H286
Judgment Title: Mount Juliet Properties Ltd -v- Melcarne Develoments Ltd & Ors Neutral Citation: [2013] IEHC 286 High Court Record Number: 2010 11587 P Date of Delivery: 19/06/2013 Court: High Court Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation [2013] IEHC 286 THE HIGH COURT [2010 No. 11587P] BETWEEN MOUNT JULIET PROPERTIES LIMITED PLAINTIFF AND
MELCARNE DEVELOPMENTS LIMITED TRADING AS WALSH BROTHERS, CAMPBELL CONROY HICKEY PARTNERSHIP, McCARRICK WOOD LIMITED TRADING AS McCARRICK WOOD CONSULTING ENGINEERS AND HENDRICK RYAN & ASSOCIATES LIMITED DEFENDANTS Judgment of Ms. Justice Laffoy delivered on 19th day of June, 2013. The applications in the context of the proceedings and procedural background 2. The involvement of the parties to the proceedings in that development was as follows:
(b) The first defendant was engaged as a building contractor to carry out the development. The Court was informed that the first defendant is now in liquidation. (c) The second defendant, a firm of architects which had been retained in and around the late 1990s to act as the plaintiff’s retained architect for various projects on the Mount Juliet Eestate, was retained to design and procure the construction of the development. The plaintiff’s position is that the other defendants were retained on the recommendation of the second defendant. (d) The third defendant, which the evidence before the Court indicates has been in creditors’ voluntary liquidation since 21st September, 2011 although this is not obvious from the title to the proceedings, which traded as consulting engineers, was retained by the plaintiff to provide mechanical and electrical engineering services for the development. (e) The fourth defendant, which trades as consulting structural engineers, was retained by the plaintiff to provide structural engineering services in relation to the development. 4. An alternative claim in these proceedings is for damages in relation to dwelling houses Nos. 1, 3, 4, 5, 6, 7, 8 and 10 of the development on the basis that the liability of the defendants and each of them in respect of properties No. 2 and No. 9 is the subject of separate proceedings, namely:
(b) Proceedings by John J. Enright and another, as plaintiffs, and the plaintiff and Mount Juliet, as defendants, in which the first defendant, the second defendant, the third defendant and the fourth defendant have been joined as third parties (the Enright Proceedings), which were instituted in this Court under Record No. 2009 No. 2444P. 5. On 8th February, 2011, the second defendant served notice of contribution and indemnity in these proceedings on the first defendant, the third defendant and the fourth defendant. On 9th March, 2011, the first defendant served a notice of contribution and indemnity in these proceedings on the second defendant, the third defendant and the fourth defendant. 6. On 21st February, 2011, the fourth defendant entered an appearance in these proceedings. No statement of claim has been delivered by the plaintiff in these proceedings. 7. The next step in these proceedings taken by the fourth defendant was to issue the application which is the subject of this judgment on 22nd June, 2012. In the notice of motion the fourth defendant sought an order pursuant to Article 8 of the Model Law and the Arbitration Act 2010 (the Act of 2010) referring the plaintiff and the fourth defendant in these proceedings to arbitration on the grounds that the disputes between them the subject of the proceedings are the subject of an arbitration agreement. At the time that the notice of motion was issued the fourth defendant was awaiting judgment on an application to set aside the third party notices against it in the O’Sullivan Proceedings and in the Enright Proceedings. However, subsequently, by order of the Court (Murphy J.) made on the 10th day of July, 2012 the application of the fourth defendant to set aside the third party notices was refused. 8. By order of the Court (Murphy J.) made in these proceedings on 9th July, 2012, it was ordered that these proceedings and the O’Sullivan Proceedings and the Enright Proceedings be consolidated. It appears that the title to the O’Sullivan Proceedings may be incorrect in that order. 9. The third defendant entered an appearance in these proceedings on 4th September, 2012. On the same day the third defendant issued the application which is the subject of this judgment, in which it sought:
(b) an order pursuant to the inherent jurisdiction of the Court staying the proceedings pending arbitration. The factual basis of the application of the fourth defendant 12. On 13th October, 2004, Brian Hendrick, on behalf of the fourth defendant, sent an e-mail to Patrick Hegarty, then Managing Director of the plaintiff, the purpose of which was expressed to be to confirm the fourth defendant’s “appointment as Civil & Structural Engineers of various future projects at Mount Juliet”. The projects were listed and included the Walled Garden Lodges. In the e-mail it was stated as follows:
13. By letter dated 15th December, 2006 to the plaintiff, which was addressed to Mr. Hegarty, Mr. Hendrick wrote on behalf of the fourth defendant in relation to fees for engineering services and addressed some detail in relation to fees. What is of particular significance is that the last paragraph of the letter stated:
14. The Opinion on Compliance in relation to the Walled Garden Lodges was issued by the fourth defendant on 6th November, 2007. The Opinion was in the form which had been proposed in the e-mail of 13th October, 2004: Form BRSE 9101, which designation appeared at the top of the form. There are several references to Agreement SE 9101 in the form, the first indicating that the form is for use where a consulting engineer is appointed under “Conditions of Engagement Agreement SE 9101”. 15. The version of “Conditions of Engagement Agreement SE 9101” relied on by the fourth defendant is the revised version of April 2000 as reprinted in August 2005, although it is common case that an agreement in this form was not executed by the plaintiff and the fourth defendant. It is clear on the evidence that this is the industry standard for consulting engineers engaged in structural engineering work, which is published by the Institution of Engineers of Ireland in agreement with the Association of Consulting Engineers of Ireland. There is a model form Memorandum of Agreement appended to the Agreement for execution by the client and the consulting engineer. As has been stated, it is common case that Agreement SE 9101 was not executed by the plaintiff and the fourth defendant. There are four pages of a Foreword and a Preamble leading into the Agreement. The Agreement itself is a comprehensive document which sets out the rights and obligations on each side. Clause 4 is headed “Settlement of Disputes”. Clause 4.1 provides that, in the event of any dispute or difference arising between the parties, either party may request conciliation/mediation. Clause 4.2 deals with arbitration and provides as follows:
The award of the arbitrator shall be final and binding on the parties and any reference shall be deemed to be a submission to arbitration within the meaning of the Arbitration Acts 1954 – 1980 or any statutory re-enactment or amendment thereof for the time being in force. 17. Mr. Hegarty swore an affidavit in response to the application of the fourth defendant on 30th July, 2012 in which he averred that he was at no stage aware of any of the terms contained in Agreement SE 9101 prior to the dispute and he was never provided with a copy of that document. At no point was any reference made to arbitration or to the understanding of the fourth defendant that any dispute in relation to the subject matter of the arrangement between the plaintiff and the fourth defendant would be referred to arbitration. Mr. Hegarty averred that he never agreed to any disputes being referred to arbitration. In essence, the position of the plaintiff is that the arbitration clause contained in Agreement SE 9101 was never sufficiently identified to make it part of the agreement between the parties and that its officers were never aware of the contents thereof or the arbitration clause contained in it. 18. The fourth defendant has exhibited a report dated 1st September, 2010 furnished by Punch, Consulting Engineers, to the plaintiff’s solicitors which was obviously exhibited in the context of the applications by the fourth defendant to set aside the third party notices in the O’Sullivan Proceedings and the Enright Proceedings, in which it was stated by Punch that the fourth defendant’s civil and structural agreement with the plaintiff was based on providing engineering services in accordance with the standard conditions in Agreement SE 9101, which statement is obviously based on the e-mail dated 13th October, 2004. The opinion of Punch in relation to the contractual relationship of the fourth defendant and the plaintiff is not material. The factual basis of the application of the third defendant
We offer to provide Consulting Engineering design services on the above basis, including negotiations with the Utility Services Companies where required, full cost control of the services sub-contracts, monitoring of the installations on site and attendance at site meetings as required based on a lump sum fee of €32,500 excluding VAT but inclusive of expenses. We trust the above offer is acceptable however if you require any further information please do not hesitate to contact the undersigned.” 21. The third defendant proceeded to provide the services as set out in the letter of 26th June, 2006. On 1st November, 2006 the plaintiff paid the third defendant seventy per cent of the agreed fee of €32,500. 22. On 7th March, 2008, the third defendant issued its “Opinion on Compliance and Building Regulations” to the plaintiff in respect of the Walled Garden Lodges project. In outlining the professional services provided, it was stated in the Opinion that the services had been provided by the third defendant in accordance with Agreement ME 9101 (October 1991 Edition). 23. The version of Agreement ME 9101 put before the Court is dated October 1991. It is described in the front page as being “for the appointment of consulting engineers where engineering services and associated equipment for building and other structures (abridged duties)”. Like Agreement SE 9101, it contains a foreword and a preamble and the actual agreement itself is comprehensive. Clause 20 deals with settlement of disputes. Clause 20.1 envisages either party requesting conciliation or mediation. Clause 20.2 deals with arbitration and is in the same terms as Clause 4.2 of Agreement SE 9101. It is common case that an agreement in the form of Agreement ME 9101 was not executed by the plaintiff and the third defendant. 24. In response to the application of the third defendant, Mr. Hegarty swore an affidavit on 27th September, 2012 in which he averred that Agreement ME 9101 was not attached to the letter of 21st June, 2006. He further asserted that the letter deals with fee arrangements only and that the third defendant was retained “through the good offices” of the second defendant and that the only issues that were negotiated between the parties related to fee arrangements. Mr. Hegarty averred that he was not familiar with Agreement ME 9101 and was not aware of its terms. At no point was any reference made to arbitration or to the understanding of the third defendant that any dispute between the plaintiff and the third defendant in relation to the subject matter of their arrangement was to be referred to arbitration. As far as he was concerned he never agreed to refer disputes to arbitration. No copy of Agreement ME 9101 was ever furnished to the plaintiff by the third defendant. Similarly to the approach adopted in relation to the application of the fourth defendant, the position of the plaintiff in relation to the third defendant’s application is that the arbitration clause contained in Agreement ME 9101 was never sufficiently identified to make it part of the agreement between the parties. 25. An additional point has been made on behalf of the plaintiff in relation to the application of the third defendant, that is to say, the third defendant has been guilty of delay in bringing the application. In this connection, the plaintiff has exhibited a letter dated 9th February, 2011 from solicitors for the third defendant to the plaintiff’s solicitors, which post-dated the service of the plenary summons in these proceedings on the solicitors for the third defendant. In that letter, the solicitors for the third defendant stated:
26. The full sequence of correspondence between the plaintiff’s solicitors and the solicitors for the third defendant has been exhibited in an affidavit sworn on 26th April, 2013 by Aoife Gaughan, a solicitor in the firm acting for the third defendant. This discloses the following:
(b) the letter of 9th February, 2011 referred to above requested the plaintiff’s solicitors, if the plaintiff was not prepared to mediate the matters in dispute, to set out the reasons why, referring to Order 99, rule 1A of the Rules of the Superior Courts; (c) there was no response to the letter of 9th February, 2011 and a reminder was sent by the solicitors for the third defendant on 23rd February, 2011; (d) a further reminder was sent by the solicitors for the third defendant on 15th June, 2012 in which it was made clear that the third defendant intended to rely on the dispute resolution clauses in Agreement ME 9101; and (e) the letter of 15th June, 2012 did elicit a response, which was dated 20th June, 2012, in which it was stated that the plaintiff did not accept that Agreement ME 9101 was binding on the plaintiff.
28. The evidence indicates that IEI Agreement ME 9101 is an industry standard form of terms and conditions used by mechanical engineers. The legislation 30. The Model Law has force of law in the State by virtue of s. 6 of the Act of 2010 and applies to arbitrations under arbitration agreements. The text of the Model Law is set out in Schedule I to the Act of 2010. In the interpretation section in the Act of 2010 it is provided that the expression “Arbitration agreement” shall be construed in accordance with Option 1 of Article 7. 31. Section 8 of the Act of 2010 deals with the construction of the Model Law and also the construction of arbitration clauses. Sub-section (1) provides that judicial notice shall be taken of the travaux préparatoires of the United Nations Commission on International Trade Law and its working group relating to the preparation of the Model Law. Sub-section (2) provides that the travaux préparatoires may be considered when interpreting the meaning of any provision of the Model Law and shall be given such weight as is appropriate in the circumstances. 32. Section 11 of the Act of 2010 provides that there shall be no appeal from any court determination of a stay application pursuant to Article 8(1) of the Model Law. Article 8(1) provides as follows:
33. Option 1 of Article 7, insofar as is relevant for present purposes, provides as follows:
(2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. (4) . . . (5) . . . (6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.”
In its final note before submission of the wording to the Commission, the Secretariat summarised the Working Group’s view of this provision as follows: ‘17. The Working Group recalled that the principal purpose of paragraph (6) was to confirm the formal validity of arbitration agreements incorporated by reference. For example, parties might conclude by performance a contract whose terms were established in a standard form but that form might, in turn, not contain within it an arbitration clause but might, instead, incorporate an arbitration clause by reference to another document that contained its terms. The Working Group agreed that, as a matter of general policy, the reference or other link to a written contractual documentation containing an arbitration clause should be sufficient to establish the formal validity of the arbitration agreement, and that domestic or other applicable law should determine whether the reference was such as to make that clause part of the contract or the separate arbitration agreement, notwithstanding that the contract or separate arbitration agreement had been concluded orally, by conduct or by other means not in writing’ [A/CN.9/606 para. 17]”. 36. The Court has had the benefit of exceptionally thorough and comprehensive written submissions, as well as oral submissions, from each of the parties. The structure I propose adopting for the remainder of this judgment is to address the principal bases on which it is contended by the plaintiff that the applications of the fourth defendant and the third defendant should be refused, namely:
(b) because of the implications of the fourth defendant and the third defendant remaining in these proceedings because of the claim for contribution and indemnity by the second defendant; and (c) that the fourth defendant and the third defendant have lost their right to invoke Article 8(1) because of the steps they have taken in the O’Sullivan Proceedings and the Enright Proceedings and alleged delay on the part of the third defendant.
(b) P. Elliott & Co. Ltd. (in receivership and in liquidation) v FCC Elliott Construction Ltd. [2012] IEHC 361. Arbitration agreement – incorporation by reference? 39. Counsel for the plaintiff supported its submissions in relation to the effect of Article 7(6) mainly by reference to authorities from England and Wales and Northern Ireland. As counsel for the fourth defendant submitted, unlike the situation in this jurisdiction, the Model Law has not been incorporated in toto into domestic law in the United Kingdom. The UK jurisprudence on the topic relates to s. 6(2) of the Arbitration Act 1996. Having said that, it seems to me that, as a matter of construction, there is very little difference between Article 7(6) and s. 6(2), which provides:
40. The Court was referred to Russell on Arbitration (23rd Ed., 2007) and, in particular, to the commentary on incorporation by reference. The editors of Russell state (at para. 2 – 044) that, where the terms of a contract have to be ascertained by reference to more than one document, the issue of ascertaining which documents constitute contractual documents and in what, if any, order of priority they should be read has to be determined by applying the usual principles of construction and attempting to infer the parties’ intentions by means of an objective assessment of the evidence. The editors state (at para. 2 – 046):
41. More significantly for present purposes, the editors of Russell then address the situation in which the reference is to “standard form terms” (at para. 2 – 048) stating:
Counsel for the plaintiff emphasised the references in the above passage to the following matters: the parties being expected to be more familiar with those standard terms, including the arbitration clause; incorporation of standard terms by use of general words being accepted particularly when the terms are readily available and the question arises in the context of dealings between established players in a well known market; and that the reason given for the stricter rule is that the other party may have no knowledge or no ready means of knowledge of the relevant term. Counsel also emphasised a statement in the next paragraph in Russell (para. 2 – 049) that the rationale for requiring specific words of incorporation, for example, in charterparty/bills of lading cases, is “the absence of knowledge of the terms of another contract between different parties and the need for adjustment for the terms as written”. 43. In this jurisdiction, the question of knowledge of standard terms by the parties sought to be bound has been most frequently considered in the context of choice of jurisdiction clauses. For instance, the decision of the Supreme Court in Leo Laboratories Ltd. v. Crompton BV [2005] 2 IR 225 concerned an application by a defendant Dutch company seeking an order staying proceedings initiated against it by the plaintiff, an Irish company, and it concerned the application of the Brussels Regulation. What is of interest for present purposes is the factual basis of the application, as set out in the judgment of Fennelly J. (at p. 228). The defendant had, for many years, supplied the plaintiff with raw materials for its business which was the manufacture of pharmaceutical products. Towards the end of 1998, the plaintiff placed a purchase order with the defendant for a product. The defendant replied with a form confirming acceptance of the order. The defendant thanked plaintiff for the order and stated that it had been accepted “subject to our general terms and conditions of sale and delivery as stated on the back hereof”. The Court was informed that these terms were not, in fact, printed on the back. The plaintiff claimed not to have been aware of the actual printed terms. The plaintiff argued that the general terms and conditions did not form part of the contract between the parties. On that issue, Fennelly stated (at p. 236):
44. Quite a number of authorities were considered at the hearing in which there was a factual and a legal issue as to whether the party contending that general or standard conditions did not apply had knowledge of the conditions, for example, the decision of the High Court (MacMenamin J.) in Kastrup Trae-Aluvinduet A/S v. Aluwood Concepts Ltd. [2009] IEHC 577. The High Court was there concerned with an application to enforce a Danish arbitration award in this jurisdiction. One of the arguments advanced by the respondent was that there was no award because there never had been a binding arbitration agreement in place between the parties. In dealing with the factual situation (at paras. 27 and 28) MacMenamin J. observed that there was no direct evidence at all before the Court that the respondent was not on notice of the general conditions, the affidavit averment having been made by the respondent’s solicitor, which was hearsay. MacMenamin J. stated that he preferred the evidence of the applicant that the respondent must be taken to have been aware of these general conditions. However, aside from that, he went on to say that, as a matter of law, the respondent must be taken to have been on notice of the general conditions. In that context he considered the decision of the High Court (O’Hanlon J.) in Sweeney v. Mulcahy [1993] ILRM 289. He observed (at para. 30) that in the case before him the respondent had been informed in the first letter as to the existence of the conditions and it was open to the respondent to seek copies of those conditions but it did not do so. I consider that on the issue of notice, the decision of MacMenamin J. is consistent with the decision of the Supreme Court in the Leo Laboratories Ltd. case. 45. The application before the Court in Sweeney v. Mulcahy was an application pursuant to s. 5 of the Arbitration Act 1980 (the Act of 1980) staying the proceedings which had been initiated by the plaintiff against the defendant. The factual context was that the plaintiff had engaged the defendant, an architect, to carry out renovation and restoration works on a dwelling house. The parties first met at the dwelling house on 22nd October, 1987. The defendant wrote to the plaintiff on 11th November, 1987 detailing the work to be carried out and stating that the conditions of engagement and scale of minimum charges laid down by the Royal Institute of Architects of Ireland (RIAI) would apply. However, the defendant did not send a copy of the RIAI conditions to the plaintiff, but stated that a copy would be available on request. The plaintiff had previously received a copy of the RIAI conditions 1984 from another architect whom she had engaged on another project. The plaintiff did not formally acknowledge the letter of 11th November, 1987 in writing but the parties met again and continued the project. The basis on which O’Hanlon J. determined that the RIAI conditions were incorporated in the contract is set out as follows in the judgment (at p. 291):
46. Finally, I consider it appropriate to refer to the judgment of Langley J. in The “Athena” (No. 2), referred to in Russell which is now reported in [2007] 1 Lloyds Law Reports 280. That case involved a claim by the owners of the vessel “The Athena” under a policy of war risk insurance, which they had entered into with the defendant and, in particular, an exclusive jurisdiction clause which the owners contended had not been incorporated in the insurance contract because it had not been specifically referred to and because they were unaware of it. Langley J. outlined the law on what he described as the “Incorporation issue” at paras. 62 – 80. He set out his conclusion at para. 81. He found for the defendant, stating that general words of incorporation may serve to incorporate an arbitration clause save in the exceptional two-contract cases in which some express reference to arbitration or perhaps provision of the relevant clause is also required. He also considered what he referred to as the “Knowledge issue” at para. 87 et seq. However, he introduced that discussion by stating that the issue was academic in view of the conclusions he had reached on the incorporation and construction issues. Application of incorporation principles to the fourth defendant 48. Accordingly, I am satisfied that there is an arbitration agreement within the meaning of Article 7 between the plaintiff and the fourth defendant. Application of incorporation principles to the third defendant 50. Accordingly, I am satisfied that there is an arbitration agreement within the meaning of Article 7 between the plaintiff and the third defendant. Multiple actions 52. The issue of multiplicity of actions was raised in Furey v Lurganville Construction Co. Ltd. [2012] IESC 38. In that case, the stay on the proceedings was being sought pursuant to s. 5 of the Act of 1980. At para. 6.3 of his judgment, Clarke J. recorded that it had been submitted that that provision did not confer on an Irish court the same level of general discretion as had formally existed in the United Kingdom under the relevant provisions of s. 4 of the Arbitration Act 1950. However, the Supreme Court did not have to determine the matter because the plaintiffs/appellants had accepted that analysis, Clarke J. observing that they had done so “correctly” in his view. Similarly, the Court does not have to address the issue in this case, because counsel for the plaintiff unequivocally accepted that this Court has no discretion in the matter under Article 8. Delay/estoppel 54. Counsel for the fourth defendant pointed out that at all material times the fourth defendant has reserved its position under Agreement SE 9101 and, in particular, its entitlement to seek a reference to arbitration in respect of the same. Further, they relied on the decision of the Supreme Court in the Furey case and, in particular, paragraphs 5.2, 5.3 and 5.4 of the judgment of Clarke J. as to the circumstances in which an estoppel could arise. Clarke J. stated (at para. 5.3) that -
55. In relation to the third defendant it was submitted that it had lost the right to apply to Court under Article 8(1) because it had put in an appearance in each of the O’Sullivan Proceedings and the Enright Proceedings and had raised a notice of particulars in each. It was submitted that it had therefore taken a step in those proceedings, which have now been consolidated with these proceedings. The fact that it was the subject of the notice of contribution and indemnity served by the second defendant was also adverted to. The delay point which was made on affidavit was not reiterated. 56. In response, counsel for the third defendant queried whether the jurisdiction to refer a matter to arbitration due to estoppel had survived the coming into force of the Act of 2010 and the Model Law and reserved the position of the third defendant on that. However, in reliance on the passage from the judgment of Clarke J. in the Furey case, which I have quoted at para. 54 above, it was submitted that the point is academic because the third defendant made no representation of the type envisaged in that passage. The action taken in the O’Sullivan Proceedings and the Enright Proceedings had been taken before those proceedings were consolidated with these proceedings. Counsel for the third defendant emphasised that the time limitation imposed in Article 8(1) is that the request to refer to arbitration must be made “not later than when submitting his first statement on the substance of the dispute”. It was submitted that the third defendant had not submitted any statement on the substance of the dispute, as properly understood, referring to the commentary in Mansfield Arbitration Act 2010 and Model Law: A Commentary (at p. 117), prior to 4th September, 2012. 57. Having regard to the totality of the evidence, I am satisfied that there is no basis for finding that the third defendant is precluded by delay or is estopped from bringing its application. 58. In the plaintiff’s written submissions it was suggested that, at the very least, the fourth defendant and the third defendant should be prevented from relying on Article 8 in relation to the elements of the claims against them that relate to the premises which are the subject of the O’Sullivan Proceedings and the Enright Proceedings. That point was not pursued with any vigour at the hearing. It is clear from the order of 9th July, 2012 that these proceedings were consolidated with the O’Sullivan Proceedings and the Enright Proceedings on the application of the plaintiff. The Court has no jurisdiction to segregate so much of the claims against the fourth defendant and the third defendant as relate to the premises which are the subject of the O’Sullivan Proceedings and the Enright Proceedings from the remainder of the claims. Orders |