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Page 1 of 63
REPUBLIC OF TRINIDAD AND TOBAGO
IN THE COURT OF APPEAL
C.A. No. 281 of 2008
H.C.C. No. CV2007-02224
In the Matter of the Arbitration Act Chapter 5:01, Sections 18, 19 and 32
And
In the Matter of an Application under Parts 60 and 61 of the Civil
Proceedings Rules 1998 (as amended)
And
In the Matter of the Decision of Dr. Robert Gaitskell QC, the Sole Arbitrator
of an Arbitration under the ICC Rules of Arbitration 1998
BETWEEN
NATIONAL INSURANCE PROPERTY DEVELOPMENT COMPANY LIMITED
Appellant
And
NH INTERNATIONAL (CARIBBEAN) LIMITED
Respondent
PANEL: A. MENDONÇA, J.A.
P. JAMADAR, J.A.
N. BEREAUX, J.A.
APPEARANCES: A. Newman QC, A. Ali, N. Bisram and S. Harrison for
the Appellant
A. Fitzpatrick SC, L. Lucky-Samaroo and J. Mootoo
for the Respondent
DATE DELIVERED: 20 December 2013
I have read in draft, the judgment of Bereaux J.A. I agree with it and have
nothing to add.
A. Mendonça
Justice of Appeal
Page 2 of 63
I also agree.
P. Jamadar
Justice of Appeal
JUDGMENT
DELIVERED BY BEREAUX, J.A.
[1] This appeal arises out of an arbitral award in respect of a contract between
National Insurance Property Development Company Limited (NIPDEC) and NH
International (Caribbean) Limited (NHIC) by which NHIC was contracted to
construct a new hospital in Scarborough, Tobago.
[2] NIPDEC challenged the award by filing these proceedings. By its fixed
date claim filed on 26th
June 2007, it sought -
(i) an extension of time for filing its claim
(ii) an order directing the arbitrator to state a case as to the proper construction
of clause 2.4 of the FIDIC conditions of contract
(iii) an order setting aside the award
(iv) the remission of the award to the arbitrator together with the opinion of the
Court on the proper construction of clause 2.4.
[3] On 14th
November 2008, the judge dismissed NIPDEC’s claim. NIPDEC
now seeks to reverse the decision. It seeks the same orders set out at paragraph 2.
The grounds upon which the orders are sought are that the arbitrator erred on the
face of the award, that the arbitrator wrongly refused to state a case for the
opinion of the court, that there was procedural mishap and that the arbitrator
technically misconducted the proceedings.
Facts
[4] By agreement in writing dated 6th
March 2003, NIPDEC engaged NHIC to
construct the Scarborough hospital. The works were jointly financed by the
Page 3 of 63
Government of the Republic of Trinidad and Tobago (GORTT) and the Inter-
American Development Bank (IDB). The parties agreed to be bound by the
Conditions of Contract for Construction, First Edition 1999 (International
Federation of Consulting Engineering - General Conditions (FIDIC COC).
[5] The time frame for completion was seven hundred and thirty (730) days
from the date of commencement of the works. The works began on 17th
March
2003. The original date of completion was 17th
March 2005. The original contract
price was in the sum of TT$118,185,069.15. When value added tax was included
the total sum amounted to TT$135,912,829.52. Disputes arose however and by
letter dated 24th
August 2004, addressed to the International Court of Arbitration
(ICC), NHIC referred several areas of dispute to arbitration pursuant to clause
20.6 of FIDIC COC.
[6] The cost of the project rose as the works were executed. By April 2005,
the estimated contractual price was TT$286,992,070.00. This was subsequently
adjusted by the Engineer to TT$224,129,801.99. There was some dispute as to
the accuracy of that figure and an Independent Quantity Surveyor was appointed
who ultimately verified the Engineer’s certification of the contract price at
TT$224,129,801.99.
[7] Dr. Robert Gaitskell QC was appointed the sole arbitrator on 3rd
October
2005. The parties agreed terms of reference to the arbitration on 1st December
2007. These were subsequently amended on 15th
January 2007. The arbitrator
published four partial awards. His fifth and final award was published on 14th
September 2011. It is the second partial award (SPA) which is the subject matter
of this appeal. It was given on 16th
April 2007. The arbitrator found that NHIC
was entitled to suspend the contract by its notice dated 3rd
November 2006.
[8] Clause 2.4 of FIDIC COC is extremely pertinent to this appeal as it was to
the SPA. Its interpretation was not directly referred to arbitration. What was
referred was the validity of NHIC’s suspension and subsequent termination of the
Page 4 of 63
works under clause 16(1) and (2) respectively of FIDIC COC. The validity of the
suspension was one of a list of ten items of dispute. NHIC’s subsequent
termination of the contract under clause 16(2) was the fourth item on the list. The
efficacy of that termination is dependant on whether the suspension under 16(1)
was valid. The other eight areas of dispute are not relevant to this appeal.
[9] By clause 16, NHIC was entitled to suspend work, or reduce the rate of
work and to terminate the contract if NHIC did not receive reasonable evidence,
as required by clause 2.4, within a specified period of time. Clause 16 provides,
inter alia:
“16.1 If the Engineer fails to certify in accordance with Sub-
Clause 14.6 [issue of Interim Payment Certificates] or the
Employer fails to comply with Sub-Clause 2.4 [Employer’s
Financial arrangements] or Sub-Clause 14.7 [Payment], the
Contractor may, after giving not less than 21 days’ notice to the
Employer, suspend work (or reduce the rate of work) unless and
until the Contractor has received the Payment Certificate,
reasonable evidence or payment, as the case may be and as
described in the notice …. If the Contractor subsequently
receives such Payment Certificate, evidence or payment (as
described in the relevant Sub-Clause and in the above notice)
before giving a notice of termination, the Contractor shall
resume normal working as soon as is reasonably practicable…
16.2 The Contractor shall be entitled to terminate the Contract
if: (a) the Contractor does not receive the reasonable evidence
within 42 days after giving notice under Sub-Clause 16.1
[Contractor’s Entitlement to Suspend Work] in respect of a
failure to comply with Sub-Clause 2.4 [Employer’s Financial
Arrangements]”
Page 5 of 63
Clause 2.4 provides as follows:
“The Employer shall submit, within 28 days after receiving any
request from the Contractor, reasonable evidence that financial
arrangements have been made and are being maintained which
will enable the Employer to pay the Contract price (as estimated
at that time) in accordance with Clause 14 [Contract Price and
Payment]. If the Employer intends to make any material change
to his financial arrangements, the Employer shall give notice to
the Contractor with detailed particulars”.
On 28th
April, 2005, NHIC invoked clause 2.4. On the 31st May, 2005, on the
basis that it had not received any reasonable evidence, it issued a twenty one day
notice under clause 16.1, threatening to suspend/reduce work.
[10] On the 23rd
September, 2005, NHIC suspended work under the contract,
alleging that NIPDEC was in breach of clause 2.4. On 3rd
November 2006 it gave
notice of termination of the contract pursuant to clause 16.2 on the same ground.
Between September 2005 and November 2006, the parties appeared to have been
in discussions aimed at securing a mutual disengagement from the contract
pursuant to its terms. Those discussions did not bear fruit and NHIC purported to
terminate pursuant to clause 16.2 in November 2006. NIPDEC denied that it was
breach of clause 2.4. NIPDEC contended that its correspondence to NHIC dated
28th
December, 2004, 29th
December, 2004, 5th
July, 2005, 6th
July, 2005, 6th
October, 2006 and 20th
October, 2006, satisfied the evidential threshold required
clause 2.4. One of the questions in this appeal is whether the arbitrator was right
to hold that the correspondence of 5th
and 6th
July 2005, 6th
October 2006 and 20th
October 2006 did not satisfy the evidential threshold under clause 2.4. NIPDEC
contends that he was wrong and that this is an error on the face of the award.
[11] The arbitrator in his SPA upheld NHIC’s contentions that NIPDEC did not
provide reasonable evidence that financial arrangements had been made and were
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being maintained so as to enable NIPDEC to pay the contract price. NHIC was
therefore entitled to reduce its rate of work and to suspend and to terminate the
contract in the manner that it had.
[12] By letter dated 18th
May, 2007, (after the SPA had been made) NIPDEC
invited the arbitrator to state a special case for the court’s consideration pursuant
to section 32 of the Arbitration Act, Chap 5:01, with respect to the proper
interpretation of clause 2.4. In its letter, NIPDEC set out certain considerations
for the Court in respect of clause 2.4.
[13] The arbitrator, by e-mail dated the 31st May, 2007, rejected NIPDEC’s
request for a case stated. In summary, he concluded as follows:
(i) s. 32(1) and (2) do not permit a case to be stated, where a binding
decision has already been produced on the issues in question.
(ii) The SPA was made on 16 April, 2007 and was issued by the ICC shortly
thereafter. NIPDEC’s request for a case stated was dated 18 May, 2007.
The SPA deals with questions formulated by the parties and at no time
prior to receipt of the request did NIPDEC suggest that there be any case
stated.
(iii) In such circumstances he was functus officio in respect of those issues, and
did not have the jurisdiction, to state a case for the court.
Further Submissions
[14] We reserved judgment in the appeal, on 23 November 2011. By letter of
29th
June 2012 to the Clerk of Appeals, NHIC raised a further issue. It alleged
that NIPDEC had abandoned the appeal because it had made an unequivocal final
election to adopt the final award and, consequently, all awards which had
preceded it. The final award was the product of the previous four partial awards.
Page 7 of 63
The SPA forms a basis upon which the final award was made. If NIPDEC
accepted the final award it meant that NIPDEC was no longer interested in
pursuing its challenge to the SPA.
[15] NHIC further submitted that the unequivocal election had come in the
form of an application by NIPDEC, filed on 23rd
February 2012, seeking to strike
out NHIC’s claim form in civil action, CV2011-04420. In its affidavit in support,
NIPDEC requested that the Court enforce the final award under section 20 of the
Arbitration Act and give judgment in terms.
[16] NHIC contends that NIPDEC by its defence, counterclaim and affidavit in
that civil action and by its conduct in pursuing its application, finally and
irrevocably abandoned this appeal. NHIC sought a further hearing of the appeal.
The parties were directed to file written submissions on the issue with which
direction they have complied. The matter now falls for decision.
The delay in giving judgment
[17] Before dealing with the questions which arise in this appeal, we must
apologise to the parties for the considerable delay in giving this judgment. By the
way of explanation (as opposed to excuse) we say that, apart from the volume of
the documents which we had to examine in this case, events occurred, during the
course of consideration of this matter, which resulted in the depletion of the
complement of appeal judges available to deal with an ever increasing list of
appeals (particularly procedural appeals which must be heard within a particular
time period). These events have been the subject of official comment and it is
unnecessary to elaborate here. Rather than reduce the number of appeals to be
listed for hearing, we endeavoured to increase the number of times each judge sat
monthly. The result is that while, in fact, more appeals were heard and
completed, the reserve time for more difficult and complicated appeals rose.
Happily, the Court of Appeal was finally back to full complement as at 1st
November 2013. Further administrative arrangements are also being made to
Page 8 of 63
address the problem of protracted reserve time.
The issues
[18] The three broad issues in this case are:
(i) Did NIPDEC’s application to strike out NHIC’s claim in CV2011-04420
constitute an abandonment of the appeal?
(ii) Was the judge right to refuse to direct the arbitrator to state a special case?
(iii) Was the judge also right to refuse to remit or set aside the award?
[19] The first issue is a straight forward question. As to the second broad issue
the question arises as to the true purport and meaning of section 32 of the
Arbitration Act (the Act).
As to the third broad issue several subsidiary questions arise:
(i) Was there a procedural mishap arising out of NIPDEC’s failure to request
that the arbitrator state a case for consideration by the High Court?
(ii) Was there referral to arbitration a general or specific reference?
(iii) Was there an error on the face of the record?
Summary of Decision
[20] (i) NIPDEC’s application to strike out NHIC’s claim in CV2011-
04420 did not constitute an abandonment of the appeal. Its decision to
apply to enforce the Final Award was not an irrevocable election because
it was not faced with a choice between alternative rights. A successful
challenge to the SPA would necessarily result in a payment to NIPDEC of
Page 9 of 63
a greater sum that made under the Final Award
(ii) The judge was right to refuse to direct that the arbitrator state a special
case because on a proper interpretation of section 32 of the Act, it did not
contemplate the direction of a case stated after the arbitrator had made his
award.
(iii) The judge was also right to refuse to remit the award or to set it aside on
the basis of procedural mishap or miscarriage of justice, because
NIPDEC’s failure to request that the arbitrator state a case for the High
Court under section 32 did not result in an injustice to NIPDEC, neither
did it constitute “a deviation from the route which the reference should
have taken toward its destination”.
(iv) However, the judge fell into error in finding that the reference to
arbitration was a specific reference. The referral of the dispute to
arbitration was in fact a general reference. The Court is free to review the
arbitral award and to remit it or set it aside, if there is in fact an error on
the face of the record.
(v) There were several errors on the face of the record. The arbitrator
committed several errors of law on the face of the record. These were:
(a) His finding that “reasonable evidence” that financial arrangements have
been made and are being maintained would ordinarily involve prima facie
some evidence of Cabinet approval having been maintained.
(b) His finding that the letters of 5th
and 6th
July 2005 and 6th
October 2006
did not satisfy the provisions of clause 2.4.
(c) His finding that the letter of 5th
July 2005 was equivocal because of the
use of the words “without prejudice”.
Page 10 of 63
(d) His finding that the letter of 6th
October 2006 in any event did not satisfy
the 28th
April 2005 notice because it referred to a contract price
($224,129,801.99) which was lower than the contract price
($286,992,070) to which the notice related and for which assurance of
financial arrangements were sought.
These were errors of law because:
(i) He placed too much emphasis on necessity for Cabinet approval to satisfy
the requirement of “reasonable” evidence. He set the bar too high and set
too high a standard as to the meaning of “reasonable evidence” in clause
2.4.
(ii) His finding that the 6th
October 2006 letter, by its reference to the lower
contract price of $224,129,801.99, did not amount to reasonable evidence,
was a finding to which no reasonable arbitrator could come.
Did NIPDEC abandon the appeal
[21] NHIC submits that NIPDEC by seeking to enforce judgment on the final
award, elected to abandon this appeal. This principle of election has a common
law and equitable element. In this case, NHIC contends that NIPDEC’s election
was a common law election. At common law, election arises when a party is
faced with two inconsistent courses of action and it elects one of these alternative
courses over the other. The decision must be unequivocal. The election
irrevocably binds the party making the choice. See Motor Oil Hellas Refineries
v Shipping Corporation of India [1990] 1 Lloyds Rep 390. Lord Goff at page
398 stated that:
“it is a prerequisite of election that the party making the election
must be aware of the facts giving rise to this new right. Where with
Page 11 of 63
knowledge of the relevant facts a party has acted in a manner
consistent only with his having chosen one of the two alternative
and inconsistent courses of action open to him, he is held to have
made his election accordingly. It requires an unequivocal
representation…”
[22] It is sufficient to show that the electing party has made an unequivocal
representation of his decision, in circumstances in which his knowledge of the
facts and of his legal rights allowed him to make an informed choice and that he
communicated that decision to the other party.
[23] At paragraph 26 of his further written submissions Mr. Fitzpatrick
submitted that the Final Award, which was based upon all the interim awards
which preceded it, including the SPA, was produced on 14th
September 2011. At
that point NIPDEC had a choice: it could either withdraw the current appeal
against the SPA (which was pending decision) and proceed to enforce the Final
Award; or it could continue with the prosecution of the appeal to decision, taking
no steps in the interim to enforce the Final Award. He relied on the decision in
Meng Leong Development Pte Ltd. v. Jip Hong Trading Co. Pte. Ltd. (1985)
1 ALL E.R. 120.
[24] He added that the alternative courses of action open to NIPDEC were
entirely inconsistent with each other. A court has no power in this jurisdiction to
affirm part and disaffirm part of an arbitral award. It must decide whether the
award is good or whether it should go in its entirely, either by way of setting aside
or referral. In those circumstances a party which enforces an award cannot
afterwards be heard to say that he wishes to appeal it, for by so doing, he would
be claiming that the award was entirely wrong, and should be set aside or
remitted, a circumstance which would mean that he would have no right to any
benefit thereunder.
[25] He submitted that NIPDEC by its Defence and Counterclaim and by its
Page 12 of 63
affidavit filed on 23rd
February 2012 in the recent action, as well as by its
subsequent arguments before the court chose to seek an order under section 20 of
the Arbitration Act enforcing the Final Award.
[26] In exercising its right under section 20, NIPDEC was relying on the SPA
and was acting in a manner consistent only with having chosen not to appeal the
SPA or to challenge any of the partial awards on which the final award is
founded.
[27] In additional submissions filed on 26th
September 2012 Mr. Fitzpatrick
further submitted that the arbitral award can only be set aside or remitted in its
entirety. It is indivisible. NIPDEC could not pursue the challenges to the SPA
and the third partial award while seeking to enforce the final award. Once the
final award had been published, any options to withdraw its challenges to the SPA
and the third partial award were closed.
[28] I agree with Mr. Newman’s submission that NIPDEC’s decision to apply
to the Court to enforce the final award did not constitute an irrevocable election.
NIPDEC’s conduct was not unequivocal. The challenge to the SPA, if successful,
(as it has been) can result in (and has so resulted) in the award being set aside and
remitted to the arbitrator with a direction that the suspension and termination of
the award by NHIC was wrongful. Such a consequence necessarily meant the
payment of a greater sum by NHIC to NIPDEC than that granted by the final
award.
[29] The dictum of Lord Atkin in Lissenden v. CAV Bosch Ltd [1940] AC
412 at 429 (helpfully cited by Mr. Newman) is apt:
“The applicant is not faced with alternative rights: it is the same
right that he claims but in larger degree. In Mills v. Duckworth
(1), a plaintiff who has been awarded damages for negligence
had taken the judgment sum out of a larger sum paid into Court
Page 13 of 63
and then had appealed against the quantum of damages and was
met by a similar objection to his appeal. Lord Fairfield in
overruling the objection pointedly said: “The plaintiff said ‘I am
not going to blow hot and cold. I am going to blow hotter’.”
Here the applicant is not faced with a choice between alternative
rights: he has exercised an undisputed right to compensation:
and claims to have a right to more. You have not lost your right
to a second helping because you have taken the first”
[30] I do not accept that the Final Award renders the entire award indivisible.
In my judgment a successful challenge of the SPA simply requires the SPA to be
reconsidered by the arbitrator as directed by the Courts. It is severable from other
partial awards.
[31] I turn then to the issues raised in the substantive appeal.
Jurisdiction of the Court
(i) Power to Remit
[32] NIPDEC seeks to have the award set aside for error on the face of the
record. It also seeks to have the award remitted to the arbitrator on the ground
that there was a procedural mishap resulting in an injustice to it. The court’s
jurisdiction to remit is statutory. It is set out in section 18(1) of the Act which
provides
“(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 arbitrators or umpire.”
[33] The judge, following the decision of Jamadar J (as he then was) in ICS
Grenada Limited v. NH International (Caribbean) Limited, H.C.A. 1541 of
Page 14 of 63
2002 accurately sets out, at paragraph 53 of her judgment the bases upon which a
court of law will order the remission of an award to the arbitrator. These are:
(i) Where the award is bad on its face.
(ii) Where there is misconduct on the part of the arbitrator.
(iii) Where there has been a mistake by the arbitrator.
(iv) Where, after the award has been made, fresh evidence has been
discovered.
[34] NIPDEC in its written submissions had contended that both Jamadar J and
the judge had adopted a restrictive construction of section 18. The submission is
not accurate. Like Jamadar J., the judge held that these categories had been
extended to include situations in which there had been “a misunderstanding
leading to injustice” or (as the judge opined) “some procedural mishap which led
to injustice”. I agree.
[35] The latter category has been the subject of juridical controversy. See the
comments of the authors of Mustill and Boyd, 2nd
edition 1989, at pages 549-
550 as follows:
“In recent years it has been held that an award may be remitted
if there has been a misunderstanding leading to injustice, even
though the arbitrator has not committed misconduct. These
decisions undoubted go beyond the list set out above. Whether
they are sustainable on the law as it now stands depends upon
whether the list is exclusive, or whether the Court has a general
discretion to remit whenever justice so demands, the list
furnishing no more than illustrations and guidance as to the way
in which the Court will intervene. This question is controversial:
there is strong authority for each view. The weight of the
existing authority is in favour of the more restricted view …”
[36] In Indian Oil Corporation v. Coastal (Bermuda) Ltd. [1990] 2 Lloyd’s
Page 15 of 63
Rep. 407, Evans J in considering section 22 of the English Arbitration Act 1950
[CHECK] (the equivalent of our section 18(1)) concluded, after some discussion,
that the “power to remit an award under section 22 …” can and should be
exercised when there is otherwise the likelihood of a substantial miscarriage of
justice, either because the arbitrator has been mishandled (that is misconduct) or
where there has been some “other procedural mishap”, even if the mishap is due
to the party seeking remission. His comments, as they relate to the law in respect
of section 22(1) bear full reproduction. He said, starting at page 414:
“The statutory power of remission is discretionary and it is not
subject to any statutory limits. However, the discretion although
unlimited in terms “may be subject to restrictions imposed by
judicial decision” (Mustill and Boyd (2nd
ed) P. 548). There have
been many decisions revealing two lines of authority, and the
question remains controversial (Mustill and Boyd again, p. 550).
Some authorities support the view that the power may be
exercised whenever justice so demands, others the narrower view
that the circumstances must fall within one of a number of
categories which have been recognized in past judgment of the
Courts (ibid).
According to Russell on Arbitration (19th
and 20th
eds.):
… ‘there is a never-ending war between two irreconcilable
principles, the high principle which demands justice though the
heavens fall, and the low principle which demands that there
should be an end to litigation.’
I must admit that I do not read the authorities in this way. True,
the power should not be exercised unless the failure to do so
would or might cause injustice to the applicant: compare The
Aros, [1978] 1 Lloyd’s Rep. 456 at p. 463 per Mr. Justice
Page 16 of 63
Brandon. But at the same time it is of “over-riding importance”
that the finality of awards hall be preserved which, on any view
of the matter , imposes severe restraints on the exercise of the
statutory power: per Sir Roger Ormrod in The Montan, [1985] 1
Lloyd’s Rep. 189 at p. 198.
These two factors, in my view, are not inconsistent with each
other. If either of them is to prevail, then it should be the
requirement of justice. But justice, even fairness, is not an
abstract concept. It has to be applied in this context between two
parties who were in dispute with each other and who agreed that
the dispute should be resolved by an arbitral tribunal. They
agreed that the tribunal’s award should be final. But they agreed
this on the basis that the arbitration procedures would be
regulated by law. The Court has statutory power to set aside an
award when the arbitrators misconduct themselves or the
reference - s. 25 of the 1950 Act - but it also has to unqualified
discretion to remit the award to the chosen tribunal under s. 22.
If the power is exercised, but only in circumstances when it
would be unjust not to do so, then there is not, in my judgment,
an uncovenanted nor an unacceptable restriction on the agreed
finality of the tribunal’s award. As Lord Atkin said in a different
context, recently cited with approval by the Court of Appeal
(Criminal Division) “Finality is a good thing, but justice is
better.” (Ras Behari Lal v. The King-Emperor, (1933) 50
T.L.R.1).
It remains, of course, a matter for judicial decision whether such
injustice exists, or would exist, in the particular case, and in the
nature of things previous cases will provide examples of the
circumstances in which it can be recognized. In addition, some
judgments will be binding on inferior Courts whenever the same
Page 17 of 63
or indistinguishable facts arise again. So far as binding
authority is concerned, the extent of the jurisdiction arose for
consideration in The Montan (above) and Sir John Donaldson,
M.R. said this (at p. 192):
Section 22 empowers the Court to remit an award to an arbitrator
for reconsideration. It provides the ultimate safety net whereby
injustice can be prevented, but it is subject to the consideration
that it cannot be used merely to enable the arbitrators to correct
errors of judgment, whether on fact or law, or to have second
thoughts, even if they would be better thoughts.
Lord Justice Robert Goff, agreed that the award in that case
should be remitted, and Sir Roger Ormrod at p. 198, in the
passage already referred to, said that the section preserved the
power to order remission:
… if the interest of justice demanded and the circumstances
permitted.
I respectfully agree with these descriptions of the Court’s power,
and I would probably be bound to adopt them, even if I did not.
It would be unusual if the unqualified statutory discretion was
limited by decisions in previous cases, binding precedent apart,
and it would be surprising if the statutory power is so encrusted
(the apt word used in argument in the present case) by judicial
statements that it cannot be exercised when justice so requires. I
must respectfully dissent, therefore, from the conclusion reached
in The Apollon, [1985] 1 Lloyd’s Rep. 597, that there is only
power to order remission on one of the four grounds listed by the
Court of Appeal in 1898 (quoted in Mustill & Boyd p. 549) or
otherwise when a further category has been expressly recognized
Page 18 of 63
by the Courts.”
[37] In MF King v. Thomas McKenna Ltd. [1991] 2 W.L.R. 1234 Lord
Donaldson of Lymington, MR added his voice to the view that the jurisdiction of
the Court under section 22(18) was “unlimited”. He stated at 1241 (under the
rubric “scope of the power to remit”):
“In ascertaining the limits of the court's jurisdiction, properly so
called, I see no reason why section 22 and the other sections
should not be construed as meaning what they say. Certainly so
far as section 22 is concerned, there is no element of doubt or
ambiguity. The jurisdiction is wholly unlimited.”
[38] Later at page 1243 letter A he added:
“In my judgment the remission jurisdiction extends beyond the
four traditional grounds to any cases where, notwithstanding that
the arbitrators have acted with complete propriety, due to mishap
or misunderstanding, some aspects of the dispute which has been
the subject of the reference has not been considered and
adjudicated upon as fully or in a manner which the parties were
entitled to expect and it would be inequitable to allow any award
to take effect without some further consideration by the
arbitrator. In so expressing myself I am not seeking to define or
limit the jurisdiction or the way in which it should be exercised in
particular cases, subject to the vital qualification that it is
designed to remedy deviations from the route which the reference
should have taken towards its destination (the award) and not to
remedy a situation in which, despite having followed an
unimpeachable route, the arbitrators have made errors of fact or
law and as a result have reached a destination which was not
that which the court would have reached. This essential
Page 19 of 63
qualification is usually underlined by saying that the jurisdiction
to remit is to be invoked, if at all, in relation to procedural
mishaps or misunderstandings. This is, however, too narrow a
view since the traditional grounds do not necessarily involve
procedural errors. The qualification is however of fundamental
importance. Parties to arbitration, like parties to litigation, are
entitled to expect that the arbitration will be conducted without
mishap or misunderstanding and that, subject to the wide
discretion enjoyed by the arbitrator, the procedure adopted will
be fair and appropriate. What they are not entitled to expect of an
arbitrator any more than of a judge is that he will necessarily
and in all circumstances arrive at the "right" answer as a matter
of fact or law. That is why there are rights of appeal in litigation
and no doubt would be in arbitration were it not for the fact that
in English law it is left to the parties, if they so wish, to build a
system of appeal into their arbitration agreements and few wish
to do so, preferring "finality" to "legality," to adopt Lord
Diplock's terminology.”
These decisions have since been eroded by the repeal of the 1950 Act and by the
case law deriving from the new legislation. They remain apposite to section 18
and reflect what is the appropriate approach to its application.
(ii) The court’s power to set aside
[39] As the judge stated at paragraph 72 of her judgment, the Courts of
Trinidad and Tobago have both an inherent jurisdiction and a statutory
jurisdiction to set aside an arbitral award. The statutory power to set aside (as set
out in section 19(2) of the Act) arises where the arbitrator has misconducted
himself or the proceedings, or, where an arbitration or an arbitration award, has
been improperly procured. The court’s inherent jurisdiction to set aside arises
where:
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(i) there is an error on the face of the award
(ii) the award is made in excess of jurisdiction, whether wholly or partly
(iii) there is a patent substantive defect.
See Mustill and Boyd - second edition - The Law and Practice of Commercial
Arbitration at page 91.
[40] As noted by Jamadar J in ICS:
“The inherent power of the court to set aside an award was given
statutory recognition by section 3 of the local Act (section 1 of the
1889 UK act). The situation is well summarised in Commercial
Arbitration by Mustill and Boyd (1989 ed.) at page 447, where
the authors state:
‘As regards the inherent powers of the Court,
section 1 of the 1889 Act provided that all
submissions should, unless a contrary intention
was expressed thereon, take effect as if they had
been made an order of court. The effect was thus
to bring virtually all references under the direct
and continuous supervision of the Court, which
would exercise powers by virtue of its own
inherent right of control, quite distinct from the
statutory powers to intervene by setting aside and
remission.’
Thus, all voluntary references to arbitration attracted the court’s
inherent powers of enforcement and supervision”.
The court’s discretion to remit or aside an arbitral award is also circumscribed by
the nature of the dispute. The court will refuse to remit or to set aside the award if
what is referred is a specific question of factor law or some principle of
construction for the determination of the arbitrator. This is so even if the error is
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clear on the face of the award. Neither will the award be remitted or set aside
because the court disagrees with the conclusion to which the arbitrator came,
unless of course it is clear on the face of the award that the arbitrator has
proceeded illegally. Two leadings cases fall to be considered here. Kelantan
Government v. Duff Development Co. [1923] A.C. 395 and F.R. Absalom Ltd.
v. Great Western (London) Garden Village Society [1973] A.C. 592.
[41] In Kelantan, the Government of Kelantan granted to an English company
certain portion of State lands and certain mining rights, by a deed of indenture. A
dispute as to the construction of the deed was referred to arbitration (as provided
for by the deed). The arbitrator decided against the Government. A motion to set
aside his award was refused by Russell J and by the Court of Appeal. The
Government appealed to the House of Lords which affirmed the decision of the
Court of Appeal. Viscount Cave at page 408 stated:
“… it is desirable to refer to a question which was mentioned
(though not decided) in the judgments of the learned judges of
the Court of Appeal and which was again raised in the argument
before this House - namely, the question whether there was not
here such a reference to the arbitrator on the construction of the
deed of cancellation that his conclusions on that point must be
accepted as final and not open to be questioned on application to
the Court. My Lords, in my opinion there was in this case a
reference to the arbitrator of the questions which had arisen on
the construction of the deed of cancellation. The arbitration
clause in the deed applied in terms to every dispute, difference or
question which might arise between the parties touching the
"construction, meaning, or effect" of the deed. The appointment
of the arbitrator showed that differences had arisen as to
construction, and the arbitrator was appointed to determine those
differences. In the pleadings delivered in pursuance of the
arbitrator's direction, the questions of construction were again
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clearly raised. Lastly, the appellants in their case delivered for
the purpose of this appeal (para. 13) stated that among the points
to be determined by the arbitrator were: "(1.) What, upon the
true construction of the Deed of Cancellation, was the nature
and extent of the obligation of the Government in regard to the
making of the cart road? (2.) Whether, upon the true
construction of the Deed of Cancellation, the Government had
entered into a covenant with the Company to construct the
railway, and if so, in what terms, and what was the nature and
extent of the obligation of the Government under such
covenant?" The reference, therefore, was a reference as to
construction.
If this be so. I think it follows that, unless it appears on the face
of the award that the arbitrator has proceeded on principles
which were wrong in law, his conclusions as to the construction
of the deed must be accepted. No doubt an award may be set
aside for an error of law appearing on the face of it; and no
doubt a question of construction is (generally speaking) a
question of law. But where a question of construction is the very
thing referred for arbitration, then the decision of the arbitrator
upon that point cannot be set aside by the Court only because the
Court would itself have come to a different conclusion. If it
appears by the award that the arbitrator has proceeded illegally -
for instance, that he has decided on evidence which in law was
not admissible or on principles of construction which the law
does not countenance, then there is error in law which may be
ground for setting aside the award; but the mere dissent of the
Court from the arbitrator's conclusion on construction is not
enough for that purpose.”
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At page 410 he said:
“… To the same effect are the decisions of this House in Holmes
Oil Co. v. Pumpherston Oil Co. (4) and of the Judicial
Committee of the Privy Council in Attorney-General for
Manitoba v. Kelly (5); and in In re King and Duveen (6)
Channell J. stated the rule concisely as follows: "It is no doubt a
well-established principle of law that if a mistake of law appears
on the face of the award of an arbitrator, that makes the award
bad, and it can be set aside ...., but it is equally clear that if a
specific question of law is submitted to an arbitrator for his
decision, and he does decide it, the fact that the decision is
erroneous does not make the award bad on its face so as to
permit of its being set aside. Otherwise it would be futile ever to
submit a question of law to an arbitrator.”
[42] Lord Parmoor at page 417 put the issue the other way:
“Where a question of law has not specifically been referred to an
umpire, but is material in the decision of matters which have
been referred to him, and he makes a mistake, apparent on the
face of the award, an award can be set aside on the ground that it
contains an error of law apparent on the face of the award”
He added at page 418 that:
“In the present appeal it was argued by the counsel on behalf of
the appellants that the question of the construction of the deed
had not been specifically referred to the arbitrator, although the
construction of the deed was absolutely necessary for the
determination of the disputes which had been referred to him. In
my opinion this contention is not maintainable. Whether,
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however, a question of law has been specifically submitted to
arbitration, falls in each case to be determined on the terms of
the particular submission. If the Court, before which the award
is sought to be impeached, comes to the conclusion that the
alleged error in law, even if it can be maintained, arises in the
decision of a question of law directly submitted to the arbitrator
for his decision then the principle stated by Channell J. in In re
King and Duveen (2) applies, and the parties having chosen their
tribunal, … are not in a position to question the award, or to
claim to set it aside.”
[43] F.R. Absalom Ltd. v. Great Western (London) Garden Village Society
[1993] AC 592 was a decision which went the other way. The facts bear
repetition because they are comparable to this case and raise a similar legal issue.
A building contract provided by clause 30 that:
“The contractor shall be entitled .... under certificates to be issued
by the architect to the contractor .... to payment by the employer
from time to time by instalments, when in the opinion of the
architect actual work to the value of 1000l. has been executed in
accordance with the contract, at the rate of 90 per cent. of the
value of the work so executed in the building and materials
actually on the site for use on the works until the balance in hand
amounts to the sum of 2000l.”
[44] The contract also provided that if any dispute should arise between the
employer, or the architect on his behalf, and the contractors as to the construction
of the contract or as to the withholding by the architect of any certificate to which
the contractors might claim to be entitled, the dispute was to be referred to an
arbitrator. By clause 26, if the contractors should suspend the work, except in
case of a certificate being withheld, the architect was empowered to give notice to
the contractors to proceed with the work with all reasonable dispatch. Disregard
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of this notice might involve the contractors in serious consequences.
[45] After 9000l. or more had been paid by the employers to the contractors
upon certificates given by the architect, the contractors claimed that on March 11,
1929, they were entitled to a further substantial sum which had not been included
in the architect's certificates. The employers insisted that the contractors had been
overpaid, and that no certificate was due to them. The contractors thereupon
stopped work, and the architect served upon them a notice under clause 26.
[46] The parties then submitted to an arbitrator the “disputes in regard to (1)
the issue of certificates and (2) the validity of the notice served by the architect
under clause 26” of the contract. The arbitrator found that on May 11, 1929, there
remained due to the contractors a sum of 793l. 17s. 10d., and awarded that
“having regard to the provisions of clause 30” “the architect had up to the said
11th day of March, 1929, issued to the contractor certificates in accordance with
the terms of the contract.” He further awarded that the notice given under clause
26 was properly given and was valid.
[47] It was held that the construction of clause 30 had not been specifically left
to the arbitrator and the award should be set aside for error of law appearing on
the face of it because he erred in his construction of clause 30. Lord Russell of
Killowen in his speech at page 607 stated:
“My Lords, it is, I think, essential to keep the case where disputes
are referred to an arbitrator in the decision of which a question
of law becomes material distinct from the case in which a specific
question of law has been referred to him for decision. I am not
sure that the Court of Appeal has done so. The authorities make
a clear distinction between these two cases, and, as they appear to
me, they decide that in the former case the Court can interfere if
and when any error of law appears on the face of the award, but
that in the latter case no such interference is possible upon the
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ground that it so appears that the decision upon the question of
law is an erroneous one.”
At page 608 he said:
“The same distinction appears in the judgment of the Privy
Council in the case of Attorney-General for Manitoba v. Kelly
(3), in which the following passage occurs: "Where a question of
law has not specifically been referred to an umpire, but is
material in the decision of matters which have been referred to
him, and he makes a mistake, apparent on the face of the award,
an award can be set aside on the ground that it contains an error
of law apparent on the face of the award.”
[48] Mr. Newman, for NIPDEC submitted the distinction between general and
specific is far too narrow a distinction. The focus in modern cases (none of which
he cited) was to permit a review if there is shown, an error of law on the face of
the award even if the award under review was in respect of a specific reference to
arbitration. He added that an error of law can be shown, he said, even where there
is a mixed question of law and fact. When one is looking at an error of law on the
face of the award, the focus is not on the general (or generic) but rather on the
specific. He submitted that this was “the slightly more modern approach”. He
described the Kelantan decision as having adopted a more rigorous approach to
the question of general versus specific references. Where there is an error of law
on the face of the award it is reviewable even though it is a specific referral to the
arbitrator. I have found no authority which supports this approach. Suffice it to
say therefore that I shall continue to follow the more restrictive approach.
I turn then to the issues in this case.
Conclusions
(a) Whether the award should be remitted to the arbitrator
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(i) Failure to request a case stated
[49] It is unclear from the written submissions whether NIPDEC was still
challenging the arbitrator’s decision not to state a special case for the
court, pursuant to section 32 of the Act. But it still relies on its full written
submissions before the judge. Moreover, Mr. Newman addressed the
matter in argument before us. He submitted that section 32 of the Act
permitted an arbitrator to state a question in the form of a special case after
an award is given. The relevant provisions of section 32 state as follows:
“(1) An arbitrator or umpire may, and shall if so
directed by the Court, state -
(a) any question of law arising in the course of the
reference, or
(b) an award or any part of an award
in the form of a special case for the decision of the Court.
(2) A special case with respect to an interim award or
with respect to a question of law arising in the
course of a reference may be stated, or may be
directed by the Court to be stated, notwithstanding
that proceedings under the reference are still
pending.
(3) …”
[50] He added that there is nothing in the wording in section 32 which provides
that the application to state a special case must be made before the award is given.
Rather, it was a matter of judicially imposed restrictions in the interpretation of
the statute. But those restrictions have been loosened “as time has gone on”. He
added that in this case the judge adopted a restrictive view. If this Court took a
restricted view of section 32, (i.e. by saying that section 32 does not contemplate
a special case being stated after the award has been made) then there was a
procedural mishap. If it took a more expansive view, then there is jurisdiction to
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remit the matter back to the arbitrator on the basis of an error law on the face of
the award.
[51] I return to the issue of procedural mishap at paragraph 53 below. The
judge found that the request to state a special case came too late. She held that the
arbitrator was functus officio in relation to the SPA and could thereafter state a
case for the court in respect of issues on which he had already made definite
findings of fact and law. She relied on the decision in Fidelitas Shipping Co Ltd
v. V/O Exportchleb, [1965] 1 Lloyd's Rep. 223 and London Dock Company v.
Shadwell 1862 7 L.T. 381.
[52] The judge was correct in her interpretation of the section 32. It is a
sufficient answer to Mr. Newman’s submissions to say that on a proper
interpretation of section 32, the clear contemplation of Parliament was for a case
to be stated prior to the making of the award. I do not see such a construction of
section 32 as restrictive. It is the only reasonable interpretation of the section.
More so from a business perspective. Why should the arbitrator seek the
guidance of the court by way of case stated, after he has already given a decision.
The decisions in Fidelitas and London Dock Company v. Shadwell give clear
guidance on the point. The passages relied on by the judge at page 228
(Fidelitas) and page 382 (London Dock Company v. Shadwell) give strong
support for the decision to which she came and with which I agree. It is
unnecessary to cite them here.
(ii) Procedural mishap
[53] Mr. Newman also submitted that there was a procedural mishap which led
to an injustice in the making of the award. He contended that the procedural
mishap was NIPDEC’s misunderstanding of the requirement to ask the arbitrator
to state a case for the opinion of the Court on the “critically important provision
of clause 2.4 of the FIDIC COC, before making the award. The serious injustice
was “the prospective loss of an important ruling from the Court on the
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interpretation of an important contractual provision which [had] far reaching
implications” not only for the contract but other Government/IDB contracts
where the FIDIC COC are generally adopted by the parties.
[54] Further, given NIPDEC’s stated intention always to seek an opinion from
the Court on this question (as confirmed by the evidence of its acting general
manager, Wendy Ali), there was in fact a “deviation from the route which the
reference should have taken towards its decision”. Put another way, there was a
procedural mishap because of NIPDEC’s misunderstanding, with the result that
the arbitration did not proceed in the manner that it should have. He relies on the
decision in Indian Oil Corporation v. Coastal (Bermuda) Ltd. [1990] 2
Lloyd’s Rep. 407, and on the decision in King v. Thomas McKenna (supra):
[55] Mr. Fitzpatrick for NHIC also relies on the King decision, in particular, on
the dictum of Lord Donaldson MR cited above at paragraph 24. He contends,
inter alia, that, arising out of the King decision, in order to constitute a procedural
mishap:
(i) The event must have arisen during the course of the reference to the
arbitration and must have resulted in a deviation from the route which the
reference should ordinarily have taken towards the award.
(ii) The event must have resulted in some aspect of the dispute not being
considered and adjudicated upon as filling or in the manner that the parties
were entitled to expect and it would be inequitable to allow the award to
have effect without some further consideration by the arbitrator.
He contended that on NIPDEC’s own evidence, the arbitration proceeded exactly
as NIPDEC intended, since it was NIPDEC’s “conscious” decision not to request
that a case be stated for the court prior to the issue of the award.
[56] The decisions in Indian Oil Corporation and King fall to be considered
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here. In King there was an arbitration of a building dispute. During the course of
argument before the arbitrator on the issue of costs, counsel for the building
owners decided not to reveal to the arbitrator that there was a sealed offer from
the owners in the sum of five thousand pounds (£5000) for the outstanding works
claimed by the contractor. In error, she failed to indicate either to the arbitrator or
the contractors that she wanted the issue of costs to be held over until questions of
liability and quantum were determined. The arbitrator awarded the sum of four
thousand, seven hundred and forty-three pounds (£4,743) in full settlement of all
claims and not knowing of the sealed offer, awarded the contractors the costs of
the arbitration.
[57] The trial judge held that a deliberate but mistaken tactical decision by
counsel, not to inform the arbitrator of the sealed offer, or to request an interim
award thus reserving the issue of costs, constituted a procedural mishap, entitling
a court to exercise its discretion to remit the award. The decision was upheld an
appeal.
[58] In Indian Oil Corporation v. Coastal (Bermuda) Ltd. (supra) (also
relied on by NIPDEC) the arbitrators had found in favour of Coastal as a result of
the decision by IOC’s counsel not to amend the pleaded case to include facts
already in evidence. This would have permitted them to advance a stronger case;
one which in the opinion of one arbitrator, “might very well have succeeded”.
[59] Evans J remitted the matter to the arbitrators. He held, inter alia, that the
consequences for IOC of the failure of its counsel to seek leave to amend the
pleadings (even when that had been raised by the tribunal itself), had been very
serious; that if the evidence disclosed facts which established a defence in law to
the claim but the tribunal failed to take account of that defence because the legal
issues were not correctly formulated in IOC pleadings, then (even if the failure
was due to IOC’s own counsel) there had been an injustice to IOC which could be
remedied by remitting the award under section 22.
Page 31 of 63
[60] In this case the judge (adopting the language of Lord Donaldson) held that
there had been no “deviations from the route which the reference should have
taken toward its destination”. She found that arbitrator dealt properly and fairly
with the issues raised by the parties and the questions posed to him by the
amended TOR. There was no serious or substantial injustice to NIPDEC as a
result of its not requesting the arbitration.
[61] The judge was correct to reject NIPDEC’s arguments. In both Indian Oil
Corporation v. Coastal (Bermuda) Ltd. and King v. Thomas McKenna,
counsel’s error occurred during the arbitration and resulted in material issues both
factual and legal not being considered by the arbitrator. These errors resulted in
decisions adverse to the aggrieved party. There was a real probability, in both
cases, that, had those issues been considered by the arbitrators, the awards would
have been different.
[62] In this case, the failure to request a case stated referral was a matter of
choice for NIPDEC (however inadvertent that might have been). Its decision not
to ask for a referral did not cause the arbitrator to ignore or to fail to consider
material issues in the arbitration, which resulted in an injustice to NIPDEC.
Neither was it a deviation from the course which the arbitration would ordinarily
have taken towards its conclusion. The judge was right to reject the contention.
While the non referral may have deprived the parties of the benefit of an
important ruling from the court on the purport of an “important contractual
provision”, there was no injustice to NIPDEC.
[63] Indeed, it is in the nature of arbitration proceedings, that court proceedings
are generally excluded. The provisions of clause 2.4 are not so much a matter of
rocket science, as to require some earth shaking decision of the Supreme Court of
Trinidad and Tobago, such that its non delivery leaves the parties bereft of advice
on the interpretation of the clause. There is no demonstrable injustice to NIPDEC
resulting from the non referral of the matter to the High Court. The submission
fails.
Page 32 of 63
(b) Should the award be remitted or set aside for error on the face of the
record
(i) General or specific reference
[64] The first question is whether, in this case, the reference to arbitration was
specific or general. The judge found at paragraph 86 that “Specific questions of
law and the construction of clause 2.4 of FIDIC COC were indeed referred to the
decision of the arbitrator” and “the award of the arbitrator ought not to be set
aside or remitted unless I find on the face of the award that the Arbitrator had
proceeded illegally or on principles of construction which I do not countenance”.
[65] Mr. Newman contended that the judge is wrong. The matters before the
arbitrator were part of a general reference to arbitration. He asserts that the
production of a list of issues for hearing and determination in a partial award (set
out in the 5th
December letter) did not serve to change the nature of the reference.
[66] Mr. Fitzpatrick responded in his written submissions that:
(a) NIPDEC’s complaint is, in reality, not one of construction. Rather, it is
that the arbitrator should not have found that evidence of the
Government’s wealth did not constitute reasonable evidence of NIPDEC
having made and maintained financial arrangements to pay the contract
price at the relevant time.
(b) NIPDEC is really seeking to attack the arbitrator’s findings of fact.
(c) What constitutes “reasonable evidence” is not a matter of construction but
is to be determined in light of all the circumstances.
(d) It is clear that the arbitrator’s findings on what was required to comply
with the reasonable evidence requirements of clause 2.4 were arrived at
after a consideration of the circumstances of the case and all relevant facts.
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(e) The arbitrator’s findings are in answer to the specific question posed by
NIPDEC, to wit:
“Assuming, without admitting, that [NHIC] was entitled to make
the request pursuant to sub-clause 2.4 did the facts and
circumstances including inter alia, the [financial arrangements
correspondence] ‘satisfy the evidential threshold’ required by
sub-clause 2.4?”
[67] In his oral submissions Mr. Fitzpatrick stated that whether the financial
correspondence constitutes sufficient evidence was a question of fact. That was
demonstrated by the positions of both parties and the approach of the arbitrator in
coming to his conclusion. Mr. Fitzpatrick submitted further, that specific
questions of law having been asked and answered, the general rule is that the
arbitrator is the sole and final judge of all questions of law and fact. The Court
will not interfere with the award, even if it is erroneous, unless it appears on its
face that the arbitrator has proceeded illegally.
[68] In my judgment, the reference was not a specific reference. The
construction of clause 2.4 is at the heart of the issue of validity under section 16
but its interpretation arises in the course of deciding whether the invocation of
clause 16 by NHIC was correct.
[69] An examination of the amended Terms of Reference and Appendix B to
the amended Terms of Reference is required. The issues addressed in the SPA
were not originally referred to the arbitrator. The disputed events occurred in
November 2006, well after the date of the initial request for arbitration and the
original Terms of Reference which were dated 1st December 2005. The parties
therefore agreed to amend the Terms of Reference to enlarge the arbitrator’s
jurisdiction to include matters not originally referred. The liability issues which
formed the subject matter of the SPA were then expressly included in the
amended Terms of Reference.
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[70] The parties agreed, by a jointly signed letter of agreement dated 5th
December 2006, that certain liability issues should be dealt with in the first
substantive hearing. Thereafter they also agreed the following “broad issues”:
1. Validity of NHIC’s Suspension.
2. Whether the Engineer suspended any portion of the Works.
3. Whether Nipdec agreed to NHIC’s suspension and/or reduction in the rate
of work.
4. Validity of NHIC’s termination.
5. Validity of Nipdec’s termination - 15.2/acceptance of repudiation.
6. Nipdec’s seizure of NHIC’s Goods and Equipment following termination.
7. Contractual requirements for notification of claims by the Employer and
by the Contractor - DEFERRED TO SECOND HEARING.
8. Extent of legal responsibility for design.
9. Compliance by NHIC’s with sub-clause 8.3 of the Contract - DEFERRED
TO SECOND HEARING.
10. Reviewability of Engineer’s awards of extension of time.
[71] An examination of the list reveals that the interpretation of clause 2.4 was
not directly listed as an issue for arbitral decision. What was actually referred
was the validity of NHIC’s suspension and subsequent termination of the contract
pursuant to clause 16(1) and (2) respectively of the contract (items 1 and 4 of the
list). There was no “specific” referral of clause 2.4. Rather (consistent with
Absalom) the interpretation of clause 2.4 arises in the course of consideration of
clause 16.
[72] Appendix B to the amended Terms of Reference bears this out. Paragraph
1-3 plainly states that the parties having agreed the broad issues (set out above);
“Thereafter, at the invitation of the arbitrator (emphasis mine) the
parties formulated specific questions to reflect issues 1-6, 8 and 10
aforesaid”.
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Therefore, the questions which were posed to the arbitrator, arose after the
validity of NHIC’s suspension, pursuant to clause 16(1), had already been
referred to him. The arbitrator, in order to obtain assistance on that broad issue,
asked that specific questions to be posed no doubt in an effort to focus on the
issues.
[73] The arbitrator then decided that certain of those questions were to be dealt
with at the first hearing. Among them were the following questions (which alone
are relevant to this appeal). I shall set them out in the format in which they are set
out in Appendix B (subject to contextual changes).
Broad Issue (1): “Validity of the Claimant’s suspension”
1.4.1 Claimant’s [NHIC’s] Questions
“(a) Was [NHIC] entitled to reduce the rate of work under sub-
clause 16.1 on 23rd
June 2005 by reason of [NIPDEC]
failure to provide reasonable evidence as required by sub-
clause 2.4 that financial arrangements had been made and
were being maintained so as to enable [NIPDEC] to pay
the contract price as estimated at the time?
(b) Was [NHIC] entitled to suspend the works under sub-
clause 16.1 from 23rd
September 2005 until termination by
reason of [NIPDEC’s] failure to provide reasonable
evidence as required by sub-clause 2.4 that financial
arrangements had been made and were being maintained
so as to enable NIPDEC to pay the contract price as
estimated at the time?”
1.4.2 Respondent’s [NIPDEC’s] Questions.
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“(i) Given the true meaning and effect of sub-clause 2.4 of the
Contract and in the events which have transpired, was
[NHIC] entitled to request from NIPDEC “reasonable
evidence that financial arrangements had been made and
were being maintained” and which enable the Employer to
pay the Contract Price as contemplated by Sub-Clause 2.4
of FIDIC (“the request”)?
(Question IV on the list)
(ii) Assuming, without admitting, that NHIC was entitled to
make the request pursuant to Sub-Clause 2.4, did the facts
and circumstances including, inter alia, [Nipdec’s] letters
and memoranda dated 28th
December 2004, 29th
December
2004, 5th
July 2005, 6th
July 2005, 6th
October 2006 and
20th
October 2006 (the financial arrangements
correspondence) “satisfied the evidential threshold”
required by sub-clause 2.4?
(Question V on the list)”
[74] In my judgment therefore, the questions raised by the parties, were posed
at the direction of the arbitrator to assist him in coming to a decision on the
validity of NHIC’s decision to suspend under clause 16. Clause 2.4, though
central to the decision, was a provision which fell to be interpreted by the
arbitrator in the course of his consideration of clause 16. It was not specifically
referred to the arbitrator as a question of law.
[75] The judge therefore erred in holding that the questions were specific
references to arbitration. She did not give full consideration to the contents of
Appendix B of the amended Terms of Reference which showed that the questions
were requested by the Arbitrator after the referral had been made to him. The
matter not being a specific question, this court can remit the matter for the
arbitrator, or set the award aside if there is shown to be an error on the face of the
Page 37 of 63
award.
(ii) Is there an error on the face of the award
[76] I find it necessary to look at the arbitrator’s findings and pattern of
reasoning. I have summarised the arbitrator’s decision, including the questions he
poses and considers, as follows:
(a) The mere fact that an Employer is wealthy is inadequate for the
purposes of Sub-Clause 2.4. Similarly, the mere fact that an Employer
has good reasons for wanting a project completed does not itself mean
he has made and maintained the necessary financial arrangements.
Accordingly, the evidence given at the hearing to the effect that the
GORTT has very substantial funds is, prima facie, insufficient by itself
for satisfying 2.4. Does the mere fact that the GORTT has funds in
general mean it has “made arrangements” enabling it to pay? The
answer emerging from the evidence … as regards the significance of
cabinet approval, is that (quite property, and for very good public policy
reasons) the GORTT cannot pay large sums of public money in respect
of cost overruns on construction contracts unless cabinet approval is
given in advance or, perhaps, retrospectively. The issue of cabinet
approval cannot simply be ignored. It is, at some point, an essential
element of any “arrangement” to pay.
(b) The first point to arise is whether the letters of 5th
and 6th
July 2005
satisfied the 2.4 requirements i.e. whether the letters contained
“reasonable evidence” of arrangements enabling the Employer to pay
the then - current estimated Contract Price (TT$286 million - see MoH
letter of 5th
July 2005). In determining whether the letters constitute
reasonable evidence, “all relevant circumstances” must be considered.
(c) It is noteworthy that Sub-Clause 2.4 does not simply require evidence
Page 38 of 63
that “the Employer is able to pay”. Instead it requires evidence that
“financial arrangements have been made and are being maintained”
which will enable the Employer to pay. Proper weight has to be given to
all the words which have been included in Sub-Clause 2.4.
(d) “Reasonable evidence” that “financial arrangements have been made
and are being maintained which will enable the employer to pay the
contract Price” would ordinarily involve, prima facie, some evidence of
cabinet approval having been obtained (see Sub-Clause 2.4).
(e) As at 5th
and 6th
July 2005 it was probable that no “financial
arrangements” had in fact been made to enable the Government of the
Republic of Trinidad and Tobago to pay NHIC for the sums, beyond the
initial IDB loan, that were being incurred and that, consistent with that
position, the letters of 5th
and 6th
July 2005 did not provide (as required
by 2.4) “reasonable evidence that financial arrangements” had been
made and were being maintained which would enable the employer to
pay the estimated contract price.
(f) Although the letters of 5th
and 6th
July had the potential to convey
reasonable evidence for the purposes of clause 2.4, Mr. Elias by his
letter of 8th
July raised the issue of the use of the terms “without
prejudice” and whether Cabinet approval had been obtained. If
Ministry of Health had responded to these queries by explaining that the
term without prejudice did not mean that the Ministry was avoiding
taking responsibility for the contents of the letter and that
notwithstanding the absence of Cabinet approval these were adequate
arrangements to pay, then the letter would, when read in light of those
subsequent clarifications, have amounted to reasonable evidence. But
this did not happen. Mr. Elias received no response to his letter. The
failure to respond is a relevant circumstance in deciding whether the
employer submitted “reasonable evidence”.
Page 39 of 63
(g) The letter of 5th
July was equivocal because of use of the phrase
“without prejudice” and because of the absence of reference to Cabinet
approval.
(h) There being no response to Elias’ letter of 8th
July and by choosing to
leave the letters of 5th
and 6th
July in their equivocal state, the employer
failed to provide reasonable evidence of financial arrangements. A
timely reply to Mr. Elias’ letter may well have rendered the letters
reasonable evidence because the letters did supply “some” evidence of
financial arrangements. Since no such reply was produced at all, the
evidence remained inadequate for the purposes of sub clause 2.4.
(i) The earliest date at which it could be said that “financial arrangements
had been made” which would enable the employer to pay the Contract
Price was the point at which the letter dated 29th
September 2006 from
Nipdec was approved and signed on 3rd
October 2006 by the Attorney
General and Minister Enil, in circumstances where the Minister of
Health (the Honourable John Rahael) had held discussions with the
Prime Minister and Minister Enil and the Attorney General on the same
day (3rd
October 2006).
(j) Thus, the necessary “financial arrangements had been made” on 3rd
October 2006. Clause 2.4 further requires that the employer should
submit to the contractor “reasonable evidence” that those financial
arrangements have been made. Thus the question arises, was such
reasonable evidence provided?
(k) Until the employer passed on the information about approval of 3 key
Cabinet Ministers to the course of action of the letter of 6th
October
2006, it had not submitted reasonable evidence. The employer did not
take the opportunity until 3rd
November 2006 to explain the steps to get
Cabinet approval.
Page 40 of 63
(l) The MoH 6th
October 2006 letter was drafted after Nipdec had taken
legal advice. It was produced on 6th
October, 2006, but Nipdec only
hand-delivered it to NHIC on 19th
October 2006. On 27.10.06 NHIC
requested confirmation of cabinet approval. Since two weeks before, the
Permanent Secretary had taken action to go to cabinet for approval
(T4/80/lines 3-5). Although the Permanent Secretary had by 30th
October 2006 actually prepared a Cabinet Note she did not succeed in
telling NHIC of that prior to the expiry of the deadline of 31st October
2006. The deadline was stated in NHIC’s 27th
October 2006 letter. She
got the NH letter on 27th
October, which was a Friday. So NH were not
told about the steps to get cabinet approval, and on 3rd
November 2006
NH issued a notice of termination.
Did the employer provide reasonable evidence pursuant to clause 2.4 on
or after 3rd
October 2006?
(m) The suspension in mid-2005 arose by reason of the Clause 2.4 request
preceding the suspension. The cost report No. 5 issued on 23rd
May
2005 showed an estimated contract price of TT$286,992,070. NHIC’s
21 days notice under Clause 16.1, in respect of suspending work unless
2.4 evidence was produced, was dated 31st May 2005. The Permanent
Secretary’s letter of 5th
July 2005 refers to funds in the sum of
TT$286,992,070 “to meet the estimated final cost to completion”. This
remained the estimated final cost until, on 5th
October 2006, Mr. Zak of
Stantec determined a figure of TT$224,129,801.99. It is this latter,
lower, figure that is referred to in the MoH letter of 6th
October 2006.
(n) It is Nipdec’s case, that the relevant Clause 2.4 request is that made at a
time when the estimated contract price was the higher figure of
TT$286,992,070. Certainly, Permanent Secretary Jones’ letter of 6th
October 2006 does not provide “reasonable evidence” of financial
arrangements having been made and maintained which would enable
Page 41 of 63
the employer to pay the higher figure (about TT286 million) as distinct
from the lower figure (TT$224 million). Thus, even if the information
had been passed on about the approval by the three key Cabinet
Ministers, that would simply have been to give “reasonable evidence” as
regards a payment limited to $224,129,801.99, and not in respect of the
higher figure of $286,922,070. Yet it is Nipdec’s case that the “request
from the contractor” that underlies the “reasonable evidence” that the
Employer was seeking to submit to the Contractor by the Ministry of
Health’s letter of 6th
October 2006 was the request made at the time
when the relevant estimated final cost to completion was $286,992,070.
Hence, (on Nipdec’s own case) even if the information about the three
Cabinet Ministers had been provided, the letter of 6th
October 2006
would not have satisfied the requirements of Clause 2.4. In such
circumstances, assuming NHIC satisfied all the other requirements as
regards time periods, and procedure as set out in Clauses 2.4 and 16, it
was entitled by Clause 16.2(a) to terminate the contract in November
2006.
[77] I also find it necessary to set out the correspondence before the arbitration
as it relates to the financial arrangements to satisfy clause 2.4. I shall set out in
their entirety the letters of 5th
and 6th
July 2005 respectively from the Permanent
Secretary, Ministry of Health and the general manager of NIPDEC. These letters
are in response to NHIC’s letter of 28th
April 2005 invoking clause 2.4 and
requesting “reasonable evidence” that financial arrangements have been made
and are being maintained to pay the then contract price at this time. The then
estimated contract price was then $286,992,070.00.
[78] I shall also set out in some detail NIPDEC’s letter of 29th
September 2006,
to the Minister of Health, the letter of 6th
October 2006 from the Permanent
Secretary Ministry of Health (the draft of which was submitted to the Minister by
NIPDEC’s September 29th
letter), NIPDEC’s letter of 20th
October 2006 and
NHIC’s reply dated 27th
October 2006
Page 42 of 63
“July 6, 2005
Mr. John Connon
Managing Director
NH International (Caribbean) Limited
39 Long Circular Road
St. James
Dear Sir,
Re: Scarborough Hospital - Confirmation of Funds
In accordance with Clause 2.4 please note that the Ministry of
Health has advised without prejudice that funds are available in
the sum of TT$286,992,070.00 to meet the final cost to completion
for the Scarborough Hospital. Attached is a copy of a letter from
the Permanent Secretary, Ministry of Health to NIPDEC on this
matter.
Please note that the Ministry’s interim declaration is made in good
faith pending a Final Cost Agreement by the relevant parties
concerned as per the procedural rules governing the determination
of the Final Cost to completion.
Yours faithfully
/s/ Margaret Mc Dowall-Thompson
Margaret Mc Dowall-Thompson
General Manager”
“July 05, 2005
Mr. Kenneth Crichlow
Programme Manager
National Insurance Property Development Co. Ltd.
56-60, St. Vincent Street
PORT OF SPAIN
Dear Mr. Crichlow
IDB Loan No. 937/OC - TT - Scarborough Hospital - Request for
evidence of Financial Arrangements
Reference is made to your fax dated June 29, 2005 and to the legal
advice from your Attorneys Mr. M. Hamel-Smith & Co. on the
Page 43 of 63
captioned subject.
The Ministry of Health is aware of the procedural matters
pertaining to the determination of the final estimated contract
price, which is yet to be finalized and agreed upon. Given the
prevailing circumstances, the only document the Ministry can rely
on is the Quantity Surveyor’s Cost Report No. 5 (as at 30th
April,
2005) dated May 23, 2005. This report indicated an Estimated
Final Cost to completion of TT$286,992,070.
In this regard, the Ministry of Health hereby advise, without
prejudice, that funds are available in the sum of TT$286,992,070
to meet the estimated final cost to completion for the Scarborough
Hospital.
Please be advised that the Ministry’s interim declaration is made
in good faith pending a Final Cost Agreement by the relevant
parties concerned as per the procedural rules governing the
determination of the Final Cost to completion.
Please be guided accordingly.
Yours sincerely,
/s/ Reynold Cooper
Permanent Secretary”
“29th
September 2006
Honourable John Rahael
Minister of Health
Ministry of Health
63 Park Street
Port of Spain
Dear Honourable Mr. Rahael,
Re: New Scarborough Hospital, Tobago -
…
We refer to the mater at caption and particularly our numerous
discussions as to the immediate re-possession of the Scarborough
Hospital site to facilitate the resumption of construction work.
You will be reminded that, notwithstanding the position taken by
NIPDEC and the Government to NH International on the 5th
July
Page 44 of 63
2005, that the sum of TT$286,992,070.00 was available to meet the
estimated final cost to completion of the project, NH International
proceeded to suspend works on the site.
As part of the ongoing arbitration proceedings, both NIPDEC and
NH International have been engaged in considerable work with the
Independent Quantity Surveyor. This has helpfully resulted in
agreement between the parties on many items, with some items
clearly disagreed.
As a result of this, NIPDEC requested, and our Engineer, Stantec
Consulting International Limited, has by letter dated the 28th
September 2006 made a determination that the current Contract
Price is now estimated to be TT$224,129,801.99 VAT inclusive
which is lower than the contract price as previously approved by
the Ministry of Health (above).
In light of the same, our external Attorneys-at-Law have, after
consultation with Mr. Stuart Catchpole Queen’s Counsel, advised
that a renewed letter should be issued by the Ministry of Health to
NH International stating that financial arrangements have been
made and continue to be maintained, which will enable the
Employer to pay the Contract Price. We now enclose a draft copy
of this letter.
This course of action, at the present time, is the best available
method to achieve the pressing objective of lawfully re-gaining
possession of the site.
Once you are in agreement, we kindly request that the permanent
Secretary sign the attached letter and return the same to our
offices for delivery to NH International. We have enclosed a soft
copy of the draft letter herein for your convenience.
As always, I am available to discuss the same with you.
We look forward to your urgent response.
Yours faithfully,
NATIONAL INSURANCE PROPERTY
DEVELOPMENT COMPANY LIMITED,”
“October 06 2006
N.H. International (Caribbean) Limited
39 Long Circular Road
St. James
Page 45 of 63
Attention: Mr. Peter V. Morris
Dear Sir,
Re: Scarborough Hospital, Tobago: Reasonable Evidence of
Employer’s Financial Arrangements.
We refer to your letter of 3rd
September, 2004 requesting pursuant
to Clause 2.4 of FIDIC that the Employer submit reasonable
evidence that financial arrangements have been made and are
being maintained which will enable the Employer to pay the
Contract Price (as estimated at that time) in accordance with
Clause 14. Your letter erroneously refers to NIPDEC as the
Employer. As you are aware, “Employer” is defined in the
Particular Conditions as being The Government of Trinidad and
Tobago.
We also refer to NIPDEC’s letter to you of 29th
December, 2004
enclosing a Memo addressed to NIPDEC from the Project
Administration Unit of the Ministry of Health dated 28th
December, 2004 confirming the availability of funds from
Government (as approved by Cabinet) and including the allocation
of funds for the Tobago House of Assembly Public Sector
Investment Programme. We also refer to NIPDEC’s letter of 6th
July, 2005 enclosing a letter to NIPDEC from the Acting
Permanent Secretary, Ministry of Health dated 5th
July 2005
submitting further reasonable evidence of financial arrangements
in compliance with Clause 2.4. NIPDEC’s letters and the Ministry
of Health correspondence and memoranda are hereafter referred
to as “the Financial Arrangements correspondence”.
In light of the definition of “Employer” given in the Particular
Conditions as well as the content of the correspondence referred to
above, it is clear that NHIC has always been aware that the
Government is the Employer under the relevant contract wherein
NIPDEC acts as agent of the Government only. In the
circumstances, both NIPDEC and the Government maintain that
the Financial Arrangements correspondence fully complies with
the requirements of Clause 2.4 of FIDIC. These matters are dealt
with in NIPDEC’s Points of Defence and the assertions set out in
the Defence are here adopted.
In the circumstances, both NIPDEC and the Government maintain
that NHIC wrongfully suspended the works following the
Engineer’s determination under Clause 3.5 that reasonable
evidence of financial arrangements had been furnished by
NIPDEC and the Government. Further, NHIC wrongfully refused
Page 46 of 63
to comply with the Engineer’s instructions given on 19th
July, 2005
to recommence work and to remedy defective work notified prior to
NHIC’s request pursuant to Clause 2.4.
Notwithstanding the above, the Government wishes to place
beyond doubt the true status of financial arrangements made and
being maintained which will enable the Employer Government to
pay the Contract Price as quantified in accordance with the
provisions of the Contract.
In this regard, the Government confirms the following:
1. Completion of the new Scarborough Hospital is of the
highest priority with regard to the administration of health
care in the sister Island of Tobago. The Government of
Trinidad and Tobago, in discharging its duty to provide
adequate health care to the citizens of the country will not
default on any obligation required to be performed by it in
order to ensure the completion of the new Scarborough
Hospital.
2. The current estimate of the Contract Price following very
useful work with the IQS put the price at Two Hundred and
Twenty Four Million One Hundred and Twenty-nine
Thousand Eight Hundred and One Dollars and Ninety-Nine
cents ($224,129,801.99), VAT inclusive, as confirmed in the
Engineer’s letter to NIPDEC dated 5th
October, 2006 a
copy of which is attached hereto.
3. We confirm that these funds are available from the
consolidated fund for disbursement to NIPDEC for onward
payment to NHIC or for direct payment to NHIC.
4. Monies certified or found to be due NHIC pursuant to the
provisions of the Contract will be paid by the Government.
5. The Government stands fully behind the project and in
support of it and will meet the contractual financial
requirements for completion of the project to a standard fit
for the intended operation of a first-class health care
facility.
This letter is being copied to relevant parties, including the
Engineer.
Yours sincerely,”
Page 47 of 63
“20th
October, 2006
NH International (Caribbean) Limited
39 Long Circular Road
ST. JAMES
Attention: Peter V. Morris
Re: Scarborough Hospital, Tobago: Reasonable Evidence of
Employer’s Financial Arrangements.
We refer to letter dated 6th
October, 2006 from the Permanent
Secretary, Ministry of Health issued to place beyond doubt the true
status of financial arrangements that were made from the outset of
this Contract, which have been maintained throughout the period
of the Works to date and which will be maintained until any monies
due under the Final Payment Certificate in accordance with
Clause 14 are paid. This letter is to be read as supplemental to the
Permanent Secretary’s letter and is provided with the authority of
the Ministry of Health to further clarify pertinent matters on the
issue of financial arrangements.
The further evidence of the Employer Government’s ability and
intention to pay any sums properly due under the contract is set
out in the Permanent Secretary’s letter dated the 6th
October,
2006. The Permanent Secretary’s letter and this letter are
however without prejudice to NIPDEC’s and the Government’s
contention that NHIC is in repudiatory breach of its obligations
under the Contract by reason of amongst other things, its wrongful
suspension of the Works, its refusal to recommence works after
receipt of the Financial Arrangements correspondence as defined
in the Permanent Secretary’s letter dated 6th
October, 2006 and its
refusal to comply with the Engineer’s determinations under clause
3.5 and instruction to recommence work given on 19th
July 2005.
NIPDEC’s and the Government’s right to proceed under Clause
15 of the Contract in respect of the matters referred to above
and/or to accept NHIC’s repudiatory breach(es) of contract are
fully reserved. Nothing in this letter or the Permanent Secretary’s
letter dated 6th
October, 2006 shall be taken as a waiver of such
rights or as otherwise precluding NIPDEC or the Government
from exercising such rights in the future.
Yours faithfully,
Wendy Ali
General Manager (Ag.)”
Page 48 of 63
“Friday, October 27, 2006
Office of the Permanent Secretary
Ministry of Health
63, Park Street,
Port of Spain
Trinidad
Fax: 623-0732
Attention: Ms. Sandra Jones - Acting Permanent Secretary
Dear Sirs,
Re: New Scarborough Hospital Project - IADB Loan 937/OC-
TT Additional Funding from Ministry of Health
We acknowledge receipt of your letter dated 6th
October 2006
concerning our long-standing requests for reasonable evidence
that financial arrangements have been made and are being
maintained to pay the Contract Price for the New Scarborough
Hospital Project (as estimated at this time) in accordance with
Clause 2.4 of the FIDIC General Conditions, to which we respond
as follows:
1. …
2. Evidence of financial Arrangements
We confirm receipt of a memorandum addressed to NIPDEC from
the Public Administration Unit of the Ministry of Health dated 29th
December 2004 confirming that on 16th
December 2004 Cabinet
approved additional funding the sum of TT$59.1m for this Project,
brining the accumulated funding up to TT195m (VAT
INCLUSIVE).
However, this Cabinet approved funding is substantially less than
the Revised Contract Price estimated by the Engineer as shown on
his Interim Payment Certificate 27 dated 28th
July 2005 in which
the Current Contract Amount is shown to be TT$249,558,321.74
(excluding VAT), which is equivalent to approximately TT $287
million (including VAT)
Accordingly we requested from NIPDEC evidence of the additional
funding required to meet the revised Contract Price of TT$287
million and under cover of a letter from NIPDEC dated 6th
July
2005 we received a communication from the Ministry of Health
dated 5th
July 2005, but it did not confirm the availability of any
additional Cabinet approved funds and was written on a Without
Page 49 of 63
Prejudice basis.
The letter from the Ministry dated 5th
July 2005 does not therefore
constitute reasonable evidence of financial arrangements in
compliance with the relevant clauses of our Contract.
Subsequently several written requests from us to NIPDEC for
evidence of Cabinet approval indicating our willingness to meet to
discuss resumption of work once such approval was provided have
received no response. This despite the fact that the Engineer
determined a current Contract Price of TT$287 million more than
15 months ago.
As you are well aware, Ministries cannot commit Public Funds
without Cabinet approval and this holds particularly true in the
construction industry in this jurisdiction where past experience
confirms that Ministries cannot pay sums admittedly due to
contractors where the original Contract Price has been exceeded
and Cabinet approval has not been obtained for the excess.
In this regard we can provide you, if necessary, with submissions
made by Ministries to a Cabinet-appointed Committee to
investigate indebtedness to Contractors confirming the absence of
Cabinet approval as the reason for non-payment of sums otherwise
due. We are certain, however, that you are familiar with this
restriction on the payment of Public Funds.
To the best of our knowledge and as confirmed to us verbally by
the Minister of Health, Cabinet approval has not been obtained for
payment of the sum of TT$287 million representing the Contract
Price at the time work was suspended, or for the sum of
$224,129,801.99 being the revised Contract Price advised by the
Engineer in his letter dated 5th
October 2006.
If, despite the information provided to us, Cabinet approval has in
fact been obtained, kindly forward evidence of this to us as soon as
possible and not later than Tuesday 31st October 2006 so that any
possible resumption of work on the Project will not be
unnecessarily delayed.
In the absence of this evidence your letter dated 6th
October 2006
does not constitute reasonable evidence of availability of the
required funds.
3. …
In light of the above, we reject entirely your allegation that NHIC
wrongly suspended work on this Project and confirm that the issue
of suspension of work is one of the several disputes referred to
Arbitration. The Arbitration Hearing is scheduled to commence on
Page 50 of 63
15th
January 2007 for a period of 3 weeks.
We look forward to receiving the requested evidence of Cabinet
approval of the additional funding now required without further
undue delay and in any event no later than Tuesday 31st October
2006.
Yours faithfully
For NH International (Caribbean) Limited
/s/ Peter V. Morris
Peter V. Morris
Acting Project Manager
Encl: NIPDEC letter dated 21st July 2005
NHIC letter dated 10th
October 2006 (ref:
1086/PVM/1499)”
[79] Mr. Newman launched a heavy assault on the arbitrator’s finding. He
submitted that the findings were akin to Wednesbury unreasonableness and
submitted as follows:
- what constituted “reasonable evidence” of financial arrangements was a
mixed question of law and fact
- that the judge was wrong to find that “the question was one of fact in the
sole purview of the arbitrator”
- that the arbitrator was wrong in his decision to reject the letter of 6th
October 2006 from the Permanent Secretary, Ministry of Health and it was
a decision to which no reasonable arbitrator would have come
- that the letter of 6th
October 2006 was a full and sufficient guarantee for
the purposes of clause 2.4 and even if it referred to the lesser sum of $225
million, it was still a sufficient guarantee for the purposes of the
expenditure required at the time for the works
- that the letter was signed by the Permanent Secretary, an accounting
Page 51 of 63
officer under the Exchequer and Audit Act Chap. 69:01, who had
ostensible if not actual authority to bind the Ministry of Health
- in that regard the absence of any reference to Cabinet approval in the
letter, was of no major significance. So too was the reference to the
phrase “without prejudice”.
[80] In my judgment “reasonable evidence” of financial arrangements under
clause 2.4 is a mixed question of law and fact. The following extract taken from
Hudson’s Building and Engineering Contracts, Volume 2, 11th
Edition
demonstrates the point:
“… it has long been recognised that some questions of law
depend upon applying what have been called primary facts to a
legal proposition itself containing a factual element …
sometimes described as a question of mixed law and fact or
simply as a secondary finding of fact. Classical examples would
be a finding that, on primary facts found, a contract had been
frustrated or that a particular period constituted a reasonable
time within which service of required notice was to take place.”
(authorities cited)
See also Devlin J in Universal Cargo Carriers Corporation v. Citati [1957] 2
QB 401, 435 speaking on the doctrine of frustration he said:
“… while the application of the doctrine of frustration is a matter
of law, the assessment of a period of delay sufficient to constitute
frustration is a question of fact.”
[81] Similarly, in this case the assessment of the evidence is a question of fact.
Whether that evidence is “reasonable” is a question of law. It is an objective
standard. Since it is an objective test, it is reviewable by a Court of law.
Page 52 of 63
Moreover, in applying the law to the facts any wrongful conclusion or wrongful
inference of fact is also reviewable as an error of law. See Lord Radcliffe in
Edwards v. Bairstow 1956 A.C. 14 at page 36, as follows:
“If the case contains anything ex facie which is bad law and
which bears upon the determination, it is, obviously, erroneous
in point of law. But, without any such misconception appearing
ex facie, it may be that the facts found are such that no person
acting judicially and properly instructed as to the relevant law
could have come to the determination under appeal. In those
circumstances, too, the court must intervene. It has no option but
to assume that there has been some misconception of the law and
that, this has been responsible for the determination. So there,
too, there has been error in point of law. I do not think that it
much matters whether this state of affairs is described as one in
which there is no evidence to support the determination or as one
in which the evidence is inconsistent with and contradictory of
the determination, or as one in which the true and only
reasonable conclusion contradicts the determination.”
[82] See also Lord Diplock in Pioneer Shipping Ltd v. BTP Tioxide Ltd
[1982] AC 724 at 742 letter E approving, Lord Denning M.R’s decision in the
Court of Appeal:
“…to justify interference with the arbitrator’s award it must be
shown (i) that the arbitrator misdirected himself in law or (ii)
that the decision was such that no reasonable arbitrator could
reach”
The question in this case therefore is whether in arriving at his decision the
arbitrator misdirected himself as to the meaning of “reasonable” or whether his
decision was one to which no reasonable arbitrator could come. Both such errors
Page 53 of 63
would be errors of law, the second may involve a wrongful conclusion or
wrongful inference of fact made in the course of the evidence.
[83] The judge found that the arbitrator’s findings were “without exception”.
But at this stage given her finding that the reference was a specific one, the
judge’s examination of his decision was directed at whether “the arbitrator has
proceeded illegally or on principles of construction which I do not countenance”.
An error of law would not have been sufficient to cause the court to remit or set
aside.
[84] In light of my finding that the arbitral reference was general, any error of
law appearing on the face of the award is sufficient to set aside the award and
remit it to the arbitrator with directions. Having looked at the evidence and in
particular at the financial correspondence quoted above. I find that there are
several errors on the face of the award. These are:
(i) His finding that “reasonable evidence” that financial arrangements have
been made and are being maintained would ordinarily involve, prima
facie, some evidence of cabinet approval having been obtained.
(ii) The arbitrator’s finding that the letters of 5th
and 6th
July 2005 did not
provide reasonable evidence of financial arrangements.
(iii) His finding the letter of 5th
July was equivocal because of the use of the
phrase “without prejudice” and because of the absence of reference to
Cabinet approval.
(iv) His rejection of the letter of 6th
October 2006 from the Permanent
Secretary Ministry as not having satisfied the provisions of clause 2.4.
(v) His finding, in the alternative, that the letter of 6th
October 2006 from the
Permanent Secretary, Ministry of Health did not provide reasonable
Page 54 of 63
evidence of financial arrangements having been made and maintained
which would enable NIPDEC to pay the sum of TT$286,992,070.00 as
distinct from the lower figure of TT$224,129,801.99. His reasoning was
that the letter of 6th
October 2006 referred to the lower figure while the
notice of 28th
April 2005 was issued when the higher figure
TT$286,992,070.00 was still the projected contractual price.
Absence of Cabinet approval
[85] The first question is what is the intention behind clause 2.4. The authors
of the text “Understanding the Fidic Red Book” 2nd
Edition - (by Jeremy Glover
and Simon Hughes) say of clause 2.4, at paragraph 2.031, page 46, that:
“This is an entirely new provision. It provides a mechanism
whereby the Contractor can obtain confirmation that sufficient
funding arrangements are in place to enable it to be paid. This is
something which may be of particular importance if the
Employer is a company which has been specifically set up to
carry out the project in question and this is therefore, typically
backed by loan finance.”
[86] They note however that:
“One potential difficulty with this clause is that no definition of
“reasonable evidence” has been provided. All that is said is that
the evidence must show that the Employer is able to pay the
Contract Price in accordance with cl. 14. Given that a
Contractor has the potential right to terminate if reasonable
evidence is not provided, it is easy to see how a dispute could
arise as to the sufficiency of any evidence supplied. Also the sub-
clause does not either provide how often or with what frequency
a Contractor can make such a request. The timing of a request
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might be considered to have an impact on the reasonableness of
it.
This sub-clause deals with matters arising in the course of the
contract. It might therefore be particularly important if a
significant and thereby costly variation is instructed mid-way
through the project which takes the Contract Price considerably
over the limits of the financial evidence provided to date by the
Employer”.
In my judgment a primary concern for the insertion of clause 2.4 must be the
ability of the employer (particularly a company specifically formed to carry out
the project) financially to meet the actual contract price. I am fortified in this view
by the requirement in clause 2.4 that the Employer must give detailed particulars
to the contractor of any intended change to its financial arrangements, where these
changes are material changes. This surely attests to financing arrangements such
as the use of overdraft facilities. The concern must be about the ability to pay and
to be able to sustain it.
[87] In this regard the following statement of the arbitrator that:
“The mere fact that an Employer is wealthy is inadequate for the
purposes of Sub Clause 2.4. Similarly the mere fact that an
Employer has good reasons for wanting a project completed does
not itself mean he has made and maintained the necessary
financial arrangements”.
was wrong. It must be a relevant consideration that the Employer is wealthy and
financially able to pay the contract price.
[88] In this case there is a contractual obligation on NIPDEC to pay the
contract price and the GORTT has stated, in unequivocal terms in the letter of
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Permanent Secretary Ministry of Health dated 6th
October 2006, not only its
ability to pay out of the Consolidated Fund but also its commitment to the project.
I consider that the arbitrator committed a fatal error in disregarding the GORTT’s
ability and commitment to pay as part of the circumstances to be taken into
account in considering the question of reasonable evidence under clause 2.4. I
doubt that such written assurances from the British, French or American
Governments, by officials of equivalent rank, would have been similarly
disregarded.
[89] I accept that that cannot be the only consideration particularly when the
contract is between a state entity such as NIPDEC and the funding is being
provided by the GORTT. Administrative arrangements may also come into play.
The contractor legitimately may wish to ensure that those arrangements do not
inhibit the flow of payment. But the converse is equally true. Undue insistence
by the contractor on requiring administrative approvals may also inhibit the
smooth execution of the project.
[90] It is in this regard that the practicability of the necessity for Cabinet
approvals looms large. The arbitrator noted that “GORTT cannot pay large sums
of public money in respect of costs overruns on construction contracts unless
Cabinet approval is given in advance or, perhaps retrospectively. The issue of
Cabinet approval cannot simply be ignored”. It was an issue which also loomed
large in the arbitrator’s mind. It certainly is an important consideration but it was
not the only consideration.
[91] Clause 2.4 speaks of “reasonable” evidence. It does not require the best
or purest form of evidence. Reasonableness for the purposes of clause 2.4
depends on the nature of the evidence. Cabinet approval is no doubt the best form
of evidence of financial arrangements. Thus the evidence of Cabinet approval
would easily have satisfied the requirement of “reasonable” evidence in clause
2.4, as did the December 2004 letter. But the absence of Cabinet approval would
not necessarily have breached it, if the assurance of the Employer’s ability to pay
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came from the Permanent Secretary. The lack of Cabinet approval does not render
any other evidence “not reasonable”. That must turn on the nature of the
evidence. NHIC by its insistence on Cabinet approval was asking, not for
reasonable evidence, but for an absolute guarantee or assurance of payment. I
struggle to comprehend how the letters of the Permanent Secretary can be
regarded as anything but reasonable evidence and to such an extent that an entire
project is shut down by a private contractor after millions of dollars of public
funds have been spent.
[92] In this case, both letters of 5th
July 2005 and 6th
October 2006 came from
the Permanent Secretaries, Ministry of Health at the relevant times. Both letters
assured that funds of the payment of the contract were available. The signatories
were no ordinary signatories. They were variously the most senior public
servants in the Ministry of Health and two of the most senior in the entire public
service. Under section 85 of the Trinidad and Tobago Constitution a Permanent
Secretary is directly charged with the supervision of the Ministry in which he
serves. He or she reports to the Minister who has direction and control over the
department. The Permanent Secretary is an accounting officer. He has direct
charge of the Ministry’s finances, unlike a Government Minister. He is an
accounting officer under the Exchequer and Audit Act Chap 69:01.
[93] The letter of 5th
July 2005 signed by the Permanent Secretary (as an
accounting officer) affirmatively state that:
“The Ministry of Health hereby advise, without prejudice, that
funds are available in the sum TT$286,992,070 to meet the
estimated final cost to completion of the Scarborough Hospital”
The term “without prejudice” set out in the letter was of no moment. It is
obviously referable to the statement in the prior paragraph that the Ministry “is
aware of the procedural matters pertaining to the determination of the final
estimated contract price which is yet to be finalised and agreed upon” and that
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“the only document the Ministry can rely on is the Quantity Surveys report
[which] indicated an Estimated Final Cost to completion of TT$286,992,070.”
[94] The issue of “without prejudice” was therefore not open ended. It related
to the uncertainty as to the final estimated contract price. That uncertainty was
borne out by the fact that ultimately the contract price was certified to be
TT$224,129,801.99 by the Independent Quantity Surveyor. The assurance given
by the 5th
July letter could not have been rendered “equivocal” by the use of such
a phrase or by the fact that there was no Cabinet approval for the funding. More
importantly, the final paragraph of the letter describes the declaration as an
“interim declaration made in good faith pending a Final Cost Agreement …”. It
is clear from the document itself that the “without prejudice” provision is inserted
to take account of the uncertainty as to the final cost of the works. It required no
evidence from anyone as to their subjective concerns about the term.
[95] The letter of 6th
October is even more sanguine in its terms. It assured,
inter alia, “that these funds are available from the Consolidated Fund for
disbursement to NIPDEC for onward payment to NHIC or for direct payment to
NHIC”. The Consolidated Fund is established by section 112 of the Constitution
of Trinidad and Tobago. All revenues or other moneys raised or received by
Trinidad and Tobago are paid into the Consolidated Fund by virtue of section 112.
The assurance of such moneys being available is given by the Permanent
Secretary Ministry of Health an accounting officer under the Exchequer and
Audit Act chap 69:01. NHIC in its letter of 27th
October 2006 rejects both the 5th
July 2005 letter and the 6th
October 2006 letter as not being “reasonable evidence
of financial arrangements”. Its concern was that “Ministries cannot commit
public funds without Cabinet approval” and cited the comments made by various
Government Ministries (in respect of another matter) in support of its rejection of
the claim.
[96] Those concerns for the purposes of clause 2.4 were misplaced. They were
based on NHIC’s subjective assessment of what is “reasonable” evidence. What
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NHIC was seeking was the highest assurance of payment as opposed to
“reasonable evidence”. The use of the term “reasonable” places the marker
quite considerably lower.
[97] As stated at paragraph 90, the arbitrator noted that GORTT cannot pay
large sums of public money in respect of costs overruns on construction contracts
“unless Cabinet approval is given in advance or perhaps retrospectively”.
[98] He further concluded that “reasonable evidence” of financial arrangement
involved “some evidence of Cabinet approval”. This conclusion was arrived at
after considering the evidence of Sandra Jones, Permanent Secretary, Reynold
Cooper, Permanent Secretary, Emile Elias, Conrad Enil, Minister in the Ministry
of Finance. Minister Enil gave important evidence which I shall re-produce from
the award as follows:
“17.2 Minister Enil: (T2/20/lines 3-22).
17.2.1 In the course of direct examination by the Respondent’s
Counsel, the Minister stated (T2/4/line 17-5 line 12):
“The Government budgeting process is one that begins somewhere
in March of one year, concludes in September, and what the
Government basically does is that it appropriates amounts to
projects on the basis of best estimates at the point in time. The
mechanism allows the Government, during the course of the next
12 months, to go back to Parliament for supplementary
appropriation in circumstances where you either have additional
expenditure or you have changes in expenditure.
During that process, however, once Parliament approves sums for
a particular head, which is how the approvals are done, the
Minister of Finance has the power, on submission by the line
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Minister for the particular Ministry, to vary that expenditure
within the context of the approved Parliamentary process.
So, for example, the system recognises that in allocating an
amount by the Ministry, there are going to be instances in which
projects either do not go according to plan, or projects have
additional expenditures that are not anticipated. In those
circumstances, the line minister can, in fact, apply to the Minister
of Finance to simply, within the allocation, move funds around.
That is part of the normal process.
In circumstances where there are amounts that cannot be found
within the allocation, within the Ministry, the Government has a
mechanism called the Infrastructure Development Fund that
allows it to move funds from Ministry to Ministry to meet any
shortfalls; especially as it relates to infrastructure development or
capital programmes.” (Underlining added).
17.2.2 At T2/20/lines 3-22 the Minister explained that when
accounts are closed the Minister goes back to Parliament and
explains what happened during the course of the year and seeks
Parliamentary approval for decisions made. At T2/20/lines 15-22
is the following interchange in cross examination:
“Q: So, in fact, nothing goes from the Minister of Health to
Cabinet - to Parliament - without Cabinet approving at the end of
the day? The Minister of Health doesn’t make a decision to; no one
Minister, even the Minister of Health, makes a decision to increase
an allocation and to seek Parliamentary approval for that increase
without Cabinet approval, I’d assume?
A. The one - the one exception to that, of course, is the
Chairman of Cabinet, who can, in fact and will in fact, make
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decisions and then have the Cabinet ratify those decisions.”
The arbitrator concluded having looked at the evidence of the witnesses as
follows:
“ 17.5 Summary of conclusions re Cabinet approval:
From the summary of the evidence given above, it is apparent that,
although there may well be a possibility of moving funds within a
ministerial allocation without obtaining Cabinet approval in
advance, in order to make payments, the normal procedure, and
certainly the procedure which was consistently applied in the case
of the present Contract, was that no actual funds were to be paid
out unless there was prior Cabinet approval. Thus ‘reasonable
evidence’ that ‘financial arrangements have been made and are
being maintained which will enable the Employer to pay the
contract Price’ would ordinarily involve, prima facie, some
evidence of cabinet approval having been obtained (see Sub-
Clause 2.4).”
[99] In my judgment the conclusion is misplaced. The arbitrator in effect
concluded that only “normal procedure” could amount to “reasonable
evidence”. Although he added emphasis to the evidence of Minister Enil, in fact,
he gave too little weight to the evidence of Minister Enil that funds could be
moved from within a ministerial allocation, without Cabinet approval in advance;
that is to say, Cabinet approval to the payment could be obtained retrospectively.
Moreover, it was implicit in both letters, given the rank of the Permanent
Secretaries that subsequent Cabinet approval would be a formality. Certainly
Permanent Secretaries, as the evidence of Ms. Jones demonstrated, had an
important part to play in that process. The Permanent Secretary ostensibly had
power to bind the GORTT on that issue and would no doubt have been authorised
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by the Minister to issue the letter.
[100] In my judgment, the arbitrator placed too high a value on the necessity for
Cabinet approval and thus set the standard of “reasonableness” of the evidence
too high. This coloured his approach to what was “reasonable” evidence. It
required an objective assessment of the letters in the light of all the circumstances,
including the fact that GORTT was “wealthy”.
[101] Further, the finding that the 6th
October 2006 letter could not stand as
reasonable evidence of financial arrangements because it referred to the lower
figure of TT$224,129,801.99, was also a wrongful application of clause 2.4 to the
facts in this case. This too was an error of law.
[102] There was a dispute as to the final cost of the contract upon to the
termination of the contract by NHIC. This dispute commenced sometime prior to
28th
April 2005 when NHIC issued its second notice under clause 2.4. At the time
of NHIC’s request for arbitration on 25 August 2004, “under certification” of the
works was one of the items of dispute listed for arbitration. At that time the
estimated contract price was TT$286,992,070.00. It was thus necessary for
NIPDEC to show that financial arrangements had been made for this sum. After
the notice had been issued under clause 2.4, the works were suspended and the
parties were engaged in discussions to facilitate NHIC’s amicable disengagement
from the site. By the time these discussions fell through in September/October
2006, the Engineer had certified that the contract price was in fact estimated at
TT$224,129,801.99. This figure was later verified as correct by the Independent
Quantity Surveyor.
[103] In my judgment, it was wholly unrealistic, illogical and contrary to sound
business practice to hold NIPDEC to the higher sum because the 28th
April 2005
notice, requesting reasonable evidence, referred to the higher sum. (Indeed, it
may well be that, because of the period which elapsed, the notice, was no longer
valid but we heard no argument on this question). The 28th
April 2005 notice, (if
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still valid) could not then be construed as still applying to the old contract price. It
then fell to be construed at the lower figure. To construe the notice as applying to
the higher sum would have the illogical result of NHIC having been justified in
terminating the contract because NIPDEC could not provide reasonable evidence
of financial arrangements having been made to pay a contract price that was no
longer valid at the time of termination. No reasonable arbitrator would come to
such a conclusion. Such a construction was an error of law by the arbitrator. It
must be that at that stage, the estimated contract price of TT$224,129,801.99, as
set out 6th
October 2006 letter, was applicable.
[104] In the result, the appeal is allowed. The matter must be remitted to the
arbitrator with a direction that the letters of the Minister of 5th
July 2005 and 6th
October 2006 constituted reasonable evidence that financial arrangements had
been made and were being maintained to enable NIPDEC to pay the Contract
Price.
Order
[105] (1) The time fixed for filing the appellant’s fixed date claim is
extended to 26th
June 2007.
(2) The SPA is remitted to the arbitrator for his reconsideration and
the making of such consequential amendments as are necessary in the light
of the determination that NIPDEC had satisfied the provisions of clause
2.4.
We will hear the parties on the costs of the appeal.
Nolan P.G. Bereaux
Justice of Appeal