Killerk Ltd v Houlihan

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 16 July 2009
• Neutral Citation: [2009] IEHC 358
• Court: High Court
• Date: 16 July 2009

[2009] IEHC 358

THE HIGH COURT

[No. 925 S/2009]

Killerk Ltd v Houlihan

COMMERCIAL

BETWEEN

KILLERK LIMITED

PLAINTIFF

AND

SHANE HOULIHAN

DEFENDANT

ARBITRATION ACT 1980 S5

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

MOOHAN & BRADLEY CONSTRUCTION v S & R MOTORS (DONEGAL) LTD UNREP CLARKE 14.12.2007 2007/42/8816 2007 IEHC 435

JOHN SISK & SON LTD v LAWTER PRODUCTS BV 1976-77 ILRM 204

PJ HEGARTY & SONS LTD v ROYAL LIVER FRIENDLY SOCIETY 1985 IR 524 1985 9 1747

ROHAN CONSTRUCTION LTD v ANTIGEN LTD 1989 ILRM 783

POWDERLY v MCDONAGH UNREP KELLY 31.1.2006 2006/48/10323 2006 IEHC 20

PRACTICE AND PROCEDURE

Summary summons

Stay - Referral to arbitration - Building contract - Defective works - Whether referral of dispute to arbitration should preclude plaintiff from recovering judgment - Test for grant of summary judgment - Whether defence amounted to cross claim against plaintiff - Whether any right to set off on foot of counterclaim - Whether parties excluded right of set off in respect of cross claims - Entitlement of plaintiff to enter judgment - Whether execution on judgment should be stayed pending arbitration - Aer Rianta CPT v Ryanair Limited [2001] 4 IR 607, Prendergast v Biddle (Unrep, SC, 21/7/1957) and Moohan v S & R Motors (Donegal) Ltd [2007] IEHC 435, [2008] 3 IR 650 applied; John Sisk & Sons Ltd v Lawter Products BV [1976 - 77] ILRM 204, PJ Hegarty and Sons v Royal Liver Friendly Society [1985] IR 524, Rohan Construction Ltd v Antigen Ltd [1989] ILRM 783 and Powderly v McDonagh [2006] IEHC 20, (Unrep, HC, Kelly J, 31/1/2006) considered - Arbitration Act 1980 (No 7), s 5 - Stay placed on execution and registration of judgment in part until counterclaim disposed of by arbitration (2009/925S - Kelly J 16/7/2009) [2009] IEHC 358

Killerk Ltd v Houlihan

Facts: The defendant had not paid sums owed for buildings works and had resisted an application for summary judgment. The agreement provided for an obligation to pay certain sums plus VAT on the date of completion of the development, which was defined therein. The issue arose as to whether the defendant had a real and bona fide defence and whether a set off on foot of a counterclaim was open to be made against an architects certification. Several invitations to arbitrate had been extended to the defendant.

Held by Kelly J. The agreement made provided for final payment to be made on foot of the architects certificate, which was binding on all of the parties and was issued and not honoured. That the Court was not satisfied that under the terms of the contract the parties excluded a right of set off in respect of cross claims. There was an entitlement to the plaintiff to enter judgment for the sum claimed. The Court would place a stay on the execution and registration of that judgment. Judgment would be entered in the sum claimed

Reporter: E.F.

1 JUDGMENT of Mr. Justice Kelly delivered on the 16th day of July, 2009

Background

2 On 15 ^th June, 2007, a contract was executed between the plaintiff and the defendant under which the plaintiff agreed to construct the Tipperary Town Shopping Centre on behalf of the defendant.

3 Under the terms of clause 6.1 of that agreement, the defendant agreed to pay €12,200,000 plus VAT for the work in three stages.

4 An initial payment of €50,000 plus VAT was payable on the signing of the agreement. A second sum of €10,650,000 plus VAT was to be paid on the completion of the floor slabs, walls and roof of the building provided that such sum would not be payable by the defendant prior to 1 ^st September, 2007.

5 A third sum of €1,300,000 plus VAT was to be paid on the date of completion of the development. It is this sum which is the subject of the plaintiff's claim.

6 The aforesaid stage payment sums did not take into account the payment of retention money of €200,000 which fell to be paid in accordance with clause 4.6 of the contract. That clause provided, in effect, for release of the retention monies twelve months following the issue of the certificate of practical completion if all defects and other faults had been remedied.

7 The defendant paid the €50,000 and VAT upon the signing of the agreement and the further sum of €10,650,000 and VAT on 18 ^th October, 2007 following the completion of the structural elements of the building.

8 Possession and occupation of the building and its common areas was provided to the defendant in September 2007.

9 The architects appointed under the contract issued a certificate of practical completion on 21 ^st September, 2007.

10 On 13 ^th December, 2007, the plaintiff's solicitors wrote to the defendant's solicitors enclosing the final contractual documents which were scheduled to that letter and sought payment of €1,300,000 plus VAT of€175,500 in accordance with the terms of the contract. The letter of demand acknowledged that there were some snagging items outstanding but recited that it had between agreed between the parties that the retention sum of €200,000 would be adequate to cover any of those.

11 The defendant has not paid the €1,300,000 and VAT and resists this application for summary judgment. In addition he has brought an application pursuant to s. 5 of the Arbitration Act 1980, seeking to stay these proceedings so that they may be referred to arbitration.

12 I heard the application to stay and the application for summary judgment at a single hearing and this is my adjudication upon both applications.

Section 5 Application

13 Both sides have filed lengthy affidavits with enormous quantities of exhibits, much of the details of which have little to do with the issues which fall for determination on the two applications before me.

14 The defendant seeks to have these proceedings stayed having regard to clause 9.2 of the agreement of 15 ^th June, 2007. That provides as follows:-

"Save and except where a specific dispute mechanism is provided for elsewhere in this agreement, if any dispute arising out of this agreement cannot be settled amicably between the parties within ten working days after written notice that such a situation exists, then, at the election of either party the matter shall be referred and finally resolved by arbitration. Any such arbitration shall be governed by the Arbitration Acts 1954-1998 as amended from time to time."

15 That there is a dispute between the parties concerning a whole variety of issues which fall within the ambit of the arbitration clause cannot be denied having regard to the voluminous correspondence dealing with allegation and counter allegation concerning defective works of one sort or another. The real issue for determination on this application is whether the referral of these disputes to arbitration should preclude the plaintiff from being able to recover judgment and execute for it in respect of the final payment of €1,300,000 plus VAT provided for at clause 6.1.3 of the agreement.

Summary Judgment

16 The agreement of 15 ^th June, 2007 is not in a standard form. That is not surprising given the fact that a third party, a Mr. Michael Woodlock is a party to the agreement. He is a director of the plaintiff but was also the owner of the site upon which the shopping centre was built. It is common case that he has been paid his entitlements under a separate contract for the sale of the lands amounting to some €1,750,000. Under the agreement in suit he is described as "the Surety" and in that capacity has unconditionally and irrevocably guaranteed the obligations and duties of the plaintiff under it.

17 The parts of the agreement which appear to me to be relevant on this application are as follows:-

18 1. The obligation to pay the €1,300,000 plus VAT created by clause 6.1.3 which provides for the payment of that sum "on the date of completion of the development".

19 2. The term "completion date" which is defined at clause 1.1 of the agreement as being "the date ten working days following the issue of the certificate of practical completion of the building". I cannot see that there is any difference between the "date of completion" in clause 6.1.3 and the definition of "completion date" in clause 1.1.

20 3. The term "practical completion" which is defined at clause 1.1 as being "the day on which the developer's architects shall certify in writing that the building or as the case may be the development has been practically completed in accordance with the provisions of this agreement".

21 4. Practical completion which is the subject of an entire portion of the agreement running from clause 3.1 to 3.8.

22 Under clause 3.1, the plaintiff's architect is to issue a certificate of practical completion of the building or the development. Under clause 3.2, the term "practical completion" is given another definition separate and apart from the definition which is contained in clause 1.1. Under clause 3.2 it means:-

"That the building or as the case may be the development has been completed in accordance with the design documents and the specifications to such a stage that the building or as the case may be the development can be taken over for its intended purposes and that any items of work or supply then outstanding or any defects then patent are of a trivial nature only and are such that their completion or rectification would not interfere with or interrupt such use or uses and that in the case of the building it is wind and water tight."

23 Clause 3.3 provides that subject to clause 3.6, the certificate of practical completion "shall be binding on the parties hereto".

24 Clause 3.4 requires that the plaintiff's architects notify the defendant in writing not less than ten working days in advance of the date on which the building or development is likely to reach practical completion and on...