K & J Townmore Construction Ltd v Kildare and Wicklow Education and Training Board

• Jurisdiction: Ireland
• Judge: Mr. Justice David Barniville
• Judgment Date: 11 October 2019
• Neutral Citation: [2019] IEHC 666
• Court: High Court
• Docket Number: [2018 No. 1096 S]
• Date: 11 October 2019

[2019] IEHC 666

THE HIGH COURT

David Barniville

[2018 No. 1096 S]

BETWEEN

K&J TOWNMORE CONSTRUCTION LIMITED

PLAINTIFF

AND

KILDARE AND WICKLOW EDUCATION AND TRAINING BOARD

DEFENDANT

Arbitration – Commercial arbitration – Construction – Dispute as to works at Community College – Application to refer matter to arbitration

Facts: The defendant had engaged the plaintiff to carry out certain construction works at St Conleth’s Community College in Kildare. Numerous points in dispute had arisen under the contract, and the plaintiff had been successful in obtained expert determination in its favour. The plaintiff had sought to apply for summary judgment in the commercial list, and the defendant now applied for the matter to be referred to arbitration on the basis of a clause in the contract.

Held by the Court, that the application by the defendant would be dismissed. Having considered the terms of the contract as well as the expert determination and conciliations agreement, the Court was persuaded that the expert determination agreement disapplied the relevant arbitration clauses of the original contract. The parties were invited to make submissions on the resulting order.

JUDGMENT of Mr. Justice David Barniville delivered on the 11th day of October, 2019

Introduction

1 This is my judgment on an application by the defendant, Kildare and Wicklow Education and Training Board, for an order pursuant to Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended, 2006) (the “Model Law”) referring the parties to arbitration in respect of the disputes the subject of these proceedings under the terms of an arbitration agreement which the defendant contends is in existence and binds the parties. The plaintiff resists the application.

2 This judgment is not to be confused with the judgment I delivered in proceedings between the same parties on 21st December, 2018, ( K&J Townmore Construction Ltd v. Kildare and Wicklow Education and Training Board [2018] IEHC 770 (unreported, High Court, 21st December, 2018); “Townmore No. 1”), which concerned a different dispute in respect of a different agreement.

Overview

3 The plaintiff, a building contractor, and the defendant, a statutory board, are parties to a building contract dated 28th October, 2015, under which the defendant engaged the plaintiff to carry out construction works at St. Conleth's Community College in Newbridge, Co. Kildare (the “contract”). The contract is in the form of the “Public Works Contract for Building Works Designed by the Employer” (the “PWC form”).

4 The parties have been in dispute in relation to a whole range of issues concerning the contract since 2016. Various dispute resolution procedures and processes have been put in place and pursued by the parties since then. They include an expert determination procedure and an unsuccessful conciliation. The expert determination procedure led to a number of determinations being issued in favour of the plaintiff who has relied on those determinations in these proceedings, which the plaintiff is seeking to have entered in the commercial list and in which the plaintiff seeks summary judgment for just under €3 million. The defendant has opposed the plaintiff's application for entry of the proceedings in the commercial list and, in the present application, has sought an order under Article 8(1) of the Model Law referring the dispute between the parties which is the subject of these proceedings to arbitration in reliance on a provision of the contract (Clause 13.2). The plaintiff opposes that application.

5 There is a dispute between the parties as to the impact and effect of the expert determination procedure on the dispute resolution procedures provided for in the contract. A further complicating factor which arises in this case is that during the course of the proceedings, and while the defendant's application for an order under Article 8(1) of the Model Law was awaiting a hearing, the parties engaged in a conciliation procedure on certain agreed terms. That conciliation procedure encompassed the disputes between the parties which were the subject of the expert determination procedure and are the subject of these proceedings as well as other disputes between the parties which are not.

6 In summary, the defendant contends that the court should make an order under Article 8(1) of the Model Law referring the disputes the subject of the proceedings to arbitration under Clause 13.2 of the contract. The defendant argues that the expert determination procedure initially agreed between the parties in August 2016, and expanded in January 2017, disapplied, supplanted or replaced the conciliation provisions in Clause 13.1 of the contract with respect to the issues the subject of the proceedings but left intact and enforceable the arbitration provisions contained in Clause 13.2. The defendant contends, therefore, that there is an “arbitration agreement” between the parties for the purposes of Article 8(1) of the Model Law which covers the disputes the subject of the expert determination procedure and these proceedings, which should be enforced by the Court.

7 The plaintiff resists the defendant's application on a number of grounds. Essentially, it contends that the arbitration agreement contained in Clause 13.2 is “inoperative” under Article 8(1) of the Model Law as the expert determination procedure was intended to, and did, replace not only the conciliation provisions in Clause 13.1 of the contract but also the arbitration provisions contained in Clause 13.2. The plaintiff says, therefore, that there is no operative arbitration agreement in respect of the disputes the subject of the proceedings. The plaintiff also relies on the terms of the parties’ agreement in August 2018 to engage in the conciliation procedure encompassing the issues in the proceedings as precluding the defendant from relying on the arbitration agreement in Clause 13.2 of the contract. The defendant contends that the conciliation agreement does not preclude it from relying on the arbitration agreement but rather expressly preserved the parties’ respective positions including the defendant's entitlement to seek recourse to arbitration under Clause 13.2.

8 I have concluded, for the reasons set out in detail in this judgment, that the defendant has failed to establish that the arbitration agreement in Clause 13.2 of the contract applies to the disputes the subject of these proceedings. Therefore, the requirements of Article 8(1) of the Model Law have not been satisfied by the defendant. Furthermore, insofar as any burden rests on the plaintiff, I have concluded that the plaintiff has demonstrated that the arbitration agreement in Clause 13.2 of the contract is “inoperative” with respect to the disputes the subject of the proceedings by reason of the agreement for expert determination entered into between the parties in August 2016, and expanded in January 2017. In my view, the effect of that agreement was to disapply or supplant both the conciliation provisions contained in Clause 13.1 and the arbitration provisions in Clause 13.2 with respect to the disputes the subject of the proceedings (leaving those provisions applicable to disputes not covered by the proceedings). That, in my view, is the correct interpretation of the agreement for expert determination and its impact and effect on the provisions of Clause 13.1 and Clause 13.2 of the contract.

9 In light of that conclusion, it is strictly speaking unnecessary for me to consider the proper interpretation of the conciliation agreement and its impact on the defendant's entitlement to have recourse to the arbitration provisions in Clause 13.2 of the contract. However, in my view, there is nothing in that conciliation agreement which undermines the conclusion I have reached in relation to the interpretation and impact of the agreement for expert determination. On the contrary, the terms of the conciliation agreement are inconsistent with the defendant's entitlement to rely on Clause 13.2 of the contract in relation to the issues which are the subject of these proceedings. In those circumstances, I must refuse the defendant's application.

Factual background

10 I set out in this section of my judgment the relevant factual background which is taken from the affidavits sworn in connection with the defendant's application. I have also had regard to the affidavits sworn in connection with the plaintiff's application for summary judgment and its application to enter the proceedings in the commercial list. There is no real dispute between the parties on the relevant facts.

11 The plaintiff and the defendant entered into the contract on 28th October, 2015, under which the plaintiff, as contractor, agreed to carry out construction works at St. Conleth's Community College for the defendant, as employer. The contract was in the PWC form and contained certain dispute resolution procedures in Clause 13. Clause 13.1 provided for conciliation. Clause 13.2 provided for arbitration. While the plaintiff and the defendant agreed in their submissions to the Court that the conciliation provisions in Clause 13.1 are optional whereas the arbitration provisions in Clause 13.2 are mandatory, I do not wish to be taken as agreeing with or endorsing that consensus, as I explain below.

12 Disputes arose between the plaintiff and the defendant during the course of 2016. The plaintiff sought to invoke the conciliation provisions in Clause 13.1 of the contract. However, the plaintiff claims that its attempts to do so were ignored by the employer's representative (the “ER”) under the contract. Ultimately, however, agreement was reached between the parties in August 2016 to enter into an expert determination process under which LEA Consulting Limited was appointed as what was termed a “mediator/expert” (the “expert”) on certain...