Mero-Schmidlin (UK) Plc v McNamara & Company & Cush

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 09 November 2010
• Neutral Citation: [2010] IEHC 393
• Court: High Court
• Docket Number: [No. 119 MCA/2010]
• Date: 09 November 2010

[2010] IEHC 393

THE HIGH COURT

[No. 119 MCA/2010]

[No. 169 COM/2010]

Mero-Schmidlin (UK) Plc v Michael McNamara & Co & Cush

COMMERICAL

IN THE MATTER OF THE ARBITRATION ACTS 1954 TO 1998

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN

MERO-SCHMIDLIN (UK) PLC

APPLICANT

AND

MICHAEL MCNAMARA AND COMPANY

AND

MICHAEL CUSH

RESPONDENTS

ARBITRATION ACT 1955 S38(1)(A)

ARBITRATION ACT 1954 S36(1)

KEENAN v SHIELD INSURANCE 1988 IR 89

MCSTAY v ASSICURAZIONI GENERALI SPA 1991 ILRM 237

FR ABSALOM LTD v GREAT WESTERN (LONDON) GARDEN VILLAGE SOCIETY LTD 1933 AC 592

MCSTAY v ASSICURAZIONE GENERALI SPA 1989 IR 248

LIMERICK CITY COUNCIL v UNIFORM CONSTRUCTION LTD 2007 IR 30

HODGKINSON v FERNIE 1857 3 CB(NS) 189

KING AND DUVEEN, IN RE 1913 2 KB 32

ARBITRATION ACT 1954 S5

KELANTAN v DUFF DEVELOPMENT COMPANY 1923 AC 395

ARBITRATION

Award

Preliminary issue - Application to set aside - Error of law on face of award - Court's jurisdiction - Exclusion to jurisdiction - Decision on specific question of law referred to arbitrator - Contractual liability - Reference to arbitration - Construction of reference - Whether error of law on the face of award - Whether parties bound by arbitrator's determination - Whether court had jurisdiction to set aside award - Whether question referred was question of law - Keenan v Shield Insurance [1988] IR 89; McStay v Assicurazioni Generali SPA [1991] ILRM 237 and Limerick City Council v Uniform Construction Ltd [2005] IEHC 347, [2007] 1 IR 30 followed; F R Absalom Ltd v Great Western (London) Garden Village Society Ltd [1933] AC 592; Hodgkinson v Fernie 3 CB (NS) 189; In re King and Duveen [1913] 2 KB 32 and Kelantan v Duff Development Company [1923] AC 395 considered - Arbitration Act 1954 (No 26), ss 36(1), 38(1) - Arbitration Act 1980 (No 7), s 5 - Relief refused (2010/119MCA & 2010/169COM - Finlay Geoghegan J - 9/11/2010) [2010] IEHC 393

Mero-Schmidlin (UK) plc v Michael McNamara & Company

Facts: The applicants sought reliefs to set aside the award of the second named respondent and arbitrator and an order to remit the award for reconsideration. The applicants alleged a fundamental error of law on the face of the award. The proceedings were admitted to the Commercial Court list as to whether the issues of law alleged to have been wrongly decided were referred to him for determination with the consequence that the parties were bound by his answer. The parties were in dispute as to the precise ambit of the questions of law referred to the arbitrator. The first named respondent was a large contractor and the applicant alleged that a sum was outstanding and due to it as a result of certain works being carried out. The second named respondent had concluded that the respondent had no liability to the claimant.

Held by Finlay Geoghegan J. that the issue of law alleged to have been wrongly decided was specifically referred to the arbitrator for his determination with the consequence that the parties were bound by his determination of such questions of law. A specific question of the contractual liability of the respondent to make the certified payment was referred to the arbitrator. The Court was not satisfied that any fundamental errors of law had been identified on any distinct question of law which emerged in the course of the arbitration and determination.

Reporter: E.F.

Ms. Justice Finlay Geoghegan

This does not require reduction

1 By an originating notice of motion of 30^th April, 2010, the applicant seeks three alternative reliefs arising out of an award given by the second named respondent on 19^th March, 2010, in an arbitration between the applicant and the first named respondent. The reliefs sought are:

2 (i) An order, pursuant to s. 38(1)(a) of the Arbitration Act 1955, setting aside the award of the second named respondent;

3 (ii) an order, pursuant to s. 36(1) of the Arbitration Act1954, remitting the award to the second named respondent for this reconsideration;

4 (iii) an order, pursuant to the jurisdiction of the Court at common law, setting aside the award and/or remitting the award to the second named respondent for his reconsideration on the grounds of fundamental error of law on the face of the award.

5 2. By order of the High Court (Kelly J.) of 17^th May, 2010, the proceedings were admitted to the Commercial List and an order was made for the trial by the Court of the following preliminary issue:

"Whether the issues of law alleged to have been wrongly decided by the second named respondent were, in effect, referred to him for his determination, with the consequence that the parties are bound by his answer."

6 The first named respondent was directed to be the moving party on the issue.

7 3. The second named respondent, as is customary, is not taking any part in the proceedings.

8 4. The originating notice of motion is grounded on an affidavit of William Aylmer, solicitor for the applicant. The preliminary issue was heard on the evidence in that affidavit, the exhibits referred to, written submissions of the applicant and respondents and oral submissions of counsel on behalf of both parties. This judgment is on the preliminary issue.

9 5. The preliminary issue relates to the reliefs sought, pursuant to the jurisdiction of the Court at common law. In accordance with the decisions of the Supreme Court in Keenan v. Shield Insurance [1988] I.R. 89, and McStay v. Assicurazioni Generali SPA [1991] ILRM 237, at common law, the Court has jurisdiction to set aside an award of an arbitrator where an error of law appears on its face. However, excluded from that jurisdiction are errors of law in a decision made by an arbitrator on a specific question of law referred to him. The parties are in dispute as to the precise ambit of this exception and its application to the arbitration and award at issue herein.

10 6. In 2006, the first named respondent was engaged as main contractor on a large commercial development known as MacDonagh Junction in Kilkenny. The employer was Cedar Tree Construction Limited. By a sub-contract made on 5^th January, 2007, the applicant agreed with the first named respondent to carry out certain works as nominated sub-contractors.

11 7. In 2009, the applicant alleged that a sum of €1,862,579.77 (inclusive of VAT) was outstanding and due to it. It issued High Court proceedings [2009 No. 1939 P] against Cedar Tree Construction Ltd. for failure to certify the said sum and against the first named respondent for recovery of the said sum. The proceedings were entered to the Commercial List and on 11^th May, 2009, judgment against Cedar Tree Construction Ltd. was given in default of appearance on the statement of claim and the Court, inter alia, ordered Cedar Tree Construction Ltd., its directors and officers to procure the certification for payment of the said amounts. On 15^th May, 2009, BSTM Project Management, at the direction of Cedar Tree Construction Ltd., issued a certificate in the sum of €1,862,579.77 (inclusive of VAT).

12 8. At a further hearing in proceedings [2009 No. 1939 P] before Kelly J. on 26^th May, 2009, the applicant herein (the plaintiff therein) sought summary judgment against the first named respondent herein (and defendant therein). At the same hearing, the respondent applied for a stay of the proceedings, pursuant to s. 5 of the Arbitration Act 1980, on the grounds that the applicant and the first named respondent had agreed in writing that any dispute between the parties should be referred to arbitration. In an ex tempore judgment to which I will return, Kelly J. granted a stay, pursuant to s. 5 of the Arbitration Act, and did not grant summary judgment.

13 9. On 30^th June, 2009, the applicant served a notice of arbitration in the following terms:

"30^th June 2009

The Secretary Michael McNamara & Company Grattan Bridge House 3 Upper Ormond Quay DUBLIN 7 Ireland

Dear Sirs

RE:NOTICE OF ARBITRATION - MacDonagh Junction, Kilkenny In the matter of an Arbitration between MERO-Schmidlin (UK) PLC Claimant and Michael McNamara and Company Respondent

We hereby serve Notice of Arbitration pursuant to Clause 26 of the Conditions of the Sub-Contract between the Parties dated the 5^th January 2007 due to your failure to make payment of the certified amount of €1,641,039.45 plus €221,540.32 (in respect of VAT) as per Main Contract Payment Certificate number 36 dated 15^th May 2009 and the related Nominated Sub-Contract Recommendation Form CR2 of the same date.

The aforesaid amounts of €1,641,039.45 plus €221,540.32 (in respect of VAT) are now overdue for payment in accordance with the terms of the Sub-Contract Agreement. We understand your position is that unless and until after receipt of payment from the Employer your company alleges it has no obligation to pay Mero (i.e. you consider the payment terms to be 'pay if paid'). We strongly dispute your view. Indeed the Sub-Contract Agreement does not pass the risk of Employer non-payment to Mero.

We list below the identity of three legally qualified persons who are capable of acting as Arbitrator to resolve this dispute:-

Michael Cush - Senior Counsel, 2 Arran Square, Arran Quay, Dublin 7

Michael Collins - Senior Counsel, 4 Arran Square, Arran Quay, Dublin 7

Paul Sreenan - Senior Counsel, 1 Arran Square, Arran Quay, Dublin 7

We invite you to select one of the above named persons to act as Arbitrator in this reference to Arbitration and provide you with seven days in which to agree upon the name of a person to act as Arbitrator failing which we shall make application to the President of the Construction Industry Federation to appoint an Arbitrator.

In the meantime we reserve all rights to recover interest pursuant to clause 11(e)(iii) of the Conditions of the Sub-Contract between the Parties dated the 5^th January 2007 on the overdue...