Galway City Council v Samuel Kingston Construction Ltd and Another

• Jurisdiction: Ireland
• Judge: O'Donnell, J.
• Judgment Date: 25 March 2010
• Neutral Citation: [2010] IESC 18
• Court: Supreme Court
• Docket Number: [S.C. No. 414 of 2008]
• Date: 25 March 2010

[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

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

Facts: The appellant decided to redevelop a famous city square and entered into a contract with the contractor to carry out certain works. A dispute arose between the parties and the proceedings went to arbitration before the second named defendant. The contractor argued that an acceleration agreement had varied the original contract and that the appellant had repudiated the entire contract. The arbitrator in his award held that the appellant had acted unreasonably in exercising its rights and the parties then sought to contend that there were errors in the award. The arbitrator published an amended award in 2007 and now accepted that there had been abandonment but that the appellant still had acted unreasonably. The appellant brought proceedings to set aside the award of the arbitrator. The appellant had contended that there were ten defects in the award amounting to errors of law in the High Court and the Court had rejected the claim in its entirety. On appeal to the Supreme Court, the appellant alleged inter alia four grounds of misconduct or error on the part of the arbitrator. The appellant alleged inter alia that the exclusion of a relevant witness without addressing the admissibility of the evidence was misconduct and that the conclusions of the arbitrator as to a repudiatory breach and the abandonment of a site were errors of law. The arbitrator had concluded that he did not have to consider the law of repudiation as IEI Clause 63 covered the dispute. He had concluded that the appellant was in breach of contract when it acted in accordance with the certificate of the engineer.

Held by the Supreme Court per O'Donnell J. (Geoghegan, Fennelly JJ.) that the arbitrator had misconducted himself in the arbitration which was itself a ground for removal of the arbitrator pursuant to s. 37 of the Act of 1954. The Court would remove the arbitrator on that ground alone. In light of this order, it was not necessary to make any order of remittal. The arbitration would have to proceed before a new arbitrator. As a matter of logic and human experience, it was entirely possible that a party would justifiably lose confidence in the arbitrator resulting from an accumulation of incidents. The exclusion of the evidence of a relevant witness without considering its content was misconduct itself and a breach of fundamental fairness. It was difficult to conceive of a contract subsisting notwithstanding abandonment. The issue as to Clause 63 merited remittal, as did the question of certification by the engineer.

Reporter: E.F.

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...