Judgment of Mr. Justice Clarke delivered the 21st of June, 2012.
1. Introduction
1.1 A building contract was entered into on the 16th October, 2002 between the first named plaintiff ("Mr. Furey") and the first named defendant ("Lurgan-ville") as a result of which it was agreed that a building at no.1 Lurgan-ville, Bailieboro, in Co. Cavan would be constructed for the contract price of €146,020.10 (inclusive of V.A.T.). The second named defendant ("Mr. Duff") was also involved in the contractual arrangements as he appears to be the owner of the lands on which the property was to be built and a separate contract for the sale of the relevant site was entered into by Mr. Duff also on the 16th October, 2002. Mr. Duff also signed the building contract on behalf of Lurgan-ville, a company of which he is the principal. The third named defendant ("Mr. O'Daly") was the architect involved in the project.
1.2 It would also appear to have been intended that the second named plaintiff ("Ms. Furey"), who is the wife of Mr. Furey, would be involved in the transaction. In any event the plaintiffs ("the Fureys") became dissatisfied with many aspects of the transaction and ultimately commenced these proceedings on the 9th June, 2005. The proceedings progressed to some extent but, in circumstances which it will be necessary to analyse in more detail, Lurgan-ville asserted a right to rely on clause 11 of the relevant building agreement so as to have the proceedings stayed pending arbitration under s.5 of the Arbitration Act, 1980 ("the 1980 Act"). Ultimately the High Court (McKechnie J.) acceded to that application and made the order sought. The Fureys appeal to this court against that order. Against that background it is necessary to turn to the specific issues relied on on behalf of the Fureys.
2. The Issues
2.1 In pursuing an appeal to this court the Fureys filed written submissions which sought to rely on three separate contentions as a result of which, it was said, the trial judge was wrong.
2.2 First, it was said that Lurgan-ville had taken a "step" in the proceedings, in the sense in which that term is used in arbitration law, such as debars Lurgan-ville from being now able to rely on the arbitration clause in question.
2.3 Second, it was said that the conduct of Lurgan-ville in the manner in which the proceedings were pursued up to the point when the application for a stay was moved was such, in all the circumstances, that the Fureys were reasonably entitled to assume that the proceedings were to be defended by Lurgan-ville. In those circumstances it is said that Lurgan-ville has lost its entitlement to have the matter referred to arbitration.
2.4 Third, it was said that the consequence of the proceedings as against Lurgan-ville being stayed pending arbitration in circumstances where the proceedings against the other defendants are not so stayed, would give rise to a multiplicity of separate legal processes which would, in all the circumstances, be unjust to a sufficient extent to justify the proceedings against Lurgan-ville not being stayed pending arbitration. However, this third point was not pursued in oral argument and it will, therefore, only be necessary to address it briefly. As each of the issues involve, to some extent, an analysis of the procedural history of this case I turn first to a description of the sequence of events which led to the proceedings being stayed by McKechnie J.
3. Procedural History
3.1 As noted earlier a plenary summons was issued on the 9th June, 2005. Appearances were entered by the same solicitors on behalf of Lurgan-ville and Mr. Duff on the 20th June while an appearance was entered on behalf of Mr. O'Daly on the 20th July. A statement of claim was delivered on behalf of the Fureys on the 8th August. A notice for particulars was raised on behalf of Mr. O'Daly on the 26th October, 2005 which was replied to by the Fureys on the 1st June, 2006.
3.2 Thereafter, a motion for judgment in default of defence as against Lurgan-ville and Mr. Duff was issued and made returnable before the High Court on the 17th July, 2006. When the matter came before the court (McKechnie J.) an order was made on consent providing for an additional three weeks for the delivery of a defence with costs in favour of the Fureys. The facts which led to that consent order derived from a letter written by the solicitors for Lurgan-ville and Mr. Duff on the 11th July (some six days before the motion was due before the court) in which it was confirmed that the solicitors concerned were "arranging to draft (their) defence and seeking time to file (their) defence". Those solicitors asked for confirmation that the Fureys' solicitor would "be agreeable to us seeking time to file our defence". On that basis agreement to an extension of time was sought. It would appear that the solicitors acting on behalf of the Fureys agreed to that arrangement provided that costs were conceded. On that basis the consent order to which reference has been made was agreed to.
3.3 Keeping to the sequence of events a defence was filed on behalf of Mr. O'Daly on the 18th September, 2006. A second motion for judgment against both Lurgan-ville and Mr. Duff was issued which was returnable for the 13th November, 2006. However, on the 3rd November a defence on behalf of Mr. Duff was filed. No point was made about that defence being late so that the question of judgment against Mr. Duff became moot.
3.4 However, on the 3rd November, 2006, along with filing a defence on behalf of Mr. Duff, the solicitors who acted for both Lurgan-ville and Mr. Duff asserted, for the first time, an alleged right to rely on clause 11 of the relevant building agreement so as to stay the proceedings pending arbitration.
3.5 Insofar as material to the issues already identified the questions which seem to arise are as to whether, first, it can be said that Lurgan-ville had, on those facts, taken a step in the proceedings and second whether it can be said the Lurgan-ville is estopped from now seeking to have the proceedings stayed pending arbitration while the third question as to whether, having regard to the fact that no application to stay has or could be made on behalf of either Mr. Duff or Mr. O'Daly, it is unjust for the proceedings to, in substance, go ahead as an arbitration between the Fureys and Lurgan-ville and as proceedings before the court as and between the Fureys and both Mr. Duff and Mr. O'Daly was, as already noted, not pursued. While there is, therefore, something of a connection between each of those issues, they are, to a significant extent, stand-alone legal points and I propose, therefore, to address them separately. I, therefore, turn to the question of whether a step was taken in the proceedings.
4. Was a step taken in the proceedings?
4.1 Section 5 of the 1980 Act is in the following terms:-
"If any party to an arbitration agreement, or any person claiming through or under him, commences any proceedings in any court against any other party to such agreement, or any person claiming through or under him, in respect of any matter agreed to be referred to arbitration, any party to the proceedings may at any time after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings, apply to the Court to stay the proceedings, and the Court, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."
4.2 It should, of course, be noted that these proceedings pre-date the significant amendments to the arbitration code which have since occurred. This case is, therefore, concerned with the law as it stood under the 1980 Act. It was not disputed that the agreement between the Fureys and Lurgan-ville contains an arbitration clause which covers the issues in dispute between those parties. Therefore, prima facie, the arbitration clause is binding. However, as is also clear from s.5 of the 1980 Act, the time at which the application to stay must be made is before "delivering any pleadings or taking any other step in the proceedings". The point had not been reached where any pleadings had been filed on behalf of Lurgan-ville. The question of compliance with the time limit contained within s.5 of the 1980 Act turns, therefore, on whether it can properly be said, having regard to the procedural history to which reference has already been made, that Lurgan-ville has taken a step in the proceedings.
4.3 What is relied on as a step in these proceedings is the agreement reached between the solicitors for the respective parties whereby the motion for judgment in default was compromised by an agreement which led to an order extending the time for the filing of a defence and directing that Lurgan-ville pay the Fureys' costs of that motion. This aspect of the case comes down, therefore, to a net question of whether, in accordance with the relevant jurisprudence, that set of actions can properly be said to constitute a "step" in the proceedings sufficient to debar Lurgan-ville from now placing reliance on the relevant arbitration clause.
4.4 It will be necessary to consider some of the case law in a little detail. However, the problem is, perhaps, best approached by starting with a consideration of Halsbury's Laws of England 4th Edition Reissue Vol. 2 at para. 627, where the question of the meaning of a "step" is considered. From that paragraph it seems clear that what is described as an application to the court for an extension of time for serving a defence is taken to be a step in the proceedings. See Ford's Hotel Company Ltd v. Bartlett [1896] A.C.1. On the other hand a request in correspondence for an extension of time for serving a defence has been taken not to amount to taking a step in the proceedings. See Brighton Marine Palace and Pier Ltd v. Woodhouse [1893] 2 Ch.486.
4.5 It seems fairly clear, therefore, and was not disputed by the parties to this appeal, that at one end of the spectrum there is a case where the defendant brings an application before the court seeking an extension of time for the filing of a defence. Such an action, it was accepted, clearly amounts to taking a step in the proceedings. At the other end of the spectrum there is a case where, by reason of the fact that the time for filing a defence has expired, the defendant requires a consent from the plaintiff to the late filing of a defence. A request to furnish that consent can arise in correspondence and outside the context of any application to the court. It seems equally clear, and not disputed, that such a request being made in correspondence does not amount to the taking of a step by the defendant in the proceedings.
4.6 Between those ends of the spectrum there are, however, a series of ways in which an extension of time for the filing of a defence may arise. Under Order 26 Rule 8(1) of the Rules of the Superior Courts (as substituted by the Rules of the Superior Courts (Order 27 (amendment) Rules 2004 – S.I. No.63 of 2004) a plaintiff who wishes to bring a motion for judgment in default of defence in many types of cases is required to write to the relevant defendant giving notice of intention to bring such a motion and consenting to the late delivery of a defence within 21 days of the date of the letter. Obviously reliance on an extension so arising under the provisions of the rules follow from a unilateral act on the part of the plaintiff and does not involve any action on the side of the defendant. However, on the assumption that the defendant does not file a defence within that period (or some longer period agreed in correspondence between the parties), it seems clear that no step is taken.
4.7 In some cases, as here, the parties may reach an agreement in advance of a motion coming before the court most typically, again as here, to the effect that the motion for judgment will be dismissed, that an agreed extension of time will be allowed (and possibly ordered by the court), and that the plaintiff will obtain the costs of the motion. In other cases it may not be possible to reach such an agreement in advance of the hearing and the defendant may be represented at the motion for judgment and ask the court not to enter judgment but rather to extend the time for defence perhaps, in most cases, conceding that it would be appropriate that the plaintiff be awarded costs. It follows that a motion for judgment may be "settled" in advance or may be the subject of a ruling by the court, but in many cases the result may be the same such that an order for an extension of time with costs to the plaintiff is made whether on consent or as a result of a judicial determination. It is also, of course, possible that no order for an extension of time for filing a defence is made but that the plaintiff furnishes a letter of consent.
4.8 The narrow but important issue which arises in this case is as to whether, against the backdrop of a motion for judgment being before the court, an agreement between the parties of the type which occurred here amounts to the taking of a step by the defendant.
4.9 The closest authority from this jurisdiction on the point at issue seems to me to be the judgment of Finlay P. in O'Flynn v. Bord Gáis Eireann [1983] 1 I.L.R.M. 324. Like this case the plaintiff in O'Flynn accepted that the subject matter of the relevant claim was a matter which had been agreed to be referred to arbitration. As noted by Finlay P. the step relied on in that case was that "on the service of a notice of motion for judgment by the plaintiff the solicitors for the defendant wrote to the solicitor for the plaintiff" in terms which suggested that, at the hearing of the motion, an application for an extension of time for the filing of a defence would be made and further accepting that the defendant would be prepared to agree to pay the costs of the motion. Finlay P. went on to note that he had been informed by counsel that, as a result of the letter in question, an agreement was made between the parties whereby the motion for judgment was struck out "and the time requested should be allowed as an extended time for the filing of the defence". It is not absolutely clear as to whether the extension of time agreed was actually recorded in an order of the court made by consent or whether the parties were content simply that the motion be struck out and the question of any extension of time be dealt with in correspondence. However, it seems to me to follow from the fact that Finlay P. did not specify which of those two courses of action was adopted that it did not appear to him that any such distinction made a difference to the issue which he had to decide. Finlay P. then went on to consider the two English cases to which reference has already been made being Ford's Hotel and Brighton Marine Palace.
4.10 Thereafter, Finlay P. said the following:-
"In general it seems to me clear that where there has been an agreement to arbitrate prior to the arising of the claim and where the claim is undoubtedly within it, the court should lean in favour of staying the proceedings and should only refuse under the section which I have quoted of the 1980 Act to do so if satisfied that the parties seeking such an order has instituted some process or procedure in the action which involves costs no matter by whom they may be payable which are lost when the matter is referred to arbitration."
4.11 In those circumstances Finlay P. took the view that the circumstances of that case more properly came within the reasoning of Brighton Marine Palace rather than Ford's Hotel.
4.12 Counsel for the Fureys sought to distinguish this case on the facts from O'Flynn. However, I cannot identify any real difference of substance that is material to the question which this court has to decide. While there were certain other surrounding facts, including delay, correspondence which post-dated the motion for judgment and the fact that there was obviously a close connection between Mr. Duff, who did not ultimately seek to have the proceedings stayed, and Lurgan-ville, it is not apparent to me how any of those surrounding facts can have any bearing on the question of whether a step can be said to have been taken in the proceedings. No other court application occurred beyond the motion for judgment which was resolved in the way described until the second motion for judgment, during the currency of which the motion to stay pending arbitration was brought, was initiated by the Fureys. The connection between the parties, the undoubted delay which occurred prior to the application for a stay being made and the correspondence which post-dated the motion for judgment could not, in my view, individually or collectively, constitute a step in the proceedings on any view. Either the agreement that the motion be dealt with by consent amounts to a step or it does not. If it does not then those surrounding circumstances could not make it so.
4.13 Insofar as reliance is placed on the fact that it is not absolutely clear as to whether a court order extending time was made in O'Flynn it seems to me that this was not regarded as a point of any relevance by Finlay P. most particularly when he characterised the action said to be a step as being "to seek a consent to the extension of time for the defence without serving any form of notice for that purpose". It should also be noted that it is not absolutely clear from the relevant correspondence as to whether there was an agreement in this case that there be an order for an extension of time or simply an agreement for an extension of time without specifying that there be an order. However, like Finlay P., I do not consider that distinction material to the issues which arise on this appeal.
4.14 It is clear from the judgment of the trial judge that he considered that this case came squarely within the judgment of Finlay P. in O'Flynn. In my view the trial judge was entirely correct in that view.
4.15 To the extent that it might have been suggested, as a fallback, that O'Flynn was wrongly decided, it seems to me that the reasoning of Finlay P. is compelling. I fully agree with the observation that the underlying policy of the 1980 Act was to keep parties to their bargain of having matters agreed to be referred to arbitration ultimately determined by an arbitrator rather than by the courts. It follows that Finlay P. was entirely correct to take the view that the court should only excuse parties from their bargain where the action taken which is said to amount to a step involves either an engagement with the merits of the case (such as by filing an affidavit on the merits in opposition to a motion for judgment in summary summons proceedings) or involves an action taken by the defendant in invoking the jurisdiction of the court which leads to costs. The actions taken by Lurgan-ville did not engage with the merits. Neither, in my view, can it be said that the actions of Lurgan-ville, which are sought to be relied on as a step in this case, led to the incurring of costs. The motion for judgment was already before the court. Whatever costs might be attributable to that motion had already been incurred before an agreement as to an extension of time was reached and before the consent order was made. The fact that the parties agreed that the motion could be struck out with an extension of time and costs to the plaintiff did not add to the costs of the proceedings. In that sense the situation is different to the one which arose in Ford's Hotel when a separate stand-alone motion for an extension of time was brought by the defendant thus incurring the additional costs of that motion.
4.16 It is true, as was argued by counsel for the Fureys, that English authority, such as County Theatres and Hotels Ltd v. Knowles [1902] 1 KB 480 and Richardson v. Le Maitre [1903] 2 Ch 222, make clear that a party does not have to be the moving party to be said to have taken a step. Both of those cases involved a motion for directions in which a series of procedural orders were made without any demur from the defendant in question. However, it seems to me that the reason why the 1980 Act uses the phrase "pleadings or other step in the proceedings" is a recognition of the fact that in different types of proceedings a different process may follow. In plenary proceedings the defendant engages on the merits by filing a pleading in the shape of a defence. In summary or special summons proceedings there are no pleadings other than the summons unless the court directs them. In such cases the defendant engages on the merits by taking action such as filing an affidavit in reply to a motion for judgment or filing an affidavit setting out the defendant's case in respect of a claim brought by special summons. While, under the procedure being followed in the English cases to which reference has been made, the plaintiff may have been the party who brought a motion for directions there can be little doubt but that the proper characterisation of the hearing of a directions motion is one in which the court is open to suggestion from either side as to the appropriate procedural directions to be given. The fact that the plaintiff may be the moving party does not mean that the defendant is not equally a party who can apply to the court for whatever procedural directions the defendant may wish (such as, in County Theatres and Hotels, for a cross order for discovery). There is no difference in substance between a case where an order for discovery is made on a motion brought by a defendant or where an identical order is made at a general directions hearing at which a whole variety of different procedural orders are made. A step will have been taken in the proceedings in either case.
4.17 However, it seems to me that where, as here, an agreement which could as easily have been reached outside the context of any court application (i.e. an agreement for an extension of time for defence) happens to arise in the context of a motion for judgment no difference of substance, so far as the taking of a step in the proceedings is concerned, can be said to arise simply because that agreement is incorporated into a consent order made in the context of a motion for judgment. It follows that Finlay P. was entirely correct to characterise the sort of facts as were before him and which occurred in this case as being more properly within the reasoning in Brighton Marine Palace rather than Ford's Hotel.
4.18 I am, therefore, satisfied that O'Flynn was correctly decided and that the trial judge was equally correct in determining that there is no material distinction between the facts of this case the facts of O'Flynn such as would justify distinguishing the two cases. It follows that I am satisfied that no step was taken in these proceedings in the sense in which that term is used in s.5 of the Arbitration Act, 1980 and that the trial judge was correct in deciding that s.5 did not provide a reason for declining to stay the proceedings pending arbitration on that basis.
4.19 It is next necessary to turn to the estoppel point made on behalf of the Fureys.
5. Estoppel
5.1 The Fureys argue that the conduct of Lurgan-ville in the proceedings up and until the 3rd November is such that it reasonably conveyed to the Fureys that it was the intention of Lurgan-ville to defend the action and as such it is said that such conduct creates an estoppel. Reliance is placed on the judgment of Finlay-Geoghegan J. in Gleeson v. Grimes & anor [2007] 4 I.R. 417, where a passage from Merkin on Arbitration Law, 1992 Ed. p.6-15 (which was approved in Pattell v. Pattell [2000] QB 551), was stated to represent the law in this jurisdiction. Amongst the matters referred to in the relevant passage was the following:-
"An act which would otherwise be regarded as a step in the proceedings will not be treated as such is the applicant has specifically stated that he intends to seek a stay… The right to apply for stay will also be lost if the defendant in judicial proceedings has expressly or impliedly represented that he does intend to refer the issues in dispute to arbitration. The matter is determined by the usual rules applicable to estoppels i.e. has the defendant unequivocally represented that there will be no reference to arbitration and has the plaintiff conducted his affairs on the basis that the matter will be determined by the court in reliance on that representation."
5.2 I did not understand counsel for Lurgan-ville to dispute the general overall principle that there might be circumstances where a defendant so conducted himself as to create an estoppel which would prevent the defendant from relying on an arbitration clause otherwise effective. However, it was emphasised by counsel for Lurgan-ville that what must be established is something that amounts to an unequivocal promise or representation to the effect that strict contractual rights (in this case a right to rely on an arbitration clause) will not be enforced and that, in that context, the court should have regard to cases such as Truck and Machinery Sales v. Marubeni [1996] 1 I.R. 12. It was said on behalf of Lurgan-ville that the sequence of events to which reference has already been made do not bear the construction that a clear promise was made not to rely on the arbitration clause.
5.3 I agree that it is possible that a party, otherwise entitled to rely on an arbitration clause, may, by conduct, create an estoppel which prevents that party from being able to continue to place reliance on an entitlement to have the matter referred to arbitration. It follows that it is possible, in theory, that there may be cases where, although no step (within the meaning of s.5 of the 1980 Act) has been taken in the proceedings by a defendant, nonetheless the defendant has, by conduct, become estopped from relying on an arbitration clause. However, it seems to me that counsel for Lurgan-ville was correct when she argued that it is necessary in those circumstances that there be a clear unequivocal promise or representation to the effect that the arbitration clause would not be relied on and also that the plaintiff had acted on the basis of that representation.
5.4 It is true that the assertion of an entitlement to arbitrate came late in the day. It is also true that there was some additional correspondence after the motion for judgment was dealt with by consent. However, it does not seem to me that anything in the conduct of Lurgan-ville can be characterised as amounting to a clear and unequivocal representation or promise that Lurgan-ville did not intend relying on the arbitration clause. The arbitration clause did not come up at all. I am not, therefore, satisfied that there is anything on the facts of this case which could be said to amount to a sufficient representation or promise that the arbitration clause was not to be relied on by Lurgan-ville.
5.5 There was, indeed, some debate at the hearing as to whether, in reality, an estoppel argument was made before the trial judge. There is undoubtedly some reference to such an argument in the papers which were before the trial judge. However, the question is not addressed in the ruling of the trial judge. Having come, however, to the view that the estoppel argument cannot succeed in any event it seems to me that the fairer course of action is to consider the point but reject it.
5.6 It is finally necessary to turn briefly to the point made concerning the potential multiplicity of actions.
6. Multiplicity of Actions
6.1 Counsel for the Fureys had, in written submissions, placed reliance on Taunton-Collins v. Cromie & ors [1964] 1 WLR 633. In those proceedings a claim was made against an architect for damages for negligence and breach of duty in relation to the construction of a house. The contractors were later joined as co-defendants. The proceedings having been referred to the official referee the contractors sought to invoke s.4 of the United Kingdom Arbitration Act, 1950 to stay the proceedings against them pending arbitration.
6.2 In that context Lord Denning M.R. said the following:-
"It seems to me most undesirable that there should be two proceedings in two separate tribunals - one before the official referee, the other before an arbitrator - to decide the same questions of fact. If the two proceedings should go on independently, there might be inconsistent findings. The decision of the official referee might conflict with the decision of the arbitrator. There would be much extra cost involved in having two separate proceedings going on side by side; and there would be more delay. … if the action went on by itself - between the building owner and the architect - without the builders being there, there would be many procedural difficulties."
6.3 Arising from that analysis Lord Denning went on to hold that "It was a very proper exercise of discretion for the official referee to say that he would not stay the claim against the builders." However, counsel for Lurgan-ville argued in replying written submissions that the decision in Taunton-Collins needed to be seen against the backdrop of the terms of s.4 of the United Kingdom Arbitration Act, 1950 which allows the court "if satisfied that there is no sufficient reason why the matter should not be referred" to arbitration to make an order staying the proceedings. It was said that s.5 of the 1980 Act does not confer on an Irish court the same level of general discretion (deriving from the words "no sufficient reason") as formerly existed in the United Kingdom under the relevant provisions of s.4 of the Arbitration Act, 1950. On that basis it was argued that the general discretion to take into account factors such as those identified by Lord Denning in Taunton-Collins does not arise in Ireland. As noted earlier counsel for the Fureys, correctly in my view, accepted that analysis.
7. Conclusions
7.1 For the reasons already set out I am, therefore, of the view that Lurgan-ville did not take a step in these proceedings in the sense in which that term is used in s.5 of the 1980 Act.
7.2 I am also of the view that no factual basis for treating Lurgan-ville as being estopped from relying on the relevant arbitration clause was made out.
7.3 The point about inconvenience having been, in my view quite correctly, not pursued in oral argument, it follows that the trial judge was entirely correct to stay these proceedings pending arbitration so far as Lurgan-ville is concerned. In those circumstances I would dismiss the appeal and affirm the order of the trial judge.
