P. Elliot & Company Ltd v FCC Elliot Construction Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Colm Mac Eochaidh
• Judgment Date: 28 August 2012
• Neutral Citation: [2012] IEHC 361
• Court: High Court
• Docket Number: [No. 1887 S/2012]
• Date: 28 August 2012

P Elliot & Company Ltd (In Receivership & Liquidation) v FCC Elliot Construction Ltd

BETWEEN

P. ELLIOT & COMPANY LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

PLAINTIFF

AND

FCC ELLIOT CONSTRUCTION LIMITED

DEFENDANT

[2012] IEHC 361

[No. 1887 S/2012]

THE HIGH COURT

Construction – Contract – Joint venture – Consultancy agreement – Plaintiff”s receivers seeking payment of sums alleged to be due under consultancy agreement – Defendant seeking to refer matter to arbitration pursuant to clause in joint venture agreement

Facts: The plaintiff company, in receivership and liquidation, had entered into a joint venture agreement (‘JVA’) in respect of the construction and operation of a new hospital in County Fermanagh. Pursuant to the JVA, which contained an arbitration clause, the plaintiff was also a party to a consultancy agreement (‘agreement’) in respect of services to be provided to the defendant. This agreement did not contain an arbitration clause.

The plaintiff, having recently encountered financial problems, went into receivership and liquidation. Other parties to the JVA contended this was a breach of the JVA, and the defendant disputed the need to make a payment to the plaintiff pursuant to the agreement. The defendant also stated they considered the matter should be referred to arbitration, which the plaintiff did not accept. Litigation having now begun by the plaintiff to recover the outstanding sum, the defendant now applied for a stay of proceedings as the matter was subject to arbitration.

Held by Mac Eochaidh J, that the defendants applied for a stay on the basis of art 8 of the Uncitral Model Law in International Commercial Arbitration (‘Model Law’), and the Court”s inherent case management powers.

Having considered the parties” respective submissions in respect of the Model Law as well as non-domestic case law, the Court found that the Court did not have discretion on whether to refer the matter to arbitration, but rather had to consider whether the parties had agreed to an arbitration process. If so, the stay must be granted. The parties expressly chose to omit an arbitration clause from the agreement, and specified Ireland as the jurisdiction of choice for litigation. Accordingly, the Court would refuse a stay on this ground for lack of jurisdiction. Fili Shipping Co Ltd v Premium Nafta Products Ltd; Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951 and City of London v Sancheti [2009] Bus LR 996 applied.

In respect of the Court”s inherent court management powers, the Court considered that the Court could not ignore the fact the parties had specifically omitted an arbitration clause from the agreement. To exercise the power to grant a stay would be to ignore the intentions of the parties as expressed in the agreement. Kalix Fund Ltd v HSBC Institutional Trust Services (Ireland) Ltd [2010] 2 IR 581 and Ahmad Al Naimi v Islamic Press Agency [2000] 1 Lloyd's Rep 150 considered.

The application for a stay was therefore refused.

ARBITRATION ACT 2010 S6

ALNAIMI v ISLAMIC PRESS AGENCY 2000 1 LLOYDS 522 2000 AER D 86

BANK v ANGELAKOS 1984 1 WLR 588

HARBOUR ASSURANCE CO UK LTD v KANSA GENERAL INTERNATIONAL ASSURANCE CO LTD 1993 1 LLOYDS 455 1993 AER 897

FIONA TRUST & HOLDING CORP v PRIVALOV UNREP 24.1.2007 2007 EWCA CIV 20

NAFTA PRODUCTS LTD v FILI SHIPPING COMPANY 17.10.2007 2007 UK HL 40 UNREP

EMMOTT v WILSON (NO2) 2009 EWHC 1 COMM 2009 1 LLOYDS 233

EL NASHARTY v SAINSBURY 2004 1 LLOYDS 309

UPS AG v HSH NORDBANK AG 2009 2 LLOYDS 272

BROOME & WELLINGTON LP v GREENSTEIN 2009 EWCA CIV 589 2009 AER (D) 189

CITY OF LONDON v SANCHETI 2008 EWCA CIV 1283 2008 AER D 204 2009 1 LLOYDS 117

ARBITRATION ACT 1996 S9(UK)

ARBITRATION ACT 1996 S9(1)(UK)

ARBITRATION ACT 1996 S9(4)(UK)

ARBITRATION ACT 1996 S11(UK)

JOINT STOCK COMP AEROFLOT RUSSIAN AIRLINES v BEREZOVSKY UNREP 1.6.2012 2012 EWHC 1610

ARBITRATION ACT 1996 S82(2) (UK)

ROUSSEL -UCLAF v GD SEARLE & CO LTD 1978 1 LLOYDS 225

PACIFIC EROSION CONTROL SYSTEMS LTD v WESTERN QUALITY SEEDS 2003 BASK 1743

ARBITRATION (INTERNATIONAL COMMERCIAL) ACT 1996 S8

GULF CANADA RESOURCES LTD v AROCHEN INTERNATIONAL LTD 1992 BCJ 500

BIRSE CONSTRUCTION LTD v ST DAVID LTD 1999 BLR 194

JOSEPH JURISDICTION & ARBITRATION & THEIR ENFORCEMENT 2ED PAR 1130 341

ALBAN v NAZA MOTORS (NO3) 2007 2 LLOYDS 1

KALIX FUND LTD v HSBC INSTITUTIONAL TRUST SERVICES (IRELAND) LTD 2010 2 IR 581

AHMED AL NAIMI v ISLAMIC PRESS AGENCY 2000 1 LLOYDS 150 CA

COMPANIES ACT 1963 S222

Mr. Justice Colm Mac Eochaidh

1 This is an application by the defendant to stay proceedings in which the plaintiff seeks judgment of approximately UK£1.2m in connection with an agreement referred as 'the consultancy contract'. The defendant's says that the plaintiff's claim is governed by an arbitration agreement pursuant to which the defendant has requested an arbitration under the auspices of the International Chamber of Commerce in Geneva, Switzerland.

2 A somewhat complicated history of commercial and legal relationships between entities connected to the parties is central to the arguments they make and so I shall first attempt to describe that before addressing the merits of the application.

3 Spanish and Irish enterprises were jointly involved in a bid to design, construct, finance, operate and maintain a new hospital in Enniskillen, County Fermanagh. An entity called 'Northern Ireland Health Group' (referred to by the parties as 'NIHG') pre-qualified in the bid process. The plaintiff (in its written submissions) says that the full name of the entity is 'NIHG South West Health Partnership' and that 5% of its shares are held by a company called Elliot Holdings Ltd. and 39% are held by FCC Construcción S.A. (apparently a Spanish corporate entity).

4 Following the successful pre-qualification of NIHG, the plaintiff and FCC Construcción S.A. ('the joint venturers') entered a joint venture agreement in February 2008. By this agreement (called the 'JVA'),"the Joint Venture" was formed and named 'FCC Elliot Healthcare Contractors'. The purpose of the joint venture, according to clause 2.2 of the JVA, was to prepare a tender for the design and construction works of the new hospital and, if selected, to carry out the works under a building contract to be entered by "P. Elliot FCC Joint Venture" and NIHG.

5 The JVA provided for what was to happen if no contract was entered with NIHG. At clause 4, the agreement stated that:

"If the joint venturers shall fail to enter into a contract with NIHG or shall fail to agree as to the terms and conditions of the tender or if the tender shall not be accepted by NIHG within the period for acceptance specified in the tender or such further period as may be agreed … or if the contract is awarded to a third party, then this agreement and all its provisions shall automatically cease …"

6 Clause 5 of the agreement provided for what was to happen in the event of a successful tender, as follows:

"If the Tender shall be accepted by NIHG on or before the expiry of the period for acceptance specified in the Tender … the Joint Venture will enter into the Contract with NIHG, and thereafter the Joint Venturers, jointly and severally, will faithfully perform and observe all the terms and conditions of the Contract and this Agreement both to each other and to NIHG."

That last reference to"Contract" is a reference to the building contract intended to be entered with NIHG for the construction of the hospital. These clauses, 4 and 5, have acquired some significance because the plaintiff argues that the joint venturers never entered the contract with NIHG and that, therefore, the joint venture agreement has terminated.

7 Approximately a year after the joint venture agreement was entered, tax advice was received which recommended that the primary construction contract for the hospital be entered, not by the joint venturers as originally envisaged, but by a new, specially formed Irish company, one share of which was to be owned by the plaintiff (one of the original joint venturers) and the other share was to be owned by another Irish company.

8 This proposed company was formed and is now the defendant in these proceedings. The corporate structure deliberately put in place by the joint venturers, following professional advice, permitted profits on the building contract - carried out in Northern Ireland - to be taxed at the relatively advantageous Irish corporate tax rate of 12.5%.

9 The JVA contained an arbitration clause for disputes arising"between the joint venturers in respect of the [building] Contract or the Joint Venture Agreement". The arbitration clause invoked the Rules of Arbitration of the International Chamber of Commerce and Geneva, Switzerland was identified as the seat of arbitration. Clause 20 provided that the JVA be construed and interpreted in accordance with the laws of Northern Ireland.

10 The parties agree that P. Elliot & Company Ltd. and FCC Constructión S.A. (the entities identified as the joint venturers in the JVA) did not enter the building contract for the hospital.

11 An unsigned and apparently draft and incomplete version of the JVA has been exhibited by the plaintiff who, for the purposes of this application only, accepts that it is the agreement entered between the joint venturers. The defendant has not exhibited the JVA in any form, much less in executed form, though it relies on its contents in seeking a stay.

12 The building contract, originally envisaged by the JVA to be entered between the joint venturers and NIHG, was entered instead between the defendant and NIHG. This is the first significant departure from the JVA one observes. The building contract is a lengthy document running to some 159 pages, not including annexes. Significantly, there is no arbitration clause in...