Dunnes Stores v Holtglen Ltd

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice Kelly
Judgment Date27 March 2012
Neutral Citation[2012] IEHC 93
Date27 March 2012

[2012] IEHC 93

THE HIGH COURT

[No. 370 MCA/2011]
[No. 259 COM/2011]
Dunnes Stores v Holtglen Ltd
COMMERCIAL
IN THE MATTER OF THE ARBITRATION ACTS 1954 - 1998 AND
IN THE MATTER OF THE ARBITRATION ACT 2010, SECTION 4
AND IN THE MATTER OF AN ARBITRATION

BETWEEN

DUNNES STORES
APPLICANT

AND

HOLTGLEN LIMITED
RESPONDENT

ARBITRATION ACT 1954 S36

CHURCH & GENERAL INSURANCE CO v CONNOLLY & MCLOUGHLIN UNREP COSTELLO 7.5.1981 1981/9/1523

KEENAN v SHIELD INSURANCE CO LTD 1988 IR 89 1988/2/325

LIMERICK CITY COUNCIL v UNIFORM CONSTRUCTION LTD 2007 1 IR 30 2005/36/7522 2005 IEHC 347

GALWAY CITY COUNCIL v SAMUEL KINGSTON CONSTRUCTION LTD & HAWKER 2010 3 IR 95 2010 2 ILRM 348 2010/20/4859 2010 IESC 18

COMPANIES ACT 1963 S214

ANALOG DEVICES BV & ORS v ZURICH INSURANCE CO & ANOR 2005 1 IR 274 2005 2 ILRM 131 2005/2/242 2005 IESC 12

HOENIG v ISAACS 1952 2 AER 176

KRAMER v ARNOLD 1997 3 IR 43 1997/9/3148

IGOTE LTD v BADSEY LTD 2001 4 IR 511 2001/12/3308

INVESTORS COMPENSATION SCHEME LTD v WEST BROMWICH BUILDING SOCIETY 1998 1 WLR 896 1998 1 AER 98 1998 1 BCLC 493

EMO OIL LTD v SUN ALLIANCE & LONDON INSURANCE PLC UNREP SUPREME 22.1.2009 2009/20/4795 2009 IESC 2

MANNAI INVESTMENT CO LTD v EAGLE STAR LIFE ASSURANCE CO LTD 1997 AC 749 1997 2 WLR 945 1997 3 AER 352

BNY TRUST CO (IRL) LTD & ARK LIFE ASSURANCE CO LTD v TREASURY HOLDINGS UNREP CLARKE 5.7.2007 2007/5/998 2007 IEHC 271

RAINY SKY SA v KOOKMIN BANK 2011 1 WLR 2900 2012 BUS LR 313 2012 1 AER 1137 2011 2 CLC 923 2011 UKSC 50

BEALE & ORS CHITTY ON CONTRACTS 30ED 2008 PARA 22.048

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S108

NATIONAL ASSET MANAGEMENT AGENCY ACT 2009 S99

ARBITRATION

Contract

Award - Construction of contract - Arbitrator finding that insolvency of respondent not constituting breach of contract - Award to respondent - Whether fundamental error of law by arbitrator - Galway City Council v Samuel Kingston Construction Ltd [2010] IESC 18, [2010] 3 IR 95 followed - Kramer v Arnold [1997] 3 IR 43; ICS Ltd v West Bromwich BS [1998] 1 WLR 896; Mannai Ltd v Eagle Star Ass Co Ltd [1997] AC 749; Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 considered - Application dismissed (2011/370MCA, 2011/259COM - Kelly J - 27/3/2012) [2012] IEHC 93

Dunnes Stores v Holtglen Ltd

Facts: Dunnes sought to set aside an arbitral award made on foot of a counterclaim by Holtglen Limited. The arbitration arose on foot of a development agreement. Dunnes argued that Holtglen had breached the agreement and had not remedied the breaches. The arbitrator made a determination which upheld the claims but found the breaches to have been remedied. The arbitrator determined that Dunnes were liable to pay Holtglen, the sum of approx. Eur 20 million. Dunnes argued that it had no liability to make payments because of the insolvency of Holtglen.

Held by Kelly J. that the challenge of Dunnes failed. The application to set aside the arbitrators award was dismissed. The whole question of the insolvency of Holtglen had become an irrelevance.

Reporter: E.F.

Introduction
1

1. Dunnes Stores ("Dunnes") seek to set aside an arbitral award ("the award") made by Mr. Eoin McCullough, S.C., ("the arbitrator") on 7 th October, 2011. The award was made on foot of a counterclaim made by Holtglen Limited ("Holtglen") in an arbitration between these parties.

2

2. The arbitration arose on foot of a development agreement of 13 th June, 2007 ("the agreement"), which was made between Dunnes, Holtglen and a company called Deerland Construction Limited as surety. The agreement was in respect of works that were to be carried out in Co. Kilkenny on a premises now know as the Ferrybank Shopping Centre (the centre).

3

3. Included in the centre was a site that was purchased by Dunnes for the purpose of establishing an anchor store there. The works to be performed under the agreement included the construction of that store.

4

4. Dunnes contended that Holtglen had breached the agreement in a number of ways and had not remedied those breaches. Thus, it was argued, it was entitled to terminate the agreement. Holtglen defended that claim and counterclaimed for monies due to it under the agreement.

5

5. On 15 th June, 2001, the arbitrator made a determination which upheld in large part Dunnes claims concerning Holtglen's breaches of the agreement. However, he found that the breaches had been remedied and accordingly, Dunnes were not entitled to terminate the agreement. That determination of the arbitrator is not challenged in these proceedings.

6

6. In September 2011, the arbitrator embarked upon the hearing of Holtglen's counterclaim and made the award in favour of Holtglen on 7 th October, 2011.

7

7. The arbitrator determined that Dunnes were liable to pay Holtglen the sum of €20,269,732.81 pursuant to clauses 17.1.5, 17.1.6, 17.1.8 and 17.3 of the agreement. He also ordered Dunnes to pay €15,905.55 pursuant to clause 12 of the agreement. He made ancillary orders dealing with costs and the payment of interest. Dunnes now seek to set the award aside. They do so on the grounds that there is a fundamental error of law upon the face of the award.

8

8. Before I consider the merits of the application, I ought to deal with the jurisdiction of the court and the criteria applicable to it.

Jurisdiction
9

9. Section 36 of the Arbitration Act 1954, provides as follows:-

2

2 "(1) In all cases of reference to arbitration, the Court may from time to time remit the matters referred or any of them to the reconsideration of the arbitrator or umpire.

(2) Where an award is remitted, the arbitrator or umpire shall, unless the order otherwise directs, make his award within three months after the date of the order."

10

10. This section provides a mechanism for the remittal of an award. It does not specify the grounds upon which an award may be remitted. The section enables the court to make the order contemplated but the grounds for so doing are to be found in common law. Quite apart from this statutory provision, there is, in any event, a common law jurisdiction to remit or set aside an award if there is an error of law on its face. This is clear from the judgment of Costello J. in Church and General Insurance Co. v. Connelly and McLaughlin (Unreported, 7 th May, 1981) where he said that:-

"...there is no doubt that at common law the court can either remit or set aside an award if there is an error of law on its face... in my view the court's jurisdiction to set the award aside in such circumstances is given by the common law."

11

11. Nowadays most, if not all, applications of this nature are brought pursuant to the provisions of section 36.

12

12. This jurisdiction, according to McCarthy J. in Keenan v. Shield Insurance Company Limited [1988] LR. 89 at 96, is limited to "an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged".

13

13. This approach was followed by Clarke J. in Limerick City Council v. Uniform Construction Limited [2007] 1 I.R. 30 at p. 43 where he said the jurisdiction is "limited and arises only where the error is 'so fundamental' that it cannot be allowed to stand (Keenan v. Shield Insurance Co. Limited [1988] I.R. 89) or 'clearly wrong' (McStay v. Assicurazioni Generali SPA)".

14

14. In recent years, the task of convincing a court that it ought to intervene and remit or set aside an arbitrator's award has become quite onerous. This much is clear from the observations of O'Donnell J. in Galway City Council v. Samuel Kingston Construction Limited [2010] 3 I.R. 95, where he said at p. 106:-

"If the grounds for remittal are matters of common law, then a number of consequences follow. Firstly, the grounds may at least in theory be capable of expansion, as indeed was recognised by Fennelly J. in McCarthy v. Keane [2004] IESC 104, [2004] 3 I.R. 617. By the same token however, the existing grounds can also be developed and if considered appropriate, made more rigorous. Indeed, this in my view is how recent Irish case law should be understood."

In Keenan v. Shield Insurance Co. Ltd. [1988] I.R. 89, McCarthy J. stated in unmistakeable and trenchant terms the policy considerations that he considered should guide the court particularly in the aftermath of the Arbitration Act 1980, and perhaps more generally in the light of the development of arbitration, both domestic and international. At p. 96 of the judgment he stated:-

'Arbitration is a significant feature of modern commercial life; there is an International Institute of Arbitration and the field of international arbitration is an ever expanding one. It ill becomes the courts to show any readiness to interfere in such a process; if policy considerations are appropriate, as I believe they are in a matter of this kind, then every such consideration points to the desirability of making an arbitration final in every sense of the term. Church & General Insurance Co. v. Connolly (Unreported, High Court, Costello J., 7 th May, 1981) itself is an example of the type of fine-combing exercise which courts should not perform when it is sought to review an arbitration award'

Applying this test, he concluded that:-

'There may be instances in which an award which shows on its face an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged.'

This it should be noted is a very significant adjustment (and restriction) of the test which had previously applied, which, as McCarthy J. himself identified it on the preceding page was merely that 'there was an error of law appearing on the face of the award'. The same process of adjustment (and restriction) is detectable in the judgment of Finlay C.J. in McStay v. Assicurazioni Generali SPA [1991] I.L.R.M. 237 where he suggested that an...

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2 cases
  • Hayes v Kelleher & Reardon
    • Ireland
    • High Court
    • 31 July 2015
    ...must be precise observance of any conditions or procedures governing termination of the agreement." ix. Dunnes Stores v. Holtglen Ltd [2012] IEHC 93 74 This was a case in which Dunnes Stores sought to set aside an arbitral award that arose out of a development dispute. The case is of intere......
  • Clarington Developments Ltd v HCC International Insurance
    • Ireland
    • High Court
    • 6 September 2019
    ...to substitute its view as to what the appropriate allocation of risk should have been. See, by analogy, Dunnes Stores v. Holtglen Ltd [2012] IEHC 93 which has been cited by the surety (“where parties have used unambiguous language, irrespective of the question of commercial sense, the unam......

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