Mc Cormack Fuels Ltd -v- Maxol Ltd, [2008] IEHC 197 (2008)

Docket Number:2007 5801 P
Party Name:Mc Cormack Fuels Ltd, Maxol Ltd
Judge:Dunne J.

THE HIGH COURT2007 No. 5801 PBETWEENMcCORMACK FUELS LIMITED PLAINTIFF ANDMAXOL LIMITED DEFENDANT JUDGMENT delivered by Ms. Justice Dunne on the 20th day of June, 2008The application herein is for an order pursuant to s. 5(1) of the Arbitration Act 1980, to stay the proceedings in the above title. The application is grounded on an affidavit of Gavin Simons, solicitor on behalf of the defendant herein. In his affidavit sworn on the 24th September, 2007, Mr. Simons referred to an Authorised Distributor Agreement dated the 18th August, 2004, between the defendant and the plaintiff. That agreement contains an arbitration clause. In the course of his affidavit, Mr. Simons explained that the parties have been involved in discussions of and concerning petrol rebates and the rates to be struck in respect thereof.Given that the application to stay the proceedings pending arbitration has been resisted by the plaintiff, it is somewhat ironic to note that the position of the parties herein to arbitration has changed somewhat over a period of time. In April 2007, it appears that both parties to the proceedings were agreeable to arbitration in respect of their dispute. By June 2007, the plaintiff herein in a letter dated the 5th June, 2007, referred to a threat of legal action from the defendant herein and as such indicated "in the light of this I have decided not to seek any reference to arbitration and not to consent to your company putting any of the disputes between us before an arbitrator". Ultimately a plenary summons was issued herein and served on the 14th August, 2007.A replying affidavit was sworn herein by John McCormack on the 23rd November, 2007. In that affidavit he referred to the petrol distribution and supply agreement entered into by the plaintiff and the defendant. He set out details in relation to what he described as one of the principal clauses and alleged that the defendant was in breach of that clause which provided for a review of the commissions payable by the defendant to the plaintiff. He alleged that that condition was a fundamental term of the agreement and even if not fundamental, that it was an essential term in the agreement. He contended that there was a breach of that term and that this amounted to a "fundamental rupture" of the agreement which had the effect of rescinding the agreement.A similar contention was considered in the decision in the case of Doyle v. Irish National Insurance Company Plc [1998] 1 I.R. 89. In that case it was held by Kelly J. that the arbitration clause survived the voidance of the contract and that the defendant was entitled to have the dispute referred to arbitration. In the course of his judgment Kelly J. followed the leading case of Heyman v. Darwins Limited [1942] A.C. 356. In the course of the judgment at p. 92, Kelly J. quoted from that decision where it was stated by Macmillan L.J. at pp.373 and 374 as follows:-"An arbitration clause in a contract . . . is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake towards each other . . . but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution . . . what is commonly called repudiation or total breach of a contract . . . does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by the contract undertaken to the repudiating party.The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract." Having referred to that passage Kelly J. went on to say:-"Whilst that decision speaks of repudiation or total breach of contract the principle decided by it is equally applicable in circumstances where one party seeks to void or...

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