Does a dispute as to the validity of a Conciliator's Recommendation fall within the agreement to arbitrate in an Irish Public Works Contract?

Thursday 15 December 2016

Does a dispute as to the validity of a Conciliator’s Recommendation fall within the agreement to arbitrate in an Irish Public Works Contract?  The High Court considered this issue in BAM Building Ltd v UCD Property Development Council Ltd [2016] IEHC 582.

 

Facts

 

The proceedings relate to a dispute arising from a contract between the parties for the construction of University College Dublin’s Sutherland School of Law. Clause 13 of the contract provided for the conciliation and arbitration of disputes arising under that contract.

 

The plaintiff referred a dispute to conciliation on 7 August 2013 pursuant to sub-clause 13.1. The conciliator issued a preliminary recommendation on 3 June 2015.The parties subsequently agreed to extend the date by which the conciliator would issue his final recommendation to Friday 27 November 2015.

 

It was not in dispute that the Conciliator was in a position to deliver his final recommendation on Friday 27 November 2015. However, the conciliator stated in his affidavit that he was contacted by email at 15:19pm on Friday 27 November 2015, by a person who he was comfortable had the authority to represent the defendant, stating that it would be Monday 30 November before a query raised by the conciliator could be completely responded to. Although inconvenient for the conciliator, he said he agreed, in those circumstances, to deliver his recommendation on 30 November 2015.  

 

The conciliator delivered his final recommendation on Monday 30th November 2015 that the defendant pay the plaintiff the sum of €1,141,838.93. The defendant issued a notice of dissatisfaction, in accordance with the terms of the contract, which entitled either party to refer the dispute to arbitration under sub-clause 13.2 of the contract. The defendant challenged the recommendation of the conciliator both as to quantum and also on the basis that it was made out of time and, therefore, void.

 

Having served a notice of dissatisfaction, certain obligations fell upon the defendant pursuant to sub-clause 13.1.11 of the contract. In particular, the defendant was obliged to pay over the sum recommended by the conciliator provided the plaintiff agreed to comply with the arbitration rules in the agreement referring the dispute to arbitration and also giving the defendant a bond as security pending the outcome of the arbitration. The disputed conciliator’s recommendation was referred to arbitration and a bond was offered by the plaintiff. However, the defendant did not pay the sum recommended by the conciliator.

 

The plaintiff commenced high court proceedings seeking various declarations, including:

A declaration that the defendant was in breach of sub-clause 13.1.11 sub-section (1) of the contract, and

Specific performance of that sub-section as against the defendant, thus requiring the defendant to pay the sum recommended by the conciliator.

 

Relief sought

 

The defendant subsequently brought a motion for an order staying the high court proceedings pursuant to Article 8(1) of the Model Law, as adopted by s. 6 of the Arbitration Act 2010, on the basis that the dispute between the parties was the subject of an arbitration agreement.

 

While it was not in issue between the parties that the dispute as to quantum came within the scope of an arbitration under sub-clause 13.2, the plaintiff argued that the issue as to whether or not the conciliator’s recommendation was out of time and, therefore, void was not a ‘dispute’ which the parties had agreed could be sent to arbitration.

 

However the defendant maintained that, insofar as there was a dispute as to the validity of the conciliator’s recommendation and consequently, whether or not it was liable to pay the sum recommended by the conciliator, this was an issue that should be determined through arbitration.

 

Judgment

 

The court acknowledged that Article 8 of the Model Law does not give the court discretion whether or not to refer a dispute to arbitration; a stay must be granted if there is an arbitration clause and the dispute is within the scope of the arbitration agreement and there is no finding that the arbitration agreement is null, void , inoperative or incapable of being performed ( P Elliott and Company Limited (In Receivership and In Liquidation)-v-FCC Elliot Construction Limited [2012] IEHC 361; Go Code Limited -v-Capita Business Services Limited [2015] IEHC 673).    

 

As a starting point in interpreting an arbitration clause, the court followed the approach  of Lord Hoffman in the House of Lords’ decision in Premium Nafta Products Ltd and ors v Fili Shipping Company Ltd and ors [2007] UKHL 40. In that case Lord Hoffman stated that the construction of an arbitration clause should start from the assumption that the parties are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.

 

The court also noted that, quite apart from any presumption that all disputes arising out of the conciliation should be referred to arbitration, the text of clause 13 also points in that direction. The title heading of Clause 13 is “Disputes” and the disputes referred to in sub-clause 13.1 include disputes arising under contract and are not merely confined to disputes involving the payment of money.

 

Although the plaintiff contended that the defendant could not dispute the validity of the recommendation on the basis that it was delivered late, in circumstances where it argued the late delivery  was to facilitate the defendant’s request for further time, the court observed that such an issue might involve a determination as to whether the individual who made the request of the conciliator had the defendant’s actual or ostensible authority to seek the extension. The court noted that it could only determine such issues if they were not within the scope of the arbitration agreement.

 

The court held that the wording of clause 13 was sufficient to bring the issue of the validity of the conciliator’s recommendation within the scope of the arbitration agreement quite apart from the general presumption that exists in favour of such an interpretation.   

 

The defendant was therefore granted an order staying the proceedings pursuant to Article 8(1) of the Model Law.

 

Take aways

 

A dispute as to the validity of a Conciliator’s Recommendation falls within the agreement to arbitrate in an Irish Public Works Contract.