Rav Bahamas Ltd and Bimini Bay Resort Management Ltd v Therapy Beach Club Incorporated
| Jurisdiction | Bahamas |
| Judge | Winder, J. |
| Judgment Date | 24 January 2018 |
| Court | Supreme Court (Bahamas) |
| Docket Number | 2017/APP/sts/0042 |
| Date | 24 January 2018 |
Winder, J.
2017/APP/sts/0042
Supreme Court
Arbitration Law - Review of arbitral award — Challenge of certain findings of arbitration award — Serious irregularity — Whether decision of arbitrator was unfair and contrary to law.
Ferron Bethell with Camille Cleare for the applicants
Krystal Rolle with Wallace Rolle for the respondent
On 18 December 2017, I gave an oral decision for the disposition of the applicant's Notice of Motion filed on 18 September 2017 and promised to put my reasons in writing and I do so now
This is an application by RAV Bahamas Limited and Bimini Bay Resort Management Limited (the applicants) to challenge certain of the findings in an Arbitration Award (the Award) given by Justice Cheryl Albury (Ret.) on 22 August 2017 (the Award is dated 21 August 2017). The Award arose from an Arbitration Agreement consisting of a Notice of Reference of Dispute to Arbitration dated 18 November 2016, a Letter of Acceptance of Reference dated 25 November 2016 and Terms of Reference dated 3 May 2017 which resulted in the appointment of Justice Cheryl Albury (Ret.) as Sole Arbitrator.
The underlying dispute arose from claims of the breach of terms of a lease agreement dated 31 December 2011, made between the contesting parties and which was for a term of 3 years with an option to renew for an additional 3-year term. The lease related to property located within a hotel site situated at the Bimini Bay Resort. The Sakara Beach Club was built pursuant to the terms of the Lease Agreement and the respondent, Therapy Beach Club Incorporated (Therapy) has not operated a Beach Club or Restaurant at the Resort since July 2013. The Bimini Bay Resort is now operated as Resort World Bimini encompassing a Hotel and Casino.
The Arbitrator found substantially against the applicants and at paragraph 183 of the decision stated as follows:
183. Based on my findings relative to Therapy's claims in Contract and Tort I make the following award which is to be paid by [the applicants] jointly and/or severally within 30 days hereof.
1.
Special Damages
$ 370,000
2.
General Damages for Consequential Loss (Breach of Contract, Trespass and Conversion)
$6,800,000
3.
Exemplary Damages (Breach of Contract, Trespass and Unlawful interference with Economic Interest)
$2,500,000
4.
Interest @5% from 18 July 2013 to date hereof
5.
respondent to pay 2/3 of the claimants cost to be taxed if not agreed
6.
respondent to pay 2/3 of the Costs of the Arbitration
The applicants filed a detailed Notice of Motion dated 18 September 2017 seeking to challenge and appeal the Award. The Notice of Motion identifies 13 grounds of challenge/appeal and seeks the following relief:
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(1) An Order, if and insofar as necessary, giving the applicants leave to appeal on a question of law.
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(2) An Order setting aside the Award to the extent that it awarded damages for breach of the Indenture of Lease dated 31 December 2011 (the Lease) against RAV.
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(3) A declaration that in the absence of the parties having agreed a Statement of Issues, in accordance with the terms of reference of the Arbitration, the Tribunal had no jurisdiction or power to grant any relief as there were no proper issues before the Tribunal for determination, and setting aside the Award.
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(4) Further and alternatively, a declaration that the Tribunal had no substantive jurisdiction to make an award of exemplary damages.
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(5) An Order setting aside the Award in respect of exemplary damages in its entirety.
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(6) Further or alternatively, a declaration that the tribunal exceeded its powers and failed to deal with all issues put to it.
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(7) An Order setting aside the Award to the extent that it awarded $$6,800,000 by way of general damages for consequential loss for breach of contract, trespass and unlawful interference with economic interests; and (insofar as necessary) remitting the matter to the Tribunal.
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(8) An Order setting aside the award as being uncertain and ambiguous in its effect as it pertains to the applicants.
The applicants contend in this ground the Court retains a jurisdiction to review an arbitral award for error on the face of the record and/or the Court may grant leave to appeal in respect of a question of law by reason of section 92(8) of the Act. They further say that the respondent agreed, in the Terms of Reference and Engagement entered into on 3 May 2017, to the applicants bringing an appeal under Section 91 of the Arbitration Act (the AA). Therapy took no formal issue with this ground of Appeal which did not tie into any specific relief sought in the Notice of Motion.
The applicants complain in this ground that the Terms of Reference entered into on 3 May 2017 expressly provided that the parties were to agree the issues to be determined by the Tribunal. They say that, as the parties were unable to agree the issues, the Tribunal had no substantive jurisdiction and was not empowered to grant any form of relief. Finally, they say that the Tribunal could not unilaterally determine the scope of the arbitration
Paragraph 9 of the Terms of Reference and Engagement provided that
The issues for determination in the Arbitration will be set out in a Statement of Agreed Facts and Issues to be submitted to the Arbitrator by Therapy and Rav in accordance with the said Directions Order.
It appears that the parties were in fact unable to agree a Statement of Issues. An exchange of emails demonstrates clearly however, that the parties subsequently agreed in writing that each would submit their own Statement of Issues. This was done as the applicants filed their own Statement of Issues in the Arbitration on and 21 June 2017.
It is also of note that at no time during the Arbitration process did the applicants make any challenge to the substantive jurisdiction of the Arbitrator on this ground. The AA specifically provides a statutory waiver is such cases where objections to substantive jurisdiction are not taken early in the process. Section 95(1) of the AA provides that
95. Loss of right to object.
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Act any objection–
(a) that the tribunal lacks substantive jurisdiction;.
…
he may not raise that objection later, before the tribunal or the Court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.
The case of Athletics Union of Constantinople v. National Basketball Association, [2002] 1 Lloyd's Rep. 305 demonstrated the operation of such a statutory waiver in the context of English proceedings. Judge Richard Fields QC, sitting in the Commercial Division of the English High Court, determined that a party to arbitral proceedings, who took part or continued to take part in those proceedings, without making any objection that the tribunal lacked substantive jurisdiction, could not raise that objection later, either before the tribunal or the Court. The only exception would be if it shows that, at the time it took part or continued to take part in the proceedings, it did not know and could not with reasonable diligence have discovered the grounds for the objection.
The applicants were aware of all the necessary facts and matters required to advance an objection to substantive jurisdiction, on this ground, when the parties accepted that they were unable to agree the Statement of Issues, however no such challenge was made. I therefore found no merit in this ground and found that it was not supported by the facts as I found them and in any event had been waived. I am satisfied therefore that this ground must fail.
The applicants complain that:
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(1) As there was no agreement the tribunal exceeded its power and the award of exemplary damages (having not been agreed by the parties) is seriously irregular. (Ground 3)
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(2) Exemplary damages were not as a matter of law awardable; alternatively, if they were awardable, their assessment the amount of $2,500,000 represented the application of a measure of damages wrong in law. (Ground 4)
In respect of the complaint that the Court had no jurisdiction to award exemplary damages, Section 95 of the AA, extracted above, likewise imposes an estoppel to the raising of jurisdiction by the applicants. The record reflects that it is only in its Closing submissions that the applicants raised, for the first time, the issue as to whether the Tribunal lacked power to make an award of exemplary damages. At no time during the entire process was this issue of lack of jurisdiction raised. Therapy's Statement of Claim, which pleaded exemplary damages, was responded to in the applicants' Defence but not as a challenge to jurisdiction. Therapy's claim to exemplary damages was denied in the Defence and they were put to proof.
Discussions on whether exemplary damages are awardable generally begin with a discussion of the celebrated case of ( Rookes v. Barnard 19641 1 All ER 367. In Rookes, Lord Devlin identified the following categories of cases where exemplary damages may be awarded. These categories were: (i) oppressive, arbitrary, or unconstitutional conduct by government authorities; (ii) conduct calculated to result in profit; and (iii) where authorised by statute. Therapy says that exemplary damages, as found by the Arbirtator, fell within the second of these categories being commonly loosely referred to as the “profit making motive”.
The Tribunal...
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