Clúid Housing Association v O'Brien and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Murphy
• Judgment Date: 30 June 2015
• Neutral Citation: [2015] IEHC 398
• Docket Number: Record No: 2012/9497 P
• Date: 30 June 2015
• Court: High Court

[2015] IEHC 398

THE HIGH COURT

Murphy J.

Record No: 2012/9497 P

BETWEEN:

CLÚID HOUSING ASSOCIATION

Plaintiff:

-and-

BRIAN O'BRIEN AND MICHAEL HASLAM PRACTICING UNDER THE STYLE AND TITLE OF SOLEARTH ECOLOGICAL ARCHITECTURE

-and-

REMCO LIMITED TRADING AS MALONE O'REGAN CONSULTING ENGINEERS

-and-

P. ELLIOT & COMPANY LIMITED (IN RECEIVERSHIP AND LIQUIDATION)

Defendants:

-and-

DTE MANUFACTURING LIMITED TRADING AS DEMPSEY TIMBER ENGINEERING

Contract – Breach of contract – Damages – Inclusion of third party – O. 16, r. 1(3) of the Rules of the Superior Courts – S. 27 (1) (b) of the Civil Liability Act, 1961 – Delay

Facts: The applicant sought an order setting aside the notice of third party proceedings brought against the applicant by the third named defendant concerning the breach of contract claim instituted by the plaintiff against the defendants. The applicant contended that the third party notice was time barred pursuant to o. 16, r. 1(3) of the Rules of the Superior Courts and s. 27 (1) (b) of the Civil Liability Act, 1961. The third named defendant contended that since the moisture ingress into the slabs installed on the plaintiff's projects was due to the negligence actions of the applicant to whom the work had been subcontracted, it was the necessary party to the proceedings.

Ms. Justice Murphy granted an order for setting aside the third party proceedings brought against the applicant. The Court held that those proceedings were not brought within the reasonable timeframe. The Court observed that under s. 27 (1) (b) of the Civil Liability Act 1961, the third party notice must be served as it was reasonably possible. The Court observed that what could be reasonable possible would vary depending on the circumstances of each case. The Court observed that the applicant was never included as a party when the issues between the plaintiff and the defendants were purported to be resolved through dispute resolution process and also when the fourth named defendant was put into liquidation thereby indicating that the third named defendant lost reasonably possible opportunities to bring the proceedings within time frame. The Court found that the averments made in the statement of claim against the contractor were sufficient for the third named defendant to include the applicant as the necessary party in the litigation.

Judgment of Ms. Justice Murphy delivered the 30th day of June, 2015

1 This is an application by a third party, namely DTE Manufacturing Limited trading as Dempsey Timber Engineering, to set aside notice of third party proceedings brought against it by the respondents, Remco Limited trading as Malone O'Regan Consulting Engineers. The third party notice was served on 23rd April, 2014 following an application issued by the third named defendant on 13th March, 2014. The application to set aside the proceedings is based on the applicant's contention that neither the application for leave to issue a third party notice nor service of the actual notice was done in a timely manner as required by Order 16, Rule 1(3) of the Rules of the Superior Courts and s. 27(1)(b) of the Civil Liability Act, 1961, respectively. Order 16 Rule 1(3) provides that an application for leave to issue a third party notice shall, unless otherwise ordered by the Court, be made within twenty eight days from the time limited for delivering the defence. Section 27(1)(b) of the Civil Liability Act 1961 provides that a third party notice be served as soon as reasonably possible.

2. Background

The underlying proceedings commenced in September 2012. Those proceedings involve various allegations of professional negligence and contractual breach against the architects, consulting engineers and main contractors of a social housing development known as the Emerald Project at Sillogue Road, Ballymun, hereinafter referred to as ‘the Project’. This Project consisted of the construction of a number of apartments and houses over two, three and four storeys in four separately constructed blocks.

3 The plaintiff in the underlying proceedings is a company limited by guarantee without share capital engaged in the business of developing and managing social housing. The first and second named defendants were appointed as the architects to the project pursuant to a contract dated 31st October, 2008. On the same date, a contract was entered into with the third named defendant, appointing it as engineer. On 23rd September, 2009, the fourth named defendant was retained as the building contractor for the Project, on the recommendation of the first, second and third named defendants. The applicant in the current proceedings, DTE Manufacturing Limited trading as Dempsey Timber Engineering, is a specialist manufacturer, supplier and installer of timber frame buildings. It was subcontracted by the fourth named defendant to design, manufacture and install the timber structure of the project with the exception of what are known as Brettstapel slabs, in respect of which it had responsibility for installation only. The respondent in the current application, Remco Limited trading as Malone O'Regan Consulting Engineers, is the third named defendant in the underlying proceedings.

4 The plaintiff's claim concerns defects which arose in Block A of the Project. It is alleged that those defects arise from the use of a timber construction method used in the project known as Brettstapel –h; a method that originated in Southern Germany/Austria. Brettstapel slabs were used in the structural frame of Block A. The plaintiff contends that the inclusion of these slabs was specified in the design produced by the first, second and third named defendants. The plaintiff, in its statement of claim, says that Brettstapel is very rarely used in Ireland because, amongst other reasons, it is unsuited to the high level of atmospheric and environmental moisture experienced in this country. This contention is disputed by the third named defendant, the respondent in the within application.

5 In March 2010, Brettstapel slabs were transported to the Project site, having been ordered from a manufacturer in Germany. These slabs were installed by the fourth named defendant and the applicant/third party, between 22nd March, 2010 and 3rd May, 2010.

6 On 8th June, 2010, the block work wall at the gable end of Block A was found to be off plumb. According to the respondent, the fourth named defendant determined that this was due to the workmanship of the applicant. The fourth named defendant demolished and reconstructed the wall and realigned the timber frame. However on 15th July 2010, the wall was found to be off plumb again. The first, second, third and fourth named defendants investigated this issue and found that the Brettstapel slab had expanded in the horizontal plane, damaging the floor, the timber frame, the windows and the external cladding to Block A. Following an inspection, the first, second and third named defendants formed the view that the expansion was due to moisture absorption by the timber and consequent swelling. Subsequent testing and specialist surveys confirmed this to have been the case. The source of the moisture was considered to be atmospheric humidity and/or rain ingress, although this is the subject of some dispute in the underlying proceedings.

7 The first, second, third and fourth named defendants subsequently took steps to remedy the difficulties that had arisen. The affidavit of Brendan Flanagan, CEO of the applicant, points to the statement of claim in the underlying proceedings which states that, on 14 September, 2010, the first and second defendants, the architects, instructed the fourth named defendant to remove and re-execute the Brettstapel flooring. The fourth named defendant refused to comply with this direction, contending that it was not necessary, and a dispute subsequently arose.

8 In January, 2011, the fourth named defendant suspended its works on the Project. According to the affidavit of Brendan Flanagan, the plaintiff, supported by the first and second named defendants, the architects, and the third named defendant/respondent, the engineer, as its professional advisers engaged in a dispute resolution process with the fourth named defendant, as envisaged by the building contract of 23rd December, 2009. The applicant/third party states that it was not invited to participate in this process. The dispute resolution process was ultimately unsuccessful and on 3rd May, 2011, the fourth named defendant wrote to the plaintiff signaling its withdrawal from the conciliation process. On 8th May, 2011, the plaintiff terminated the fourth named defendant's obligation to complete works on the Project, in accordance with the terms of the building contract. On 19th May, 2011, the first of a series of receivers was appointed to the fourth named defendant. On 4th July 2011, pursuant to an order of the High Court, the fourth named defendant was placed in liquidation. It appears to be undisputed that following the termination of the fourth named defendant's obligation to complete the works the plaintiff made a call on the performance bond provided to it under the building contract and recouped a sum of €850,000 from the bond provider.

9 According to its statement of claim, the plaintiff, in June 2011, received specialist technical advice to the effect that the damage to block A could not be corrected and, even if catered for structurally and concealed cosmetically, the block would represent a long term maintenance problem. In light of this advice, and the reduced amount of funding available to it, the plaintiff decided to demolish block A (excluding the two two-storey houses) and to proceed only with blocks B, C and D.

10 On 21st September, 2012, the underlying proceedings were commenced by plenary summons. A statement of claim...