The High Court has refused Dublin Waterworld Limited’s attempt to overturn an arbitration award requiring it to pay €10.25 million in VAT arising from a lease of the National Aquatic Centre.
Campus and Stadium Ireland Development Limited and Dublin Waterworld had entered the lease on April 30, 2003. A dispute later arose over whether VAT of €10,254,600 had been correctly charged on its capitalised value.
In June 2005, the Commercial Court referred that question to arbitration. The agreed arbitrator, VAT specialist Dermot O’Brien, issued his award on July 1, 2005, finding that the VAT had been properly charged.
Campus and Stadium Ireland then sought High Court permission to enforce the award. Dublin Waterworld asked the court to set it aside, arguing that the arbitrator had misconducted himself by adopting an approach which it said had not been properly flagged during the arbitration.
The dispute centred on how the open market value of the lease should be calculated for VAT purposes. A Valuation Office report had put the relevant open market figure at €35 million. Campus and Stadium Ireland instead relied on a statutory formula which produced a capitalised value of €75.96 million, above the agreed economic value of approximately €62 million and therefore sufficient to trigger the VAT charge.
Mr Justice Gilligan held that the arbitrator was entitled, on the evidence and submissions before him, to regard the €35 million valuation as an estimate rather than satisfactory evidence of open market price and to proceed using the alternative formula.
The judge rejected Dublin Waterworld’s claim that it had been unfairly surprised. The relevant argument had been raised during cross-examination and submissions at the arbitration.
Gilligan J did find that the arbitrator had made an incorrect statement when suggesting that a customer could not review a supplier’s VAT charge. However, he held that this was not a fundamental error of law and had no significant impact on the decision.
The application to set aside the award was therefore refused. The precise form of the enforcement order remained to be settled after further submissions.