Galway City Council v Samuel Kingston Construction Ltd and Another

JurisdictionIreland
JudgeMr. Justice McMahon
Judgment Date17 October 2008
Neutral Citation[2008] IEHC 429
CourtHigh Court
Date17 October 2008

[2008] IEHC 429

THE HIGH COURT

No. 6 MCA/2008
Galway City Council v Samuel Kingston Construction Ltd & Hawker
IN THE MATTER OF THE ARBITRATION ACTS 1954 -1988 AND IN THE MATTER OF AN ARBITRATION

BETWEEN

GALWAY CITY COUNCIL
PLAINTIFF

AND

SAMUEL KINGSTON CONSTRUCTION LIMITED AND GEOFFREY F. HAWKER
DEFENDANTS

ARBITRATION ACT 1954 S36

ARBITRATION ACT 1954 S38

ARBITRATION ACT 1954 S37

KEENAN v SHIELD INSURANCE COMPANY LTD 1988 IR 89

McCARTHY v KEANE 2004 3 IR 617

LIMERICK CITY COUNCIL v UNIFORM CONSTRUCTION LTD 2007 1 IR 30

LONDON EXPORT CORPORATION LTD v JUBILEE COFFEE ROASTING CO LTD 1958 1 WLR 661

WILLIAMS v WALLIS & COX 1914 2 KB 478

PORTSMOUTH ARMS HOTEL LTD v ENNISCORTHY UDC UNREP O'HANLON 14.10.1994 1995/4/1501

TOBIN & TWOMEY SERVICES LTD v KERRY FOODS LTD & KERRY GROUP OLC 1996 2 ILRM 1

McCARRICK v THE GAIETY (SLIGO) LTD 2002 1 ILRM 55

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

McSTAY v ASSICURAZIONO GENERALI SPA & ANOR 1991 ILRM 237

LIMERICK CITY COUNCIL v UNIFORM CONSTRUCTION LTD 2007 1 IR 30

OMNIBRIDGE CONSULTING LTD v CLEARSPRINGS (MANAGEMENT) LTD 2004 EWHC 2276

THOMAS BORTHWICK (GLASGOW) LTD v FAURE FAIRCLIUGH LTD 1968 1 LLOYDS 16

INTERBULK LTD v AIDEN SHIPPING CO LTD (THE VIMEIRA) 1984 2 LLOYDS 66

WARBOROUGH INVESTMENTS LTD v S. ROBINSON & SONS (HOLDINGS) LTD 2003 EWCA CIV 751 2003 2 EGLR 149

VIA NETWORKS IRELAND LTD IN RE 2002 2 IR 47

FIDELITY MANAGEMENT SA & ORS v MYRIAD INTERNATIONAL HOLDINGS BV & ANOR UNREP MORISON 9.6.2005 2005 EWHC 1193 COMM

RUSSELL ON ARBITRATION 23ED 2007

ARBITRATION ACT 1954 S27

ARBITRATION ACT 1954 S28

ARBITRATION ACT 1950 S17 (UK)

RSC O.28 r11

MUTUAL SHIPPING CORPORATION OF NEW YORK v BAYSHORE SHIPPING CO OF MONROVIA 1985 1 A E R 520 528

ARBITRATION ACT 1996

ARBITRATION ACT 1950 S17 (UK)

KEATING ON BUILDING CONTRACTS 7TH ED

HEYMAN v DARWINS 1942 AC 356

HUDSONS BUILDING & ENGINEERING CONTRACTS 11 ED

STUBBS v THE HOLYWELL RAILWAY COMPANY 1867 LR 2 EX 311

TAYLOR v CALDWELL 1863 27 JP 710 1863 3 B & S 826

WILLIAM NEVILLE & SONS LTD v GUARDIAN BUILDERS LTD 1995 1 ILRM 1

ZUPHEN & ORS v KELLY TECHNICAL SERVICES (IRELAND) LTD & ORS 2000 ELR 277

NORBROOK LABORATORIES LTD v TANK UNREP 2006 COLMAN EWHC 1055 COMM

ARBITRATION

Set aside

Application to remit or set aside award - Application to remove arbitrator from remainder of arbitration - Misconduct - Arbitrator asleep during hearing - Improper unilateral contact with parties alleged - Errors in award - Words used in part of award deleted - Failure to raise matters with arbitrator - IEI standard conditions of contract - Repudiation - Reasonableness - Frustration - Whether arbitrator misconducted himself - Whether errors in award so fundamental as to warrant remission - Whether arbitrator had jurisdiction to issue note explaining various conclusions in award - Whether conduct of parties unreasonable - Whether withdrawal from site constituted repudiation - Keenan v Shield Insurance Company Ltd [1988] IR 89, Re Via Net Works (Ireland) Ltd [2002] 2 IR 47 and McCarthy v Keane [2004] 3 IR 617 applied; Fidelity Management SA v Myriad International Holdings BV [2005] EWHC 1193 (Comm) followed; Limerick City Council v Uniform Construction Ltd [2005] IEHC 347 [2007] 1 IR 30, Stubbs v The Holywell Railway Company [1867] LR Ex 311, Taylor v Caldwell [1863] 3B & S 826, William Neville and Sons Ltd v Guardian Builders [1995] 1 ILRM 1, Zuphen v Kelly Technical Services (Ireland) Ltd [2000] ELR 277, London Export Corporation Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 661, Williams v Wallis and Cox [1914] 2 KB, Portsmouth Arms Hotel Ltd v Enniscorthy UDC (Unrep, O'Hanlon J, 14/10/1994), Tobin & Twomey Services Ltd v Kerry Foods Ltd [1996] 2 ILRM 1, McGarrick v The Gaiety (Sligo) Ltd [2002] 1 ILRM 55, Mutual Shipping Corporation of New York v Bayshore Shipping Co of Monrovia ("The Montan") [1985] 1 All ER 520, Heyman v Darwins [1942] AC 356, Church & General Insurance Co v Connolly (Unrep, Costello J, 7/5/1981), McStay v Assicurazioni Generali SPA [1991] 2 ILRM 237, Interbulk Ltd v Aiden Shipping Co Ltd (the "Vimeira") [1984] Lloyds Law Reports 66 considered; Omnibridge Consulting Ltd v Clearsprings (Management) Ltd [2004] EWHC 2276 (Comm), Thomas Borthwick (Glasgow) Ltd v Faure Fairclough Ltd [1968] 1 Lloyd's Law Reports 16, R v Betson [2004] EWCA Crim 254, Norbrook Laboratories v Tank [2006] EWHC 1055 (Comm) and Warborough Investments Ltd v S. Robinson & Sons (Holdings) Ltd [2003] EWCA Civ 751 distinguished - Arbitration Act 1954 (No 26), ss 27, 28 36, 37 and 38 - Rules of the Superior Courts 1986 (SI 15/1986), O 28, r 11 - Applications refused (2008/6MCA - McMahon J - 17/10/2008) [2008] IEHC 429

Galway County Council v Samuel Kingston Construction Ltd

1

JUDGMENT of Mr. Justice McMahon delivered on the 17th day of October, 2008

1. The Application
2

In these proceedings, the plaintiff seeks to remit and/or set aside the award of the second named respondent [pursuant to sections 36 and 38 of the Arbitration Act 1954 ('the Act')] and to remove the second named defendant as Arbitrator and appoint a new Arbitrator.

2. Factual Background
3

Galway City Council ('G.C.C.'), the plaintiff in these proceedings, decided to redevelop Eyre Square in Galway and entered into a contract with the first named defendant, Samuel Kingston Construction Ltd. ('S.K.C.') to carry out certain construction works at the site. The contract ('the original contract'), for the sum of €6,362,388.49 inclusive of VAT, was dated the 5 th April, 2004, and incorporated, with certain amendments, the standard conditions of contract of the Institution of Engineers in Ireland ('the I.E.I. Conditions').

4

Work had started on the project in February, 2004 with a period of 78 weeks set for its completion and provision for liquidated damages for delay of €15,000 per week. During the course of the work, the original completion date was pushed back to the 20 th October, 2005. S.K.C. made a number of applications for extension of time under clause 44 of the I.E.I. conditions and G.C.C. issued a number of notices under clause 46 which required S.K.C. to "take such steps as are necessary and the Engineer may approve to expedite progress".

5

Galway City Council was anxious that the work be completed before Christmas, 2005 at the latest. When the delay began to occur a number of meetings took place between the parties in order to find a way of achieving completion within this time frame. These meetings culminated in the conclusion of an "Acceleration Agreement" in or around the 8 th March, 2005. Under this agreement, which was never reduced to writing and the exact terms of which were disputed, S.K.C. was to apply additional resources to the project over and above its contractual obligations in order to ensure its completion by November, 2005; in return, G.C.C. would make certain additional payments to S.K.C.

6

Although resources were increased and certain payments made, delays continued to hamper progress on the project. On the 17 th May, 2005, a site meeting took place between the parties at which the parties appear to have agreed that the Acceleration Agreement, as originally scheduled, was no longer achievable. Attempts to renegotiate failed. On the 4 th June, 2005, Mr. Frampton of G.C.C. issued Certificate No. 16 which withdrew all sums previously paid under the Acceleration Agreement. On the 27 th June, 2005, S.K.C. ceased work on the site and returned the site keys to the Engineer. On the same day, G.C.C's Engineer issued a certificate under clause 63 of the I.E.I. conditions which allowed entry onto the site and expulsion of the contractor in certain circumstances such as bankruptcy or abandonment. Clause 63(6) of the I.E.I. conditions provided that the termination rights under clause 63 "shall not be exercised unreasonably".

7

This gave rise to a dispute between the parties. On the 26 th May, 2006, the parties referred the dispute to arbitration. Upon application by the parties, the President of the I.E.I. appointed Mr. Geoffrey F. Hawker, the second named defendant, as Arbitrator on the 9 th July, 2006. A preliminary meeting took place on the 5 th September, 2006. On the 3 rd October, 2006, the Arbitrator directed that the arbitration would be conducted under the I.E.I. Arbitration Procedure 2000, ('the I.E.I. Procedure') and that hearing of the arbitration would take place in two stages: first a hearing on liability followed then by a hearing on quantum. S.K.C. was the claimant in the arbitral proceedings; G.C.C. was the respondent.

8

The hearing on liability took place in early July, 2007. This was followed by written closing submissions. On the 8 th October, 2007, the Arbitrator issued his award on liability. Subsequently, the parties sought amendments under Rule 21.3 of the I.E.I. procedure. On the 8 th December, 2007, the award was republished with certain amendments, accompanied by a 'Note of Explanation'.

3. The Award
9

In his award, the arbitrator found that there was an Acceleration Agreement which took effect from the 8 th March, 2005, and which was repudiated by G.C.C. with the wrongful withdrawal of funds in Certificate No. 16 on the 4 th June, 2005. He further found that the wrongful withdrawal of funds directly resulted in the withdrawal of S.K.C's overdraft facility and left the company at risk of trading while insolvent if it continued with its works. The Arbitrator also found, however, that G.C.C's actions of the 4 th June, 2005, did not repudiate the original contract. Furthermore, although S.K.C's withdrawal from site on the 27 th June, 2005, was a breach of this contract, it was not a fundamental breach or repudiation. The Arbitrator also found that, while the Engineer's Certificate No. 16 under clause 63(1)...

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