Supreme Court allows appeal to award interest on arbitration costs from the award date, not the court order date.

THE SUPREME COURT

[S.C. NO. 202 OF 2001]

Denham J.

Murray J.

Hardiman J.

BETWEEN/

TADGH HORAN

PLAINTIFF/APPELLANT

AND

THOMAS QUILTER

DEFENDANT/RESPONDENT

Judgment delivered on the 1st day of March, 2004 by Denham J.

1. Appeal

This is an appeal by Tadgh Horan, the plaintiff/appellant, hereinafter referred to as the plaintiff, from an order of the High Court

(O’Higgins J.) delivered on the 2nd July, 2001 and perfected on the 11th July, 2001. Thomas Quilter, the defendant/respondent, is

hereinafter referred to as the defendant.

2. One Issue

There is a single issue on this appeal and it is as to the date from which interest is payable on the taxed costs of the arbitration.

3. Facts

The plaintiff and the defendant commenced a partnership to practise veterinary surgery in or about 1989. Difficulties arose in the

partnership in or about 1990 and by agreement Mr. Joseph Dundon was appointed as arbitrator to determine the disputes. The

arbitration progressed in the years from 1992 to 1996. An interim award was made in 1992 and in 1993, and the final award was made

in 1996. Clause 5 of the final award stated:

“I award the applicant his costs of the reference, together with witnesses’s expenses.”

The applicant referred to is the plaintiff. On behalf of the plaintiff a bill of costs was furnished in 1998 to the defendant. The bill of

costs amounts to £30,331.65. No demand was made that the bill of costs be referred to the Taxing Master or elsewhere. The plaintiff

sought that the bill of costs be discharged. The plaintiff then brought proceedings by way of special summons for an order pursuant

to O. 56 r. 4 (f) of the Rules of the Superior Courts and s. 41 of the Arbitration Act, 1954 to enforce the provisions of clause 5 of the

final award of the arbitrator. He sought, if necessary, judgment in the sum of £30,331.65 (being the bill of costs) together with

interest on the sum until judgment.

4. High Court Order

The High Court ordered, pursuant to s. 41 of the Arbitration Act, 1954, that the plaintiff be at liberty to enforce the arbitration award

in the same manner as a judgment or order to the same effect. It was ordered that the plaintiff do recover against the defendant the

sum of £30,331.65 and costs of the proceedings when taxed and ascertained.

5. High Court Judgment

The learned High Court judge adopted counsel’s note of his ex tempore judgment given on the 2nd July, 2001. Counsel’s note states:

“This is an application for a section 41 order to enforce the provision of clause 5 of an arbitrator’s award. There were two

interim awards and a final award which is dated the 26th November, 1996 which is exhibited and which was made four and a

half years ago.

Pursuant to the arbitrators order a bill of costs was submitted. This bill of costs was not taxed and was not paid.

Two reasons have been advanced by the defendant as to why this was so.

1. There is an allegation by the defendant that a witness who gave evidence was not qualified. He was not a Chartered

Accountant and he was not a Certified Accountant. This was irrelevant said the plaintiff as he was acting within the practice of

the profession. I am satisfied that there is no substance to this argument.

2. Another matter arises in relation to the evidence giving by Mr. Neville. Mr. Quilter says that his was part of the partnership

expenses. But it seems it is clear that this was not given about the accounts of the partnership. He gave evidence on behalf of

one of the parties. This is not denied by the defendant in the pleadings.

The defendant is not entitled to challenge the final award. The arbitrator has made his final award.

A further argument made is that these proceedings are premature. That argument is more impressive. But the position is set out

accurately in the letter of Mr. McMahon exhibited. (Judge reads) ‘This relates to Mr. Neville’s costs for preparing accounts for

the arbitration on the instructions and on behalf of Mr. Quilter. David Fitzmaurice & Co., were accountants to the partnership

and other accountancy services provided to either party by other firms did not relate to the partnership accounts. Unless Mr.

Neville’s fees are excluded then agreement cannot be reached. I confirm Mr. O’Donnell’s fees will not be submitted by Mr. Horan

as against the partnership accounts.’ (Letter November 17, 1999).

I think that that is the reality. The fact is that these were not partnership accounts and this was a lever being exerted by Mr.

Quilter. The final award was the final award and these proceedings are not premature.

The Court then made an Order:

in terms of paragraph 1 of the Special Indorsement of Claim, under section 41 of the Arbitration Act, 1954 and

in terms of paragraph 3 of the Special Indorsement of Claim giving the plaintiff judgment for £30,331.65.

Counsel for the plaintiff then applied for interest on the Bill of Costs and witnesses expenses as and from the date of the

arbitrator’s award and relied on:

(i) section 22 Courts Act, 1981 and

(ii) Best –v- Wellcome Foundation Limited.

The Judge refused to grant interest on the arbitrator’s award. But allowed that interest to accrue from the date of his

judgment/order.”

Consequently, it is the latter part of the judgment which is in issue on this appeal, although the context is explained in the body of

the judgment. It is the refusal of interest, from the date of the award of the arbitrator, which is in issue.

6. Notice of Appeal

Against the said order and judgment the plaintiff has appealed. He set out the following grounds of appeal in his notice of appeal:

“1. That the learned Trial Judge erred in law and in fact in determining that the Plaintiff/Appellant was not entitled to interest,

pursuant to the provisions of the Courts Act, 1981, on foot of the said Arbitrator’s Award and in particular on foot of the

circumstances award of costs and witnesses as and from the date of the said award, namely the 26th day of November, 1996.

2. That the learned Trial Judge erred in law and in fact in determining that the Arbitrator’s said award did not have the status,

nature and effect of a court order.”

7. Submissions

Counsel on behalf of the plaintiff in written submissions submitted that an arbitrator’s award of costs should carry statutory (Courts

Act) interest as and from the date of the award in the same way as an award of costs in either High Court or Supreme Court

proceedings carries statutory interest as and from the date of judgment and not from the date of the ascertaining of the amount of

such costs. Counsel referred the Court to O’Sullivan v. Dwyer (No. 2) [1973] I.R. 81, Walsh J. at p. 85; Best v. Wellcome Foundation

Limited (No. 2) [1995] 1 I.L.R.M. 554; and s. 34 Arbitration Act, 1954. He submitted that an arbitrator’s award is of the same nature,

effect and consequence as a court order. He submitted that the Court should grant interest on the costs of the arbitrator’s award as

and from the date of the final award and not from the date of the High Court order giving power to enforce the award either (i) on

the basis of the Debtors (Ireland) Act, 1840, or (ii) on the basis of s. 34, Arbitration Act, 1954.

8. In written submissions counsel on behalf of the defendant submitted that there was no statutory definition of the term “award”,

that on its own the arbitrator’s award does not have the standing of a judgment or order, that only the courts can make judgments or

orders and that leave of the court is required to enforce the award as a judgment or order. Counsel also submitted that pursuant to

s. 41 of the Arbitration Act, 1954 the High Court had ordered that the plaintiff be at liberty to enforce the arbitration award in the

same manner as a judgment or order to the same effect. Thus, counsel submitted, as and from the 2nd July, 2001, when the High

Court order was made, s. 26 of the Debtors (Ireland) Act, 1840, post judgment statutory interest attached but it did not attach

before that date. Further, it was submitted that interest provided for by s. 34 of the Arbitration Act, 1954 does not apply as it refers

to “a sum directed to be paid by an award.” Clause 5 of the arbitrator’s final award does not refer to a sum, it refers simply to the

costs of the reference. In addition it was submitted that s. 34 does not refer to interest on costs, a lacuna, which has since been

corrected by the legislature. Section 34 of the Arbitration Act, 1954 has been amended in relation to interest on awards by the

Arbitration (International Commercial) Act, 1998, which Act does not apply to this case as it applies only to arbitrations commenced

after the date on which the Act of 1998 came into operation.

9. Oral Submissions

When this matter was heard before the court the oral submissions crystallised the matter as requiring an interpretation of s. 34 of the

Arbitration Act, 1954. In construing s. 34 Arbitration Act, 1954 reference was made to other sections of the Arbitration Act, 1954 and

to the rationale of the law on interest on judgments of the courts.

10. Law

The relevant statutory and case law referred to is as follows:

The Arbitration Act, 1954, s. 29:

“(1) Unless a contrary intention is expressed therein, every arbitration agreement shall be deemed to include a provision that

the costs of the reference and award shall be in the discretion of the arbitrator or umpire who may direct to and by whom and

in what manner those costs or any part thereof shall be paid, and may, with the consent of the parties, tax or settle the

amount of costs to be so paid or any part thereof, and may award costs to be paid as between solicitor and client.

(2) Where an award directs any costs to be paid, then, unless the arbitrator or umpire, with the consent of the parties, taxes

or settles the amount thereof-

(a) the costs shall be taxed and ascertained by a Taxing Master,

(b) the procedure to obtain taxation and the rules, regulations and scales of costs of the Court relative to taxation and to

the review thereof shall apply to the costs to be so taxed and ascertained as if the award were a judgment or order of

the Court.”

Section 34:

“A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award

and at the same rate as a judgment debt.”

Section 41:

“An award on an arbitration agreement may, by leave of the Court, be enforced in the same manner as a judgment or order to

the same effect and, where leave is so given, judgment may be entered in terms of the award.”

The Arbitration (International Commercial) Act, 1998, s. 17 amends the Arbitration Act, 1954 by substituting the following for s. 34:

“(1) The parties to an arbitration agreement may agree on the powers of the arbitrator or umpire as regards the award of

interest.

(2) Unless otherwise agreed by the parties, the arbitrator or umpire may award simple or compound interest from the dates, at

the rates and with the rests that he or she considers meet the justice of the case -

(a) on all or part of any amount awarded by the arbitrator or umpire, in respect of any period up to the date of the award;

(b) on all or part of any amount claimed in the arbitration and outstanding at the commencement of the arbitration but paid

before the award was made, in respect of any period up to the date of payment.

(3) Unless otherwise agreed by the parties, the arbitrator or umpire may award simple or compound interest from the date of

the award (or any later date) until payment, at the rates and with the rests that he or she considers meet the justice of the

case, on the outstanding amount of any award (including an award of interest under subsection (2) and an award of costs).

(4) References in this section to an amount awarded by an arbitrator or umpire include an amount payable in consequence of a

declaratory award by the arbitrator or umpire.

(5) This section shall not apply to an arbitration commenced before the day on which the Arbitration (International

Commercial) Act, 1998, comes into operation unless –

(a) the arbitration is concluded after that day, and

(b) the parties agree that this section shall apply.

(6) This section shall apply to an arbitration commenced on or after the day on which the Arbitration (International

Commercial) Act, 1998, comes into operation –

(a) under an arbitration agreement entered into on or after that day, or

(b) if the parties so agree, under an arbitration agreement entered into before that day.

…”

In O’Sullivan v. Dwyer (No. 2) [1973] I.R. 81 Walsh J. at p. 85 said:

“A judgment debt of the High Court or the Supreme Court carries interest at 4% from the date of judgment’s pronouncement.

This is the result of ss. 26 and 27 of the Debtors (Ireland) Act, 1840, and the Rules of the Superior Courts, 1962. Section 26 of

the Act of 1840 provides that every judgment debt due upon any judgment not confessed or recovered for any penal sum for

securing principal and interest shall carry interest at the rate of 4 per cent per annum from the time of entering up the

judgment, or from the time of the commencement of the Act in cases of judgments then entered upon and not carrying

interest, until the same shall be satisfied. Section 27 of the Act provides that any persons to whom any sum of money, costs,

charges or expenses are payable under any order are deemed to be judgment creditors within the meaning of the Act. Thus

interest on a judgment of the High Court or the Supreme Court may be claimed from the date of the pronouncement of the

judgment and the costs awarded.”

In Best v. Wellcome Foundation Limited (No. 2) [1995] 2 I.R. 393, the High Court (Murphy J.) held in allowing the plaintiff’s claim,

“1. That where an order for costs is made and the order is merely expressed as an order ‘for costs’ interest accrues thereon

from the date of the order and not from the date of the taxation notwithstanding the fact that the costs are of necessity

unascertained until taxation.

Cooke v. Walsh (1989) I.L.R.M. 322, Hickey v. Norwich Union Fire Insurance Ltd. (unreported, High Court, Murphy J., 23rd

October, 1987, ex tempore) applied.

...

5. That while the approach of the High Court in Hickey v. Norwich Union Fire Insurance Ltd. in determining that the accrual of

interest was not conditional upon the taxation of costs was not expressly endorsed by the Supreme Court in Cooke v. Walsh

there was no reason, in the circumstances of the instant case why such an approach should not be followed.

Hickey v. Norwich Union Fire Insurance Ltd. (unreported, High Court, Murphy J., 23rd October, 1987, ex tempore) applied.”

In Best v. Wellcome Foundation Murphy J. at p. 397 said:

“Issues with regard to the payment of interest on costs awarded in legal proceedings have been debated in this country and in

England over many years and there are conflicting decisions within both jurisdictions. As it happens, the matter came before me

in Hickey v. Norwich Union Fire Insurance Ltd. in which an ex tempore judgment was delivered on the 23rd October, 1987. My

judgment is of assistance in that it reviews the law in England and Ireland and the conflict on the matter in issue between (and

within) the two jurisdictions. The judgment is of importance in that the views expressed therein were endorsed in part by the

late McCarthy J. when delivering the judgment of the full Supreme Court in Cooke v. Walsh [1989] I.L.R.M. 322.

In Hickey v. Norwich Union (unreported, High Court, Murphy J., 23rd October, 1987, ex tempore) I expressed my conclusion in

the following terms:

‘I take the view that the law in this country is that where an order for costs is made and the order is merely expressed as

an order ‘for costs’ that interest accrues thereon from the date of the order and not from the date of the taxation

notwithstanding the fact that the costs are of necessity unascertained until taxation.’”

In Clarke v. Commissioner of An Garda Siochana [2002] I.R. 207 the plaintiffs were plaintiffs in a High Court action which was settled

on 15th May, 1996 on terms, one of which was that the defendants pay to the plaintiffs their costs of the action when taxed and

ascertained. Fennelly J. at p. 209 stated:

“Although the case stated is silent on the point, it can be assumed that the settlement was made a rule of court and that an

order for taxation of costs was made.”

The essential legal issue on the case stated was whether interest should run from the date of judgment and thus prior to the amount

being determined in taxation. The case related to a judgment of a court.

On the issue Fennelly J. held at p. 218:

“On the issue of principle, I am of the view that costs constitute a liability of the unsuccessful party from the moment of the

decree or judgment, that they are not payable until quantified but that, from that point the debt relates back to the date of

the judgment, with interest running from that earlier date.”

11. Decision

11.1. At the heart of this case is s. 34 of the Arbitration Act, 1954 which provides that:

“A sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award

and at the same rate as a judgment debt.”

The award in this case did not otherwise direct. Thus the case turns on the construction of s. 34. The critical words are “a sum

directed to be paid by an award.”

The question is whether these words include costs, so that they shall, pursuant to the further words of s. 34, “carry interest as and

from the date of the award and at the same rate as a judgment debt.”

11.2. “Sum”

At first glance the word “sum” might appear to mean a definite amount of money, an amount of money calculated by the arbitrator.

This meaning would require that the amount be ascertained at the time of the award. As costs are not ascertained at the time of the

award, but at a later date, it might be inferred that the word “sum” does not include costs.

Although the exact amount of money involved in an order for costs is not defined at the time of the award it is a definite award of the

costs. While the amount of the costs may have been agreed it is more probable that they have not. If it were necessary in the

construction of the section that an exact amount of money be awarded by the arbitrator to attract interest then if the amount of

costs had been agreed it would attract interest but if it had not then no interest would lie. This construction would appear to create

an injustice.

In Stroud’s Judicial Dictionary, 6th Ed., there are many entries relating to the word “sum.” Included in the entries are:

“A ‘sum’ does not necessarily mean an amount expressible in some coin of the realm …;

‘Provided the sum or damages sought to be recovered shall not exceed £50’; ‘sum’ in such a connection, means ‘debt’ (Joule v.

Taylor 7 Ex. 58)…;

‘Sum of money’, in regard to ad valorem stamp duty, will generally mean the principal sum, not a sum compounded of principal

and interest (Pruessing v. Ing 4 B. & Ald. 204).”

On occasion the word “sum” is defined further. Included in the entries for “sum adjudged” are:

“The ‘sum adjudged to be paid on a conviction, ‘refers to the sum in which the party is convicted, and does not include the

costs’…;

‘Sum adjudged’ (Public Health Acts) meant the sum in respect of which the adjudication was made …”

These meanings are to be contrasted with a “sum certain”, which connotes further certainty. In London, Chatham and Dover Railway

v. South Eastern Railway [1893] A.C. 429 Herschell C. held that the phrase “sum certain” did not cover a sum which was liable to

subsequent adjustment. He stated at p. 436: “I think that the certain sum payable must be a certain sum which is due absolutely and

in all events from the one party to the other, though it may not come, strictly speaking, within the term ‘debt’.”

Section 34 contains the term “sum” simpliciter. On its face it is describing money. It does not expressly refer to a specified sum or a

certain sum. It is the sum adjudged to be paid by the arbitrator. I am satisfied that its plain and simple meaning is that it refers to

money. I would construe the section as referring to money directed to be paid by an award. I am satisfied that the precise amount of

the money does not have to be specified in the award, as the circumstances may require an arbitrator to make an order linked to the

circumstances of a case. Taking this approach it is money which would carry interest from the date of the award at the same rate as

a judgment debt.

11.3. “Award”

The word “award” is not defined in the Arbitration Act, 1954. It is defined in the Concise Oxford Dictionary, 8th Ed. as:

“A noun:

1. A payment, penalty or prize awarded.

2. A judicial decision.”

In s. 34 of the Arbitration Act, 1954 the term “award” has a clear meaning. Taking its plain meaning it refers to the conclusion

reached by the arbitrator. This is the decision of the arbitrator. Having reached this view I was pleased to note a contemporary

author on the topic. In considering the award of an arbitrator Ercus Stewart in “Arbitration, Commentary and Sources” (Dublin,

2003), states at p. 92:

“The decision of the arbitrator is called the award.”

I am satisfied that the term “the award” of the arbitrator refers to the decision of the arbitrator.

Thus, in light of this construction of the Act of 1954 the words of s. 34 have a plain meaning. It means that money directed to be

paid by a decision of an arbitrator shall, unless the decision otherwise directs, carry interest as from the date of the decision and at

the same rate as a judgment debt. This construction of s. 34 of the Arbitration Act, 1954 would also be consistent with the principle

in the case law on interest payable on costs in court decisions.

The underlying principle of the common law as to court orders for costs is that interest will run from the date of the court order. This

is so even though the sum is as yet unascertained at the date of the court order. The taxation of the costs and the determination of

the amount would be post the court order. Yet interest runs from the court order. The rationale behind this is one of justice, the

party is out of his money all this time and should be compensated by the payment of interest. It is also a measure which encourages

early payment of costs to defeat a high interest bill. This is consistent with a policy opposed to delay in litigation. I can conceive of

no reason why the same approach is not taken in the legislation on arbitrations. There appears to be no reason why the principle

underlying both schemes for decision making would be different and every good reason why they should be consistent.

To avoid doubt it would appear to be good practice for the written decision of an arbitrator, the award, to deal expressly with

interest. It may well be that this has been common practice and that that is why this issue has not been the subject of any recorded

court decisions which counsel could bring to the attention of the Court. The absence of reference to interest in the Arbitration Act,

1954 has been rectified in the Arbitration (International Commercial) Act, 1998, in relation both to international commercial arbitration

and to domestic arbitration.

The usual order in arbitration is that costs follow the event. Thus it is similar to the position in courts of law. If there is a departure

from the usual order then it should be clear and reasons should be given.

In this case the decision of the arbitrator was that money be paid and it shall, unless the decision otherwise directs, carry interest as

and from the date of the decision at the same rate as a judgment debt. Thus the decision in this case of the arbitrator carried

interest as the decision did not otherwise direct. The High Court made an order under s. 41 of the Arbitration Act, 1954 enforcing the

award. It may well have been that there was a different emphasis by counsel when arguing the matter in the High Court. It was

conceded in this Court that s. 22 Courts Act, 1981 was not relevant, that the relevant law is s. 34 Arbitration Act, 1954. Further, no

reason was recorded in the note of the ex tempore judgment of the learned High Court judge as to why interest was refused on the

arbitrator’s award but interest was allowed from the date of the judgment.

I am satisfied that the High Court erred in not including interest from the date of the award and in offering no reasons for departing

from the usual rule. Therefore, I would allow the appeal and vary the order of the High Court to enable interest to run from the date

of the award of the arbitrator, as well as from the date of the judgment.

12. Conclusion

I would allow the appeal for the reasons given in the judgment. I would order that the money directed to be paid by the award, the

costs, carry interest from the date of the award.