Supreme Court of Ireland Decisions

Gulliver v. Brady & Ors [2003] IESC 68 (19 December 2003)

Hardiman J.

Geoghegan J.

Fennelly J.

THE SUPREME COURT

310/2003

BETWEEN/

JOHN GULLIVER

Plaintiff/Appellant

and GEORGE BRADY, ANNE-MARIE BOHAN, BRIAN D. BUGGY, SHARON C. DALY, ANDREW B. DOYLE, TARA M. DOYLE, RODERIC ENSOR, PAUL FARRELL, TURLOUGH J. GALVIN, GARRETT P. GILL, PAUL GLENFIELD, ALAN G. GRAHAM, ROBERT HERON, JAMES HICKEY, RUTH HUNTER, MICHAEL GLYNN IRVINE, MICHAEL G. JACKSON, NEIL KEENAN, HELEN G. KELLY, DON McALEESE, PARAIC T. MADIGAN, STUART PHILIP MARGETSON, EDWARD C.G. MILLER, PATRICK J. MOLLOY, ARTHUR D.S. MORAN, JOYCE DEIRDRE MORRIS, ANDREW MUCKIAN, BRID MUNNELLY, FRANK NOWLAN, MICHAEL O'CONNOR, PAULINE O'DONOVAN, ANTHONY G. O'GRADY, ANTHONY O'REILLY, WILLIAM P.M. PRENTICE, CHRISTOPER J. QUINN, WILLIAM A. QUIRKE, GRAHAM C. RICHARDS, DONAL ROCHE, JAMES SCANLON, TIMOTHY SCANLON, PATRICK F.G. SPICER, PATRICK SWEETMAN, MICHAEL W. TYRRELL, MARK VARIAN, STANLEY G. WATSON, JOHN RYAN, ANTHONY WALSH, BERNARD DOHERTY, CATHERINE GALVIN, GREG LOCKHART AND FRANK O'NEILL PRACTISING UNDER THE NAME AND STYLE OF MATHESON ORMSBY PRENTICE

Defendants/Respondents

JUDGMENT of Mr. Justice Geoghegan delivered the 19th day of December 2003 [Nem Diss]

The defendants/respondents are a leading firm of Dublin solicitors practising under the style and title of Matheson Ormsby Prentice. The plaintiff/appellant who is a tax adviser and specialist but not a solicitor claimed in these proceedings that he had become a full equity partner in this firm. That claim was heavily disputed by the respondents and, accordingly, the appellant commenced these proceedings in which by the plenary summons and statement of claim he seeks as his primary reliefs declarations with a view to establishing his alleged partnership. At all material times the respondents have disputed the claim of the appellant to be a partner and they do so by reference to a certain contractual document dated 21^st July 1999 entered into by them with the appellant and headed "Memorandum of Understanding". Paragraph 1 of that document clearly indicates what was the intention of the contracting parties and for the purpose of understanding the nature of this appeal I think it helpful to quote it in full. It reads as follows:

"1. Objective.

1.1 A (being the appellant) andB (being the respondents) have agreed to use best endeavours to facilitate the establishment of a dedicated tax advisory group by A to complement and assist in the development of the existing taxation advisory service provided by B with an emphasis by all parties to focus on the generation of high margin tax related consultancy work. It is further agreed by the parties hereto that subject to regulatory constraints an integral element of this agreement is the commitment of the parties hereto to put in place a mechanism by which A will (subject to the terms and provisions of this agreement including, without limitation, clause 5 and sub-clause 7.12) be admitted as a full profit sharing partner of B with effect from the 1^st of January 2003.

1.2 B. hereby confirms and accepts that it is committed to the development of its existing taxation advisory service and is committed in principle to the creation of a structure to facilitate the career progression of new senior recruits other than solicitors towards full equity partnership, status and benefits.

It is necessary now to move to paragraph 5. Sub-clause 1 of that paragraph provides that "subject always to the preconditions specified in sub-clauses 5.2 and 5.3 below" it was agreed that with effect from the 1^st of January, 2003 the appellant should be admitted as a full equity partner to the respondents' firm at the level specified in a certain letter of admission set out in Schedule 4 to the agreement. It is not necessary to refer to each of the preconditions referred to. For the purposes of this case it is sufficient to refer to the precondition set out at 5.2.2 of the agreement. That reads as follow:

"The equity partners of B shall not have passed a resolution, on which at least 75 per cent of the equity partners thereof have voted in favour, to the effect that A shall not be admitted as an equity partner to B."

Such a resolution of the kind referred to in the condition was in fact passed on 17^th December, 2002. On the face of it, that precluded the appellant from becoming a partner with effect from the 1^st of January, 2003 as agreed. The appellant, however, claims that that the provision was already redundant at the time of the resolution. He claims that he had been made a partner and had acted as a full equity partner long before the resolution and, of course, well in advance of the agreed date of commencement. That is essentially the dispute and the respondents claim that that dispute must be referred to arbitration under the terms of the contract referred to. The respondents brought a motion in these proceedings to stay the action pending reference to arbitration. The High Court (O'Sullivan J.) granted that stay for the reasons set out in an ex tempore judgment which he delivered. The appellant has appealed that order to this court.

The relevant arbitration clause is contained in paragraph 7.7 of the "Memorandum of Understanding" and it reads as follows:

"Any disputes between the parties to this Agreement, arising out of or in relation to this Agreement, the Services Agreement or Letter of Admission or in relation to the termination of validity hereof shall be referred to arbitration and such arbitration shall be governed by the provisions of the Arbitration Acts, 1955-1980 ('the Acts') by arbitrator agreed between the parties, or, in the absence of agreement within fourteen days of one party nominating an arbitrator in writing, by an arbitrator appointed by the Chairman of the Bar Council of Ireland for the time being. The arbitrator shall be a senior counsel of at least seven years standing specialising in commercial law."

The appellant maintained in the High Court and maintains in this court that he is not bound by the arbitration clause because his alleged partnership did not arise pursuant to the terms of the Memorandum of Understanding. At all times it has been unclear whether the appellant is claiming an entirely new and different partnership agreement without reference to the Memorandum of Understanding or whether for all practical purposes he is claiming (as found by the learned High Court judge) an amended agreement which enabled him to become a partner sooner. There was probably an element of deliberate fudge here in that the appellant thought fit to make both claims in the alternative. The appellant's difficulties in this regard are understandable because in either event he has to concede that parts at least of the Memorandum of Understanding and the documents annexed thereto establish the terms of his alleged existing partnership. It has never been suggested that in relation to the alleged existing partnership new terms were negotiated across the table with the respondents or that terms relating to profit sharing etc. could in some way be implied other than the terms contained in the Memorandum of Understanding and the documents annexed thereto. But if that is so, at the very least, the Memorandum of Understanding forms part of the partnership contract now alleged by the appellant in so far as it is consistent with the alleged earlier creation of such partnership. That being so, it is difficult to see how it can be argued that the arbitration clause contained in paragraph 7.7 would not apply.

But even if for one reason or another the arbitration clause could not be regarded as having been incorporated expressly or by implication in any amended or substituted partnership agreement, the essential feature of the dispute in this case would still be whether the plaintiff's rights and obligations as against the defendants arose solely out of the "Memorandum of Understanding" and the documents being incorporated therewith. That is the case being made by the defendants and that dispute has to be resolved. Beyond any doubt that dispute is captured by the arbitration clause. In my view, the dispute is a dispute "in relation to this Agreement" within the meaning of the arbitration clause and it can also be regarded as a dispute "in relation to the termination or validity" of the agreement. The court has been referred to the second edition of the Law and Practice of Commercial Arbitration in England by Mustill and Boyd. At page 119 of that work the following is stated in connection with (inter alia) the words "in relation to":

"On the face of them, expressions of this sort would appear to be of considerable width and the current tendency is to enlarge rather than to diminish their scope where the context allows. The courts have, however, in the past given them a surprisingly restrictive interpretation. Thus, they have been held not to cover claims for damages based on the fraudulent inducement of the contract, or claims for payment on a quantum meruit in respect of work done under a contract which the claimants sought to declare void, or a claim for breach of an implied contract not to impede building works which were being carried out under the contract in question. These earlier cases do not, however, decide that expressions of this type must always bear the same limited meaning. In the context of different transactions and differently worded contracts such expressions are capable of bearing, and prima facie do bear, a meaning which embraces any dispute other than one which is entirely unrelated to the transaction covered by the contract.

The words 'relating thereto', and 'relative to', have been treated as apt to cover cases where it is alleged that the contract is terminated through failure of a condition, or non-disclosure."

The principles stated in that passage clearly support the view that this is an arbitrable dispute. In the same work at p. 120 the learned authors treat of the words 'arising out of" and they say the following:

"These words have been given a wide meaning. It has been said that they cover every dispute except a dispute as to whether there was ever a contract at all. If the parties to a contract make provision in it as to their rights should certain events occur in the course of the contract, and a dispute arises between them as to their rights following the occurrence of those events, then that dispute as to their rights arises out of the contract. …"

That passage would appear to bear out the view that the dispute in this case is a dispute arising out of the contract as well as a dispute in relation to the contract.

Statements of the law to similar effect are contained in Russell on Arbitration, 22^nd edition. Dealing with the words "in relation to" at p. 60 the learned editors of that work refer to the fact that those words were at one time given a restricted interpretation but that it is now well established that they should be given a broad meaning. Authorities are cited to support the view that such words may be sufficient to catch disputes arising under another contract relating to the contract containing the arbitration clause. At pp. 59 and 60 of the same work there is treatment of the words "arising out of" and it is pointed out that these words have been held to have a wide meaning. Indeed, they are said to have a wider meaning than "arising under a contract".

I am doubtful as to the usefulness of subdividing the dispute between the parties in the manner done by the learned High Court judge. In my opinion, there is essentially a single dispute here and that is whether the plaintiff is a partner of the respondents or not and that dispute falls within the arbitration clause. Accordingly, the stay must be granted and I would, therefore, dismiss the appeal.