The Attorney-General of Montserrat v J.E. Galloway Construction Company Ltd
| Jurisdiction | Montserrat |
| Judge | Morley J |
| Judgment Date | 02 August 2022 |
| Judgment citation (vLex) | [2022] ECSC J0802-3 |
| Docket Number | CASE MNIHCV2021/0017 |
| Court | High Court (Montserrat) |
| Year | 2022 |
IN THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
CASE MNIHCV2021/0017
In the matter of section 11 of the UK Arbitration Act 1889
And
In the matter of the Montserrat Arbitration Act
And
In the inherent jurisdiction of the Court
Miss Renée Morgan for the Applicant;
Ms E. Ann Henry QC and Ms Marcelle Watts for the Respondent.
On whether to set aside or remit an arbitrator's award
Concerning an arbitrator's award, I am asked to set it aside or remit it to the arbitrator for further consideration. At its simplest, in a protracted and complicated suit concerning a major construction project, the Government of Montserrat (GoM) complains the award to Galloway Construction (GC) 1 made a miscalculation about concrete, and awarded way too much money in interest without properly showing why nor fair calculation.
Concerning the concrete, I will leave the award untouched; concerning the interest, there is much to consider, as the award here as damages was of compound interest, greatly increasing the award, raising complaint.
The arbitrator is John Redmond, BA and FCIArb, appointed on 20.06.13, clearly very experienced, his final assessment of quantum dated 07.06.21 running to 106 pages. Formidable London counsel were deployed, being Peter Collie of 3 Paper Buildings for GoM, and for GC Steven Walker QC of Atkin Chambers.
In 2008, GoM contracted with GC to redevelop Little Bay, and on 06.04.09 expelled GC for not completing. Litigation followed, and it appears GC by amended statement of claim dated 20.08.19 sought in East Caribbean dollars 2 $18713054.73 with $36521546.07 in interest, totaling $55234600.80, (which figures for ease of reading will be rounded off to $18.7m, $36.5m and $55.2m). The paperwork is voluminous. In the end, the arbitrator awarded a principal sum of $2072852.49, with $6159535.11 in interest, totaling $8232387.60, (rounded off as $2.1m, $6.2m, and $8.2m).
Put neatly, arising from 2009, in 2019 GC sought $55.2m and in June 2021 was awarded $8.2m, of which $6.2m was interest.
Concerning concrete, it is suggested by GoM there should be a reduction of the $2.1m by between $62356 and $213493.94, depending on how the calculation is made, for GC using GoM materials to make concrete. GoM suggested this by letter to the arbitrator on 13.05.21. In a reply on 25.05.21, the arbitrator dismissed the suggestion, stating:
Item 2: Credit re materials used in concrete
Mr Collie says that a further concession was made in Mr Walker's closing submissions. In the section of those submissions dealing with Galloway's claim in respect of additional earthworks,
and specifically in the part of that section dealing with the quantum of that claim, it is acknowledged that a credit might be appropriate for savings made by Galloway in using crushed material as aggregate in concrete. Such a credit would be given against the cost claimed in respect of earthworks. I found that Galloway was not entitled to claim anything under that heading and therefore credit could not be given. Mr Collie argues that nevertheless a credit should be given against Galloway's claims generally. GoM did not include any claim for such an item in its counterclaim, and, not being a pleaded claim, it was not appropriate for me to consider it. There was no accidental slip or omission for me to correct.
Given the clarity with which the arbitrator has dismissed the invitation to adjust his award for concrete, in the knowledge arbitrations are supposed to be final, assessing he has reasonably addressed his mind, I will not consider this aspect further.
Concerning the interest calculation of $6.2m, what was awarded on page 104 of the 07.06.21 award was compound interest as damages, leading to the interest over so long being three times the principal of $2.1m. Though calculation of the principal was conducted meticulously over the preceding 103 pages, not much was said about the interest calculation, which was as below, raising the impression its assessment was more an afterthought than an in-depth analysis:
32.13. Galloway does however claim interest as damages for breach of contract. Mr Walker asserts that “ it is now well established that simple or compound interest can be awarded as damages for late payment”. He relies on the decision in Sempra Metals v Inland Revenue Commissioners [2008] 1 AC 561. Mr Collie says that this can be of no help as “The point at which Montserrat's law can be said to have diverged from that of England and Wales is 1967, specifically the passing of the West Indies Act 1967 which inter alia conferred jurisdiction upon the Eastern Caribbean Supreme Court.” I understand him to mean that the law of Montserrat stopped following decisions of the English courts at that point, in which case it remains unaffected by the decision in Sempra Metals. He is suggesting that before the Sempra Metals decision, interest could not be claimed in English law as a head of damage for late payment and therefore that remains the position in Montserrat.
32.14. I do not think that the effect of the West Indies Act 1967 was to crystallise the common law in Montserrat so that it was unable to develop in ways that seem appropriate in other common law jurisdictions. The judgment in Sempra Metals did not change the law, although it is accepted that dicta in the opinion of Lord Nichols of Birkenhead laid the basis for a change in how the courts should approach claims for interest as damages for breach of contract. Referring to the reluctance of the courts in England to allow such claims, he said: “The House should recognise the remnant of the restrictive common law exception for what it is: the unprincipled remnant of an unprincipled rule. The House should erase the remains of this blot on English common law jurisprudence.”
32.15. I accept that the Sempra Metals decision did not change the law in Montserrat. If however it had been the practice of the Montserrat courts not to allow claims for interest as damages for late payment (a matter on which I have not been given any authority), it would not be unreasonable to argue that such a practice was also a jurisprudential blot which the Montserrat courts in 2021 would be eager to erase.
32.16. I therefore accept that it is open to Galloway to claim interest as damages for late payment, subject to the normal requirement to demonstrate loss and causation.
32.17. Mr Galloway has calculated a claim for interest using a rate of 1% per month, compounded monthly. This is the rate stated in the Contract and he states that the rate broadly reflects the costs that Galloway incurs if it has to borrow money. The rate in the Contract is not relevant to a claim for damages. His statement regarding borrowing costs was not however challenged and I accept it. He has not given specific evidence that Galloway was borrowing substantial sums throughout the period from the expulsion to the present day but in view of the evidence that has been given regarding the company's financial difficulties I accept that it is very probable that it was doing so.
32.18. I have decided that Galloway is entitled to be paid the sum of…XCD $2,072,852.49 giving credit for its liability for liquidated damages. I am satisfied that Galloway has suffered loss as a result of GoM's breaches of contract and has suffered further loss by way of interest costs of 1% per month, compounded monthly, on all of that sum from 20 April 2009 with the exception for the damages for conversion of the plant and equipment that was returned. That figure takes account of depreciation to the date of return and therefore interest should only run from the date of return… [thereby calculating $6159535.11]
In assessing the witnesses, the arbitrator had earlier said:
9.1. Galloway called just one witness of fact, Mr Galloway. He is a Director of the company which had been founded by his father. He has substantial academic and practical experience of the management and coordination of construction projects in the USA and the Caribbean, but those projects were primarily construction of buildings rather than civil engineering. He was personally involved in most if not all aspects of the Little Bay project, and if Galloway was restricted to being able to call only one witness of fact, he was the obvious person to choose. With regard to several aspects however he was not the person primarily responsible. For example, he did not personally prepare Galloway's tender, although he was responsible for reviewing and approving it before it was submitted. Similarly, he did not personally prepare applications for payment, but again reviewed and approved such applications. Mr Collie was extremely critical of his evidence. He said in his closing submissions that he was “thoroughly dishonest” and made regular comment that Mr Galloway was deliberately untruthful. That was not an impression that I shared. I believe that Mr Galloway was trying very hard to give truthful evidence. Nevertheless, there were a number of instances where Mr Galloway's recollection was not supported by contemporary documentary or photographic evidence. I am quite sure that he believed that his company's works had been seriously undervalued and that it was entitled to substantial further payment. He prepared the claim interpreting the available documentary evidence in a way that appeared favourable and over the very considerable period of time since the work was done persuaded himself that his interpretation was correct. He believed in what he said, but his belief was not always well-founded.
In plain terms, it appears the arbitrator has applied the Sempra Metals case, though is aware it may not apply locally, yet seems to think it should, awarding compound interest at 1% per month,...
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