Court of Appeal will not re-examine facts following a voluntary arbitration

Following an arbitration award, the Court of Appeal cannot enter into the facts of the case, if the arbitration is a voluntary one

Following an arbitration award, the Court of Appeal cannot enter into the facts of the case, if the arbitration is a voluntary one. This was held on 18 November 2019 by the Court of Appeal, presided by Mr Justice Anthony Ellul in Michele Peresso Limited -v- Dr Tigne Limited, John Sammut and Mark Sammut.

The case concerns a shopping complex in Sliema, which the plaintiff company had rented in 2008 and arbitration proceedings had commenced due to the fact that part of the rented property was still in the hands of third parties and the property had significant defects. The plaintiff company had asked the arbitration panel to declare that the defendants had failed to fulfil their obligations and to order a refund of rent, and to order that the third parties vacate the premises.

The arbitration panel ordered that the defendants pay the plaintiff company over €200,000 in rent paid and €11,650 in pre-liquidated damages. The panel had argued the rented property was not in the hands of the plaintiff company and that the air conditioners, lifts and escalators did not work and could not have been used.

It was argued that the parties had agreed that their agreement stated that there was no appeal on the arbitration. However, the Court did not find this in their agreement, but that the issues would have been referred “for final and binding arbitration in terms of Abitration Law in accordance with the rules and practices of the Malta Arbitration Centre”. But this does not mean that there is no right to an appeal.

The plaintiff company argued that the appeal should have been limited to points of law as dictated in the Arbitration Act (Chapter 387 of the Law of Malta).

Mr Justice Ellul then dealt with the first ground of appeal, that is on how the arbitration panel dealt with how the damages were calculated. The Court of Appeal held that this ground was unclear, however, if the defendants were referring to Article 1545 of the Civil Code which regulates how the rent should be reduced, the arbitors had absolute discretion to establish the percentage used to reduce the rent. Notwithstanding this, this ground of appeal is not a point of law.

As to the second ground of appeal, the defendants argued that it was unfair that there was a further reduction of rent, when there was an agreement on how much rent was to be refunded. The arbitors had decided this point because part of the rented property was still occupied by third parties. This ground of appeal would have allowed the Court of Appeal to analyse the evidence and therefore, render the appeal on a point of fact. This ground of appeal is a criticism on how the arbitration panel handled the evidence produced. This ground of appeal goes contrary to Article 70B of the Arbitration Act, which allows only points of law to be dealt with by the Court of Appeal.

The next ground of appeal, dealt with whether the defects in air conditioners, lift, escalators, and electrical system, were defects in terms of Article 1545 (1) of the Civil Code. This article reads:

  • “1545. (1) The lessor is bound to warrant the thing let against the faults or defects which prevent or diminish the use thereof; and, where the existence of such faults or defects is proved, the lessee may demand at his option either the dissolution of the contract or an abatement of the rent.
  • (2) The same rule shall apply even though such faults or defects shall have arisen after the stipulation of the contract.
  • (3) The lessor, however, shall not be bound in respect of apparent faults or defects which the lessee could have discovered for himself at the time of the contract.”

The arbitration panel held that the defects had a substantial impact on the plaintiff company’s operation. Again to see whether the Court of Appeal agreed with the arbitration award, it would have to see evidence produced and therefore, certainly did not constitute a point of law.

To establish whether the defects had an impact of business operation, the Court would have to investigate whether these defects were known or otherwise at the time, when the lease agreement was signed. Under the Arbitration Act only mandatory arbitrations have a right of appeal on points of fact. When the arbitration is voluntary, the appeal is limited to points of law only.

The Court of Appeal, then moved to dismiss the appeal.

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