Clarington Developments Ltd v HCC International Insurance

JurisdictionIreland
JudgeMr Justice Garrett Simons
Judgment Date06 September 2019
Neutral Citation[2019] IEHC 630
CourtHigh Court
Docket Number2014 No. 2536 P.
Date06 September 2019
BETWEEN
CLARINGTON DEVELOPMENTS LIMITED
PLAINTIFF
AND
HCC INTERNATIONAL INSURANCE COMPANY PLC
DEFENDANT

[2019] IEHC 630

Garrett Simons

2014 No. 2536 P.

THE HIGH COURT

Dismissal of proceedings – Reasonable cause of action – Abuse of process – Defendant seeking to dismiss the plaintiff’s claim – Whether the plaintiff’s claim disclosed no reasonable cause of action

Facts: The defendant, HCC International Insurance Company plc, applied to the High Court to dismiss the claim of the plaintiff, Clarington Developments Ltd, on the grounds that it disclosed no reasonable cause of action. An order was sought, in the alternative, staying the proceedings pursuant to the court’s inherent jurisdiction on the grounds that the plaintiff’s case was bound to fail. The proceedings sought to enforce a bond which had been entered into between the plaintiff, the defendant and the contractor under a separate building contract. The bond had been described variously as a “performance bond” or a “contract guarantee bond”. The bond represented a form of guarantee whereby the defendant, as surety, undertook to satisfy and discharge any damages sustained by the plaintiff, as employer, in the event of default on the part of the contractor in the performance of the building contract. This undertaking was subject to a twelve-month time-limit reckonable by reference to the date of the issuing of a certificate of practical completion. The plaintiff alleged that the construction works under the building contract were carried out defectively by the contractor, and had issued the proceedings seeking to recover damages from the defendant as surety under the bond.

Held by Simons J that the institution of these proceedings represented an abuse of process in circumstances where the claim against the surety could not succeed. He held that the claim had been brought in the teeth of the terms of the bond. He held that the claim was also wholly inconsistent with the separate proceedings instituted against the contractors on the same date as these proceedings were instituted (18 February, 2014); those latter proceedings sought to refer the quantification of the damages sustained to arbitration.

Simons J held that the proceedings would be dismissed pursuant to the court’s inherent jurisdiction.

Proceedings dismissed.

Judgment of Mr Justice Garrett Simons delivered on 6 September 2019.
Introduction
1

This matter comes before the court by way of an application to dismiss the plaintiff’s claim on the grounds that it discloses no reasonable cause of action. An order is sought, in the alternative, staying the proceedings pursuant to the court’s inherent jurisdiction on the grounds that the plaintiff’s case is bound to fail.

2

The proceedings seek to enforce a bond which has been entered into between

(i) the plaintiff, (ii) the defendant and (iii) the contractor under a (separate) building contract. The bond has been described variously as a “performance bond” or a “contract guarantee bond”. In brief, the bond represents a form of guarantee whereby the defendant, as surety, undertook to satisfy and discharge any damages sustained by the plaintiff, as employer, in the event of default on the part of the contractor in the performance of the building contract. This undertaking is subject to a twelve-month time-limit reckonable by reference to the date of the issuing of a certificate of practical completion.

3

The plaintiff alleges that the construction works under the building contract were carried out defectively by the contractor, and has issued these proceedings seeking to recover damages from the defendant as surety under the bond.

4

The plaintiff and defendant both agree that the damages must be quantified—to use a neutral term—before liability to make payment under the bond arises. There is, however, a fundamental disagreement between the parties as to the mechanism by which damages are to be quantified. The plaintiff contends that damages can be assessed by the High Court in plenary proceedings taken against the surety. Conversely, the defendant insists that it is a condition precedent to the surety’s liability under the bond that damages must first have been established and ascertained by way of conciliation or arbitration between the employer and the contractor pursuant to the building contract. No such arbitration has yet taken place. On this interpretation, it is not open to the plaintiff, as employer, to have the damages quantified by the High Court, and the within proceedings are accordingly bound to fail.

5

The resolution of this disagreement between the parties turns on the correct interpretation of the bond. In particular, it turns on the meaning to be attributed to the phrase “the damages sustained […] as established and ascertained pursuant to and in accordance with the provisions of” the building contract. It will be necessary to decide whether this phrase requires that the damages can only be quantified—to use a neutral term—by way of conciliation or arbitration under the building contract.

6

Before embarking upon any consideration of the correct interpretation of the bond, however, it will be necessary first to address the following jurisdictional issue. The defendant, by issuing a motion to dismiss the proceedings, is asking the court to exercise an exceptional jurisdiction. The court is being invited to dismiss the proceedings in limine without a full hearing on oral evidence. This jurisdiction is to be sparingly exercised, and should only be adopted when it is clear that the proceedings are bound to fail, rather than where the plaintiff’s case is very weak or where it is sought to have an early determination on some point of fact or law (per Clarke J. in Keohane v. Hynes [2014] IESC 66, [6.6]).

7

The application of these principles to the circumstances of the present case is discussed in detail at page 7, paragraphs 22 et seq. below. The judgment will then turn to consider the question of whether the proceedings are bound to fail.

Relevant facts
8

There is no factual dispute between the parties as to the events leading up to the institution of these proceedings. The parties have very helpfully prepared an agreed factual chronology which was handed in to the court at the hearing.

9

The plaintiff entered into a building contract with Sammon Contracting Ltd on 9 December 2011 (“ the building contract“). For ease of exposition, I will refer to the plaintiff as “ the employer“, and to Sammon Contracting Ltd (and its successor in title, Sammon Contracting Ireland Ltd) as “ the contractor“, for the balance of this judgment. The building contract related to the construction of a primary care centre and sports hall in Newbridge, Co. Kildare (“ the development“).

10

The clause of the building contract of most immediate relevance to the dispute which has since arisen in respect of the “performance bond” or “contract guarantee bond” (discussed below) is clause 38. This clause sets out the dispute resolution mechanisms pursuant to the building contract as follows.

“38.(a) If a dispute arises between the parties with regard to any of the provisions of the Contract such dispute shall be referred to conciliation in accordance with the Conciliation Procedures published by the Royal Institution of the Architects of Ireland in agreement with the Society of Chartered Surveyors and the Construction Industry Federation.

If a settlement of the dispute is not reached under the Conciliation Procedures either party may refer the dispute to arbitration in accordance with Clause 38(b).

(b) Provided always that in case any dispute or difference shall arise between the Employer or the Architect on his behalf and the Contractor, either during the progress of the Works or after the determination of the employment of the Contractor under the Contract or the abandonment or breach of the Contract, as to the construction of the Contract or as to any matter or thing arising thereunder or as to the withholding by the Architect of any certificate to which the Contractor may claim to be entitled, then either party shall forthwith give to the other notice of such dispute or difference and such dispute or difference shall be and is hereby referred to the arbitration and final decision of such person as the parties hereunto may agree to appoint as Arbitrator or, failing agreement, as may be nominated on the request of either party by the President for the time being of the Royal Institute of the Architects of Ireland after consultation with the President of the Construction Industry Federation and the award of such Arbitrator shall be final and binding on the parties. Such reference, except on Article 3 or Article 4 of the Articles of Agreement or on the question of certificates, shall not be opened until after the Practical Completion or alleged Practical Completion of the Works or determination or alleged determination of the Contractors employment under this Contract, unless with the written consent of the Employer or of the Architect on his behalf and the Contractor. The Arbitrator shall have power to open up, review and revise any opinion, decision, requisition or notice, and to determine all matters in dispute which shall be submitted to him and of which notice shall have been given as aforesaid in the same manner as if no such opinion, decision, requisition or notice had been given. Every or any such reference shall be deemed to be a submission to arbitration within the meaning of the Arbitration Act, 1954 (Number 26 of 1954), or the Arbitration Act (Northern Ireland) 1957 (as the case may be) or any act amending the same or either of them.”

11

The employer and the contractor subsequently entered into a bond on 22 December 2011. The surety under the bond is HCC International Insurance Company plc, i.e. the defendant to these proceedings. I propose to use the shorthand “ the surety” to refer to...

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4 cases
  • Towey v The Government of Ireland
    • Ireland
    • High Court
    • 11 November 2022
    ...Equality and Law Reform [2014] IESC 21; [2014] 2 IR 30, Clarington Developments Limited v HCC International Insurance Company plc [2019] IEHC 630, Kearney v Bank of Scotland [2020] IECA 92) and it is unnecessary to conduct a full review of the 23 It is well-established that there is a diffe......
  • Cronin v Cowen; Cronin v Harris and Another; Cronin v Martin; Cronin v McEntee and Another
    • Ireland
    • High Court
    • 23 March 2023
    ...jurisdiction of the Court, was addressed by Simons J. in Clarington Developments Limited v. HCC International Insurance Company PLC [2019] IEHC 630 (at para. 24) in terms which were adopted with approval by Dignam J. in Towey as follows (para. 26): “24. For the reasons explained by the Supr......
  • BGB Property Holdings Ltd, Arno Properties Ltd, Tagus Properties Ltd, Tiber Properties Ltd and Downby Developments Ltd v Tifco Ltd
    • Ireland
    • Court of Appeal (Ireland)
    • 24 June 2021
    ...Agreement. The Court held that, in contrast to the position in Clarington Developments Ltd v HCC International Insurance Company plc [2019] IEHC 630, clause 2.2 does not present a straightforward issue of contractual interpretation which admits of an obvious answer. The Court needed to be c......
  • BGB Property Holdings Ltd v Tifco Ltd
    • Ireland
    • High Court
    • 29 May 2020
    ...court to consider the approach adopted recently by Simons in Clarington Developments Limited v. HCC International Insurance Company PLC [2019] IEHC 630. That case concerned the interpretation of a bond provided in connection with a construction contract where the bond was in an utterly stan......
1 firm's commentaries
  • Construction Arbitration: Ireland
    • Ireland
    • Mondaq Ireland
    • 19 August 2022
    ...to performance bonds in particular, the Irish High Court in Clarington Developments Ltd v HCC International Insurance Company Plc [2019] IEHC 630 took a new approach to the interpretation of a form of wording widely used in performance bonds. It dismissed the employer's application to enfor......

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