on agreement terms?
- Where parties do reach a settlement via the ERS process, they will be deemed to be ethically bound by participation in the process. However, where agreements are not honoured within a specific timeframe, the case/referral may be re-introduced to the relevant adjudicative hearing or inspection processes without delay.
- How long does the early resolution process take?
- It is envisaged that where the parties agree to become involved the attempt at early resolution will be completed over a maximum period of 6 weeks. The process is likely to involve a number of relatively short telephone or e-mail interventions with both sides.
- Will participating in the Early Resolution Process affect the formal adjudicative /inspection processes if the outcome is unsuccessful?
- No. If the early resolution intervention is not successful cases can be slotted back in to the relevant adjudicative or inspection process without any undue time delays.
- What if I have a representative?
- If you appoint a representative to act for you the Case Resolution Officer will engage through that representative. It is important to ensure that your representative is fully aware of your requirements.
If you have a dispute and you need advice or representation contact pat.brady@workplacesolutions.ie to discuss your needs.
NERA publishes Annual Report for 2011
The National Employment Rights Authority has today (March 20th) published its annual report for 2011.
We will publish a commentary shortly but in the meantime you can read the report here
Some headlines:
NERA report says only 1% of inspections result in prosecutions
2011 saw 5,591 NERA inspections involving 100,000+ employees. (2010; 7,164 cases). Unpaid wages recovered was €1,905k (2010 €1,250k).
Minister reports ‘good story’ on employment rights reform
On a day when there was some silliness in the air about Ministerial ‘report cards’ Richard Bruton returned to UCD, the location of his announcement last July at the UCD Law School/Employment Law Association of Ireland event on his plans to shake up the employment rights bodies to give an update on what he had been doing in the meantime.
The Minister for Jobs, Enterprise and Innovation would be getting ‘A’s for effort and achievement on his ‘report card’!
Speaking at the IRN annual conference in UCD (www.irn.ie, no serious practitioner should be without a subscription!) the Minister told the attendance that he had ‘a good story to tell’ about the journey since that announcement.
He first outlined the principles underlying the project.
‘High standards in the workplace and good employment rights give us competitive advantage’ he said. ‘While the voluntary system is good up to a point the absence of a means to vindicate rights would undermine confidence in the system’.
He repeated the widely shared criticism of the current system as having too many routes of entry, of engaging parties in the adversarial process too early and of being too legalistic and costly.
His key priorities were early intervention, speedy adjudication when it reaches the adversarial stage and credible enforcement.
The Minister’s ‘good story’ included confirmation that the 30 complaints forms had now been reduced to one and the five portals of entry to the system also down to one.
There is a single website www.workplacerelations.ie
Employers are now notified in 48 hours that a claim has been lodged (this could have been 8 months according to the Minister and also in this writer’s experience. Long after the ‘safety’ of the six month deadline had passed one could learn that a claim had been lodged).
And this Minister ain’t finished yet!
The next phase will include the option of inputing a claim on line, and a pilot project of the new system ‘within weeks’.
The shape of the new system in three stages will be early resolution (mediation); inspection by the newly titled ‘Compliance Officers’ of NERA (better than ‘Inspectors’, the Minister feels) who will seek voluntary compliance and may impose ‘on the spot’ fines rather than drag an employer through the formal processes.
Stage three will be adjudication initially by a single person adjudicator with the option of a de novo appeal hearing at a three person tribunal in a newly vamped Labour court, it would seem.
And it doesn’t stop with the structures.
The Minister promised a decision from the first instance hearing within 28 days, and a database of ‘case law’ which parties can consult for reference.
Interestingly, as I understood him these adjudicators will be sought from suitably qualified people selected by open competition.
The Minister has promised that legislation to underpin all this will be on the statute books in the autumn with a consultative document to be published by the end of this month (March).
The Minister ended with a strong endorsement of the public service team which had taken this project so far.
He said he had often referred to the public service as containing ‘committed and talented people trapped in a system which had failed them’. He paid a tribute to those led by Ger Deering who had driven the reform process.
An interesting discussion followed with contributions from Kevin Duffy, Chairman of the Labour Court, Kieran Mulvey Chief Executive of the LRC, Ger Deering, Director of the Reform process, Brendan McGinty of IBEC and Tom O’Driscoll BL who heads up the Legal unit at SIPTU. All agreed that these were ‘landmark’ developments and in Kevin Duffy’s words ‘looked like they will happen’ a reference, one assumes to previous discussions about reform failing to get beyond the starting gate
I have one question (and it has been discussed in a recent blog). Within the commercial sphere the courts have powers (and in the UK have used them) to ‘punish’ parties who unreasonably refuse to attend at mediation or mess about when they are there.
What incentives will there be to use the early resolution service, or, based on the Halsey case principles (and others) and the likely application of Order 56A of the Rules of the Superior Courts what adverse consequences might flow for not doing so?
Kieran Mulvey went a step further (backwards, in a way) to say that there was a need to bring solutions back to the workplace, and said that the continued juridification of the process is not helpful, a point echoed by Brendan McGinty who noted that behind the issue of employment rights is the issue of workplace relations.
Here at Workplace Solutions we are really in favour of, well workplace solutions!
Press Statement from CIArb Irish Branch on Mediation Bill
Press Statement
The Irish Branch of the world’s largest dispute resolution body, the Chartered Institute of Arbitrators has given a warm welcome to the publication this week of the outline of the Mediation Bill. The Irish branch of CIArb has about 750 members qualified in all areas of dispute resolution, (including mediation, arbitration, conciliation and adjudication).
This follows the Law Reform Commission Report in 2010 and commitments in the Programme for Government to improving dispute resolution and reducing legal costs.
Pat Brady, Chairman of the Irish Branch of CIArb commented;
This is an important day for Irish business. It would be easy to underestimate the significance of the statutory underpinning of mediation as a means of resolving disputes throughout the economy, in family and employment matters also.
Professional mediators, such as our mediator members, deploy a range of skills and techniques which, in the vast majority of cases, aid parties in dispute to resolve their differences in a positive way, that not only keeps them out of the courts and away from crippling legal costs, but which can sometimes avoid the negative destruction of relationships. Many judges have spoken strongly in favour of mediation, not simply as an alternative to the legal system but increasingly as a vital part of it in achieving justice for those involved.
We welcome the provision for lawyers and the courts to encourage parties into mediation, (with a possibility of financial consequences if they do not).
The following are highlights in the proposed Bill:
- Solicitors and barristers must tell clients about the possibility of using mediation as an alternative to commencing court proceedings;
- Confidentiality is required in all communications between parties to mediation;
- Participation in and conclusion of mediation will be voluntary;
- A statutory basis for the courts to invite parties to consider mediation and to adjourn court proceedings for the duration of the process.
- A requirement that mediators advise parties of their qualifications.
Mr Brady especially welcomed the requirement that mediators have high level and specialised training and operate under a code of conduct.
‘CIArb accredited mediators are trained to an international standard and operate under the Institute’s Code of Conduct and its Charter, and we provide additional training in workplace mediation for example. We will be making a submission to the Oireachtas committee on Justice & Equality in due course on operational aspects of the Bill’
he concluded.
Ends
Further Info: Pat Brady 086 258 7940 pat.brady@workplacesolutions.ie
CIArb 01 707 9739, ciarb@arbitration.ie
Anne-Marie Blaney 087 60 2262. annemarieblaney@gmail.com
Alan Shatter announces ‘general scheme’ of a Mediation Bill
The Minister for Justice, Equality and Defence Mr. Alan Shatter, T.D. has said “The Mediation Bill will give effect to the undertaking in the Programme of the Government for National Recovery (2011 – 2016) to encourage and facilitate the use of mediation to resolve civil, commercial and family disputes.”
The Minister added “The general objective of the Bill is to promote mediation as a viable, effective and efficient alternative to court proceedings thereby reducing legal costs, speeding up the resolution of disputes and relieving the stress involved in court proceedings. I am anxious to ensure that individuals and companies engaged in a dispute regard resolution of their dispute through mediation as preferable to court litigation.”
The General Scheme builds on the recommendations of the Law Reform Commission in their ‘Report on Alternative Dispute Resolution – Mediation and Conciliation’ which you can read here
The following are highlights in the proposed Bill:
· the imposition of a statutory requirement on solicitors and barristers to tell clients about the possibility of using mediation as an alternative means of resolving disputes prior to commencing court proceedings;
· a requirement that all communications between parties as they try to resolve a dispute using mediation shall be confidential;
· it will remain for the parties themselves to decide whether to engage in mediation and, indeed, to decide on the terms of any agreement arising from the mediation;
· the provision of a statutory basis for the courts to invite parties to consider the mediation option and to adjourn court proceedings for the duration of the process.
-a requirement that mediators advise parties of their qualifications.
The draft Bill is to go to the Joint Oireachtas Committee for Justice, Defence and Equality which has to forward its views prior to finalisation of the Bill and the Minister is asking the Committee to revert to him no later than the 1 June next.
The Bill extends to employment disputes but not if they have already been referred to the Labour Relations Commission
Should fees be introduced for EAT hearings etc. The UK is planning to do so
Given that our own employment rights structures are undergoing serious review and surgery it is interesting to see that the UK government is planning to introduce fees for lodging and pursuing cases at the employment tribunals. (Note that the EAT in the UK is presided over by a High Court judge, it is not the same as the Irish EAT; the UK equivalent of which is the Employment Tribunal.
Many Irish employers (especially small companies) complain about the system here being stacked in favour of the employee, specifically the facility with which employees can make claims.
They would doubtless welcome a deterrent to mischievous or flippant claims, and according to recent research carried out by HR Magazine (UK) they believe that will happen as a result of introducing fees. (Read the report here).
That said employers would not be the only beneficiaries of rooting out such claims. Genuine claimants waiting a long time for an EAT outcome would also benefit. There are of course arguments against such fees. Claimants, for example recently dismissed or redundant employees should not be impeded in making their claim (although the delay in getting it heard is a more serious issue than any fee that might be charged).
It ought to be relatively easy to devise a system for exemptions.
In my submission to the Employment Rights review I made a strong case for the extension of mediation at all levels of the system. Looking at the question of fees from a different and more positive point of view in order for mediation to develop as an alternative to adjudication in employment disputes a big problem is that there is no real financial incentive to settle.
The opposite is the case in commercial disputes where disputants face the costs of litigation and the additional threat of an adverse finding on costs even where they succeed in the courts if they have unreasonably refused mediation. (Sup Cts Order 56A in Ireland, Halsey v Milton Keynes Trust in UK,)
So costs are seen in the wider justice system as a means of incentivising parties to mediate. What about a fee system which could be waived in the event that parties entered into mediation in good faith?
This might also tend to discourage the presence of lawyers at early stages of employment rights disputes where, frankly, they are often no addition. One could go further. Both the Rights Commissioners and the EAT (or whatever we end up with) could be empowered with ‘Order 56A’ type powers to adjust downward awards to claimants who refuse to mediate at an early stage. I have been involved in a recent EAT case where the award to a successful claimant was reduced by 20% because he did not use the internal appeals procedure. Extending the logic of this to failure to engage with mediation is hardly a giant step.
Radical perhaps, but radical is needed!
Since posting this initially a number of colleagues have commented on Linkedin on the financial benefits to employers of using mediation in terms of time saved etc. This is a good point but underscores the point that the benefits of mediation are still not fully appreciated and embraced by many employers.
However most claims are triggered by employees and more carrot and a little stick is what is being floated here!
So now we take a look at the UK proposals.
The UK Consultation document is here
Fee Levels – Employment Tribunal The first step will always be to categorise the claim as between minor or ‘straightforward’ cases (Payment of Wages etc), Unfair Dismissal as the second category and then more serious disputes (TUPE) etc are thurd. In relation to Option 2 (below), there will be a fourth fee level for any claim exceeding £30,000 in value.
Option 1 Under this option, the Claimant would have to pay both a fee for issuing the claim and a fee for a hearing. If the incorrect fee is paid when issuing a claim, the Employment Tribunal will reject the claim.
The claim could then be struck out if the Claimant fails to pay the correct, or any, fee for the matter to proceed to a hearing. The fees payable by the Claimant will depend on how the claim is categorised and they range from UK£150 to £250 to lodge a claim and £250 to £1250 for a hearing (£1000 for an Unfair Dismissals case)
Under Option 2, the Claimant would only have to pay a fee for issuing the claim. However, the size of the fee would depend on the Claimant’s assessment of the value of the claim, with the intention that this will provide employers with greater certainty about the potential liability they could face.
Option 2 The consultation paper suggests that a subsequent award given by the Tribunal in the event that the Claimant is successful could not exceed the assessment value, even where the Tribunal decides that it should do so. A Claimant will therefore have to take great care to pitch the value of his claim correctly: too high and he will have to pay a higher fee; too low and his award will be limited. The consultation paper gives an indication of the fees likely to be payable in respect of claims of different value, as follows:
Refunds In general fees outlined above would be non-refundable. However, the Tribunal might be given a discretion to order the unsuccessful party to reimburse the fees paid by the successful party.
Fees for Applications In addition to proposals to introduce fees for lodging claims, the Government has also indicated that it is considering the introduction of fees for making specific applications: This fee would be submitted at the time the application is made. If the requisite fee is not paid, and the party is not eligible for the Remission Scheme, (see below), the application will not be processed.
EAT Fees The proposal is that Appellants to the EAT will have to pay an Issue Fee of £400 and a Hearing Fee of £1200. (Again bear in mind this is not the equivalent to an Irish EAT but is at the level of the High Court)
Courts & Tribunals Remission Scheme The Remission Scheme currently operates in the civil courts to provide individuals with a full or partial exemption from paying Court fees subject to certain eligibility criteria. It is proposed that this scheme will be extended to proceedings in the Employment Tribunal and EAT. Remission will be granted without proof in emergency situations. Of most interest to employers is the fact that those in receipt of income support / job seeker’s allowance – highly likely where an individual has lost his job – will receive full exemption from the new fees.
Multiple Claims The proposals also envisage that different fees will apply where there are multiple Claimants.
So what do you think? Clearly the main thrust of these proposals is to reduce the cost burden on employers. Nothing wrong with that in principle (as employees gain from more profitable businesses too) if the application of employment rights is not affected and disputes arising are resolved expeditiously. Employees should not be bullied out of pursuing their rights on financial grounds and yet there is a level of abuse of the system which fees might help reduce.
But its a negative way of approaching dispute resolution. The increasing claims culture is not exclusively an outcome of litigious employees, but a failure of dispute resolution processes and skills.