Narooma Ltd v Health Service Executive

• Jurisdiction: Ireland
• Judge: Mr. Justice David Barniville
• Judgment Date: 26 June 2020
• Neutral Citation: [2020] IEHC 315
• Docket Number: [2020 No. 2593 P.]
• Court: High Court
• Date: 26 June 2020

BETWEEN

NAROOMA LIMITED

PLAINTIFF

AND

HEALTH SERVICE EXECUTIVE

DEFENDANT

[2020] IEHC 315

David Barniville J.

[2020 No. 2593 P.]

THE HIGH COURT

Arbitration – Referral – Dispute – Defendant seeking to refer dispute to arbitration – Whether contract contained arbitration agreement

Facts: The plaintiff, Narooma Ltd, and the defendant, the Health Service Executive (HSE), entered into a contract on 27th March, 2020. Under the contract, the HSE agreed to purchase from the plaintiffs some 350 ventilators at a cost of almost €7.5 million. The plaintiff contended that the HSE was required under the contract to pay for the ventilators on 30th March, 2020. The HSE did not make that payment. It became concerned about the plaintiff and about the accuracy of representations allegedly made by the plaintiff concerning its status as an authorised agent or distributor for the manufacturer of the ventilators, a medical device manufacturer in China. The HSE sought belatedly to conduct due diligence in relation to the plaintiff. In the absence of payment by the HSE, the plaintiff commenced proceedings on 7th April, 2020 and sought interlocutory injunctive relief. Ultimately, on 10th April, 2020, the HSE’s solicitors confirmed to the plaintiff’s solicitors that the HSE would not be purchasing the ventilators from the plaintiff for the various reasons set out in that letter. The plaintiff did not proceed with its application for an interlocutory injunction and, on 14th April, 2020, that application was adjourned to the trial of the action. The plaintiff brought an application to enter the proceedings in the Commercial List and the HSE brought an application to refer the parties to arbitration pursuant to Article 8 of the NCITRAL Model Law on International Commercial Arbitration (the Model Law). On 30th April, 2020, the High Court (Barniville J) listed the latter application for hearing on 11th June, 2020, gave directions in relation to the hearing of the application and adjourned the plaintiff’s entry application pending the outcome of the HSE’s application. The HSE maintained that the contract contained an arbitration agreement (in clause 21) and that all issues in the proceedings fell within the scope of that agreement. Consequently, it contended that the court was required to refer the parties to arbitration under Article 8 of the Model Law.

Held by Barniville J that the HSE had established that clause 21 of the contract was an “arbitration agreement” for the purposes of Article 8 of the Model Law and that the issues the subject of the proceedings, as they stood, fell within the scope of that arbitration agreement, notwithstanding the case made to the contrary by the plaintiff. Barniville J was also satisfied that the plaintiff’s contention that the arbitration agreement was illusory or meaningless was not well founded and that the plaintiff had failed to establish that the arbitration agreement was “null and void, inoperative or incapable of being performed” for any of the reasons advanced by it. Barniville J also concluded that the HSE was not debarred from bringing the application on the ground advanced by the plaintiff.

Barniville J held that he would make an order under Article 8(1) of the Model Law referring the parties to arbitration in respect of the disputes the subject of the proceedings and would stay the proceedings as requested by the HSE.

Application granted.

JUDGMENT of Mr. Justice David Barniville delivered on the 26th day of June, 2020

Introduction

1 This is my judgment on an application by the Health Service Executive (the “HSE”), the defendant in these proceedings, for an order under Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which has force of law in the State by virtue of s. 6 of the Arbitration Act, 2010 (the “2010 Act”), referring the dispute between the parties, which is the subject of these proceedings, to arbitration and staying the proceedings consequent upon such referral.

2 The proceedings are emblematic of the COVID-19 era. They arise in the context of a contract entered into between the plaintiff, Narooma Limited, and the HSE on 27th March, 2020 (the “contract”), the date on which An Taoiseach announced major restrictions on movement and other relevant measures due to the COVID-19 pandemic, known colloquially as the “lockdown”. This followed earlier less severe restrictions, including the closing of schools, some two weeks previously.

3 Under the contract, the HSE agreed to purchase from the plaintiffs some 350 ventilators at a cost of almost €7.5 million, as it was at that stage envisaged that a large number of ventilators would be required to treat people who were expected to become seriously ill with the COVID-19 virus. There is no dispute between the parties that the contract was made and signed by the parties late at night on 27th March, 2020, in circumstances of great urgency and at a time when there was perceived to be a very urgent need to secure a supply of ventilators for those falling ill with the virus. Nonetheless, the circumstances on which the contract was entered into were very unusual, to say the least.

4 The plaintiff contends that the HSE was required under the contract to pay for the ventilators on Monday, 30th March, 2020. The HSE did not make that payment. It became concerned about the plaintiff and about the accuracy of representations allegedly made by the plaintiff concerning its status as an authorised agent or distributor for the manufacturer of the ventilators, a medical device manufacturer in China. The HSE sought belatedly to conduct due diligence in relation to the plaintiff.

5 In the absence of payment by the HSE, the plaintiff commenced proceedings on 7th April, 2020 and sought interlocutory injunctive relief. Ultimately, on 10th April, 2020, the HSE's solicitors confirmed to the plaintiff's solicitors that the HSE would not be purchasing the ventilators from the plaintiff for the various reasons set out in that letter. The plaintiff did not proceed with its application for an interlocutory injunction and, on 14th April, 2020, that application was adjourned to the trial of the action.

6 Two things then happened. The plaintiff brought an application to enter the proceedings in the Commercial List and the HSE brought this application to refer the parties to arbitration pursuant to Article 8 of the Model Law. On 30th April, 2020, I listed the latter application for hearing on 11th June, 2020, gave directions in relation to the hearing of the application and adjourned the plaintiff's entry application pending the outcome of the HSE's application.

7 In this application, the HSE maintains that the contract contains an arbitration agreement (in clause 21) and that all issues in the proceedings fall within the scope of that agreement. Consequently, it contends that the court is required to refer the parties to arbitration under Article 8 of the Model Law.

8 The plaintiff resists that application on several grounds. It contends that there is no “arbitration agreement” between the parties for the purposes of the Model Law and that, on its terms, clause 21 of the contract merely amounts to an agreement to agree. It further contends that clause 21 of the contract is illusory and meaningless in that it refers to rules of an arbitral institution, the International Chamber of Commerce (the “ICC”), which no longer exist. The plaintiff contends that, if contrary to its principal contention, the court were to find that clause 21 does amount to an arbitration agreement, the agreement is not broad enough to cover all of the issues in dispute between the parties in the proceedings. The plaintiff further maintains that the HSE is debarred from bringing its application under Article 8 on the basis of disparaging statements allegedly made by a solicitor acting for the HSE in a telephone conversation with the plaintiff's solicitor, which were then recorded in a letter from the plaintiff's solicitors to the HSE's solicitors. It is said that those disparaging comments allegedly made by the HSE's solicitor amount to the submission by the HSE of its “first statement on substance of the dispute” between the parties for the purposes of Article 8(1) of the Model Law and that the request for the referral to arbitration came after the making of that statement and was, therefore, too late. Finally, the plaintiff contends that, if contrary to its principal contention that there is no arbitration agreement between the parties, the court were to find that such an agreement was made by them, the agreement is “null and void, inoperative or incapable of being performed” within the meaning of those terms in Article 8(1) of the Model Law on various grounds.

Summary of Decision on HSE's Application

9 For reasons set out in detail in this judgment, I am satisfied that the HSE has established that clause 21 of the contract is an “arbitration agreement” for the purposes of Article 8 of the Model Law and that the issues the subject of the proceedings, as they currently stand, fall within the scope of that arbitration agreement, notwithstanding the case made to the contrary by the plaintiff. I am also satisfied that the plaintiff's contention that the arbitration agreement is illusory or meaningless is not well founded and that the plaintiff has failed to establish that the arbitration agreement is “null and void, inoperative or incapable of being performed” for any of the reasons advanced by it. I have also concluded that the HSE is not debarred from bringing the application on the ground advanced by the plaintiff. I will, therefore, make an order under Article 8(1) of the Model Law referring the parties to arbitration in respect of the disputes the subject of the proceedings and will stay the proceedings as requested by the HSE.

Structure of the Judgment

10 I will first set out the...