Galway City Council v Samuel Kingston Construction Ltd and Another

 
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[2010] IESC 18

THE SUPREME COURT

Geoghegan, J.

Fennelly, J.

O'Donnell, J.

414/08
Galway City Council v Samuel Kingston Construction Ltd & Hawker
IN THE MATTER OF THE ARBITRATION ACTS 1954 -1998
AND IN THE MATTER OF AN ARBITRATION

Between:

GALWAY CITY COUNCIL
Plaintiff
-and-
SAMUEL KINGSTON CONTRUCTION LTD
First Named Defendant
-and-
MR GEOFFREY F HAWKER
Second Named Defendant

414/2008 - Geoghegan Fennelly O'Donnell [nem diss] - Supreme - 25/3/2010 - 2010 3 IR 95 2010 2 ILRM 348 2010 20 4859 2010 IESC 18

AMPTHILL PEERAGE, IN RE 1977 AC 547 1976 2 WLR 777 1976 2 AER 411

ARBITRATION ACT 1954 S27

ARBITRATION ACT 1954 S28

MCCARRICK v THE GAIETY (SLIGO) LTD 2001 2 IR 266 2002 1 ILRM 55 2002/19/4846

MCCARTHY v KEANE & ORS 2004 3 IR 617 2005 2 ILRM 241 2004/33/7696 2004 IESC 104

ARBITRATION ACT 1954 S38

ARBITRATION ACT 1954 S36

MCSTAY v ASSICURAZIONI GENERALI SPA & MAGUIRE 1991 ILRM 237 1991 ILT 126 1990/9/2720

ARBITRATION BETWEEN BRIEN & BRIEN, IN RE 1910 2 IR 84

HEGARTY, STATE v WINTERS 1956 IR 320

R v NORTHUMBERLAND COMPENSATION APPEAL TRIBUNAL, EX PARTE SHAW 1952 1 KB 338 1952 1 AER 122

R v BELFAST RECORDER, EX PARTE MCNALLY 1992 NI 217

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

M & J GLEESON & CO & ORS v COMPETITION AUTHORITY 1999 1 ILRM 401

ORANGE COMMUNICATIONS LTD v DIRECTOR OF TELECOMMUNICATIONS REGULATION & METEOR MOBILE COMMUNICATIONS LTD (NO 2) 2000 4 IR 159 2000/15/5538

CARRICKDALE HOTEL LTD v CONTROLLER OF PATENTS DESIGNS & TRADE MARKS & PHONOGRAPHIC PERFORMANCE (IRL) LTD 2004 3 IR 410

HUDSON & DUNCAN-WALLACE BUILDING & ENGINEERING CONTRACTS 11ED 1994 PARA 4.209

RAMSEY & KEATING KEATING ON BUILDING CONTRACTS 7ED 2001

LAING MANAGEMENT LTD (FORMERLY LAING MANAGEMENT CONTRACTING LTD) v AEGON INSURANCE CO (UK) LTD 86 BLR 70 55 CON LR 1

DALKIA UTILITIES SERVICES PLC v CELTECH INTERNATIONAL LTD 2006 1 LLOYDS 599 2006 2 P & CR 9

R v BETSON & ORS 2004 2 CR APP R (S) 52 2004 EWCA CRIM 254

BULFRACHT (CYPRUS) LTD v BONESET SHIPPING CO LTD (THE PAMPHILOS) 2002 2 LLOYDS 681 2002 EWHC 2292 (COMM)

LONDON UNDERGROUND LTD v CITYLINK TELECOMMUNICATIONS LTD 2007 2 AER (COMM) 694 2007 BLR 391 114 CON LR 1

ARBITRATION ACT 1954 S37

ARBITRATION

Award

Review - Grounds for arbitral review - Serious and fundamental flaw - Hearing - Application to set aside award - Misconduct of arbitration - Misconduct - Whether "procedural mishap" ground for review of arbitral award - Whether serious and fundamental flaw - Whether misconduct occurred - Evidence - Admissibility of evidence - Exclusion of relevant witness -Relevance of evidence - Whether evidence admissible - Whether evidence of witness necessary in reaching decision - Application to remove arbitrator - Misconduct of arbitration - Errors of law on face of record - Arbitrator falling asleep during arbitration - Adequacy of performance of decision maker dependent on quality of decision - Whether arbitrator falling asleep reason in itself to remove arbitrator - Loss of confidence in arbitrator - Accumulation of incidents leading to loss of confidence - Whether arbitrator's interpretation of law correct - Whether remedy contained in contract between parties excluded common law remedy of repudiatory breach - McCarthy v Keane [2004] IESC 104 [2004] 3 IR 617 and Keenan v Shield Insurance Co. Ltd. [1988] IR 89 followed; McStay v Assicurazioni Generali SPA [1991] ILRM 237, Laing Management Ltd v Aegon Insurance Company (UK) Ltd (1997) 86 BLR, Dalkia Utility Services Plc v Celtech International Ltd (2006) EWHC 63, Limerick City Council v Uniform Construction Ltd [2005] IEHC 347 [2007] 1 IR 30, Carrickdale Hotel v Controller of Patents [2004] IEHC 85 [2004] 3 IR 410, M&J Gleeson v Competition Authority [1999] 1 ILRM 401 and Orange v ODTR (No 2) [2000] 4 IR 159 considered: R v Betson [2004] EWCA Crim 254 distinguished; Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd, The MV Pamphilos [2002] EWHC 2292 (Comm); (2002) 2 Lloyd's Rep 681 and London Underground Ltd v Citylink Telecommunications Ltd [2007] EWCH 1749 considered - Arbitration Act 1954 (No 26), ss 27, 28, 36, 37 & 38 - Plaintiff's appeal allowed (414/2008 - SC - 25/3/2010) [2010] IESC 18

Galway City Council v Samuel Kingston Construction Ltd

1

Judgment delivered by O'Donnell, J. on the 25th day of March 2010.

INTRODUCTION
2

Judgment Delivered by O'Donnell. J. [nem diss]

3

The realisation, in the words of Lord Simon of Glaisdale in the Amptill Peerage Case [1977] AC 547, that litigation, while certainly preferable to personal violence is not in itself an intrinsically desirable activity, has encouraged the search for other methods of dispute resolution each of which has attracted it adherents and enthusiasts. One of the oldest and best established of these systems is that of arbitration, and there are now well understood rules governing both domestic and international arbitrations, and a well established regime that regulates the system of arbitration and its interaction with the courts system. However, as this case illustrates all too clearly, no system can by itself guarantee a correct, or even an acceptable outcome. In this case the parties already incurred the stress, inconvenience and considerable expense involved in eight days of hearing before the second named defendant Arbitrator, three days in the High Court, and a further two days in this Court and will, in the event, now have to return for a full hearing before another arbitrator, if they wish their dispute to be resolved to a final binding determination. That is a result which I cannot contemplate with any enthusiasm, but which is I believe regrettably unavoidable.

THE FACTS
4

The facts of the case have already been set out in the careful and comprehensive judgment of the High Court (McMahon, J). The Appellant Galway City Council ("the Council" or "GCC") decided to redevelop Galway's famous Eyre Square, and entered into a contract dated the 5 th April 2004, with the Respondent Contractor, Samuel Kingston Construction Limited ("the Contractor" or "SKC"), to carry out certain works for a contract sum of €6.326 million and for that purpose the parties adopted, with certain amendments, the standard form of contract published by the Institute of Engineers in Ireland ("the IEI") containing conditions which incorporate an arbitration clause.

5

Work had already commenced in February of that year, with a contract period of seventy-eight weeks and was thus due to complete in August 2005. There appears to have been an understandable desire on the part of GCC to ensure that all works were completed in a timely fashion and in particular, that the disruption to the public and to businesses, which was inevitably involved in the works, would be limited. As the contract proceeded, and delays occurred, the Council considered that it would be particularly unacceptable, that there should be a second Christmas period during which the public and businesses should be subject to the inconvenience and disruption created by the works. On the other hand, it also seems clear, that SKC was in a difficult financial position almost throughout the course of the contract. The Arbitrator, who is the second named Defendant in these proceedings, was critical of the Council for not seeking a specific provision guaranteeing completion before the Christmas period of 2005 although he also considered that such a provision would have been prohibitively expensive. For my part I do not think it was necessarily unreasonable to expect the building contract with a completion date of August 2005 to have been completed by December of that year but in any event it is not necessary to resolve this. The significance of these matters is rather, that when matters occurred giving rise to further delays from the point of view the Council, and increasing expense from the point of view of the Contractor, both parties were particularly unhappy, and perhaps less tolerant than they otherwise might have been.

6

The parties discussed the problems in early 2006 and came to a conclusion which in principle made considerable sense. They came to an understanding that the work would be accelerated and the previous extensions of time granted to the Contractor rescinded, and that the Contractor would be paid more money in return. Unfortunately, indeed it is not excessive to say catastrophically, that agreement was never reduced to writing, so that when, almost inevitably, further disputes arose, there was further disagreement as to the terms of the agreement, the nature of the agreement, (and in particular whether it was a separate freestanding agreement, or rather an agreed variation of the April 2004 agreement), and indeed as to whether there was any binding agreement.

7

It was and is common case, that under what has been described as the acceleration agreement (and leaving to one side the precise legal status of that agreement) that there was provision for the payment to the contractor of a lump sum of €130,000 and a further sum of €6,802.69 per week to be paid monthly, albeit that the precise basis for such payments was in dispute between the parties at the Arbitration. Whether there was any obligation on the Contractor to provide extra resources and if so the quantum and nature of such resources was also in dispute. However, once again delays were encountered which...

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