S & R Motors (Donegal) Ltd v Bradley Construction

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 14 December 2007
• Neutral Citation: [2007] IEHC 435
• Court: High Court
• Docket Number: [2006 No. 1711S]
• Date: 06 May 2009

Moohan & Bradley Construction v S & R Motors (Donegal) Ltd

BETWEEN

KATHLEEN MOOHAN

AND

JOHN BRADLEY TRADING AS BRADLEY CONSTRUCTION

PLAINTIFFS

AND

S. & R. MOTORS (DONEGAL) LIMITED

DEFENDANTS

[2007] IEHC 435

[No. 1711S/2006]

THE HIGH COURT

PRACTICE AND PROCEDURE

Summary summons

Stay of proceedings pending arbitration - Whether Master correct in granting judgment when application for stay pending - Whether application for judgment should have been adjourned pending stay application - Test for grant of summary judgment - Whether cross claim gave rise to defence in equity - Whether cross claim stemmed from same set of circumstances as primary claim - Whether cross claim gave rise to equitable set off - Whether defendant entitled to set off - Whether meaningful or timely attempt by defendant to quantify cross claim - Whether agreement excluded set off - Aer Rianta Cpt v Ryanair Ltd. [2001] 4 IR 607 considered; Prendergast v Biddle (Unrep, SC, 31/7/1957) applied; P J Hegarty & Sons Ltd v Royal Liver Friendly Society [1985] IR 524 followed - Liberty to enter final judgment granted but stay pending arbitration on cross claim granted (2006/1711SS - Clarke J - 14/12/2007) [2007] IEHC 435

Moohan v S & R Motors (Donegal) Ltd

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

PRENDERGAST v BIDDLE UNREP SUPREME 31.7.1957

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

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

ROHAN CONSTRUCTION LTD v ANTIGEN LTD 1989 ILRM 783

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

1. Introduction

2 1.1 The defendants (S.& R. Motors) employed the plaintiffs ("Bradley Construction") to build a Volkswagen car show room at Drumlonagher in Donegal town. The parties entered into a written building construction contract ("the agreement") on 24 ^th June, 2004. The agreement used the Royal Institute of Architects of Ireland ("RIAI"), 2002 template contract as its basis.

3 1.2 The disputes which have now arisen between the parties concern on the one hand, an allegation on the part of Bradley Construction of non-payment and, on the other hand, an allegation on the part of S. & R. Motors of faulty workmanship. Bradley Construction have issued summary summons proceedings claiming sums due on foot of architects' certificates issued under the terms of the agreement. The issues which I have to decide concern whether Bradley Construction is entitled to judgment at this stage in those proceedings or whether the proceedings should be stayed pending a possible arbitration of the disputes which have arisen concerning workmanship. In order to properly set out the specific issues which have now arisen it is necessary to turn firstly to the procedural history of this case.

2. Procedural History

2 2.1 A summary summons claiming the amounts certified by the architect concerned in Certificates 11 and 12 (together with interest on those amounts in accordance with Clause 35(m) of the agreement and the retention monies held under the provisions of that agreement) totalling €233, 098.34 was issued on 23 ^rd November, 2006. The summons as originally issued claimed pounds sterling by error and also misdescribed the defendant company. By order of 11 ^th May, 2007 the Master, on the application of Bradley Construction, amended the summons by substituting the euro sign "€" in lieu of the sterling pound sign "£" and also amended the name of the defendant to read "S. & R. Motors (Donegal) Limited". Thereafter Bradley Construction brought a motion for judgment which was initially returnable on 26 ^th July, 2007 seeking the above sum together with continuing interest. That motion was adjourned on a number of occasions and finally until the 26 ^th October, 2007. In the meantime, on 25 ^th September, 2007, solicitors on behalf of S. & R. Motors requested, by letter, a stay on the proceedings to enable the issues between the parties to be referred to arbitration. Solicitors for Bradley Construction declined and on 9 ^th October, 2007 a motion seeking such a stay was issued before this court which was made returnable for the 19 ^th November, 2007. However, in the meantime, on 26 ^th October, 2007, the motion for judgment came on before the Master who declined to adjourn same to enable the stay application to be first considered by this court.

3 2.2 The stated basis put forward on behalf of S. & R. Motors for seeking an adjournment on the 26 ^th October, 2007 was that, in order for S & R Motors to be entitled to successfully pursue an application for a stay pending arbitration, it was necessary, in accordance with the jurisprudence of the courts in the area, that no step be taken in the proceedings by S & R Motors prior to the stay application. In those circumstances it was said that S. & R. Motors were unable to file a replying affidavit setting out their substantive defence to the motion for judgment because so to do would amount to a step in the proceedings and would, thus, lose S & R Motors any entitlement which they might have, to have the case stayed pending arbitration. Notwithstanding that application the Master declined to further adjourn the motion for judgment and, in the absence of any effective opposition evidence, proceeded to give judgment in favour of Bradley Construction.

4 2.3 S. & R. Motors has appealed against that decision of the Master. That appeal together with the application for a stay came on for hearing at the same time before me and this judgment is directed towards both issues.

3. The legal consequence of the sequence of events

2 3.1 The first procedural issue which arises concerns the sequence of events which I have just outlined. I am satisfied that the Master was not correct in going ahead with the motion for judgment in circumstances where there was already pending before the court, an application for a stay pending arbitration. It seems to me that S. & R. Motors were placed in an invidious position. S & R Motors correctly argued that, had they contested the motion for judgment by filing replying affidavits, a step would have been deemed to have been taken by them in the proceedings and they would, thus, have lost any entitlement which they might have to arbitration. The situation might have been otherwise if S. & R. Motors had not already pending before this court a motion in which such a stay was sought. In those circumstances it would have been open to the Master to take the view that a party wishing to seek such a stay had lost any such entitlement by virtue of a failure to initiate the appropriate application prior to the motion for judgment coming on for hearing. However, that was not the case here. S. & R. Motors had initiated an application for a stay. Unfortunately S & R Motors could not be accommodated with a hearing date for that application in this court until the 19 ^th November, 2007 notwithstanding that the motion for judgment was due for hearing on 26 ^th October, 2007. The timing of court listings of that type should not affect the substantive rights of parties. In those circumstances it seems to me that it would have been appropriate for the Master to adjourn the motion for judgment until such time as the stay application had been considered. Be that as it may, both matters are now before this court and it is possible to deal with both of them at the same time.

3 3.2 In substance the real issue which I have to decide is as to whether S. & R. Motors must now make payment on foot of the architect's certificates which have issued. The contention of S & R Motors is that they should not be required to make payment because they have a bona fide cross claim which would, in principle, entitle them to defend these proceedings but, having regard to the fact that the cross claim ought, under the terms of the agreement, be referred to arbitration, entitles them, on the facts of this case, to a stay pending such arbitration. Against that background it is appropriate to turn first to the legal principles applicable.

4. The Law

2 2 4.1 The test to be applied in deciding whether a party should be given leave to defend a summary judgment application was most recently addressed by the Supreme Court in Aer Rianta Cpt v. Ryanair Limited, [2002] 1 ILRM 381. In that case the court indicated that the test is as to whether, looking at the whole situation, the defendant has satisfied the court that there is a fair and reasonable probability that he has a real and bona fide defence. As pointed out by Hardiman J., the test does not mean that the party must establish that he has a defence which will probably succeed; rather he must establish that it is probable that he has a bona fide defence.

3 3 4.2 Where the nature of the defence put forward amounts to a form of cross claim slightly different considerations may apply. In those circumstances the court has a wider discretion. Where the defendant does not establish a bona fide defence to the claim as such, but maintains that he has a cross claim against the plaintiff, then the first question which needs to be determined is as to whether that cross claim would give rise to a defence in equity to the proceedings. It is clear from Prendergast v. Biddlle (Unreported, Supreme Court, 21 ^st July, 1957, Kingsmill Moore J.), that the test as to whether a cross claim gives rise to a defence in equity, depends on whether the cross claim stems from the same set of facts (such as the same contract) as gives rise to the primary claim. If it does, then an equitable set off is available so that the debt arising on the claim will be disallowed to the extent that the cross claim may be made out.

4 4 4.3 On the other hand if the cross claim arises from some independent set of circumstances then the claim (unless it can be defended on separate grounds) will have...