Belize Natural Energy Ltd v Maranco Ltd

CourtCaribbean Court of Justice
Docket NumberCCJ Application BZCV2014/004; BZ Civil Appeal No. 35 of 2011
JudgeAnderson, J.
Judgment Date10 Mar 2015
JurisdictionCaribbean States

Caribbean Court of Justice

Nelson, J. CCJ.; Saunders, J. CCJ.; Wit, J. CCJ.; Hayton, J. CCJ.; Anderson, J. CCJ.

CCJ Application BZCV2014/004; BZ Civil Appeal No. 35 of 2011

Belize Natural Energy Ltd.
and
Maranco Ltd.
Appearances

Mr. E Andrew Marshalleck SC and Mr. David Morales for the appellant.

Mr. Eamon Courtenay SC for the respondent.

Costs - Assessment of costs — Arbitration costs — Whether the arbitrators had correctly applied the principle that costs follow the event Consideration of Matheson & Co. Ltd. v. A Tabah & Sons [1963] Vol.2 Lloyd's List Law Reports 270 and King v. Thomas McKenna Ltd. [1991] 2 Q.B. 480 — Power to remit — Remittal misconduct — Error of law — Costs follows the event — Whether the exercise to determine what constituted the event was to be conducted under the CPR or for purposes of arbitration — Consideration of Blue Horizon Shipping Co S.A v. E.D.F Man Ltd., The Aghios Nicolaos [1980] 1 Lloyd's Rep 17 — Whether the arbitrators had improperly awarded costs in an attorney client basis — Whether the arbitrators should have given reasons — Finding that the Arbitrators did not act outside of the perimeters in identifying the even that would dictate the award of costs — Appeal dismissed — Sections 4, 8, 11, 12 and 15 of the Arbitration Act — Rule 9 of the First Schedule to the Arbitration Act — CPR Part 64 and CPR Rule 44.3 (7).

EXECUTIVE SUMMARY
1

The appellant, Belize Natural Energy Limited (‘BNE’), in a second round of challenges, appeals the judgment of the Court of Appeal of Belize upholding the Supreme Court's decision to dismiss an application to set aside or remit to Arbitrators an award as to costs in arbitration proceedings.

2

In May 2008, BNE and the respondent, Maranco Ltd. (‘Maranco’), entered into Onshore Oil Drilling Contracts in which they agreed that Maranco would provide drilling rigs for the purpose of carrying out exploratory drilling operations at BNE's request. Also in the contracts BNE and Maranco agreed that any disputes would be settled by arbitration pursuant to the Arbitration Act of Belize.

3

In April 2009 the contracts came to an end but in early May 2009 disputes arose. Maranco claimed that BNE owed it monies with respect to the daily rate for drilling operations, demobilization fees and damages in respect of failure to pay the demobilization fees on time. It also claimed interest and the costs associated with the arbitration. However, BNE claimed that neither the daily rate nor the demobilization fees were payable. As a result, the parties commenced arbitration proceedings.

4

The Arbitrators concluded that Maranco had abandoned its claim for demobilization fees and, having heard from their appointed umpire as to the due date for payment of such fees, refused to award damages in connection with that claim. However, it ultimately awarded Maranco a total of US $1,207,800.00 plus interest on the award and ordered BNE to bear its own costs and to pay one half of Maranco's costs. When BNE failed to satisfy the Award, Maranco applied to the Supreme Court for permission to enforce the Award. BNE also filed an application challenging the Award for serious irregularity. The court granted Maranco leave to enforce the Award save the award of costs which was remitted to the Arbitrators for their reconsideration.

5

Following their reconsideration, the Arbitrators concluded that Maranco was entitled to US$211,069.57 as full and final settlement of its costs. Once again, BNE challenged the Arbitrators' award of costs. Its application was rejected both in the Supreme Court and in the Court of Appeal so it now appeals to the Caribbean Court of Justice primarily on the bases that the Arbitrators incorrectly applied the principle that costs follow the event and that they improperly awarded costs on an attorney and client basis.

6

The Court first considered its competence to interfere with arbitration proceedings and decided that any such interference should be as minimal as possible given the judicial regard for party autonomy to choose arbitration over court litigation. Particularly in relation to a review of an award of costs, arbitrators have a wide discretion to award costs so that when a court sets out to review an arbitrator's award it is not entitled to intervene merely because it may have awarded different costs or awarded costs on different bases.

7

With respect to remedies, the Court noted that BNE sought an order to remit the decision to the Arbitrators for reconsideration and, in the alternative, set aside the Arbitrators' costs award. The Arbitration Act grants the broad power of remittal and the power to set aside for misconduct, however, a judge should only remit where there is a good reason for the remittal. The remedy of setting aside for misconduct is a remedy of last resort and should be granted only in clear cases. A mere error on the part of the arbitrator does not constitute misconduct; in order to justify setting the award aside, the error must be something substantial which smacks of injustice or unfairness.

8

Concerning the issue of the general rule that costs follow the event, the Court decided that what constitutes ‘the event’ which costs should follow is not an exact science and each case depends on its own peculiar facts. Here the Arbitrators had identified the event which costs were to follow. They found that while there was not a clear winner on all issues, Maranco could be said to have won the arbitration when viewed from the standpoint of the overall result. In so deciding they did not act outside of their wide perimeters. They had the discretion, pursuant to the Arbitration Act, to choose the manner in which they awarded costs, that is, on an ‘issues-based’ approach or the percentage basis, and they chose to adopt the approach of finding the overall winner of the arbitration. The Arbitrators then made a direct connection between the outcome of the case and the award of costs so as to reflect Maranco's success in relation to some claims and not others. In light of this it has not been show that the Arbitrators acted perversely in making this award.

9

The Arbitration Act empowered the Arbitrators to award costs on an attorney and client basis and this is what the Arbitrators did. No reason was given for the Arbitrators' award of costs on this basis. The Arbitrators could give reasons but were not obliged to do so. In the circumstance where no reason is given it becomes necessary to look at the award and what is said in the award in order to see whether anything there appears which makes it clear that the arbitrators were exercising their discretion improperly. There was no error of law apparent on the face of the award that would then have opened the door for the court to interrogate the reasonableness of the award or adequacy of the reasons. In these circumstances the Court is unable to say that the Arbitrators misdirected themselves or otherwise acted on any wrong principle in awarding costs on an attorney and client basis.

10

In any event, the parties were at liberty to include whatever provisions they desired in the contracts but they had failed to include any provision that would oblige the Arbitrators to award costs on a particular basis or require them to give reasons for their award.

11

Ultimately, there is no basis to remit or set aside the award of costs made by the Arbitrators. Consequently, the appeal is dismissed and the respondent is to have its costs of the appeal in this Court.

This Summary is not intended to be a substitute for the Judgment of the Caribbean Court of Justice or to be used in any later consideration of the Court's Judgment.

1

Anderson, J. CCJ.: This appeal interrogates the role and remit of the courts in reviewing the discretion of arbitrators to award costs in arbitration proceedings using a percentage approach and on an indemnity basis. The appellant, Belize Natural Energy Limited (‘BNE’), challenges the judgment of the Court of Appeal of Belize upholding a decision of Mr. Justice Legall which had dismissed the appellant's application that an award by arbitrators as to costs in arbitration proceedings be set aside or remitted to the arbitrators for reconsideration. The appellant contends that the arbitral award of costs in favour of the respondent, Maranco Limited (‘Maranco’), ought to be set aside or remitted on the ground that in making the award using the percentage approach and on an indemnity basis the arbitrators had misapplied the law and thereby misconducted themselves within the terms of sections 11 and 12 of the Arbitration Act of Belize. This is in fact the second round of challenge to the award. The original award of costs was already previously remitted by Mr. Justice Legall to the Arbitrators for reconsideration. It is this reconsidered. award of costs that is the subject of the current round of litigation ending with this appeal.

2

The power of arbitrators to award costs is broad. Section 15 of the Arbitration Act provides that orders as to costs of the kind made in the arbitration, “may be made on such terms as to costs, or otherwise, as the authority making the order thinks fit.” Further, section 4 of the Act makes Rule 9 of the First Schedule applicable. Rule 9 provides:

“The costs of the reference and award shall be in the discretion of the arbitrators or umpire, who may direct to and by whom and in what manner those costs or any part thereof shall be paid, and may tax or settle the amount of costs to be so paid or any part thereof, and may award costs to be paid as between attorney and client.”

3

The general discretion thus given to arbitrators to award costs justifies and supports the reluctance of courts to intervene in arbitration proceedings or to interfere with arbitral awards. Whether the appellant has demonstrated sufficient cause for this Court to agree that the Arbitrators in the present proceedings have so misdirected...

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