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Cite as: [1998] IEHC 53

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Sheahan v. FBD Insurance plc [1998] IEHC 53 (25th March, 1998)

THE HIGH COURT
1996 No. 442 Sp.
IN THE MATTER OF THE ARBITRATION ACTS, 1954-1980
AND IN THE MATTER OF AN ARBITRATION
BETWEEN
JOSEPH SHEAHAN
PLAINTIFF
AND
FBD INSURANCE PLC
DEFENDANT

JUDGMENT of Mr. Justice Kelly delivered the 25th day of March, 1998

1. In this application the Plaintiff seeks to set aside parts of two awards made in arbitration proceedings conducted between him as Claimant and the Defendant as respondent.


BACKGROUND

2. The Plaintiff was at all material times the owner of a licensed premises known as Saints and Scholars. It was located at Robert Street in Limerick City.

3. The Vintners Federation of Ireland had, on behalf of its members, negotiated a master policy of insurance with the Defendant. The Plaintiff availed himself of this master policy and, subject to appropriate adjustments to it, the Defendant came on cover in respect of the Plaintiff's premises from the 28th March, 1991. The policy was renewed annually thereafter. The last renewal was from the 28th March, 1993 to the 28th March, 1994.

4. On the 9th February, 1994 damage was caused to the licensed premises. The Plaintiff claimed that it was caused as a result of bursting or overflowing of water tanks and that this was one of the perils covered by the policy. The Defendants were notified of this event and a claim was made in respect of both property damage and consequential loss. The Defendants did not accept that the loss had been caused in the manner alleged nor did they accept that they had any liability to indemnify the Plaintiff on foot of the policy. From this disagreement between the parties was spawned the arbitration in suit which went on for many days, gave rise to two interim awards and one final award being made and ultimately has resulted in these proceedings.

5. The Arbitrator's first interim award was made on the 2nd October, 1995. It dealt with the issue of the Defendant's liability to indemnify the Plaintiff. The Defendant contended that it had no liability whatsoever to the Plaintiff. It was unsuccessful in that contention. The Arbitrator held that there was a leak in the toilet system in the Plaintiff's premises and that it was a factor which contributed to a collapse of the floor in the ladies toilet on the 8th/9th February, 1994. He held that the leak contributed to the floor collapse to the extent of 33 1/3%. He furthermore held that the Plaintiff had not failed to disclose material facts in connection with the claim. Neither had the Plaintiff furnished incorrect or inadequate information intended to deceive as to the real cause of the floor collapse. The Arbitrator also held that the leak in the toilet constituted a peril within the meaning of the policy. He therefore held in favour of the Plaintiff to the extent of one-third of the loss and damage suffered by him as a result of the collapse of the floor. None of these findings are in dispute between the parties.

6. The Arbitrator's second interim award was published on the 16th July, 1996. This award dealt with the amount to be awarded to the Plaintiff in respect of both material damage and consequential loss. There is no dispute as to the former since it was agreed in the sum of £7,000 less an excess of £100. The major dispute relates to the award in respect of consequential loss and the Arbitrator's approach to that question.

7. The final award was made on the 7th August, 1996. It was concerned with the question of costs. Two disputes arose concerning it. The first related to the apportionment of costs as between Plaintiff and Defendant. Whether this apportionment should stand or not will depend upon my determination of the issues which are in dispute on the second interim award. The second matter which was in contention concerning the final award has now disappeared out of the case. The Arbitrator directed that his fees (which he assessed at £37,510) be paid as to four-fifths thereof by the Defendant and one-fifth by the Plaintiff. In the course of the hearing before me, the Defendant accepted that it would be responsible for and would discharge all the Arbitrator's fees.

8. The foregoing is but a brief introduction to the disputes which exist in this case. In order to understand them more fully, it is first necessary that I examine the provisions of the policy of insurance which the parties contend are relevant to my consideration.


THE POLICY

9. The policy was divided up into eight sections followed by a series of general conditions. Only some of these are relevant for my consideration.

10. Section 1 dealt with the buildings insured. Under this section the Defendant agreed to indemnify the Plaintiff in the event of loss or damage to the property which was caused by, inter alia, the bursting or overflowing of water tanks, apparatus or pipes. Neither of the exclusions from that liability has any relevance to this case. The form of indemnity offered was by payment, reinstatement or repair at the Defendant's option. Under subsection C(2) any work of reinstatement was required to be commenced and carried out with reasonable dispatch. Under the first special provision of the reinstatement clause it was expressly provided that the work of reinstatement must be commenced and carried out with reasonable dispatch, otherwise no payment beyond the amount which would have been payable under the policy if that memorandum had not been incorporated in it was required to be paid.

11. Section 2 of the policy dealt with the trade contents and it is not relevant to my consideration.

12. The third section of the policy dealt with consequential loss. This section contained a definition of gross profit. Neither that definition nor the Arbitrator's application of it are in dispute. This section also contained a definition of the indemnity period. It is clear from it that a cap was placed on the upper limit of the Defendant's liability under this section. Only losses sustained during the twelve months subsequent to the occurrence were recoverable. It was a further stipulation of this part of the policy that the Defendant should indemnify the Plaintiff only in respect of consequential losses resulting from his business being affected by loss or damage for which liability had been admitted and payment had been made under the first and second sections of the policy. At one stage the Defendant was contending that because the Arbitrator had found it liable for one-third of the loss and damage suffered as a result of the collapse, it was therefore liable only for one third of the consequential loss. Later, however, it accepted that if it had a liability for any part of the loss or damage to the property, the Plaintiff was entitled to recover consequential loss in full. There is, therefore, no longer any contention on the part of the Defendant to the effect that it is liable only for one-third of the consequential loss sustained by the Plaintiff.

13. None of the remaining sections of the policy have any relevance to this dispute and so I can therefore turn to those parts of the general conditions which are germane.

14. The fifth general condition provides that the Plaintiff was obliged "upon any defect or danger being brought to his notice forthwith, cause such defect of (sic) danger to be remedied and in the meantime shall take such temporary precautions to prevent accidents as the circumstances may require but so far as practicable no alteration or repair shall without the consent of the company be made to any premises after any occurrence covered by this policy until the company shall have had an opportunity of making an inspection. The company shall at all reasonable times have free access to inspect any property and the insured shall facilitate the company in every way requested" .

15. The seventh general condition at paragraph (g) provided "the company and every person authorised by the company may, without thereby incurring any liability and without diminishing the right of the company to rely upon any conditions of this policy, enter, take or keep possession of the building or premises where the loss or damage has happened, and may take possession of or require to be delivered to them any of the property hereby insured and may keep possession of and deal with such property for all reasonable purposes and in any reasonable manner. This condition shall be evidence of the leave and licence of the insured to the company so to do. If the insured or anyone acting on his behalf shall not comply with the requirements of the company or shall hinder or obstruct the company in doing any of the above-mentioned acts, then all benefit under this policy shall be forfeited. The insured shall not in any case be entitled to abandon any property to the company whether taken possession of by the company or not" .

16. The only other general condition which has any relevance is the tenth one which is the arbitration clause.

THE BASIS FOR THIS APPLICATION

17. The Plaintiff contends that there is an error of law on the face of the Arbitrator's second interim award. As a result of that error of law, it is said that the Arbitrator went wrong in his approach to the computation of the consequential loss to which the Plaintiff was entitled resulting in an award substantially less than what it ought to be. The Arbitrator said as follows:-


"I determine the outstanding issues as follows:-
(a) That the claimant did sustain consequential loss resulting from his business being affected by the loss and damage found by me in my interim award.
(b) In calculating the indemnity period I consider that in normal circumstances there was an undoubted duty on the claimant to do all things reasonable to minimise any interruption or interference with his business and to proceed with due diligence to carry out the repairs to his premises. This duty is not dependant on the premises being open or closed or on the insured having public liability insurance or on the insurer accepting or repudiating liability under the policy. The claimant is expected to act as if he were uninsured. Normally then one would have expected the claimant to have taken steps within a reasonable time to put the repairs of his premises in hand. The claimant however does not seem to have focused on his duty to mitigate at any stage. He stated that he considered 'the ball was very much in their (the insurers) court'. In the reply to the notice for particulars under the heading ' Mitigation of Loss' the claimant gives three reasons to justify not being in a position to mitigate his loss, i.e.,
(1) Due to his financial situation at the time of the insured peril and the cutting off of the income estimated at £27,500/£30,000 per month he was not able to raise the appropriate finance in order to carry out the necessary repairs.
(2) He was hampered in efforts to raise sufficient finance to enable him to have the repair works carried out by the uncertainty created by the Respondents as to whether the claim was within or without the scope of the policy.
(3) That there was the clear indication to the claimant from the Respondents that in the event that he reopened his premises at the time, that all liability insurance would be withdrawn by the Respondents.

With regard to No. (1), I am not satisfied that Mr. Sheahan was not in a position to carry out the repairs because of lack of finance. In fact I am satisfied that he did have substantial cash on hands and he furthermore made no effort to seek finance from his bank. He stated himself in evidence that 'it was not an issue to ask for it'.

With regard to No. (2), I do not accept this argument as the claimant did not, on his own admission, make any efforts to raise the finance to enable him to have the repair works carried out.

With regard to No. (3), the claimant makes the case that if he reopened his premises all liability insurance would be withdrawn by the Respondents. This however is irrelevant to his duty to carry out the repairs. In fact the carrying out of the repairs would be facilitated by the premises being closed. For whatever reason Mr. Sheahan appears to have been blind to his duty to mitigate his loss. Lord Haldane in British Westing House Co. Limited -v- Underground [1912] refers to 'the duty of taking all reasonable steps to mitigate the loss and debars the claimant from claiming any part of the loss which is due to his neglect to take such steps'.

I conclude that I should allow the claimant consequential loss for the period beginning with the occurrence of the damage and continuing while the claimant acting reasonably took steps to have the damage assessed, obtained quotations for the repair, permitted reasonable inspection by the insurer and for the time while the repairs would be carried out, making due allowance for the kind of delays that can be met in having building works carried out. When Mr. Sheahan decided to close the premises on the 27th February, 1994 it should have been clear to him that he should take immediate steps to have the repairs carried out. In his own letter dated the 27th February, 1994 to Michael Farrell, he gives the reason for closing the premises as 'Mr. Fleming was unwilling to assure me about my position, if anyone was injured before the area was repaired '. Had the claimant proceeded in a reasonable manner from then on, I believe that the repairs could have been carried out and the premises open for business within two months".

18. The Arbitrator then assessed the indemnity period in respect of consequential loss to be one of 78 days commencing on the 9th February, 1994 and ending on the 27th April of that year. The Plaintiff says that the error of law on the face of the second interim award is to be found in the Arbitrator's statement that "the claimant is expected to act as if he were uninsured" . He contends that there is no such principle of law and that even if there were, it could not possibly apply to the instant case because of the legal obligations owed by the Plaintiff to the Defendant under the terms of the policy. He says, and quite correctly, that this is not a case in which the Defendants sought to rescind the contract of insurance. They merely declined to accept liability in respect of his claim and were of course found to be incorrect in that approach. At all times Mr. Salafia says, on behalf of the Plaintiff, both Plaintiff and Defendant continued to "work the policy" . By so doing the Plaintiff was in effect precluded from getting on with the repairs to the premises. There was therefore no justification for the Arbitrator to fix a period of 78 days as being the appropriate one from the point of view of calculating consequential loss. The fixing of such a period flowed from the Arbitrator's incorrect view of the law concerning the obligations of the Plaintiff towards the Defendant. That view found expression in the Arbitrator's statement that the Plaintiff was expected to act as if he were uninsured.

19. In due course I will consider these arguments in some greater detail but at this stage it is appropriate to sketch out the legal boundaries within which the Court must operate on an application of this sort.

THE LAW ON APPLICATIONS TO SET ASIDE AN ARBITRATOR'S AWARD

20. An application to set aside an Arbitrator's award may arise pursuant to the provisions of Sections 36 or 38 of the Arbitration Act, 1954 or at common law.

Section 36 of the 1954 Act reads as follows:-

"36(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 arbitrator or umpire.
(2) Where an aware is remitted, the arbitrator or umpire shall, unless the order otherwise directs, make his award within three months after the date of the order".

21. As no reliance was placed on Section 38 of the Act, it is not relevant to this case.


In Keenan -v- Shield Insurance Company Limited (1988) I.R. 89 at 95, McCarthy J,. speaking for the Supreme Court, said:-

"Section 36 would appear to be the procedure appropriate, for example, to a case of a patent mistake in monetary calculation, in the giving or not giving of a particular credit, in an award that is on its face ambiguous or uncertain, in a case where the arbitrator, himself, seeks to rectify some error and, perhaps, where fresh evidence has become available subject to the standard rules of an appellate court in such cases".

22. This is not a case in which any of the circumstances outlined by McCarthy J. in the passage just quoted have any application and, consequently, at the conclusion of the hearing it was, in my view quite correctly, conceded by Mr. Salafia that the Plaintiff could not bring himself within the ambit of Section 36.

23. This application falls to be considered under the common law jurisdiction of the Court. That such a jurisdiction exists cannot be doubted having regard to what was said by McCarthy J. in the Keenan case. He said at p.95:-


"The precedents cited establish that, before the passing of the Act of 1954, the jurisdiction to set aside an award because of an error of law that appeared on the face of the award had been established as part of the common law. In addition I would point to Ex Parte Strabane RDC (1910) 1 IR 135 and The Honourable The Irish Society -v- Ministry for Finance (1958) N.I. 170. This jurisdiction was abolished in England by the Arbitration Act, 1979. This feature of the common law was described in Russell on Arbitration 19th Edition (1979) at page 437 as a somewhat anomalous extension of the rule that an award which, on its face, fails to comply with the requirements for a valid award, will be remitted or set aside.

The concept that a long-established common law principle necessarily requires legislation to effect a change in it has little appeal for me since the common law, itself, by definition, reflects the changing demands of society, adapting itself to meet perceived needs. Where, however, the legislature has intervened in a particular branch of the law, and has not expressly negatived an existing common law jurisdiction, such a jurisdiction must have survived, albeit that it must be administered so as to accommodate to the legislation".

24. The judgment of McCarthy J. also provides assistance as to what the approach of the Court ought to be in exercising this common law jurisdiction. He said at page 96:-


"Arbitration is a significant feature of modern commercial life; there is an International Institute of Arbitration and the field of international arbitration is an ever expanding one. It ill becomes the Courts to show any readiness to interfere in such a process; if policy considerations are appropriate as I believe they are in a matter of this kind, then every such consideration points to the desirability of making an arbitration award final in every sense of the term. Church and General Insurance Company -v- Connolly and McLoughlin (unreported High Court, Costello J. 7th May, 1981) itself is an example of the type of fine combing exercise which Courts should not perform when it is sought to review an arbitration award. There may be instances in which an award which shows on its face an error of law so fundamental that the Courts cannot stand aside and allow it to remain unchallenged. This is far from such a case. Indeed, the judgment of Blayney J. in the instant case (1987 IR 113) demonstrates this to the full. Even without such judgment, it is clear that it is, at best from the Plaintiff's point of view, merely an arguable case. It is far from satisfying any test of obvious error and, in my view, should not have been entertained in the High Court".

25. This approach was reiterated again by the Supreme Court in McStay -v- Assicurazioni Generali S.p.A [1991] ILRM 237 where Finlay C.J. stated at 242 that:-


"A fundamental ingredient of the concept of arbitration, as contained in the common law, is the finality of the decision of the arbitrator, subject, of course, to certain qualifications and precautions. Broadly speaking, however, as one might expect, the law appears to acknowledge that where two parties agree to refer a particular question which is in dispute between them to the decision of a particular individual by way of arbitration, they are taken to have abandoned their right to litigate that precise question.

To that broad principle qualifications and exceptions have developed, both in the common law and in statutory provisions which protect a party against injustice".

26. The reluctance of the Courts to interfere with an Arbitrator's award exists to an even greater extent where a specific question of law is referred to arbitration. There is a clear distinction to be drawn between cases where a question of law becomes material to an arbitration as distinct from one in which a specific question of law is referred for decision. In McStay's case Finlay C.J. expressly approved of the following passage from the speech of Lord Russell of Killowen in Absalom Limited -v- Great Western (London) Garden Village Society (1933) AC 592 where he stated at page 607 as follows:-


"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 ground that it so appears that the decision upon the question of law is an erroneous one".

27. It is common case that there was no specific question of law referred to the Arbitrator here but rather questions of law arose in the course of the reference which involved a consideration of both law and fact by him.

In Doyle -v- Kildare County Council (1995) 2 IR 424 the Supreme Court was once again called upon to consider its approach to setting aside an arbitrator's award. It followed the previous decisions in Keenan and McStay's cases. Hamilton C.J. approved of the statement made by Murphy J. in Power Securities Limited -v- Daly (unreported High Court, 27th February, 1984) where he said:-

"The Courts should be slow to usurp the functions of the chosen tribunal by intervening whether by way of setting aside an award, remitting an award or directing a case to be stated" .

28. These authorities establish the following propositions:-


1. At common law, this Court has jurisdiction to set aside an award where an error of law appears on its face.
2. If a specific question of law is referred to an arbitrator for decision, an award will not be set aside merely because the decision upon the question of law is an erroneous one.
3. In the case of a reference in which a question of law becomes material, the Court may set aside such an award because of error on its face but such a jurisdiction may only be exercised sparingly and where the error of law on the face of the award is so fundamental that the Court cannot stand aside and allow it to remain unchallenged.

29. The second and third of the above propositions are applicable to cases where there is no allegation of misconduct made against the Arbitrator. No allegation of misconduct is made against the Arbitrator here. It is common case that it is not misconduct on the part of an arbitrator to come to an erroneous decision.

30. I must now turn to the application of these principles to the matters in dispute here.


ANALYSIS OF THE PLAINTIFF'S COMPLAINT AND THE RESPONSE THERETO

31. The statement to which exception is taken and which was used by the Arbitrator in his second interim award, namely, that "the claimant is expected to act as if he were uninsured" is to be found in a textbook called "Principles and Practices of Interruption Insurance" by an author called Hickmott. At page 468 of that work the author writes as follows:-


"Throughout the indemnity period, the insured is expected to act as reasonably and as diligently as though uninsured. He must, therefore, take all possible steps to minimise the loss as, in the circumstances, ought to be taken by reasonable men. The law casts this duty upon him and will not excuse him in event (sic) of non-performance".

32. It is clear that in his second interim award the Arbitrator quoted a part of the first sentence from that paragraph. It is accepted by the Defendants that the book in question is not a legal authority and that the proposition in its raw form as stated by the Arbitrator is not a principle of law. But the Defendant says the sentence in question cannot be taken in isolation from the remaining parts of the award nor indeed from the pleadings and the particulars which were exchanged in the course of the reference. To accede to the Plaintiff's application would be wrong for two reasons, according to the Defendant. First, it would run counter to the proposition expounded by McCarthy J. in Keenan's case to the effect that the Court ought not to perform a fine combing exercise of an award when it is sought to be reviewed for an error of law on its face. Secondly, there is here no fundamental error of law. To take the sentence in isolation gives an inaccurate and skewed picture of what went on before the Arbitrator. The Defendant contends that the Arbitrator fully considered the contents of the policy, the obligations of each party under it and the behaviour of the parties towards each other in the light of those obligations. Looked at in this way, the statement to which exception is taken amounts to no more than a consideration by the Arbitrator of the Plaintiff's obligation to mitigate his damage.

33. I propose to consider the second of these submissions first. Before doing so it is as well to be clear as to the true legal position at common law concerning the much spoken of "duty to mitigate" . A plaintiff is under no duty to mitigate his loss, despite the habitual use of the phrase "duty to mitigate" . He is completely free to act as he judges to be in his best interests. On the other hand, a defendant is not liable for all loss suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiff's loss as is properly to be regarded as caused by the defendant's breach of duty. In this case of course the common law position was supplanted by the provisions of the contract.

34. In the present case the damage was caused to the premises on the 9th February, 1994. On the 27th February, 1994, the Plaintiff wrote to the Defendant telling it that he had decided to close the premises on the 27th February, 1994 on a temporary basis. It is clear that at that stage the Defendant had not made up its mind as to whether it was going to cover him in respect of the damage. Neither had it done so by the 9th March, 1994 when the Plaintiff's solicitor wrote to the Defendant asking three questions. They were:-


"1. Are the FBD providing indemnity in respect of this claim?
2. What is the position regarding our client's ability to trade in view of the present difficulties in the building?
3. What is the position regarding the client's claim for consequential loss?"

35. The letter went on to point out that the premises remained closed and that as a result the Plaintiff was continuing to suffer loss.

36. On the 11th March, 1994 a firm of chartered loss adjusters replied on behalf of the Defendant. They pointed out that their inquiries were continuing and that they could not confirm that the policy would operate in respect of the loss. They also pointed out that extensive renovations were carried out to the premises in 1991/1992. They asked for information concerning these. This letter also pointed out that, insofar as the consequential loss item was concerned, it was being dealt with without prejudice to policy liability and they were not in a position to confirm that the policy would apply in respect of the loss. This letter also sought an explanation from the Plaintiff as to why the business was closed since the 1st March, 1994. This letter pointed out that under the terms of the policy, the Plaintiff was obliged to minimise his losses and a full explanation in that respect was sought. This letter also said that as there were toilet facilities in the first floor area of the premises, they wished to know why they could not be used in the short term.

37. On the 28th March, 1994 the Plaintiff's solicitors again wrote to the Defendant. This letter confirmed information which had been furnished to the Plaintiff's solicitor by a representative of the Defendant to the effect that if the premises were to be reopened at that time in its present condition, public liability cover would not be provided. That was apparently the first clear indication that the Plaintiff had of this position. This letter went on to point out that the premises had been effectively closed as and from the 8th February (this clearly should have been the 28th February) and that the consequential loss claim would be maintained for this period.

38. The insurance fell for renewal on the 28th March, 1994. On that day the Defendant sent a fax to the Plaintiff's solicitor. This pointed out that the current insurance under the policy expired on that day but the Defendant was prepared to extend cover for 14 days "at expiring terms to enable us to obtain our loss adjusters' specialist report on the damage and its cause" . On the following day, another fax was sent from the Defendant to the Plaintiff's solicitors. It read:-


"I refer to your fax and confirm that the extension of cover for 14 days includes the public liability cover on the basis that the premises remain closed to the public. Should the insured decide to open the premises for business, all public and employer's liability cover will cease".

39. On the 30th March, 1994 the Defendant's loss adjusters again wrote to the Plaintiff's solicitors. They indicated that their inquiries were continuing without prejudice to the question of policy liability. They sought further information from the Plaintiff with regard to the matter. They also drew the Plaintiff's attention to the policy terms and conditions and pointed out that the onus of proof of the operation of an insured peril rested on the Plaintiff and that he was obliged to provide such proof and information with respect to the claim as required.

40. On the 11th April, 1994 the property underwriter of the Defendant wrote to the Plaintiff's solicitor. He said:-


"I refer to my fax of the 29th March, 1994. The 14 day extension of cover expires at midnight tonight and, as we have not yet received the final report from our loss adjusters to enable us to determine if we have any liability under our policy, we are prepared to extend cover for a further 14 days. The public and employer's liability insurances are subject to the premises remaining closed to the public. As the premises are now unoccupied, the property damages insurances will exclude burst or overflowing of water tanks, apparatus or pipes. The cost of the 28 day extension amounts to £2,058 inclusive of 2% Government levy. Please confirm that the further extension of cover is required by your client" .

41. The Plaintiff's solicitors wrote to the Defendant's loss adjusters on the 13th April, 1994. Not surprisingly, they expressed their deep concern as to the position of uncertainty in which the Plaintiff remained. The letter pointed out that the Plaintiff's premises had been inspected on a number of occasions by experts on the Defendant's behalf. The Plaintiff's solicitors felt that the experts should be in a position to confirm the cost of the damage and to indicate that the Defendant would indemnify the Plaintiff in respect of it.

42. By the 25th April, 1994 the Defendant had still not made up its mind on the question of its obligations to the Plaintiff. On that day, the Plaintiff's solicitors wrote a letter pointing out that the 28 day extension of cover was due to expire then. They asked for confirmation by return that the cover would be extended for a further period of 28 days.

43. On the 28th April, 1994 the Plaintiff's solicitors again wrote to the Defendant and referred to a conversation which had taken place on the 26th April. In that conversation the Defendant advised that the policy cover would remain in place in connection with the Plaintiff's premises so long as the place remained closed and subject to the resolution of the ongoing investigations in connection with the wet rot/dry rot difficulties.

44. On the following day, the Plaintiff's solicitors sent yet another fax to the Defendant's loss adjusters. They pointed out that the matter seemed to be dragging on and they asked for confirmation by return that the investigations were then finished. The response was a letter of the 4th May, 1994. This required further facilities for inspection of the premises so as to complete what were described as "preliminary inquiries" . The letter pointed out that pending completion of these inquiries, they were not in a position to confirm that the policy would apply in respect of the loss.

45. On the 5th May, 1994, the Plaintiff's solicitors wrote to the Defendant in the following terms:-


"I am writing to you on behalf of my client to once again express our extreme concern at the delay in coming to a conclusion in the matter. We received by fax a letter from the loss adjusters dated the 4th instant. a request for further inspection facilities for today. As well as receiving the short notice, our client was requested to have a schedule of works carried out to enable this further inspection to take place. We attach herewith a copy of your letter. This inspection had to be cancelled in view of the very short notice.

Having discussed this matter with our clients again, we are at a complete loss to understand why this further inspection is necessary and feel that such further inspection will only cause further delay. Perhaps it might be worth reflecting on the sequence of events to date. The difficulty in this matter arose on the 8th February last and was reported to your goodselves. Mr. Farrell of the FBD office in Limerick inspected the premises on the 23rd/24th February and as a result of advices given the business was closed on the 26th February (sic).

Mr. Corcoran of Ove Arup inspected the premises on the FBD's behalf on the 1st March.

A further inspection was carried out by Messrs Robins, Scully and Tyrrell and other experts included a Mr. Gerry Galvin of Protim on the 18th March.

A further inspection was carried out on the 23rd March by Mr. Eddie Farrell of Protim and the report issued on the 4th April.

It is my understanding that in order to facilitate these examinations, some opening work was carried out in suspect areas.

It now seems totally unreasonable that a further inspection is to be carried out again with Messrs Ove Arup and a new party called Wood Preservation Services Limited. Effectively this means that a further firm of experts is now being brought into the picture some 11 weeks after notification of the problem.

As you are already aware, I have expressed on behalf of my client my deep concern at the delay in coming to a decision in this matter. Following the meeting on the 18th March my client was required to obtain estimates and other documentation in support of the claim. These were furnished to Messrs Robins Scully and Tyrrell on the 13th April last.

Our client is of the view that enough inspections have been carried out at this point by enough experts to enable a decision to be made as to whether or not the FBD are prepared to indemnify in respect of this claim.

In the circumstances, we are now calling upon you to clearly indicate what the position is so that our client can consider his position.

In the circumstances, we must advise you that no further inspection facilities will be made available until such time as we receive a clear indication of what the FBD's decision is. Our client has done everything in his power to try and deal with the queries raised and is in our view entitled to a speedy decision. We await hearing from you by return".

46. There was no response by return.

47. On the 9th May, 1994 the Plaintiff's solicitors wrote to the Defendant's loss adjusters. In that letter they pointed out that until such time as a firm decision was made by the Defendant as to whether or not the Plaintiff's losses were covered, the Plaintiff did not wish to prejudice his rights in any way. They reiterated their deep concern about the matter being allowed to continue and the fact that the Plaintiff's premises were closed throughout. The response was a letter of the 10th May from the loss adjusters. It pointed out that Wood Preservation Services were in fact an authorised agent of Protim and that the next inspection would take place on the 11th May, 1994 and that this would conclude their preliminary enquiries.

48. The letter of the 5th May was responded to on the 11th May, 1994 by the Defendant. It said as follows:-


"The position is that your client's policy indemnifies him against many perils. Dry/wet rot is not one of these perils and accordingly we are examining the underlying reasons behind this condition. The information we have to date suggests the loss does not fall within the terms of the policy.

You will appreciate that all our efforts at the moment are to ascertain if the loss falls within the policy. You obviously require a decision urgently and if such a decision is required today it can only be that the loss falls outside the policy terms. Given your permission however we would like to continue to investigate the matter and in this connection perhaps you would facilitate Messrs Robins Scully Tyrrell with whatever appointments they wish to arrange.

Incidentally the most recent delay has been due to the problem of arranging an appointment with more than one person at the same time. We are sure you will appreciate this.

Finally we wish to advise that Wood Preservation Services and Protim are one and the same firm".

49. On the 13th May, 1994 the Plaintiff's Solicitor wrote to the Defendant in the following terms:-


"We confirm that we have taken our client's further instructions in this matter. Our client does not wish to appear unreasonable and on the contrary is anxious that all facilities are made available to progress this matter. However, he requires clarification of the following matters before any further inspection would take place. We would refer to M/s Robin Scully and Tyrrell's letter of the 4th inst. setting out a schedule of works they require to be done.

It is our client's contention that he will be put to enormous inconvenience and expense if he is required to do these works. It is our understanding that certain areas were already open for the purposes of previous examinations, by Protim, and Ove Arup.

Secondly, our client requires clarification that in the event that these works are carried out, who is going to restore the property and more importantly who will be responsible for the costs of any such restoration.

Again we would ask you to take on board that in the event that a decision is come to whereby it is contended that the damage caused to our client's property is outside the scope of the policy and accordingly that he is not covered, potentially he risks being left in a situation where he has no insurance cover and a building where there would be a substantial amount of damage caused.

Another item on which he requires clarification is that Messrs Robin Scully & Tyrrell suggest that they require these works to be carried out in order to complete their 'preliminary enquires'. Does this mean that out client faces the likelihood of further requirements being made of him and again, who is to bear the costs of any such further requirement.

In the circumstances, what we would request is that in the event that this inspection is to be carried out that either you would arrange for a builder to prepare the building for the inspection works and also confirm that the builder will restore the premises to its original condition.

Alternatively, if our client is obliged to do so that he will be reimbursed both for the carrying out of the works required and subsequent restoration, whether the claim is admitted or not.

We would also be obliged if you would please furnish us with all the reports available to date, I am much obliged."

50. On the same day, the Plaintiff's Solicitors contacted the Defendant's Loss Adjusters, indicating the Plaintiff's preparedness to allow an inspection of the property to take place towards the end of the following week on condition that he would receive a satisfactory response to the letter which I have just quoted.

51. The next letter in this chain of correspondence was written over a month later on the 17th June, 1994. It was from the Plaintiff's Solicitors and was addressed to the Defendant's Loss Adjusters. It read as follows:-


"We refer to previous correspondence regarding the above, we are extremely disappointed that we have not as yet received any further information following the last inspection of our client's premises on the 19th May.

Effectively the position now is that our client's premises has been closed for four months.

Secondly, our client will obviously suffer a further loss of income which he might reasonably have expected during the World Cup.

Thirdly, we must put you on notice that our client has received considerable correspondence from his creditors indicating the likelihood of legal action for outstanding debts.

In the circumstances, we must insist that we receive by return a letter advising as to the exact position of our client's claim together with copies of all reports".


52. This letter was responded to on the same day. The Loss Adjusters wrote as follows:-


"With reference to the above, we are in receipt of further reports from our consultant experts with regard to this matter. We have referred these to our principals and are requesting their instructions. However, from information available at present, there is no evidence to indicate that the loss was as a result of the occurrence of an insured peril and in the circumstances we are not in a position to recommend payment to insurers at this time.

Consequently, we are continuing to deal with the matter without prejudice to policy liability, pending receipt of our principals' instruction".

53. Over a month later on the 19th July, 1994, the Loss Adjusters wrote to the Plaintiff's Solicitors as follows:-


"We referred the matter to insurers who have considered all the evidence available in this instance. We must advise that insurers regret that as the loss falls beyond the scope of the policy, they are not in a position to consider payment in this instance.

We are therefore repudiating the claim on their behalf".

54. The Arbitrator has already found that the Defendant was wrong in its repudiation of the Plaintiff's claim. But the Plaintiff now says that in the light of this correspondence, the Arbitrator was himself wrong in law in a very fundamental way in holding that the Claimant was expected to act as if he were uninsured and then fixing a period of 78 days as being the appropriate one with a view to calculating consequential loss. The correspondence makes it quite clear that the Plaintiff's premises was closed for a period well in excess of the 78 days allowed by the Arbitrator. Inspections of the premises were still being carried on, on behalf of the Defendants, up to the 19th May, 1994. It was not until the 19th July, 1994 that the Defendant decided to repudiate the claim.

55. The Defendant contends that simply to look at this correspondence gives an incomplete picture of the true position as it appeared before the Arbitrator. First, it says that under the terms of the policy there was a contractual obligation upon the Plaintiff to commence and carry out works of reinstatement on the premises with reasonable dispatch (see Section 1 subsection C (2)). Secondly, it says that that contractual obligation of the Plaintiff was raised, argued and determined before the Arbitrator. In that regard, it calls attention to a letter from the Defendant's Solicitors dated the 13th October, 1995, which put the Plaintiff on notice that the Defendant would allege a failure of mitigation of loss on, inter alia, the following bases:-


"A. A contention that the Plaintiff did not need to close the premises to carry out the works.
B. That he should have continued to operate the business at a level compatible with the period of repairs.
C. That the works should have been carried on outside business hours if it was necessary to do so.
D. That either the disco or the bar or both could have continued to function.
E. That alternative toilet facilities in the building should have been availed of.
F. That otherwise a temporary toilet should have been made available.
G. That if it was necessary to close the premises temporarily, the Plaintiff would have had to do so anyway as a result of the unsafe condition of the floor of the men's toilet.
H. That the time necessary to replace the floor in the gents toilet as opposed to the gents and the ladies combined would have been almost identical and thus no loss under the heading arose under the policy.
I. That the Plaintiff should have borrowed the necessary monies to carry out the repairs.
J. That if the Plaintiff could not borrow the monies, then since he was personally liable for two-thirds of the loss he could not, in any event, have stayed in business following the collapse of the floor from the case which he was making".

56. The Defendant also draws my attention to replies to particulars which again were before the Arbitrator dealing with the topic of mitigation of loss. These replies were dated the 9th February, 1996 and under this heading say:-


"The Claimant was not in a position to mitigate his losses, as due to his financial situation at the time of the insured peril, and the cutting off of the income estimated at £27,500/£30,000.00 per month. He was not able to raise the appropriate finance in order to carry our the necessary repairs. Furthermore, because of the uncertainty created by the Respondents as to whether the claim was within or without the scope of the policy, this further hampered the Claimant's efforts to raise sufficient finance to enable him to have the repair works carried out.

Furthermore, there was the clear indication to the Claimant from the Respondents that in the event that he re-opened his premises at the time, that all liability insurance would be withdrawn by the Respondent".

57. The Defendant has also called my attention to the fact that a quotation for the work to be done was first given by the Plaintiff as far back as the 14th April, 1994.

58. It is in the light of this information that the findings contained in the second interim award of the Arbitrator must be viewed. It is said that these findings when seen in the context of the matter that was rehearsed before the Arbitrator do not demonstrate any error of law at all. The Arbitrator found that the Plaintiff was in a position to carry out repairs and his excuse for not doing so because of alleged impecuniosity was not well founded. He also found that the Plaintiff made no effort to raise any finance to have the works carried out, if such were necessary. He also found that the Plaintiff had not behaved reasonably in not having the repairs carried out. In fixing the period of 78 days the Arbitrator took a variety of matters into account all of which are recited in the award.


CONCLUSIONS

59. Having considered the afffidavits and all of the documentary matter, which I have already set out in some detail in this judgment, and the Arbitrator's findings, I conclude as follows:-


1. I am not satisfied that the Plaintiff has demonstrated an error of law on the face of the Arbitrator's award. I am of opinion that the Plaintiff has isolated a particular statement and has attempted to ascribe to it a significance which it does not deserve. It appears to me to have been taken out of context having regard to all the material which was put before the Arbitrator and indeed the various findings on factual matters which he made in his second interim award. When viewed in context it is no more than an indication of the Plaintiff's contractual obligation of mitigation pursuant to the relevant provisions of the policy. It might have been more happily worded but it is not an error of law.

2. If I am wrong in my first conclusion and there is an error of law on the face of the Arbitrator's second award, I am quite satisfied that it is not one which calls for the intervention of this Court. It does not appear to me to have about it the qualities which would justify an Order of the type sought. In the context of the matter placed before the Arbitrator, it does not demonstrate an error of law so fundamental that the Courts cannot stand aside and allow it to remain unchallenged. The statement to which exception is taken, even if it does constitute an error of law, when viewed in context does not satisfy the "obvious error" test described by McCarthy J. in Keenan's case.
3. Even if there is an error of law in the instant case (contrary to the views already expressed by me), it would in my opinion be contrary to the policy consistently enunciated by the Supreme Court in the decisions which I have mentioned for this Court to intervene. To do so would be to usurp the functions of the tribunal chosen by the parties.

4. Like the plaintiff in Doyle v. Kildare County Council, I am of opinion that what is really sought by the Plaintiff here is a re-hearing of his consequential loss claim and an opportunity to re-argue the matter which has already been fully considered by the Arbitrator.

5. As the attack on the second interim award has failed so also must that which was mounted on the apportionment of costs in the final award.

6. The Plaintiff is not entitled to the Orders sought. This application is dis
missed.

© 1998 Irish High Court

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