Costs in Arbitration
Anthony Hussey
LIABILITY FOR COSTS
–
Section 30 of the 1954 Act: The parties could not
agree on how costs were to be paid until after the
dispute had arisen.
–
Section 21(1) of the 2010 Act: “The parties to an
arbitration agreement may make such
provision as to costs of the arbitration as they
see fit”
2
–
September 2011 amendment to Public Works
form of tender: “We also agree that should a
dispute arise under any contract formed by
acceptance of this Tender that is referred to
arbitration, to the extent permitted by law, under
the Arbitration Act 2010 and a sealed offer has
not been made, or where a sealed offer has
been made and the contractor’s award is greater
than the sealed offer, then each party will bear
their own costs in relation to the arbitration
proceedings. If an award is equal to or less than
the sealed offer the contractor is liable for the
costs of both parties in relation to the arbitration
proceedings”
3
QUANTUM OF COSTS
•
The default position under Section 29 of the
1954 Act was that unless the parties agreed
otherwise, the costs would be taxed by the
Taxing Master of the High Court.
•
The default position under Section 21(4) of the
2010 Act is that unless one or other party
requests the arbitrator to refer the costs to the
Taxing Master for taxation within 21 days of his
award, the arbitrator must ascertain the amount
of costs payable under his order for costs.
4
Irish Awards Set Aside on Costs include:•
Vogelaar v O'Callaghan [1998] IESC 9
•
S&R Motors (Donegal) Ltd v Moohan and Another [2008]
IEHC 383
5
ISSUES OF LIABILITY
• Arbitrator has discretion, but discretion must be exercised judicially.
• The primary rule is that costs should follow the event i.e. the successful party
should be awarded his costs.
• Arbitrator may depart from that principle, but at his peril.
“The usual order (in arbitration and litigation) is that costs follow the event. If an
arbitrator is making a different or unusual Order for Costs a reasoned Award on
costs is necessary”. (Ercus Stewart: Arbitration Commentary and Sources).
“As it is well established, the Courts have a discretion to depart from the
general principle according to which the costs follow the event where there are
special or exceptional circumstances in a particular case”. (Emphases added) –
Supreme Court, O’Keeffe v Hickey & Others 2009 IESC 39.
6
THE SUCCESSFUL PARTY
Ascertaining the successful party can be difficult where:
a) There are preliminary issues;
b) A party succeeds but only recovers a small
fraction of the amount claimed;
c) A party is successful on some heads of claim but
unsuccessful on other quite separate heads of
claim;
7
Recent Shift in Judicial Thinking
Position remains that the overriding principle is that costs follow the event.
However: “……at least in complex cases………it seems to me to be incumbent
on the Court to attempt to do justice to the parties by fashioning where
appropriate, orders of costs which do more than simply award costs to the
winning side”. Clarke J, Veolia Water UK Plc v Fingal County Council 2006
IEHC 240
“Where the matter before the Court involved oral evidence and where the
evidence of certain witnesses was directed solely towards an issue upon which
the party who was, in the overall sense, successful, failed, then it seems to me
that, ordinarily, the Court should disallow any costs attributable to such
witnesses and, indeed, should provide, by way of set off, for the recovery by
the unsuccessful party of the costs attributable to any witnesses which it was
forced to call in respect of the same issue. A similar approach should apply to
any discrete item of expenditure incurred solely in respect of an issue upon
which the otherwise successful party failed”.
8
BANANA SKIN ISSUES
• Calderbank offers
(a) They create a benchmark (see Michael O’Reilly on Costs
in Arbitration Proceedings, 2nd Edition, Page 99)
(b) Should they be kept open for acceptance throughout the
proceedings?
• Counterclaims
(a) A separate award for costs of the counterclaim must be
made;
(b) A simple order awarding the claimant the costs of the claim
and the respondent the costs of the counterclaim may be
unfair;
9
ISSUES OF QUANTUM
• Rules of Court do not apply;
• Arbitrator must nonetheless act judicially;
• Bases for calculation – should the arbitrator follow a
commercial basis or seek to follow the principles applied by
the Taxing Master? In either event, the successful party will
usually only recover costs which were reasonable and
necessary on a party and party basis;
• Application of hourly rates (Cafolla v Kilkenny [2010] IEHC
248 Unreported, High Court, Ryan J., 5 February 2011)
10