Campus and Stadium Ireland Ltd v Dublin Waterworld Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 03 June 2005
• Neutral Citation: [2005] IEHC 201
• Docket Number: [2005 No.1466 P]
• Court: High Court
• Date: 03 June 2005

[2005] IEHC 201

THE HIGH COURT

No. 1466 P/2005

CAMPUS & STADIUM IRELAND DEVELOPMENT LTD v DUBLIN WATERWORLD LTD

COMMERCIAL

BETWEEN

CAMPUS AND STADIUM IRELAND DEVELOPMENT LIMITED

PLAINTIFF

AND

DUBLIN WATERWORLD LIMITED

DEFENDANT

CONVEYANCING & LAW OF PROPERTY ACT 1881 S14

ARBITRATION ACT 1980 S5

ARBITRATION ACT 1980 S2

CHANNEL TUNNEL GROUP LTD v BALFOUR BEATTY CONSTRUCTION LTD 1993 1 ALL ER 664 1993 AC 334

Stay

Arbitration clause - Alternative method of dispute resolution agreed by parties -Whether proceedings should be stayed -Court's inherent jurisdiction to stay proceedings - Channel Group v Balfour Beatty Ltd [1993] AC 334 approved -Arbitration Act 1980 (No 7), s 5 - Stay granted (2005/1466P - Kelly J - 3/6/2005)[2005] IEHC 201Campus and Stadium Ireland Development Ltd v Dublin Waterworld Ltd

Facts: the plaintiff brought proceedings against the defendant for, inter alia, non-payment of rent, for sums it claimed the defendant was indebted to it in respect of VAT payable on the lease and disputes concerning compliance by the defendant with its obligations concerning repair and maintenance of the demised premises. The defendant applied to have the proceedings stayed on the basis that clauses 9 and 10 of the lease provided for the arbitration and alternative resolution of disputes between it and the plaintiff under the lease. Clause 9 dealt exclusively with disputes concerning compliance by the defendant with its obligations concerning repair and maintenance of the demised premises which provided that they should be referred to an expert for resolution. Clause 10 was an arbitration clause which dealt with any dispute arising between the parties in relation to the lease save those in respect of rent.

Held by Mr. Justice Kelly in staying the proceedings in respect of the defendant's liability for VAT which would be referred to arbitration and disputes in respect of repair and maintenance which would be referred to an expert for determination under clause 9 that there was no dispute between the parties in respect of the rent but that the defendant was in breach of its obligations to pay rent and other specified sums. There was not therefore any dispute between the parties making it mandatory to stay the proceedings under section 5 of the Arbitration Act 1980 to allow the plaintiff's claim to go to arbitration in respect of the rent. There was a dispute between the parties however concerning the liability of the defendant for VAT on the execution of the lease which fell within the provisions of clause 10 and therefore the proceedings were stayed to allow that issue to be referred to arbitration. There were also disputes between the parties in regard to the defendant's repair and maintenance obligations which should be referred to alternative dispute resolution under the court's inherent discretion to stay the proceedings in respect thereof to facilitate such alternative resolution as the correct approach to be applied was that where commercial enterprises negotiating at arms length decided on a particular procedure for the resolution of disputes a court ought to be slow in permitting them to depart from such procedures.

Reporter: P.C.

1 JUDGMENT delivered by Mr. Justice Kelly on the 3rd day of June, 2005

The Property

2 The property the subject of these proceedings is known as the National Aquatic Centre, situate at Abbottstown, County Dublin. It is owned by the plaintiff. The shareholding of the plaintiff is held as to 25% by the Taoiseach, 25% by the Minister for Finance and 50% by the Minister for Arts, Sports and Tourism.

3 The National Aquatic Centre cost €62 million to develop.

4 It was opened on 10th March, 2003.

5 The plaintiff let the facility to the defendant on what is described in the evidence as a "commercial basis". It did so by a lease dated 30th April, 2003. The lease has a term of 30 years. That lease is competently drafted and comprehensive. Regardless of how well a lease is drafted, however, it will be of little benefit to a landlord if the tenant is not an entity of substance.

The Tenant

6 The tenant in this case is the defendant. It is a limited company with its registered office at Caherweesheen, Ballyard, Tralee, County Kerry. Its accounts for the year ending 31st December, 2003 (the year the lease was created) show it as having an authorised and paid-up capital of just €127. It had no fixed assets. It had no current assets that year, save for a sum of €12,243 due to it from a company called Dublin Waterworld Management Limited, which is its own 100% owned subsidiary. It is nothing short of astonishing that a valuable premises such as the one in suit could have been let to the defendant. But it was, with entirely predictable results which have now, unfortunately, come to pass.

The Tenant's Behaviour

7 Since going into occupation of the property in March, 2003, the defendant has paid nothing at all save a single sum of €67,191.33 in respect of insurance. Not a single cent has been paid by way of rent, and that is not in dispute. That failure to discharge the basic obligation of any tenant long antedated the problem with the roof of the premises which occurred in January, 2005. Much has been made by the Defendant of this roof defect in an attempt to explain or indeed excuse its default.

8 Leaving aside a sum in excess of €10 million which is allegedly due by the defendant in respect of VAT liabilities, there was up to the end of last year, a sum well in excess of €1 million outstanding in respect of liabilities owed by the defendant to the plaintiff, principally that of rent. This figure does not take into account the rent due from January, 2005 to date.

9 The defendant was obliged to provide security for its obligations to a limited extent. That it did. It has however proved to be entirely inadequate. The failure to make the payments due to the plaintiff has resulted in that security being called by the plaintiff. It was not discharged on demand but during the course of the hearing before me on Wednesday last a fax from Anglo-Irish Bank Corporation as of 1.43 p.m. that day, demonstrated that funds to a total of €761,842 had been transferred to the plaintiff's account. The net effect of that payment is twofold. First, the plaintiff no longer has the security of the guarantee since it is now exhausted. The guarantee fund has been used in discharge of the defendant's basic obligation to pay its rent. Secondly, even with the exhaustion of that fund there is still an admitted sum of the order of €300,000 at least due by the defendant to the plaintiff. No proposal has been forthcoming as to the due discharge of that amount.

10 Quite apart from that sum, the plaintiff alleges that the defendant is also indebted to it in a sum of in excess of €10 million in respect of VAT payable on the lease. The defendant contends that it has no such liability.

11 A number of other shortcomings on the part of the defendant have been identified by the plaintiff including failure to deliver audited accounts. These were needed in order to place the plaintiff in a position to assess the portion of the rent due which would represent 10% of the defendant's profit for the years 2003 or 2004. There is also an alleged failure to set up and contribute to a sinking fund; a failure to take steps to agree with the plaintiff the terms of a capital maintenance programme and a failure to pay insurance rent.

The Plaintiff's Response

12 Given the defendant's conduct and in particular its failure to pay any rent, it is hardly surprising that the plaintiff decided to take action. What is surprising is the length of time that elapsed before the plaintiff decided to do so. In the course of an affidavit which was sworn by the chief executive of the plaintiff, which sought to transfer this case into the Commercial List, he said:

"The NAC is a very valuable premises upon which there has been a great deal of expenditure. The property is of national importance in terms of the part it is designed to play in international and national sporting events as well as being a vital facility intended for community use."

13 With that state of affairs one would have expected that a defendant in possession of such valuable premises, who had paid no rent since going into occupation in March, 2003, might have had action taken against it in a much shorter timeframe than that which occurred. That is not intended to be, nor indeed could it be, any criticism of the lawyers acting on behalf of the plaintiff because they have acted with commendable efficiency and excellent despatch since instructed to do so.

14 On 18th March, 2005, a forfeiture notice under s. 14 of the Conveyancing and Law of Property Act, 1881 was served by the plaintiff on the defendant. It set out a whole series of alleged breaches on the part of the defendant of its obligations pursuant to the lease of 30th April, 2003. They included:

15 a) the failure to pay any rent;

16 b) the failure to deliver audited accounts;

17 c) the failure to pay insurance rent;

18 d) the failure to contribute to the sinking fund;

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