Kenny and Another v BGM Engineering Ltd and Another

• Jurisdiction: Ireland
• Judge: Ms Justice Bolger
• Judgment Date: 28 April 2023
• Neutral Citation: [2023] IEHC 368
• Court: High Court
• Docket Number: Record No. 2019/3181P

Between

Alan Kenny and Emma Claire Mullally

Plaintiffs

and

BGM Engineering Limited and Creedon Construction Limited

Defendants

[2023] IEHC 368

Record No. 2019/3181P

THE HIGH COURT

Stay – Arbitration agreement – Estoppel – Second defendant seeking an order staying the proceedings against it – Whether the arbitration agreement between the parties was inoperative

Facts: The second defendant, Creedon Construction Ltd (the applicant), a contractor, was engaged by the plaintiffs, Mr Kenny and Ms Mullally (the respondents), in October 2012 in relation to the construction of their house at Silken Vale, Maynooth, County Kildare. The applicant was last on site on 29 March 2013 when its contract was terminated by the respondents, and at which stage the works were incomplete. The agreement between the parties was a written agreement dated 12 October 2012 (the Building Agreement), clause 23 of which contained an arbitration agreement which stipulated that if a dispute arises between the parties with regard to any of the provisions of the contract, such dispute shall be referred to conciliation in accordance with the Conciliation Procedures published by the Royal Institute of Architects of Ireland; if settlement is not reached by way of conciliation, then either party may refer the dispute to arbitration in accordance with clause 23(b). The applicant applied to the High Court seeking an order staying the proceedings against it pursuant to Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) as adopted by s. 6 of the Arbitration Act 2010. The applicant emphasised the mandatory nature of the court’s obligations pursuant to Article 8(1) to refer a matter to arbitration, relying on Barniville J at para. 26 of Ocean Point Development Company Ltd (In Receivership) v Patterson Bannon Architects Ltd & ors [2019] IEHC 311 (Ocean Point). The applicant asserted that they met the three requirements set out by Barniville J in that: firstly, an action had been brought before the court in respect of a dispute between the parties – namely a claim against the applicant for damages in relation to alleged defective construction works; secondly, the action concerned a matter which was the subject of an arbitration agreement – it was not disputed that the dispute fell within the arbitration agreement contained at clause 23 of the Building Agreement; and thirdly, the applicant had requested that the dispute be referred for arbitration before submitting any statement on the substance of the dispute. The respondents did not dispute the existence of an arbitration agreement between the parties but asserted that the agreement was inoperative within the meaning of Article 8 of the Model Law by reason of the applicant having previously issued Summary Summons proceedings in May 2013, which the respondents understood as the applicant waiving its entitlements under clause 23. The respondents also alleged that the delay on the part of the applicant in relying on clause 23 in the proceedings rendered the clause inoperative by virtue of estoppel.

Held by Bolger J that the scope of the arbitration agreement does not allow for the division of disputes that do or do not come within it, as was provided for by the arbitration agreement in Ocean Point. She held that the arbitration agreement was wide enough to encompass the issues in the dispute the respondents raised against the applicant and the issues the applicant raised against the respondents in the 2013 proceedings. She was satisfied that the institution of the proceedings in 2013 constituted a repudiation of the arbitration agreement and was accepted as such by the respondents. She had regard to the conduct of the applicant when the proceedings were commenced which, when assessed objectively, fortified her findings in relation to their earlier repudiation and also satisfied her that they should be estopped from seeking to rely on the arbitration agreement. She noted that the applicant engaged both with the pleadings and with the arrangement of an engineer’s inspection; they delayed from when they were first informed of the proceedings on 8 January 2020 (which was some time after the Plenary Summons had been issued) until 9 June 2021, before asserting for the first time what they claimed was the respondents’ obligation to refer their dispute to arbitration.

Bolger J refused the application. Her indicative view was that costs should be granted to the respondents.

Application refused.

Counsel for the Applicant: Patricia Hill BL

Counsel for the Respondent: Alan Keating BL

Judgment of Ms Justice Bolger delivered on the 28 ^th day of April 2023

1 . The second named defendant seeks an order staying the within proceedings against it pursuant to Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) as adopted by section 6-of the Arbitration Act 2010.

2 . For the reasons set out below, I am refusing this application.

Background

3 . The plaintiffs will be referred to as “the respondents”, and the second named defendant as “the applicant”.

4 . The applicant is a contractor who was engaged by the respondents in October 2012 in relation to the construction of their house at Silken Vale, Maynooth, County Kildare. The applicant was last on site on 29 March 2013 when its contract was terminated by the respondents, and at which stage the works were incomplete.

5 . The agreement between the parties is a written agreement dated 12 October 2012 (the Building Agreement”), clause 23 of which contains an arbitration agreement which stipulates that if a dispute arises between the parties with regard to any of the provisions of the contract, such dispute shall be referred to conciliation in accordance with the Conciliation Procedures published by the Royal Institute of Architects of Ireland. If settlement is not reached by way of conciliation, then either party may refer the dispute to arbitration in accordance with Clause 23(b).

6 . Article 8(1) of the Model Law provides as follows:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

Applicant's submissions

7 . The applicant emphasised the mandatory nature of the court's obligations pursuant to Article 8(1) to refer a matter to arbitration, relying on Barniville J at para 26 of Ocean Point Development Company Ltd (In Receivership) v. Patterson Bannon Architects Lid & ors [2019] IEHC 311 (“ Ocean Point”) as follows:

“In order for the provisions of Article 8(1) of the Model Law to be engaged, various requirements must be satisfied. First, an action must have been brought before the court in respect of a dispute between the parties. Second, the action must concern a “matter which is the subject of an arbitration agreement”. Third, one of the parties must request the reference to arbitration “not later than when submitting his first statement on the substance of the dispute”. If those requirements are satisfied, the court must refer the parties to arbitration (the word “shall” is used). The only circumstances in which the court's obligation to refer the parties to arbitration does not arise is where the court finds that the arbitration agreement is (i) “null and void” or (ii) “inoperative” or (iii) “incapable of being performed”. The onus of establishing the existence of one or more of these disapplying factors rests on the party who seeks to rely on them.” (para. 26)

8 . The applicant asserts that they meet the three requirements set out by Barniville J. in that firstly, an action has been brought before the court in respect of a dispute...