Arbitration - Caselaw Update

There were a number of decisions of the Irish Courts in 2012 in relation to arbitration.  The Arbitration Act 2010 came into force in June 2010 and implemented the UNCITRAL Model Law into Irish law; the cases considered below deal with the application of the new Act to agreements to arbitrate entered into before the passage of the Act, whether a party could rely on an arbitration clause in an agreement to which it was not itself a party, and the impact of delay on an agreement to arbitrate.

O’Meara -v- Commissioners of Public Works concerned an application for a stay to arbitration.  The parties were the landlord of the old Richmond Hospital in Dublin, and the Commissioners of Public Works who had taken a lease of the building for use as courtrooms.  The dispute concerned an alleged breach by the Commissioners of the obligation to repair under the lease, as well as a claim in tort based on the alleged commission of waste by the defendant. The landlord was claiming €1.4 million in damages.  The lease contained an arbitration clause.

The landlord sought to resist a referral to arbitration on the basis that the arbitration clause could not apply to its claim in tort (for waste) and that the arbitration clause pre-dated the Arbitration Act 2010 which significantly changed the Irish law of arbitration.

The Court endorsed the approach taken in the 2007 House of Lords decision in the Fiona Trust case, in which it was held that parties should be taken to have intended that all matters arising from their relationship should be dealt with in a single tribunal, absent clear language to the contrary.  He noted with regard to the claim in tort that it could be dealt with in the arbitration on the basis that it had arisen out of the performance of the lease rather than arising independently.  On the issue of the change of law, the judge had some sympathy with the landlord’s position, but noted that the legislation clearly provides that it applies to any arbitration commenced after the operative date of the legislation, and that the new Act was therefore applicable to the dispute.

Charleton J granted the stay to arbitration and observed that ‘A court has little choice where a valid arbitration clause occurs in a lease or contract’ and that there are only limited circumstances in which a Court may hear a matter where the parties have agreed to arbitration.

Rory O’Meara -v- Commissioners of Public Works in Ireland and the Attorney General[2012] IEHC 317

In P Elliot & Co Ltd -v- FCC Elliot Construction Ltd  (MacEochaidh J, August 2012), a stay to arbitration refused where the party seeking the stay was not party to the agreement in which the arbitration clause was contained.

Section 6 of the Arbitration Act, 2010, incorporates Article 8 of the UNICTRAL Model Law, and requires a Court to refer parties to arbitration where they have agreed by contract to deal with disputes by arbitration.  The Court must refuse jurisdiction unless the arbitration agreement is null and void, inoperative, or incapable of being performed.

The parties in this case were the plaintiff Irish construction company, P Elliott, (‘P Elliott’) and the defendant FCC Elliott (‘FCC’).

The defendant company in this case sought a stay of litigation by the plaintiff in respect of monies due under a consultancy contract, on the basis of an arbitration agreement.  Although there was no arbitration clause in the consultancy agreement itself, the defendant argued that the payment dispute should be dealt with pursuant to an arbitration clause in a related joint venture agreement (to which it was not a party).   

MacEochaidh J in the High Court accepted that there were circumstances in which a party would be allowed to rely on an arbitration agreement, even one contained in an agreement to which it was not itself a party.  He described the relevant circumstance as arising where a third party to a contract had a ‘sufficient connection’ to a party to the arbitration agreement, in which case it could invoke the arbitration clause by reason of that connection.  As to the nature of the connection required between the parties, MacEochaidh J. confirmed the approach taken in the 2008 decision of the UK Court of Appeal in City of London -v-  Sancheti, to the effect that a connection beyond a ‘bare commercial or legal connection’ between the parties was required.

The Court noted that the parties in this case could have chosen to incorporate an arbitration clause into the consultancy contract, but had chosen not to do so, and instead had specifically inserted a clause granting jurisdiction to the Irish Courts.   The Court held that the defendant could not rely on the arbitration clause in the joint venture agreement, and refused to grant a stay.

P Elliot & Company Ltd (in receivership and liquidation) -v- FCC Elliot Construction Ltd [2012] IEHC 361

Regan Civil Engineering -v- Minister for Defence concerned an application for an extenstion of time to refer to a dispute to arbitration.  The High Court refused an extension of where no action had been taken by the plaintiff for a period of four years.

Mitchell -v- Mulvey Developments 2012:

This case concerned proceedings in relation to a defective property, issued by the plaintiff against the seller of the lands, the developer of the property, and against HomeBond, the national house building guarantee scheme.  HomeBond brought an application to stay the proceedings to arbitration.  The plaintiff challenged the application on the basis that the arbitration clause was not effective, as there had been a change of Minister since the signature of the HomeBond agreement, and on the basis that HomeBond had delayed in seeking a stay of the proceedings to arbitration.

Hogan J. in the High Court rejected the first argument, on the basis that the change of name of the Government Minister did not affect the validity of the clause; a minister as a ‘corporation sole’ is a legal entity and its status does not change with changes of minister.  However, the Court accepted that there had been inordinate delay by HomeBond in seeking to invoke the arbitration clause.  The Court also found that HomeBond had taken a number of steps to engage with the litigation, by entering an appearance to the proceedings, by requesting a statement of claim, and by being legally represented in Court.    Therefore, it had given the impression to the plaintiff that it intended to take part in the proceedings, and had thus given up its right to rely on the arbitration clause in the HomeBond agreement.

Mitchell -v- Mulvey Developments Ltd & Ors [2012] IEHC 561

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Keywords: Commercial Litigation, Landlord and Tenant, Deirdre Ní­ Fhloinn, Publication

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