THE HIGH COURT
[2019] IEHC 861
[2018 No. 76 MCA]
IN THE MATTER OF THE ARBITRATION ACT 2010
AND IN THE MATTER OF AN ARBITRATION
BETWEEN
BOWEN CONSTRUCTION LIMITED (IN RECEIVERSHIP)
AND
SOMAGUE ENGENHARIA SOCIEDADE ANOMINA
TRADING TOGETHER IN JOINT VENTURE AS BOWEN SOMAGUE JV
APPLICANT
AND
KELLY’S OF FANTANE (CONCRETE) LIMITED (IN RECEIVERSHIP)
RESPONDENT
JUDGMENT of Mr. Justice David Barniville delivered on the 6th day of December, 2019
Introduction
1. This is my judgment on an application by a joint venture between Bowen Construction
Limited (in receivership) and Somague Engenharia SA, a Portuguese company, which is a
party to an arbitration brought by Kelly’s of Fantane (Concrete) Limited (in receivership).
The joint venture challenges a ruling by the arbitrator pursuant to Article 16(3) of the
UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended in 2006)
(the “Model Law”), that she has jurisdiction over certain parts of the claims made in the
arbitration. For ease of reference, and to avoid endless confusion, I will refer in this
judgment to the applicant to this application as the “respondent” (as it is the respondent
in the arbitration) and the respondent to the application as the “claimant” (as it is the
claimant in the arbitration).
2. In the course of the arbitration, the respondent contended that the arbitrator did not have
jurisdiction over certain parts of the claim sought to be advanced by the claimant as those
claims had not been referred to in the notice referring the dispute to arbitration. The issue
on jurisdiction arose in the following circumstances. The respondent sought to rely on
certain points by way of defence to the claimant’s claim. It argued that, on the basis of
certain determinations made by it following the termination of the relevant contract
between the parties, the claimant could not succeed in certain parts of its claim which
were affected by those determinations. When the claimant sought to challenge the
determinations in the course of the arbitration proceedings, the respondent contended
that the claimant was not entitled to do so as it had not referred those issues to
arbitration and that, as a consequence, the arbitrator did not have jurisdiction to deal
with the attempted challenges to its determinations.
3. The parties agreed that it was open to the respondent to rely upon its determinations by
way of defence to the relevant parts of the claimant’s claim. However, the parties did not
agree that the claimant could, in response to the defence advanced by the respondent in
reliance upon the determinations it had made, seek to challenge those determinations in
the arbitration, as no such challenge had been adverted to in the notice referring the
dispute to arbitration.
4. The claimant’s position was that the dispute referred to arbitration encompassed a
challenge to the relevant determinations and that, once it was open to the respondent to
rely on the determinations by way of defence, it would in turn be open to the claimant to
respond to that defence by challenging the determinations in the arbitration.
5. The arbitrator delivered a ruling on 9th March, 2018, in which she found that she did have
jurisdiction in respect of the contested parts of the claimant’s claim. The respondent
disagreed with that ruling on jurisdiction and brought this application to the court
pursuant to Article 16(3) of the Model Law requesting the court to decide the issue of
jurisdiction in relation to the relevant parts of the claimant’s claim.
6. The application involves a number of interesting points of law which have not previously
been considered by the Irish Courts, although they have been considered elsewhere in
the common law world. It will, in, due course, be necessary to consider those points,
including the principles applicable to the construction of a notice referring a dispute to
arbitration and to the ascertainment of the ambit or scope of a particular dispute referred
to arbitration.
7. Before considering those issues, it is necessary to set out the relevant factual background
contractual relationship between the parties as well as the circumstances in which the
dispute between the parties was referred to arbitration and the manner in which it was
dealt with in the course of the arbitration. It will be necessary to consider the function of
the court and the proper approach to be taken in the context of an application under
Article 16(3) of the Model Law. It will then be necessary to consider the respective
contentions of the parties on the jurisdiction issue and, in that context, to address the
legal principles applicable to the construction of a notice referring a dispute to arbitration
and to the question as to how a court should determine whether a particular dispute (or
issue within a dispute) has been referred to arbitration. Having done all that, I will set out
my conclusions on the various issues.
Outcome of Application
8. I should indicate at this stage that, for the detailed reasons set out in this judgment, I
have concluded that the arbitrator does have jurisdiction in relation to the relevant parts
of the claimant’s claim which is the subject of this application and that the arbitrator was
correct in ruling that she had such jurisdiction.
Factual Background
9. There is substantial agreement between the parties as to the relevant facts. The following
is a summary of the relevant facts as found by me, which I have taken from the affidavits
sworn by the parties in connection with the respondent’s application.
The Parties
10. The respondent is an unincorporated joint venture between Bowen Construction Limited
(“Bowen”) and Somague Engenharia SA (“Somague”), a Portuguese entity, which was
formed by way of an agreement between the parties made in February, 2008. Bowen
went into receivership in July, 2011. Thereafter, Somague assumed all of the obligations
of the joint venture under the terms of the relevant joint venture agreement. Bowen did
not, therefore, participate in the proceedings.
11. The claimant, Kelly’s of Fantane (Concrete) Limited, is a specialist building subcontractor
providing road paving and associated works. The claimant went into receivership on 21st
March, 2011.
The Contracts
12. On 31st January, 2008, the respondent and Laois County Council entered into a contract
under which the respondent was to execute and complete various works, including paving
works, on the N7 Castletown to Nenagh (Derrinsallagh to Ballintotty) Scheme (the “main
contract”). The main contract was in the form of the “Public Works Contract for Civil
Engineering Works designed by the Contractor”(19 February 2007). On 19th January,
2009, the respondent entered into a subcontract with the claimant under which the
claimant was appointed to carry out and supply road surfacing works and materials to the
respondent in connection with the scheme (the “subcontract”). The subcontract expressly
incorporated the “Conditions of Sub-contract for use in conjunction with the Forms of
Main Contract for Public Works for use with Domestic Sub-contractors”. Substantial
completion of the works under the main contract was achieved on 22nd December, 2010.
The respondent certified that the claimant’s subcontract works were substantially
complete on that date and the road was opened for public traffic around that time.
13. The parties engaged in discussions in relation to monies which were being claimed by the
claimant and which it contended were outstanding from the respondent under the
subcontract.
9th March 2011 Claim
14. On 9th March, 2011, the claimant submitted a claim to the respondent under clauses
10(a), 10(b) and 10(c) of the subcontract (the “9th March, 2011 claim”). The 9th March,
2011 claim was expressly stated to incorporate sums unpaid from previous applications
and included a claim for extension of time and additional costs allegedly incurred by the
claimant as a result of alleged delays to the works under the subcontract which it is
alleged were beyond the claimant’s control. The 9th March, 2011 claim was made by way
of a letter of that date which enclosed four folders of documents (appendices A to D). The
total amount claimed was €13,798,995.00.
23rd March 2011 Rejection
15. The 9th March, 2011 claim was rejected by the respondent in a letter dated 23rd March,
2011 (the “23rd March, 2011 rejection”). In the 23rd March, 2011 rejection the
respondent pointed out that the claim was being advanced by the claimant just after
substantial completion and more than two years after some of the alleged events
occurred. It further asserted that clause 10(a)(1) of the subcontract contained a condition
precedent which the claimant had to comply with in order successfully to pursue a claim
(the condition relied upon by the respondent was one requiring that notice in certain
terms be given within a particular time period where the claimant considered that it was
entitled to an adjustment to the subcontract sum or that it had any other entitlement
under or in relation to the subcontract). The respondent contended that the claimant had
failed to comply with that condition and as a consequence, the respondent had no liability
in relation to the 9th March, 2011 claim. For that reason, the claim was “rejected in its
totality”.
Termination of the Subcontracts and Subsequent Events
16. A receiver was appointed to the claimant on 21st March, 2011. The respondent was
unaware of this fact when it sent the 23rd March, 2011 rejection. Having been informed
of the appointment of a receiver to the claimant, the respondent terminated the
subcontract by letter dated 12th April, 2011, in accordance with clause 12(a) of the
subcontract. That clause entitled the respondent to terminate the subcontract in the event
of a receiver being appointed to the claimant. Thereafter, the provisions of clause 12(b) of
the subcontract provided that the provisions of clause 12.2 of the main contract were to
apply. Those provisions deal with the consequences of the termination of the subcontract
in the case of a default by the claimant. I will set out in somewhat more detail later in my
judgment the relevant provisions of the subcontract and of the main contract in this
regard. It should be noted at this point that there is no dispute between the parties as to
the respondent’s entitlement to terminate the subcontract.
17. Following the termination of the subcontract, the respondent sought to implement the
steps provided for in clause 12.2 of the main contract (which applied by virtue of clause
12(b) of the subcontract). First, the respondent wrote to the claimant on 3rd June, 2011,
informing it that the respondent had determined that the amount due to the claimant
under the subcontract for works completed in accordance with the subcontract and unpaid
was “nil”. This is what is known in clause 12.2.3 as the “termination value”. The
respondent was, therefore, informing the claimant that the termination value was nil.
Second, the respondent wrote to the claimant by letter dated 21st October, 2011,
reminding the claimant that the respondent had informed the claimant that the
respondent was obliged to appoint a replacement contractor to complete and remedy
certain alleged defects in the subcontract works and that those works were now complete
and that all defects had been remedied. In those circumstances, the respondent informed
the claimant that it was in a position to determine the “termination amount” in
accordance with clause 12.2.9 of the subcontract. The respondent informed the claimant
that it had determined the “termination amount” at €768,911.27 and it set out a
breakdown of that sum. In the same letter, the respondent demanded that the claimant
pay to the respondent the sum of €768,911.27 being the amount by which the
termination amount exceeded the termination value. That demand was made pursuant to
clause 12.2.11 of the subcontract. The respondent also informed the claimant that if that
sum was not paid within ten working days of the date of the letter, the respondent
intended to make a claim on foot of the performance bond provided by the claimant.
Under the performance bond, Hiscox Insurance Company Limited was the bondsman (the
“bondsman”).
18. The claimant did not respond to the respondent’s letters of 3rd June, 2011 and 21st
October, 2011 in which the claimant was informed of the respondent’s determination of
the termination value and of the termination amount, respectively.
Respondent’s Claim Against the Bondsman
19. The sum demanded by the respondent on 21st October, 2011 was not paid by the
claimant. In those circumstances, the respondent sought to recover that sum from the
bondsman. It is accepted that the quantity surveyors engaged by the bondsman liaised
with Anthony Kelly, the managing director of the claimant, in relation to that claim. Prior
to the determination by the respondent of the termination amount but following its
determination of the termination value, the bondsman wrote to the respondent’s solicitors
on 5th October, 2011 informing them that in the event that the respondent ultimately
pursued a claim against the bondsman, sums due to the claimant would need to be
calculated and offset against any sums incurred in completing the works in order to
establish if there were any monies due under the bond. That letter made clear that the
bondsman did not accept that the termination value was nil.
20. In due course, the respondent commenced proceedings against the bondsman in 2013
seeking payment on foot of the performance bond (the “bondsman proceedings”). In its
statement of claim in those proceedings, the respondent pleaded the fact of the
determination of the termination value and of the termination amount. In its defence to
those proceedings, the bondsman admitted that the respondent had determined the
termination value at nil and the termination amount at €768,911.27. However, the
bondsman denied that the determination of the termination value and of the termination
amount was correct. The bondsman expressly pleaded that the termination amount
claimed by the respondent did not take into account all sums properly due or which might
become due to the claimant under the subcontract and contended that that amount had
not been properly calculated in accordance with the terms of the subcontract. The
bondsman proceedings proceeded up to the point of discovery in 2014.
Correspondence in November – December 2014
21. On 13th November, 2014, Hussey Fraser, the claimant’s solicitors wrote to the
respondent’s solicitors, Maples and Calder. This was the first time that the claimant had
written to the respondent since June, 2011 and the first time that the claimant had
written in relation to the determinations made by the respondent of the termination value
and of the termination amount under the subcontract. There is major disagreement
between the parties as to the interpretation and effect of the Hussey Fraser letter of 13th
November, 2014. It will, therefore, be necessary to examine the contents of that letter in
some detail later in this judgment. At this stage, however, I will note that the letter
referred to the fact that the respondent had issued proceedings against the bondsman
and that Hussey Fraser were instructed to issue proceedings against the respondent on
behalf of the receiver of the claimant arising out of the subcontract. The letter then
referred to the claim against the bondsman before moving on to refer to the valuation of
the works carried out by the claimant under the subcontract up to completion in
December, 2010. It referred to various discussions and negotiations between the claimant
and the respondent in relation to the final account and disputed the deletion of variations
that had allegedly been previously agreed and a deduction of alleged unsubstantiated
contra charges on behalf of the respondent which the complainant said would be
“vehemently defended”. The letter then referred to the “cost of completion” of €768,911
asserted by the respondent (i.e. the termination amount) and asserted that the claimant’s
works had been completed by November, 2011 and that there were no works
outstanding. The letter then referred to alleged defects in the claimant’s works and took
issue with the claims being made in respect of the alleged defects. The letter then
considered the claimant’s claims against the respondent and indicated that, after allowing
contra charges which had been agreed and payments on account made to date, the sum
of €1,329,670.00 remained due to the claimant and asserted that that sum did not
include additional compensation payable to the plaintiff in respect of various matters
including additional movements, delay and disruption. The letter then suggested that
there may be additional claims and made reference in that context to the 9th March, 2011
claim and stated that the claimant’s solicitors had not yet examined that claim in detail.
The letter concluded by referring to clause 13(a) of the subcontract providing for
arbitration and the service of a notice to refer and asked whether the respondent’s
solicitors had authority to accept service of the notice to refer.
22. The respondent’s solicitors replied to the letter of 13th November, 2014, by letter dated
1st December, 2014 (the “Maples letter of 1st December, 2014”). In that letter, they
described the claimant’s claim as set out in the Hussey Fraser letter of 13th November,
2014 as having “no substance” and being an attempt by the claimant “to leverage
nuisance money” from the respondent by attempting to interfere with the bondsman
proceedings. The basis for that contention was then set out in a series of numbered
paragraphs. Amongst those grounds was the fact that the claimant had not sought to
advance its claim for more than three years. It was also asserted that the Hussey Fraser
letter of 13th November, 2014 was “littered with various factual inaccuracies regarding
the works performed and not performed by [the claimant], the status of [the claimant’s]
account at the time that [the respondent] terminated its obligation to complete the
works, and the manner in which the subcontract was performed by the parties.”. The
claimant attaches some significance to the terms of the Maples letter of 1st December,
2014 in support of its contention that the respondent was aware that the claimant was
disputing the determinations in relation to termination value and termination amount. The
respondent’s solicitors concluded their letter by contending that the claimant’s claim was
not “legitimate, meritorious or sustainable” and that the claimant saw “its opportunity
cheaply to make some nuisance money…”. They stated that the respondent did “not
intend to waste time or legal fees engaging with” the terms of the Hussey Fraser letter.
They concluded by confirming that they had authority to accept service of any dispute
resolution proceedings initiated by the claimant pursuant to the subcontract.
23. The claimant’s solicitors responded by letter dated 19th December, 2014. In that letter,
they stated that the claimant did not intend to interfere with the bondsman proceedings
and asserted that, insofar as the respondent was maintaining in those proceedings that
the claimant was indebted to it, the letter of 13th November, 2014 commenced with that
alleged debt in order to demonstrate that the respondent was indebted to the claimant
rather than the other way around. The letter further noted that the respondent had been
given substantial material in the claim documents furnished in March, 2011 and concluded
by indicating that the claimant would anticipate serving a notice to refer to arbitration in
early course.
The Notice to Refer
24. The claimant served a notice to refer to arbitration (the “notice to refer”) on 13th March,
2015. I set out below the terms of the notice to refer as significant reliance is placed by
both parties on the notice in support of their respective positions as to the disputes and
issues which were referred to arbitration by means of that notice.
25. The notice to refer contained four recitals which were in the following terms:-
“WHEREAS:
I. The claimant and the respondent entered into a sub-contract agreement dated the
19th January 2009 whereby the claimant was sub-contractor and the respondent
was main contractor in respect of works to be executed in respect of the N7,
Castletown to Nenagh Road Scheme on the terms and conditions more particularly
set out in that agreement.
II. The works the subject matter of that sub-contract were completed on or about the
20th November 2010.
III. The claimant submitted a claim for payment to the respondent on or about the 9th
March 2011 for a total sum of €13,798,955.
IV. The respondent disputes the said claim.”
26. Having set out those recitals, the notice to refer continued:-
“TAKE NOTICE that the claimant hereby refers the said dispute to arbitration pursuant to
clause 13(a) of the terms and conditions of contract. The issues in dispute are as follows:
1. The balance due to the claimant on foot of the contract without reference to
variations, extras, contra-charges or additional sums.
2. The sum due on the variation account.
3. The sum due in respect of the tack coat.
4. The sum due in respect of prolongation charges between the 9th August 2010 and
the 20th November 2010.
5. The amount due in respect of changes to the central reserve…
6. The amount due in respect of additional moves (remobilisation at different
locations) …
7. The claimant’s entitlement to be compensated for the cost of heating bitumen over
a prolonged period.
8. Additional sums due in respect of work on side roads and accommodation works not
included in the sub-contract sum.
9. The sum due in respect of additional cores which were required to be filled by the
claimant. These additional works were not included in the sub-contract sum.
10. Because the works had to proceed in a piecemeal fashion in circumstances giving
rise to legitimate claims on the part of the claimant, more tar joints and cbm joints
had to be made than otherwise would have been the case. This gave rise to a claim
for additional materials and additional works.
11. The sum due in respect of delay and disruption, standing time and inefficiencies
identified in appendix D, supporting sheets B, C, D, E, F and G and therein
described on the last page of each of those summary sheets as ‘standing time’.
12. Finance charges and/or interest payable to the claimant.
13. The costs of the arbitration proceedings.”
The notice to refer then called upon the respondent to agree to the appointment of an
arbitrator and proposed two persons as arbitrator.
Conciliation
27. Having served the notice to refer, the provisions of clause 13(b)(1) of the subcontract
applied. Under that clause, no step could be taken in the arbitration after the notice to
refer had been served until the disputes had first been referred to conciliation. The parties
agreed on a conciliator and referred their disputes to him. He issued a recommendation in
December, 2015 which found that the sum of [REDACTED] was due by the respondent to
the claimant following termination of the subcontract. The respondent was unhappy with
that recommendation and gave notice of its dissatisfaction.
28. The claimant commenced summary proceedings seeking judgment against the respondent
in the amount of the recommendation. The respondent brought an application under
Article 8(1) of the Model Law staying the proceedings on the grounds that the dispute
between the parties was the subject of an arbitration agreement (contained in clause
13(a) of the subcontract). The High Court (McGovern J.) refused that application in a
judgment delivered on 1st June, 2017 (Kelly’s of Fantane (Concrete) Limited (In
Receivership) v. Bowen Construction Ltd (In Receivership) & ors [2017] IEHC 526).
McGovern J. concluded that the dispute between the parties as to whether the
conciliator’s recommendation had to be paid following notice of dissatisfaction and
pending the outcome of the arbitration between the parties was a discrete issue which the
parties agreed should be determined by the courts. In a further judgment delivered on
31st July, 2017, McGovern J. granted summary judgment to the claimant on foot of the
conciliator’s recommendation ([2017] IEHC 526).
29. Subsequent to the hearing before me of the respondent’s application in relation to the
arbitrator’s jurisdiction, the Court of Appeal delivered judgment on the respondent’s
appeal from the judgment and order of McGovern J. granting summary judgment to the
claimant. The judgment of the Court of Appeal was delivered on 20th March, 2019
([2019] IECA 98). The Court of Appeal dismissed the respondent’s appeal. While the
judgment of the Court of Appeal is not directly relevant to the issues which I have to
decide on this application, it is relevant to observe that, in the course of his judgment for
the Court of Appeal, Peart J. noted that following termination of the subcontract, the
respondent determined that the termination value was “nil” and that the termination
amount was €768,911.00 and that the claimant did not accept those calculations made by
the respondent and issued a notice to refer the dispute to arbitration under clause 13(a)
of the subcontract. The claimant argued in the course of the summary proceedings that
the dispute the subject of the conciliation was the same dispute which was the subject of
the notice to refer to arbitration dated 13th March, 2015. The respondent argued that the
dispute the subject of the notice to refer, was not the “same dispute” as was the subject
of the conciliator’s recommendation. That issue was relevant to the summary proceedings
in light of the provisions of clause 13.1.11 of the main contract which applied to the
subcontract by virtue of clause 13(b) thereof. The High Court (McGovern J.) had held that
the dispute before the conciliator and the dispute referred to arbitration was the “same
dispute”. The Court of Appeal agreed.
30. At para. 30 of his judgment for the Court of Appeal, Peart J. stated:-
“The question then arises as to whether the ‘same dispute’ that was referred to
arbitration has been the subject of the conciliator’s recommendation. I am
completely satisfied that the dispute that went to arbitration is essentially the same
as that which became the subject of the conciliator’s recommendation. The dispute
which arose was referred to arbitration. That arbitration was put on hold until such
time as the matter was referred to conciliation as provided for in clause 13(b).
What was referred to conciliation was the dispute that was the subject of the notice
to refer dated 13th March 2015… I am satisfied that the trial judge was entitled on
the evidence before him to conclude that the dispute which was the subject of the
notice to refer dated [13th] March 2011 is the same dispute that was referred to
the conciliator and became the subject of his recommendation.”
31. The Court of Appeal dismissed the respondent’s appeal from the judgment and order of
the High Court (McGovern J.) granting summary judgment to the claimant on foot of the
conciliator’s recommendation. As that judgment was delivered after the hearing before
me had concluded, the parties were afforded the opportunity of making further
submissions to me arising from the judgment of the Court of Appeal and, while initially
indicating that further submissions would be made, it was subsequently agreed between
the parties that they were not necessary.
The Arbitration
32. In the meantime, and following the giving of the conciliator’s recommendation in
December, 2015, the parties agreed to the appointment of an arbitrator on foot of the
notice to refer. Ms. Siobhan Fahey, chartered engineer and chartered arbitrator, was
appointed arbitrator by agreement between the parties.
33. Following her appointment, the arbitrator held a preliminary meeting on 7th April, 2016 at
which a timetable for the arbitration was agreed. The timetable and further directions
were confirmed by an order for directions (No. 1) dated 12th April, 2016. The arbitrator
gave extensive directions in relation to the conduct of the arbitration and in relation to
various applications which the claimant had indicated it intended bringing. The claimant
had indicated an intention to bring an application for early disclosure of documents in
relation to claims made by the respondent “against the employer which directly or
indirectly related to, or were connected with” works carried out by the claimant under the
subcontract. The claimant also indicated an intention to bring an application for an early
interim award in respect of “the sum due on the agreed valuation of the measured works
and variations”. The respondent indicated its intention to bring an application for security
for costs in respect of those two intended applications. The arbitrator gave detailed
directions in relation to those proposed applications. In addition to doing that, the
arbitrator further directed that while clause 13(c)(2) of the subcontract made reference to
the Arbitration Procedure, 2000 published by Engineers Ireland (the “2000 Procedure”),
the relevant procedural rules that would apply in the arbitration from the date of the
preliminary meeting on 7th April, 2016 would be the Arbitration Procedure, 2011
published by Engineers Ireland (the “2011 Procedure”). The parties are in agreement that
up to the date of the preliminary meeting on 7th April, 2016, the 2000 Procedure applies
with the 2011 Procedure applying after the date of the preliminary meeting.
34. The claimant brought its applications for early disclosure and for an early interim award
and they were responded to by the respondent. In response to the claimant’s application
for an early interim award in respect of the measured works and variations, the
respondent made reference to the provisions of clause 12.2 of the main contract as
applied by clause 12(b) of the subcontract and to the determinations as to termination
value and termination amount made by the respondent under clause 12.2 of the main
contract (paras. 62 to 67 of the respondent’s response to the claimant’s application dated
29th April, 2016). At para. 66 of that response, the respondent stated that the claimant
had never disputed the termination value or the termination amount and that the
respondent would, therefore, be entitled to rely upon the provisions of clause 12.2.2 of
the main contract even if the claimant obtained an early award in respect of the
“measurement account”.
35. The arbitrator gave her decision in respect of the claimant’s two applications on 25th May,
2016 (the “May, 2016 decision”). In her decision in relation to the request for early
disclosure, the arbitrator commented on the scope of the dispute referred to arbitration
under the notice to refer and expressed the view (at that stage) that the scope of the
dispute referred and the extent of her jurisdiction in the arbitration corresponded with the
scope of the 9th March, 2011 claim (para. 3.15 of the May, 2016 decision). The arbitrator
expressed the view that the claim was not for all financial entitlements that might be due
to the claimant in respect of the subcontract works but was for particular additional
payments claimed under four broad headings, namely, prolongation, delay and disruption,
additional testing/“quality issues” and revised scope of works (paras. 3.15 and 3.16). The
arbitrator was not persuaded (at that stage) by the claimant that item 1 in the notice to
refer was sufficient to include all additional payments claimed and received by the
respondent from the employer in respect of the subcontract works carried out by the
claimant (which was the subject of the claimant’s application for early disclosure). The
arbitrator concluded, therefore, that the scope of the claimant’s request for disclosure
extended significantly beyond the scope of the dispute which was referred to arbitration
and over which she had jurisdiction (para. 3.17).
36. In ruling on the claimant’s application for an early interim award in the May, 2016
decision, the arbitrator returned to the question of jurisdiction. She stated (at para. 4.13)
that she had “come to question” whether the issue of the disputed sum which was due to
be paid to the claimant for measured subcontract works fell within the scope of the
dispute referred to arbitration and questioned her jurisdiction to deal with it (para. 4.13).
She then stated (at para. 4.14) that, as she saw it, the scope of the dispute referred to
arbitration and, therefore, the extent of her jurisdiction in the arbitration, corresponded to
the “scope of the claimant’s claim by letter dated 9th March, 2011”. She could find no
reference in the 9th March, 2011 claim to the claimant’s measurement amount (para.
4.14).
37. The arbitrator refused both of the claimant’s applications in the May, 2016 decision. It is
accepted by the respondent that the May, 2016 decision does not amount to a final
determination by the arbitrator on the question of jurisdiction although it is said that the
views she expressed in that decision represented her determination of the objective
meaning of the notice to refer and that it is relevant on that basis.
38. The arbitrator gave further directions in her order for directions No. 2 dated 25th May,
2016. She directed the parties to address the question of her jurisdiction to deal with the
issue of the disputed sum due to be paid to the claimant for measured subcontract works
in circumstances where she had raised a question as regards her jurisdiction to deal with
that issue in the May, 2016 decision. She directed the exchange of further written
submissions by the parties on that issue. This was done and on 17th June, 2016, the
arbitrator issued a ruling stating that she had jurisdiction in the arbitration to deal with
the issue of the disputed sum due to be paid to the claimant for measured subcontract
works. The arbitrator had given further directions in her order for directions No. 2, dated
25th May, 2016 for the service by the claimant of its statement of case and also gave
directions in relation to the respondent’s intended application for security for costs.
39. The claimant served its statement of case on 1st July, 2016. The statement of case did
not refer to clause 12(b) of the subcontract or clause 12.2 of the main contract. While the
statement of case referred to the termination of the subcontract by the respondent and to
the determinations by the respondent of the termination value and of the termination
amount, it did not assert that those determinations were incorrect or unlawful in any
respect. There is much disagreement between the parties as to the significance of the
failure by the claimant expressly to challenge those determinations by the respondent in
the statement of case.
40. Following the service of the statement of case, the arbitrator dealt with security for costs
issues. In its application for an order for security for costs dated 15th July, 2016, the
respondent stated that it intended defending the claimant’s claims on various grounds
including jurisdictional grounds (paras, 43(i) to (xxx) of the respondent’s application for
security for costs). Among the grounds set out by the respondent was that, the claimant
was not entitled to any further payment from the respondent save under clause 12(b) of
the subcontract and clause 12.2 of the main contract having regard to the termination of
the subcontract and that the claimant had not pleaded an entitlement to payment on that
basis. The respondent further asserted that the scope of the arbitration was co-extensive
with the scope of the 9th March, 2011 claim for extensions of time and for associated
costs and that no claim was made in the statement of case for an extension of time or for
associated costs. The respondent also indicated that it would rely on the notice provisions
contained in the subcontract (clause 10). Numerous grounds of intended defence were set
out in the respondent’s application.
41. The arbitrator gave her decision in principle in respect of the respondent’s application for
security for costs on 4th November, 2016 (the “November, 2016 decision”). She granted
the respondent’s application and decided in principle that the claimant should provide
security for costs. The arbitrator subsequently made an order for security for costs on 8th
February, 2017. The security for costs required to be provided by the claimant was
provided in full on 5th May, 2017.
42. Thereafter, the respondent sought particulars arising from the claimant’s statement of
case. Those particulars were provided. There was a dispute in relation to the adequacy of
the particulars provided and the arbitrator ruled on that dispute on 26th July, 2017. The
claimant was directed to provide certain further particulars.
43. The respondent served its statement of defence on 7th September, 2017 in accordance
with a further order for directions made by the arbitrator on 18th August, 2016. In its
statement of defence, the respondent raised a number of preliminary defences including
jurisdictional defences. The respondent pleaded that the arbitrator had no jurisdiction to
determine the claimant’s claims on two separate bases. The first basis advanced by the
respondent was founded on clause 12(b) of the subcontract and clause 12.2 of the main
contract. It was pleaded that the respondent had complied with the provisions of clause
12.2 of the main contract (which applied to the subcontract by virtue of clause 12(b)) and
had proceeded to determine the termination value and the termination amount in
accordance with the provisions of clause 12.2 and that those determinations had not been
disputed by the claimant whether in the context of the dispute referred to arbitration or
otherwise. In support of that contention, the respondent pleaded that the scope of the
claimant’s reference to arbitration was co-extensive with the 9th March, 2011 claim and
that, therefore, the reference to arbitration could not include a dispute relating to the
determinations as to termination value or termination amount since neither of those
matters had been determined at the time of the 9th March, 2011 claim. The respondent
pleaded, therefore, that those determinations were not within the scope of the reference
to arbitration and were, therefore, not within the jurisdiction of the arbitrator. The
respondent advanced another preliminary defence based on want of jurisdiction in respect
of the prolongation claim which is not relevant to the present application. The respondent
attached legal submissions to its statement of defence (at schedule A) concerning the
arbitrator’s jurisdiction.
44. Particulars were sought by the claimant arising from the statement of defence and were
furnished by the respondent. The claimant then served a statement of reply on 8th
November, 2017 in which reference was made by the claimant to the “purported
determinations” by the respondent of the termination value and termination amount and
also addressed the notice to refer. The claimant did not accept that the arbitrator did not
have jurisdiction in relation to its claim or in relation to those determinations.
45. The respondent indicated that it wished to serve a statement of rejoinder. However, prior
to doing so, the claimant served a draft amended statement of case on 10th November,
2017 and another version of a draft amended statement of case on 21st November, 2017.
That was not done by agreement with the respondent or on foot of any direction made by
the arbitrator. The claimant’s solicitors redelivered the amended statement of case on
29th March, 2018 on foot of further directions given by the arbitrator that day following
the delivery of her ruling on jurisdiction of 9th March, 2018. While a timetable for the
delivery of further amended pleadings by the respondent appears to have been agreed on
29th March, 2018, the directions made that day were superseded by the respondent’s
application to the High Court under Article 16(3) of the Model Law in relation to the
arbitrator’s jurisdiction.
46. The claimant’s amended statement of case does now seek expressly to challenge the
respondent’s determinations as to termination value and termination amount and
contends that those determinations were wrongful and unjustified in failing to take
account of the legitimate entitlements of the claimant under the subcontract. The
amended statement of case further contends that the Hussey Fraser letter of 13th
November, 2014 did reject and dispute the respondent’s determinations in relation to
termination value and termination amount and asserts that the notice to refer to
arbitration, validly referred to arbitration the dispute between the parties concerning the
claimant’s rejection of those determinations made by the respondent and its entitlement
to recover the monies claimed in the 9th March, 2011 claim and in the Hussey Fraser
letter of 13th November, 2014. Three new reliefs were included in the amended
statement of case including declarations that the purported determinations by the
respondent of the termination value and the termination amount should be opened up,
reviewed and revised to reflect the findings made by the arbitrator in relation to the
merits of the claimant’s claims and the respondent’s defences in the arbitration and
declarations as to the correct amounts arising in respect of the termination value and the
termination amount under clause 12(b) of the subcontract and clause 12.2 of the main
contract.
47. The respondent relies on the stark contrast between the pleas contained in the statement
of case and in the amended statement of case in support of its contention that no issue in
relation to the respondent’s determinations of termination value and termination amount
were referred to arbitration or are within the jurisdiction of the arbitrator.
48. In her order for directions No. 6, dated 18th August, 2017, the arbitrator directed that
potential or intended applications by either party in respect of the arbitrator’s jurisdiction
should be deferred until after the close of pleadings. On 27th November, 2017, the
arbitrator informed the parties that she felt that it was appropriate at that stage to
proceed to hear an application and to make a ruling on her jurisdiction having regard to
the preliminary defences in relation to her alleged want of jurisdiction pleaded by the
respondent in its statement of defence. Further directions were agreed and issued by the
arbitrator in her order for directions No. 7, dated 4th December, 2017. The arbitrator
directed a simultaneous exchange of written submissions and fixed 18th January, 2018 as
the date for the hearing of the jurisdictional issue. The hearing proceeded on that date
and the arbitrator reserved her decision.
The Arbitrator’s Ruling on Jurisdiction
49. With commendable expedition, the arbitrator delivered her ruling in respect of jurisdiction
on 9th March, 2018. In a detailed ruling, the arbitrator ruled that she had jurisdiction in
respect of the two disputed areas where her jurisdiction was challenged by the
respondent, namely, in respect of the issues arising under clause 12 of the subcontract
and clause 12.2 of the main contract and in respect of the prolongation claim. The latter
aspect of her ruling has not been challenged by the respondent.
50. In rejecting the respondent’s contention that she did not have jurisdiction in relation to
the claims sought to be made by the claimant having regard to clause 12(b) of the
subcontract and clause 12.2 of the main contract, the arbitrator looked at the notice to
refer and concluded that there was an ambiguity in the description of the dispute which
was referred to arbitration by that notice. She ruled, therefore, that she was entitled to
look at documents other than the 9th March, 2011 claim in interpreting the scope of the
reference. She decided that, in accordance with the case law relied upon by the claimant,
it was necessary to ascertain what dispute had crystallised as of the date of the notice to
refer, as that was the dispute which had been referred to arbitration. In seeking to
ascertain what that dispute was, the arbitrator agreed with the claimant that it was
appropriate that she should have regard to the factual background to the notice to refer
as evidenced in the exchange of communications between the parties pre dating that
notice. Having referred to the exchange of communications between the parties between
December, 2010 and the date of service of the notice to refer on 13th March, 2015, the
arbitrator was satisfied that the Hussey Fraser letter of 13th November, 2014 and the
Maples letter of 1st December, 2014 demonstrated that the claimant intended to pursue
its claims against the respondent as set out in the 9th March, 2011 claim and that the
respondent did not accept those claims and maintained its position in relation to the
termination value and the termination amount. The arbitrator did not accept that the first
part of the Hussey Fraser letter of 13th November, 2014 was only a “running
commentary” on the bondsman proceedings and considered that the claimant was
disputing in that letter the termination value and the termination amount as determined
by the respondent. On that basis, the arbitrator rejected the respondent’s contention that
the dispute referred to arbitration did not include a dispute in respect of the termination
value and the termination amount. She ruled that such a dispute had been referred to
arbitration.
51. The arbitrator further noted that while the notice to refer did not state that the claimant
took issue with the termination value and the termination amount, it was common ground
between the parties that if a claim was referred to arbitration by the claimant then so
were the defences to that claim which were sought to be relied upon by the respondent.
The arbitrator stated that it was clear from the statement of defence and from the
respondent’s written submissions on the question of jurisdiction, that one of the defences
advanced by the respondent was based on clause 12 of the subcontract and, in particular,
on the respondent’s determination as to termination value and termination amount. The
arbitrator, therefore, concluded that that defence did form part of the dispute referred to
arbitration. The arbitrator did not accept the respondent’s argument that the dispute was
“co-extensive” with the 9th March, 2011 claim. The arbitrator also rejected the contention
that she had already determined the scope of the reference in the May, 2016 decision, as
that decision concerned the claimant’s application for early disclosure and for an interim
award and the arbitrator was not at that stage being asked to consider or rule
exhaustively upon the extent of her jurisdiction or to define the ambit of the dispute
which had been referred to her. For those reasons, the arbitrator concluded that she had
jurisdiction in respect of the issues concerning clause 12 of the subcontract and did not
accept the preliminary objection raised by the respondent that there was a want of
jurisdiction in respect of those issues.
Respondent’s Challenge to Jurisdiction
52. The respondent contends in this application that the arbitrator’s ruling that she has
jurisdiction in respect of the entirety of the claimant’s claim, including those parts of the
claim which seek to impugn the respondent’s determinations as to termination value and
termination amount, is wrong. It contends that the arbitrator does not have jurisdiction in
relation to those issues having regard to clause 12(b) of the subcontract and clause 12.2
of the main contract and to the terms of the notice to refer.
53. Before considering that the basis on which the respondent contends that the court should
decide that the arbitrator has no jurisdiction in relation to those issues, I should, first,
outline in a little more detail the provisions of the subcontract and of the main contract
which are relevant to the jurisdiction issue and, second, consider the approach which the
court should take in considering the question of jurisdiction under Article 16(3) of the
Model Law.
Relevant Provisions of the Subcontract and of the Main Contract
54. It will be apparent from my outline of the relevant factual background and of the
circumstances in which the arbitrator came to give her ruling on jurisdiction in March,
2018, that the most relevant provisions of the subcontract and of the main contract are
clause 12(b) of the subcontract and clause 12.2 of the main contract.
55. Before setting out those provisions, I should refer also to the provisions of clause 10 of
the subcontract which provides for claims and adjustments. Clause 10(a) was relied upon
by the respondent in the 23rd March, 2011 rejection which rejected the 9th March, 2011
claim. Clause 10(a) provides for the procedure whereby a subcontractor who considers
that it is entitled to an adjustment of the subcontract sum or that it has any other
entitlement under or in relation to the subcontract must follow in order to claim such
adjustment or entitlement. Clause 10(a) requires the subcontractor to give notice of its
alleged entitlement to the contractor in certain terms and within a particular time limit.
Clause 10(a) then provides for the procedure to be followed in relation to such claims.
Clause 10(a)(3) provides that if the subcontractor does not give the required notice and
details within the stipulated time period, the subcontractor will not be entitled to an
increase in the subcontract sum and the contractor will be released from all liability to the
subcontractor in relation to the particular claim, save in certain circumstances. As I have
indicated, in the 23rd March, 2011 rejection, the respondent rejected the claim made in
the 9th March, 2011 claim on the grounds that the claimant failed to comply with the
notice requirement contained in clause 10(a)(1), which it asserted amounted to a
condition precedent. As a consequence, it was contended that the respondent had no
liability in respect of the claimant’s claim, and for that reason, its claim was rejected in its
totality. The respondent has pleaded the claimant’s failure to comply with the notice
requirement in clause 10(a)(1) of the subcontract in its statement of defence as a
preliminary defence (without prejudice to the other preliminary defences raised by it) and
as a substantive defence to the claimant’s claims.
56. Clause 12 of the subcontract is concerned with termination. Clause 12(a) provides for the
circumstances in which the respondent could terminate the subcontract in the event of a
default on the part of the claimant. Under clause 12(a)(x), the respondent was entitled to
terminate the subcontract if any of the insolvency events referred to in clause 12.1 of the
main contract occurred in relation to the claimant. One of those insolvency events was
the appointment of a receiver to the claimant. As outlined earlier, the respondent
terminated the subcontract in accordance with clause 12(a)(x) following the appointment
of a receiver to the claimant. There is no dispute between the parties as to the
termination of the subcontract.
57. Clause 12(b) is concerned with the consequences of the termination of the subcontract in
the case of a default by the subcontractor. It provides that where the subcontractor’s
obligation to complete the subcontract works is terminated under clause 12(a), the
provisions of clause 12.2 of the main contract will apply mutatis mutandis as between the
contractor and the subcontractor as if every reference to the contractor in clause 12.2
were a reference to the subcontractor and all references to the employer in clause 12.2 or
the employer’s representative were to the contractor.
58. Clause 12.2 of the main contract (as adapted and applied to the subcontract by virtue of
clause 12(b) of the subcontract) provides as follows:-
“12.2 Consequences of default termination
If the subcontractor’s obligation to complete the works is terminated under sub–
clause 12.1, the following shall apply:
12.2.1 The subcontractor shall leave the site in an orderly manner.
12.2.2
Payment of all sums of money that may then be due from the contractor
to the subcontractor shall be postponed, and the contractor shall not be
required to make any further payment to the subcontractor except as
provided in this sub-clause.
12.2.3
The contractor shall, as soon as practicable, determine the amount due
to the subcontractor under the sub-contract for the works completed in
accordance with the subcontract and unpaid (the termination value).
12.2.4 …
12.2.5
The contractor may engage other contractors, use any works, items and
subcontractor’s things on the site and do anything necessary for the
completion of the works.
12.2.6 …
12.2.7 …
12.2.8 …
12.2.9
When the works have been completed and the termination amount as
described below has been determined, the contractor shall give a
certificate to the subcontractor setting out the total of the following (the
termination amount):
(1) the contractor’s additional cost of completing the works compared with
the cost that would have been incurred if the works had been
completed by the subcontractor in accordance with the subcontract.
(2) loss and damage incurred by the contractor as a result of the
termination and its cause.
(3) the amounts due to the contractor by the subcontractor under or in
connection with the subcontract or in connection with the works.
12.2.10 …
12.2.11
If the termination amount is less than the termination value, the
subcontractor shall issue an invoice to the contractor for the difference
and the contractor shall pay the amount due on the invoice within 15
working days after receiving the invoice. If the termination amount is
more than the termination value, the subcontractor shall pay the
contractor the difference within 10 working days of receiving the
contractor’s demand for payment.”
The Parties Respective Positions Following Termination of Subcontract
59. As outlined earlier, following the termination of the subcontract in April, 2011, the
respondent sought to implement the provisions of clause 12.2 of the main contract (which
applied to the subcontract by virtue of clause 12(b) thereof). It determined the
termination value at “nil” (under clause 12.2.3) and the termination amount at
€768,911.27 (under clause 12.2.9) and demanded that latter sum from the claimant
under clause 12.2.11. The respondent has sought to rely on clause 12.2.2 as providing for
the postponement of the payment following the termination of the contract of any sums
of money that might then have been due from the respondent to the claimant and the
statement that the respondent was not required to make any further payment to the
claimant except as provided for in clause 12.2.
60. At the heart of the dispute between the parties in relation to the jurisdiction of the
arbitrator is the question as to whether the arbitrator has jurisdiction to deal with the
claimant’s claims in light of the provisions of clause 12.2 of the main contract as applied
to the subcontract by virtue of clause 12(b) of that contract and in light of the
determinations made by the respondent as to the termination value and the termination
amount. The respondent contends that none of those matters were referred to arbitration
although it contends (and the claimant accepts) that the respondent is entitled to rely on
the provisions of clause 12.2 and its determinations as to termination value and
termination amount by way of a defence to the claim. However, the respondent contends
that the claimant is not entitled to respond to those defences by seeking to challenge the
determinations as to termination value and termination amount. The claimant contends,
for various reasons, that all of those matters were referred to arbitration and that the
arbitrator has jurisdiction to deal with them. It maintains that in circumstances where the
respondent is entitled to rely on its determinations of termination value and termination
amount in defence of the claimant’s claims, so too is the claimant entitled to challenge
those determinations in response.
The Dispute Resolution Provisions of the Subcontract
61. Clause 13 of the subcontract is concerned with disputes. Clause 13(a) is headed “Notice
to Refer” and provides as follows:–
“If a dispute arises between the parties in connection with or arising out of the sub–
contract, either party may, by notice to the other, refer the dispute for arbitration
by serving on the other a notice to refer. The notice to refer shall state the issues in
dispute. The service of the notice to refer will deemed to be the commencement of
arbitration proceedings.”
62. Central to the dispute between the parties in this application is the proper construction of
the notice to refer served by the claimant on the 13th March, 2015. As we shall see, a
number of legal principles apply to the construction of a notice to refer and to the
ascertainment of the ambit or scope of the dispute or issues referred to arbitration.
63. Clause 13(b) provides for conciliation and, as touched upon earlier, clause 13(b)(1)
provides that:-
“No step will be taken in the arbitration after the notice to refer has been served
until the disputes have first been referred to conciliation.”
64. There is then a provision for the conduct of the conciliation. Certain provisions of the main
contract are expressly applied to any conciliation between the contractor and the
subcontractor under the subcontract. As noted earlier, a conciliation did take place
between the parties following service of the notice to refer. The conciliator made a
recommendation in favour of the claimant which was not complied with and led to the
commencement of the summary proceedings by the claimant to enforce the conciliator’s
recommendation and ultimately to the recent judgment of the Court of Appeal. Once the
conciliation took place, the parties could proceed with the arbitration on foot of the notice
to refer and did so.
65. Clause 13(c) is concerned with the procedure applicable to the arbitration. It provides as
follows:-
“(1) The parties shall jointly appoint the arbitrator and, if the parties are unable to agree
an arbitrator to be appointed under this clause, the arbitrator will be appointed by
the President of Engineers Ireland.
(2) Any arbitration between the contractor and the subcontractor will be governed by
the Arbitration Procedure 2000 published by Engineers Ireland and will be subject
to the Arbitration Acts 1954 – 1998.”
66. The parties ultimately agreed on the appointment of Ms. Fahey as arbitrator.
Notwithstanding the reference to the Arbitration Acts 1954-1998 in clause 13(c), it is
accepted by the parties that the 2010 Act applies (having regard to s.3 of that act). In
her first order for directions dated 12th April, 2016, the arbitrator directed (with the
agreement of the parties) that the 2000 Procedure would apply up to the date of the
preliminary meeting on 7th April, 2016 but that the 2011 Procedure would apply
thereafter. The 2000 Procedure is potentially relevant to the jurisdiction issue between
the parties and it is appropriate, therefore, to refer to a number of its provisions at this
stage. Although clause 13 of the subcontract does not expressly so state, it seems to me
that it must be the case that in the event of any conflict or inconsistency between the
provisions of the subcontract and the 2000 Procedure, the provisions of the subcontract
must prevail. It remains to be seen as to whether there is any conflict or inconsistency
between the subcontract and the 2000 Procedure.
The 2000 Procedure
67. The following seem to the most potentially relevant provisions of the 2000 Procedure for
present purposes. Rule 2 is concerned with the commencement of the arbitration. Rule
2.1 provides as follows:-
“Unless otherwise provided in the contract, a dispute or difference shall be deemed
to arise when a claim or assertion made by one party is rejected by the other party
and that rejection is not accepted, or no response is received within the period of
28 days. Subject only to the due observance of any condition precedent in the
contract or the arbitration agreement, either party may then invoke arbitration by
serving a notice to refer on the other party.”
The parties directed some argument to the construction and application of this rule in the
context of the scope of the dispute referred to arbitration and its interaction with clause
13(a) of the subcontract.
68. Rule 2.3 provides as follows:-
“The notice to refer shall list the matters which the party serving the notice to refer
wishes to be referred to arbitration. Nothing stated in the notice to refer shall
restrict that party as to the manner in which it subsequently presents its case.”
Again the parties addressed this provision and its interaction with clause 13(a) of the
subcontract.
69. Rule 5.2 provides as follows:-
“Once his appointment is completed, the arbitrator shall have jurisdiction over any
issue connected with and necessary to the determination of any dispute or
difference already referred to him whether or not any condition precedent to
referring the matter to arbitration had been complied with.”
This provision is also potentially relevant to the scope of the dispute which was referred to
arbitration and the extent of the arbitrator’s jurisdiction to deal with issues within the
dispute referred.
70. These appear to me to be the relevant provisions of the subcontract, the main contract
and the 2000 Procedure for the purposes of the jurisdiction issues which arise on this
application.
Article 16(3): The Role of the Court
71. The first issue I have to address is to the approach which the court is required to take in
considering a challenge to a ruling by an arbitrator that he or she has jurisdiction in
relation to all or part of a claim. The parties made extensive written and oral submissions
on this issue. However, it seems to me that ultimately there was not a great deal of
difference between them on the issue.
Article 16
72. Under Article 16(1) of the Model Law, an arbitral tribunal may rule on its own jurisdiction.
Article 16(2) requires that a challenge to the jurisdiction of the arbitral tribunal must be
made in a timely manner. Article 16(3) then provides as follows:-
“The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article
either as a preliminary question or in an award on the merits. If the arbitral tribunal
rules as a preliminary question that it has jurisdiction, any party may request,
within thirty days after having received notice of that ruling, the court specified in
Article 6 to decide the matter, which decision shall be subject to no appeal; while
such a request is pending, the arbitral tribunal may continue the arbitral
proceedings and make an award.”
73. In the arbitration between the claimant and the respondent, the respondent did challenge
the jurisdiction of the arbitrator to deal with certain parts of the claimant’s claims having
regard to clause 12(b) of the subcontract and clause 12.2 of the main contract and the
terms of the notice to refer. It did so in its statement of defence (having previously
adverted to the jurisdiction issue in earlier submissions) as one of a number of
preliminary defences advanced by it. The arbitrator received submissions on the issue of
jurisdiction and conducted a hearing on the issue before giving her decision on jurisdiction
in the March, 2018 ruling. She ruled that she had jurisdiction in relation to the contested
issues. The respondent has brought this application under Article 16(3) contending that
the arbitrator was incorrect in so ruling and asking the court to “decide the matter” under
Article 16(3) by concluding that the arbitrator does not have jurisdiction in relation to the
contested issues.
Standard of Review
74. There was some debate between the parties as to the standard review the court should
adopt in carrying out its function under Article 16(3) of the Model law and, in particular,
whether the court should adopt what has been termed a “full judicial consideration” of the
“matter” (i.e. the question of jurisdiction) or whether it should consider that question on a
“prima facie basis”. Ultimately, the claimant accepted the respondent’s contention that
the court has to decide the jurisdiction question on the basis of a “full judicial
consideration” of that question. That is undoubtedly correct. I have no hesitation in
concluding that the approach which the court must take when deciding on the question of
jurisdiction under Article 16(3) is to engage in a “full judicial consideration” of the
question. In my view, this follows from the requirement imposed on the court under
Article 16(3) to “decide the matter”. It should be borne in mind that the court is not in
fact carrying out a “review” of the decision or ruling of the arbitrator on the issue of
jurisdiction or hearing an “appeal” from that decision or ruling.
75. It is now well established that the “full judicial consideration” standard is the standard
which must be applied by the court in determining whether an arbitration agreement
exists between the parties for the purposes of an application for a reference to arbitration
under Article 8(1) of the Model Law (see: Lisheen Mine v. Mullock & Sons (Shipbrokers)
Limited [2015] IEHC 50; Sterimed Technologies International Limited v. Schivo Precision
[2017] IEHC 35; Kellys of Fantane Limited v. Bowen Construction Limited & Anor.
[2017] IEHC 357; and K.& J. Townmore Construction Limited v. Kildare & Wicklow Education and
Training Board [2019] IEHC 666).
76. In his judgment in Barnmore Demolition and Civil Engineering Limited v. Allendale
Logistics Limited & Ors. [2013] 1 I.R. 690, Feeney J. was dealing with a similar issue,
namely, whether an arbitration agreement was in existence between the parties for the
purpose of an application to refer the parties to arbitration under Article 8(1) of the Model
Law. He was faced with the competing lines of authority as to whether the court should
consider that issue on the basis of “full judicial consideration” or whether it should do so
on a “prima facie basis”. Feeney J. ultimately did not have to decide as to which approach
should be adopted as he was satisfied that on either standard there was no arbitration
agreement between the parties. However, among the authorities he considered was the
leading textbook in the area of international commercial arbitration, Gary Born
“International Commercial Arbitration (1st Ed., Kluwer Law International, (2009)) which
provided express support for the application of the “full judicial consideration” approach in
the context of the consideration of an objection to the jurisdiction of an arbitrator. Born
stated as follows: –
“When a party seeks an interlocutory judicial determination of jurisdictional
objections, prior to any arbitral award on the subject, there is uncertainty regarding
the standard of judicial review that should be applied by court under the Model
Law. As discussed below, the text of the Model Law, and many judicial authorities,
strongly suggest that full judicial review of the jurisdictional objection is
appropriate, at least in some circumstances. In contrast, as also discussed below,
some judicial authority, and some aspects of the Model Law’s drafting history,
suggest that only prima facie interlocutory judicial consideration is ever
appropriate”. (Chapter 6, p. 881, quoted by Feeney J. at 696).
77. Born’s preference was clearly for the application of the “full judicial consideration”
approach in the context of the consideration by a court of a challenge to the jurisdiction of
the arbitrator.
78. Laffoy J. in the High Court in John G. Burns Limited v. Grange Construction and Roofing
Company Limited [2013] 1 I.R. 707 expressed a similar view. Without definitively
deciding the point, Laffoy J. was dealing with an application pursuant to Article 16(3) of
the Model Law for the court to decide whether or not an arbitrator had jurisdiction to act
in a particular arbitration. The assertion by the applicant in that case was that there was
no jurisdiction to nominate an arbitrator and that no arbitration agreement existed
between the parties as none was agreed. The arbitrator had ruled as a preliminary
question that he had jurisdiction to act as arbitrator. The applicant then applied to the
court under Article 16(3) for the court to decide that issue. Laffoy J. decided that the
arbitrator did not have jurisdiction to act in the arbitration.
79. In the course of her judgment, Laffoy J. had to consider the function of the court under
Article 16(3). Having noted that its function was “to decide the matter”, Laffoy J. assumed
that in doing so “the standard to be applied by the Court is the normal standard in
determining matters in civil cases, on the balance of probabilities” although she did not
definitively decide that issue (per Laffoy J. at para. 24, p. 723).
She then stated as follows:-
“. . . counsel for the respondent pointed to the fact that the Court’s jurisdiction is
‘to decide the matter’, acknowledging that the process is not an appeal from the
decision of [the arbitrator]. He acknowledged that the Court may consider such
evidence as it sees fit and is not bound by the submissions made to [the
arbitrator]. In other words, the Court has untrammelled jurisdiction to consider de
novo the issue whether there is an arbitration agreement which binds the parties”.
(Per Laffoy J. at para. 24 at p. 723).
80. That is the approach that Laffoy J. took in Burns. She ultimately concluded that there was
no arbitration agreement between the parties and, therefore, there was no jurisdiction to
appoint the arbitrator.
81. Although Laffoy J. did not definitively decide the issue in Burns and although, in the
passage quoted above, she was recording the submission of counsel for one of the
parties, the description given by Laffoy J. to the function of the court under Article 16(3)
of the Model Law in the passage quoted above, was subsequently found to be correct by
the High Court (McGovern J.) in Mayo County Council v. Joe Reilly Plant Hire Limited
[2015] IEHC 544. In that case, McGovern J. recorded Laffoy J. as having held that in an
application brought under Article 16(3):-
“, … the court may consider such evidence as it sees fit and is not bound by the
submissions made to the arbitrator. I accept that as being the correct approach.”
(Per McGovern J. at para. 11).
82. In that case, the arbitrator had embarked upon a preliminary hearing as to whether or
not he had jurisdiction in the arbitration. The arbitrator concluded that he did have
jurisdiction. The applicant applied to the court under Article 16(3) of the Model Law and
asked the court to decide that the arbitrator did not have jurisdiction in the arbitration.
Although McGovern J. stated that the courts would be “very slow to interfere with the
arbitrator’s ruling on his own jurisdiction” (para. 13), he went on to state that an
application under Article 16(3) is a “challenge to the arbitrator’s jurisdiction” and “not an
appeal against his construction of the agreement” (para. 14). He continued: –
“What this court has to decide is whether he had jurisdiction to hear the preliminary
issue, or whether the arbitration clause giving him that power was spent. If he has
jurisdiction, then it is a matter for him as to how he construes the agreement. In
this case, there is no challenge to the arbitration clause. The court therefore has to
decide whether or not the arbitrator was correct in law in holding that he had
jurisdiction to commence the hearing and rule on his own jurisdiction including any
objections with respect to the existence or validity of the arbitration agreement”.
(Per McGovern J. at para. 14).
83. McGovern J. held that the arbitrator did have jurisdiction and was competent to rule on
the preliminary issues before him and that it was: –
“ . . for the arbitrator and not this Court to determine the issues before him”.
(Per McGovern J. at para. 15).
84. There was some debate between the parties as to the effect and application of these dicta
of McGovern J. in the Mayo County Council case. The respondent felt that these dicta
downplayed the role of the court under Article 16(3). The claimant felt that, if read
literally, the dicta might be difficult to reconcile with the obligation of the court under
Article 16(3) to “decide the matter”. The claimant felt the Mayo County Council case was
concerned with quite specific and distinct facts which may have made those dicta
appropriate in that case. I am inclined to agree. In my view, it is clear from Article 16(3)
that the role of the court is to “decide the matter”. When dealing with an application in
relation to jurisdiction under Article 16(3), the court is not conducting an appeal from the
decision or ruling of the arbitrator, or a review of that decision or ruling. The court is
deciding the question of jurisdiction. Further, in performing its function under Article
16(3), the court must carry out a “full judicial consideration” of the question of
jurisdiction and not consider that question on a mere “prima facie basis”. I agree with the
assumption made by Laffoy J. in Burns that in carrying out that function, the court must
apply the normal civil standard, namely, to decide the issue of jurisdiction on the balance
of probabilities. I also agree with McGovern J. in Mayo County Council and with the
submission made in Burns, as recorded by Laffoy J., that in carrying out that function, the
court may consider such evidence as it sees fit and is not bound by the submissions made
to the arbitrator or the evidence before him or her. To be clear, in my view, no matter
how eminent or distinguished the arbitrator, the court should not exercise any deference
to the arbitrator or to adopt the position that it should be slow to interfere with the
arbitrator’s decision on jurisdiction. In my view, the court has an untrammelled power to
consider the question of jurisdiction without reference to any question of deference. The
absence of any requirement to show deference to the decision of the arbitrator on
jurisdiction is, I believe, consistent with the decision of the Supreme Court in Galway City
Council v. Samuel Kingston Construction Limited [2010] 3 IR 95 (see para. in particular,
per O’Donnell J at paras 34-35, pp 110-111).
85. The fact that the application in relation to jurisdiction under Article 16(3) is a full
rehearing and not an appeal or a review and without any question of deference, is also, I
believe, consistent with the approach taken by the Courts of England and Wales under s.
67 of the Arbitration Act, 1996 (the “English 1996 Act”). That section is the section under
which a party to arbitral proceedings may apply to the court to challenge an award of the
arbitral tribunal as to its substantive jurisdiction or for an order declaring that an award
made by the tribunal on the merits is of no effect, in whole or in part, because the
tribunal did not have substantive jurisdiction. Under s. 67(3) of the English 1996 Act, the
court may by order confirm or vary or set aside the award. While there is no express
statement in s. 67 requiring the court to “decide the matter”, as there is in Article 16(3)
of the Model Law, and while there is no express statement as to the nature of the
exercise required to be undertaken by the court under that section, it is well established
that the section entails a “complete rehearing rather than a review”. The authors of
Russell on Arbitration (24th Ed.) (2015) put the position as follows, at para. 8-069:-
“Rehearing rather than a review. A s. 67 hearing is a complete rehearing rather
than a review:-
‘A party who is not submitted to the arbitrator’s jurisdiction is entitled to a
full judicial determination on the evidence of an issue of jurisdiction before
the English Court’.
There is no halfway house between a limited review akin to that which the court
conducts when reviewing the exercise of judicial discretion and a full rehearing.
Section 67 entails the latter. The court should not be put in a worse position than
the arbitrator in determining the issue of substantive jurisdiction. The court’s role is
to confirm that the tribunal reached the right answer, not simply to decide that it
was entitled to reach the decision it did.” (para. 8-069, p. 498) (footnotes omitted).
The dictum quoted in the extract from Russell on Arbitration is from the judgment
of Moore-Bick L.J. in the Dallah case discussed below.
86. Both parties relied on the approach taken by the UK Supreme Court in Dallah Real Estate
& Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan [2011] 1
AC 763 to illustrate the approach taken by the Courts of England and Wales to a challenge
to the decision of an arbitral tribunal as to its jurisdiction. It should be said, however, that
that case did not involve an application under s. 67 of the English 1996 Act but rather an
application to enforce under s. 101 of the English 1996 Act an arbitration award which
was made under the auspices of the International Chamber of Commerce in Paris under
the provisions of the New York Convention. Leave to enforce the award was granted at
first instance. The defendant applied successfully to set aside the order granting leave.
The English Court of Appeal upheld the judge’s decision and its decision in turn was
affirmed by the UK Supreme Court. The arbitral tribunal had concluded that the defendant
was bound by the relevant agreement to arbitrate and that it, therefore, had jurisdiction
in the arbitration. Of relevance for present purposes is that the English Court of Appeal
and the UK Supreme Court considered the approach which the court should adopt when
considering whether an arbitral tribunal had jurisdiction and, in particular, the weight that
should be afforded to the tribunal’s own decision on jurisdiction.
87. In the Court of Appeal, Moore-Bick LJ. addressed the contention made by counsel for the
claimants (who were seeking to enforce the award) and stated as follows:-
“Moreover, I have to say that I find it difficult to understand exactly what [counsel]
had in mind when submitting that the court should accord deference to the
tribunal’s conclusions, particularly in view of the fact that she asserted that the
principle was flexible in its application. If it meant no more than that the court
should have regard to the tribunal’s reasoning in reaching its own conclusion, I
should have little difficulty with it, since the tribunal’s reasons will almost invariably
be before the court and will carry as much persuasive weight as their cogency gives
them. That is not, however, what I understood her to mean, since it was essential
to her argument that the court should at least accord great weight to the tribunal’s
conclusions unless they are clearly wrong. However, as became clear in the course
of argument, it is impossible to formulate any satisfactory principle that falls
somewhere between a limited review akin to that which the court undertakes when
reviewing the exercise of a judicial discretion and a full re-hearing, not to mention
one that is also capable of flexibility in its application. Moreover, for the court to
defer to the tribunal’s conclusions in the manner suggested by [counsel] when it is
required to decide whether a particular state of affairs has been proved would be to
give the award a status which the proceedings themselves call into question. It is
for similar reasons that our courts have consistently held that proceedings
challenging the jurisdiction of an arbitral tribunal under s. 67 of the Arbitration Act,
1996 involve a full rehearing of the issues and not merely a review of the
arbitrators’ own decision.” (per Moore-Bick LJ. at para. 21, p. 775)
88. In the UK Supreme Court, Lord Mance stated:-
“30. …The tribunal’s own view of its jurisdiction has no legal or evidential value, when
the issue is whether the tribunal had any legitimate authority in relation to the
Government at all. This is so however full was the evidence before it and however
carefully deliberated was its conclusion. It is also so whatever the composition of
the tribunal – a comment made in view of Dallah’s repeated (but no more attractive
for that) submission that weight should be given to the tribunal’s ‘eminence’, ‘high
standing and great experience’ …
31. This is not to say that a court seised of an issue under [the relevant provisions of
the New York Convention and the English 1996 Act] will not examine, both carefully
and with interest, the reasoning and conclusion of an arbitral tribunal which has
undertaken a similar examination. Courts welcome useful assistance…” (per. Lord
Mance at paras. 30 and 31, p. 813)
89. Lord Mance approved of the summary of the correct position set out in the defendant’s
written submission in the case, namely, that:-
“In making its determination, the Court may have regard to the reasoning and
findings of the alleged arbitral tribunal, if they are helpful, but it is neither bound
nor restricted by them.” (para. 31, p. 813)
90. In his judgment, Lord Saville also accepted that summary as being correct. Prior to that,
he stated:-
“In my judgment therefore, the starting point cannot be a review of the decision of
the arbitrators that there was an arbitration agreement between the parties. Indeed
no question of a review arises at any stage. The starting point in this case must be
an independent investigation by the court of the question whether the person
challenging the enforcement of the award can prove that he was not a party to the
arbitration agreement under which the award was made. The findings of fact made
by the arbitrators and their view of the law can in no sense bind the court, though
of course the court may find it useful to see how the arbitrators dealt with the
question. Whether the arbitrators had jurisdiction is a matter that in enforcement
proceedings the court must consider for itself.” (per Lord Saville at para. 160, p.
850)
91. I accept that these observations made by the UK Supreme Court, albeit in the context of
the enforcement of an arbitral award under the New York Convention, accurately describe
the approach which a court should take in “deciding the matter” of jurisdiction under
Article 16(3) of the Model Law and the weight which should be given to the arbitrator’s
decision or ruling on jurisdiction. The court can carefully consider the reasoning and
conclusions of the arbitrator and may find them to be of useful assistance but is not
bound or restricted by those findings. The role of the court under Article 16(3) of the
Model Law is to embark on a full and complete rehearing of the question of jurisdiction
and is required to decide that question itself.
92. Interestingly, a similar view have been expressed by the courts of Singapore. The High
Court of Singapore expressed the view in Insigma Technology Co. Ltd v. Alstom
Technology Ltd [2008] SGHC 134 that the court’s jurisdiction to decide on the jurisdiction
of an arbitral tribunal is an “original jurisdiction and not an appellate one” on the basis of
the wording of Article 16(3) providing for the court to “decide the matter” of jurisdiction
after the tribunal made a ruling that it had jurisdiction. The court (Judith Prakash J.)
stated that “this is not language implying that the court’s powers to act are of an
appellate nature” (at para. 21).
93. The Court of Appeal of Singapore confirmed the position both in relation to Article 16(3)
and Article 36(1) (which provides for the grounds for refusing recognition or enforcement
of an arbitral award). In PT First Media TBK v. Astro Nusantara International BV
[2013] SGCA 57, Sundaresh Menon CJ. (delivering the judgment of the court) cited with approval
the decision of the UK Supreme Court in Dallah and, in particular, the judgment of Lord
Mance and, where he stated that the arbitral tribunal’s own view as to its jurisdiction “has
no legal or evidential value… [and] this is so however full was the evidence before it and
however carefully deliberated was its conclusion…” (at para. 30) (quoted by the Chief
Justice at para. 162), and stated:-
“The extracted passage represents the leading statement on the standard of curial
review to be applied under the New York Convention, and there is no reason in
principle for the position under the Model Law to be any different. Significantly, the
jurisprudence of the Singapore courts has also evinced the exercise of de novo
judicial review… We affirm these local authorities. In particular, we also agree with
Lord Mance JSC that the tribunal’s own view of its jurisdiction has no legal or
evidential value before a court that has to determine that question.” (at para. 163)
94. In summary, therefore, in deciding on an application in relation to jurisdiction under
Article 16(3) of the Model Law, the court is exercising an original and not an appellate
jurisdiction. It is not conducting an appeal or a review but a complete de novo rehearing
on the question of jurisdiction. While the decision or ruling of the arbitral tribunal on the
question of jurisdiction and the reasons for its decision or ruling may be of interest and of
assistance and while the court may have regard to the reasoning and findings of the
arbitral tribunal, if they are helpful, it is not bound or restricted by them. Further, the
court does not afford deference to the arbitrator when exercising its function under Article
16(3) of the Model Law in deciding on the question of jurisdiction. As indicated earlier, the
decision of the Supreme Court in Samuel Kingston makes clear that it is not appropriate
for the court to show deference to the decision of the arbitrator where the issues before
the court were issues of law and that it would “be taking judicial humility to excessive
lengths” (in the words of O’Donnell J.) to afford such deference. While those observations
were made in the context of the pre-2010 Act legislative regime, in my view, they are
equally relevant to the approach the court is required to take in deciding jurisdiction
under Article 16(3) of the Model Law. While I was urged by the claimant to have regard to
the very significant expertise of the arbitrator in the field of dispute resolution in the
construction field, and while that experience was not in any way contested by the
respondent, and while I have no hesitation whatsoever in accepting the undoubted
experience and expertise of the arbitrator, it would not be appropriate for me to afford
any deference to the arbitrator’s decision on jurisdiction or the reasons for that decision
having regard to the function which I am required to exercise under Article 16(3) of the
Model Law, as discussed and considered in the authorities to which I have referred. I will,
therefore, proceed to consider the question of jurisdiction in accordance with the
principles derived from those cases and without exercising any deference to the decision
of the arbitrator or to the reasons given by her for her decision.
Consequences of Termination of Subcontract.
Respondent’s Position on Consequences
95. The parties made submissions on the consequences of termination of the subcontract
and on the respective rights and entitlements of the claimant following such termination.
The essential contention of the respondent was that on termination of the subcontract,
there was a fundamental alteration of the contractual relationship between the
respondent, as contractor, and the claimant, as subcontractor. This fundamental
alteration occurred as a consequence of the importation into the subcontract, by virtue of
clause 12(b) of the subcontract, of the provisions of clause 12 of that contract and, in
particular, the importation of the provisions of clause 12.2 of the main contract which sets
out the consequences of a default termination. The respondent drew attention, in
particular, to the provisions of clause 12.2.2 of the main contract (as applied and adapted
to the subcontract) which provides that the payment of all sums that may be due from
the contractor is “postponed” on termination of the subcontract and that the contractor
“shall not be required to make any further payment to the subcontractor except as
provided in [clause 2.2]”. The respondent then relied on the fact that it determined that
the termination value under clause 12. 2.3 was nil and that the termination amount under
clause 12.2.9 was €768,911.27 with that sum thereby being payable by the claimant to
the respondent under clause 12.2.11. The respondent contended that these provisions of
clause 2.2 of the main contract (as adapted and applied to the subcontract) effected a
substantive change in the contractual relations between the claimant and the respondent
on the termination of the subcontract rather than a mere procedural change. As a
consequence, the respondent contended that on termination of the subcontract, the
claimant can only make a claim for payment under the subcontract in accordance with
clause 12.2 of the main contract (as adapted and applied to the subcontract) and not
under clauses 9, 10 or 11 of the subcontract.
Claimant’s Position on consequences
96. The claimant’s position is that clause 12.2 effects a procedural rather than a substantive
change to the contractual relationship between it and the respondent. It contended that
the substantive entitlements of the parties (which would inform the determinations made
by the respondent in respect of the termination value and the termination amount) were
to be primarily determined by reference to the contractual entitlements and obligations of
the parties under the provisions of the subcontract. The claimant contended that while its
entitlement to payment under the subcontract is postponed upon the termination of the
subcontract, clause 12.2 provides for the procedural mechanism by which its entitlement
to be paid (or otherwise) is determined albeit that its substantive entitlement to be paid is
governed by the other provisions of the subcontract such as clauses 9, 10 and 11, where
applicable. Clause 12.2 does not create or confer any right or claim to payment which is a
pre-existing right or entitlement under the other relevant provisions of the subcontract, in
the claimant’s submission. The claimant stressed in that regard the references in clauses
12.2.3 and 12.2.9, with regard to the determination of termination value and termination
amount, to the respective entitlement to payment of the subcontractor and the contractor
“in accordance with” the subcontract, although no express reference is made to the
relevant provisions of the subcontract conferring the entitlement to payment. The
claimant contended that clause 12.2 is regulating what is to happen on termination and
preserving a right of set off as between the contractor and the subcontractor on the
termination of the subcontract. The claimant, therefore, submitted that where a claim for
additional remuneration is made by a subcontractor, following the termination of the
contract, that claim will necessarily entail a challenge to all determinations whether made
during the currency of the subcontract or following termination which are alleged by the
contractor to have the effect of denying or defeating the subcontractor’s entitlement to
such payment.
White Cedar
97. Both the respondent and the claimant made reference in the course of their submissions
to the judgment of the High Court (Laffoy J.) in White Cedar Developments Limited v.
Cordil Construction Limited (In Receivership) [2012] IEHC 525 (“White Cedar”). That was
a judgment on an application by the plaintiff for an interlocutory injunction restraining the
presentation and advertising of a petition to wind-up the plaintiff pursuant to s. 213 of the
Companies Act, 1963. The plaintiff was the employer and the defendant was the
contractor under a building contract which incorporated almost identical provisions of the
public works contract as applies to the subcontract at issue in the present case. The
contract was terminated by the plaintiff under the provisions of clause 12.1 of the
contract. A conciliation process, which was in place prior to the termination, continued
after the termination and led to a recommendation that the plaintiff pay a particular sum
to the defendant under the contract. Following termination of the defendant’s obligation
to complete the works, the plaintiff made alternative arrangements for their completion.
The receivers of the plaintiff demanded payment from the defendant on foot of the
recommendation of the conciliator. The demand was expressly stated to be a notice
pursuant to s. 214 of the 1963 Act. In seeking to restrain the presentation and
advertising of a winding up petition by the defendant, the plaintiff contended that there
was no debt due by the plaintiff to the defendant when the demand was served and,
alternatively, that the amount of the demand was less than the amount due to the
plaintiff on a crossclaim.
98. In the course of her judgment, Laffoy J. considered the provisions of clauses 11 and 12 of
the contract (which are almost identical to those at issue in the present case). As in the
present case, there was no issue in that case as to the entitlement of the plaintiff to
terminate the contract. The court considered the provisions of clause 12.2 dealing with
the consequences of a default termination and referred to the very same provisions that
are at issue in the present case (save that clause 12.8 was not incorporated into the
subcontract in the present case). The court then discussed the provisions of clause 13
which dealt with disputes and their resolution and made provision in the first instances for
conciliation and then for arbitration.
99. Having analysed those provisions, Laffoy J. concluded that the proper application of the
provisions in the context of the factual position in that case was clear. She held that as
neither party had given notice of dissatisfaction in relation to the recommendation of the
conciliator, the recommendation was conclusive and binding on the parties and the
plaintiff was obliged to comply with it. However, she stated that that obligation was “one
obligation only in the overall scheme of mutual rights and obligations of the parties under
the [contract], all of which continue to apply notwithstanding the fact that one dispute
may be resolved in accordance with Clause 13” (per Laffoy J. at para. 18).
100. Laffoy J. continued (at para. 18):-
“Secondly, the rights and obligations to which the plaintiff’s termination of the
defendant’s obligation to complete the Works gave rise under Clause 12 provide
that all the defendant is entitled to following termination is the termination value,
as determined in accordance with Clause 12.2.3, and the plaintiff is entitled to set
off against that sum the termination amount as determined in accordance with
Clause 12.2.9. Both determinations are to be carried out by the ‘Employer’s
Representative’. Obviously, in determining the termination value, the Employer’s
Representative would have to factor in the sum which the Conciliator recommended
is to be paid by the plaintiff to the defendant. Thirdly, the termination amount does
not fall to be determined by the Employer’s Representative until the Works have
been completed.”
101. Laffoy J. noted that it was the plaintiff’s contention that the termination amount likely to
be certified would be well in excess of the termination value so that there would be no
sum due to the defendant from the plaintiff, although it was acknowledged by the plaintiff
that it was a matter for the employer’s representative to determine both termination
value and termination amount (as it is a matter for the respondent under the subcontract
in the present case). Bearing in mind the test to be applied on an application to restrain
the presentation or advertising of a winding up petition, Laffoy J. was satisfied that not
only had the plaintiff disputed the debt in good faith and on substantial grounds but had
done so in a “very convincing manner” (para. 29). Laffoy J. continued:–
“Having regard to the provisions of Clause 12.2, of the Building Agreement, until
such time as the termination amount has been determined in accordance with
Clause 12.2.9 whether there is any amount due to the defendant by the plaintiff
cannot be determined. Once the termination amount is determined, if it is less than
the termination value, the defendant will be entitled to demand repayment of the
difference from the plaintiff by delivering an invoice in accordance with Clause
12.2.11 and the plaintiff will then have 15 working days in which to make payment.
In short, the service of the s. 214 demand was premature. It has not been shown
that the plaintiff is indebted to the defendant, and, accordingly, the defendant does
not have standing to present a petition to wind up the plaintiff.” (para. 29).
In those circumstances, the court made an order restraining the defendant from
presenting or advertising the petition to wind up the plaintiff.
102. While both parties made reference to the judgment in White Cedar and while it may be
the only judgment of the Irish Courts dealing with the provisions of clause 12.2 of the
relevant public works contract (which applied in that case and in the present case), in my
view, it does not advance the position of either party in this case. All that Laffoy J. was
deciding was that until the procedures provided for under clause 12.2 in relation to the
determination of the termination value and the termination amount were concluded, it
was not possible to determine whether any sum would be due by the plaintiff to the
defendant or vice versa. In those circumstances, the service of a statutory demand under
the 1963 Act and any attempted presentation or advertisement of a petition would be
premature and inappropriate. Therefore, Laffoy J. was in a position to apply the well-
established case law that where a debt is disputed in good faith and on substantial
grounds, it would be an abuse to proceed with the presentation or advertising of a
winding up petition.
103. The judgment in White Cedar does not, nor was it intended to, determine the question as
to whether the provisions of clause 12.2 of the public works contract effected a
fundamental and substantive alteration in the contractual relationship of the parties in
terms of the entitlement or otherwise to payment of either party to the contract or
whether it merely affected a procedural change in terms of regulating the procedure by
which the parties’ respective entitlements and obligations under the relevant contract
were to be addressed following the termination of the relevant contract.
Wren
104. Another authority referred to by both parties was Thomas Wren “Public Works in Ireland
Procurement and Contracting” (2014, Clarus Press). Wren provides a commentary on the
provisions of clause 12.2 of the public works form of contract. Both parties sought to rely
on that commentary in support of their respective positions.
105. At para. 16-85, Wren comments generally on the provisions of clause 12.2. He says as
follows:-
“This provision, when read together with clause 12.8, amounts to an exclusive remedies
schema or code as commented by the BLR editors in reporting the decision of the
[English] Court of Appeal in Stocznia Gdynia v. Gearbulk Holdings [[2009] EWCA Civ 75,
[2009] BLR 196]. For the greater part, clause 12.2 is prescriptive in nature. The start-
point is twofold in that it assumes the contractor was in default and that a valid notice of
termination was served by the employer. Where either or both are not contested by the
contractor, the procedure acts to cut in and foreclose on other rights and obligations
contained in numerous other provisions of the GCCC major forms, clause 11 in
particular.” (para. 16-85, p.683)(footnotes omitted)
It should be noted, however, that the subcontract in the present case does not incorporate the
provisions of clause 12.8 of the main contract.
106. In commenting on clause 12.2.2 providing for the postponement of payment, Wren
observes (at para. 16-87) that provision “effectively freezes all further payment of monies
as would otherwise have been due to the contractor pursuant to clause 11, except as
clause 12.2 provides”.
107. Having commented upon the determinations as to termination value and termination
amount, Wren then observes in relation to clause 12.2.11 (in relation to the settlement of
account under clause 12.2) as follows:-
“Under this provision, the two figures represented by the supplementary terms
‘termination value’ and ‘termination amount’ as determined by the ER form the
basis for a final settlement of account as between the parties. Under the exclusive
code which clause 12.2 provides, the employer is entitled to recover the
termination amount from the contractor. If the sum so certified by the ER is less
than the termination value, then the former is deducted by way of contractual
setoff and any remaining balance on the termination value shall be due to the
contractor, subject to the contractor raising an invoice for the balance. In this
respect, the two-stage payment mechanism in clause 11 is maintained, with the
employer having 15 working days to pay the amount of the invoice.” (para. 16-101,
pp. 689-690) (footnotes omitted).
108. Again, it seems to me, that these passages from Wren do not conclusively determine the
issue as to whether clause 12.2 fundamentally and substantively alters the contractual
relationship between the contractor and the subcontractor or whether merely affects a
procedural change regulating the entitlement to payment in accordance with the
provisions of clause 12.2. However, in my view, it is unnecessary for me to resolve that
issue in determining the question of the arbitrator’s jurisdiction in this arbitration. It
would, I believe, be inappropriate for me to express a concluded view on this issue since I
have concluded that the arbitrator does have jurisdiction in relation to the claims and it
would, therefore, be wrong for me to express any concluded view as to whether clause
12.2 of the main contract (applied to the subcontract in the present case) constitutes a
complete separate code which fundamentally and substantively alters the contractual
relationship between a contractor and a subcontractor or whether it merely sets out the
procedural mechanism by which the parties’ rights and entitlements to additional
payments under the contract are to be regulated following the termination of the
contract. That is a matter which ultimately may well have to be determined by the
arbitrator and I will refrain, therefore, from expressing any concluded view on the issue.
However, I should make clear that even if I were to assume that the respondent is correct
in its contention that there is such a fundamental and substantive alteration in the
contractual relationship between the parties, I would have still reached the same decision
which I have reached in terms of the arbitrator’s jurisdiction.
Detailed Consideration of Jurisdiction Issue
109. I now move to consider the substance of the dispute between the parties on the question
of jurisdiction. This will involve a consideration of the legal principles applicable to the
construction of a notice referring a dispute to arbitration and of the principles to be
applied by a court in determining whether a particular dispute has been referred to
arbitration. In doing so, it will be necessary for me to consider two separate but
inextricably related strands or principles of law which have been considered quite
extensively by the Courts of England and Wales.
110. It is, I believe, necessary for me to summarise in relatively brief terms the respective
contentions of the parties on the question of jurisdiction. I will set out at this point in
relatively general, albeit brief, terms, the respective contentions of the parties. I will,
where appropriate, consider further and in more detail those respective contentions when
addressing the applicable legal principles.
Respondent’s Position on Jurisdiction
111. In broad terms, it is the respondent’s position that the only dispute referred to arbitration
on foot of the notice to refer is the dispute arising from the making by the claimant of the
9th March, 2011 claim and from the rejection of that claim by the respondent in the 23rd
March, 2011 rejection. The respondent contended that no dispute has been referred to
arbitration concerning the validity or otherwise of the respondent’s determinations as to
termination value or termination amount or concerning any claim by the claimant for
payment under clause 12 of the subcontract. While the respondent accepted that a
dispute concerning the validity of the determinations as to termination value or
termination amount or as to any claim for additional payment under clause 12 could have
been referred to arbitration under the provisions of clause 13(a) of the subcontract, it was
the respondent’s contention that no such dispute in respect of those issues was in fact
referred. The respondent further contended that while any defence which might be open
to it to raise by way of defence in response to the claim referred (including the
determinations made by it under clause 12.2 as to termination value and termination
amount) would be encompassed within the scope of the dispute referred to arbitration as
this would be a matter of procedural fairness to the respondent. The respondent did not
accept that any response which the claimant might have or wish to advance in respect of
any such defence or defences is also within the scope of the reference. The respondent
submitted that if it were open to the claimant to rely on any such response or responses
to any defence or defences which the respondent may wish to raise to the claimant’s
claim, it would mean that it would never be possible to raise a jurisdiction objection
before an arbitrator and any such objection would always be capable of being overcome.
112. The respondent contended that it was not open to the arbitrator, and is not open to the
court, to have regard to correspondence between the parties, such as the Hussey Fraser
letters of 13th November, 2014 and 19th December, 2014 or the Maples letter of 1st
December, 2014 in construing the notice to refer and, in particular, in determining the
scope of the dispute referred to arbitration on foot of that notice. In the alternative, the
respondent contended that if it were open to the arbitrator, and is open to the court, to
have regard to that correspondence, notwithstanding that it is not expressly referred to in
the notice to refer, in construing or interpreting the notice and the scope of the dispute
referred to arbitration, that correspondence does not support the contention that the
claimant had put in issue the validity of the respondent’s determinations as to termination
value or termination amount or its entitlement to additional payment under the provisions
of clause 12.2 of the subcontract. In addition, the respondent also relied on clause 13(a)
of the subcontract itself which requires that the notice to refer “state the issues in
dispute” and contended that the notice to refer does not state any issue in relation to
clause 12 or in relation to the respondent’s determinations as to termination value or
termination amount under clause 12.2.
Claimant’s Position on Jurisdiction
113. The claimant’s position can be briefly explained in general terms. The claimant contended
that it is necessary to construe the notice to refer by reference to the state of affairs
which existed as of the date of the notice. It maintained that the arbitrator was, and the
court is, required to construe the notice in light of the background factual matrix which
would include the 9th March, 2011 claim and the 23rd March, 2011 rejection as well as
the subsequent correspondence between the parties following the termination of the
subcontract including the respondent’s determinations as to termination value or
termination amount and the Hussey Fraser letters of 13th November, 2014 and 19th
December, 2014 and the Maples letter of 1st December, 2014 as well as the
correspondence in connection with the bondsman proceedings. While asserting that the
notice must be construed in light of this factual background matrix, the claimant
contended that, although its claim is as set out in the 9th March, 2011 claim, nonetheless
the correspondence demonstrates that as of the date of the notice to refer in March,
2015, the claimant had taken issue with the respondent’s determinations as to
termination value and termination amount and that, therefore, the validity of those
determinations and the entitlement of the claimant to additional payment, whether under
clause 12 of the subcontract or otherwise, was within the scope of the dispute referred to
arbitration by the notice to refer. The claimant made the further point that since it is
accepted that the respondent is entitled to rely on clause 12 and on its determinations as
to termination value and termination amount in defence of the claimant’s claim, the
dispute referred must, therefore, include those defences and any response which the
claimant may have to them. While accepting that the notice to refer makes no express
reference to clause 12 of the subcontract or to any challenge to the validity of the
determinations made by the respondent as to termination value and termination amount,
the claimant contended that it was not necessary to refer expressly to those issues in the
notice to refer as it was clear from the factual background matrix, including the
correspondence between the parties, that as of the date of the notice to refer, a dispute
had arisen between the parties in relation to these various issues.
114. Although it was accepted by the claimant that it was necessary for it to seek to amend its
statement of case, in order to deal with the points raised by the respondent in its
statement of defence, including the defences and jurisdiction objections raised by the
respondent in reliance on clause 12.2 and on the determinations which the respondent
had made thereunder, it maintained that that gave rise to a pleading point rather than a
jurisdictional point and that it was open to the arbitrator to permit the claimant to amend
its statement of case to include a challenge to those determinations and otherwise to deal
with the points sought to be raised by the way of defence in reliance on clause 12.2.
Finally, and by way of a fallback position, the claimant sought to rely, in particular, on the
provisions of clause 5.2 of the 2000 Procedure which was expressly incorporated into the
subcontract by clause 13(c)(2). The claimant contended that the arbitrator had
jurisdiction over issues in relation to clause 12.2 and the validity of the determinations as
to termination value and termination amount in that those issues were “connected with
and necessary to the determination of any dispute or difference already referred to [the
arbitrator] whether or not any condition precedent to referring the matter to arbitration
had been complied with”. The claimant also sought to rely on certain other provisions of
the 2000 Procedure (including clause 2.1 and clause 2.3). In response, the respondent
did not accept that the 2000 Procedure was of any assistance to the claimant in light of
what it regarded as the clear terms of the notice to refer and that while all defences to
the claim actually made and referred would travel with the referred claim and be within
the jurisdiction of the arbitrator, additional claims intended to overcome or defeat those
defences would not.
115. Broadly speaking, those are the respective contentions of the parties on the jurisdiction
question. To resolve this issue, it is necessary to refer to some statements of the relevant
legal principles applicable to the construction of notices to refer and to the ascertainment
of the scope or ambit of a dispute referred to arbitration.
Construction of Notice to Refer: Legal Principles
116. The proper approach to be taken to the construction of a notice to refer a dispute or
disputes to arbitration has been the subject of much discussion and consideration in
leading academic texts and in judgments of the Courts of England and Wales. I will
consider in this part of my judgment some of those texts and cases. While I have not
referred to all of the cases open to me, as to do so would be unnecessary, I have
considered all of the relevant cases in forming the views expressed in this judgment.
117. In Russell on Arbitration (24th Ed.) (2015), the authors consider the requirements of a
notice to refer to arbitration and the approach to be taken in determining the scope of the
reference. They state as follows:-
“5-027 Identifying matters in dispute. Whilst it is not a requirement of the statute, the
notice of arbitration should identify the matters in dispute and indeed there may be
a contractual requirement to do so. Care should be taken to identify all the matters
in dispute which are to be determined in the arbitration. This is because the tribunal
will have jurisdiction to decide only those matters actually referred, and if there is
doubt about whether a particular matter has been included, a tribunal’s jurisdiction
to deal with it will be open to challenge. Consequently, it is advisable to include in
the notice of arbitration some general wording which embraces all the outstanding
matters in dispute between the parties, as well as specific wording identifying clear
and discreet issues to be decided which can be described in the notice.
5-028 Scope of the reference. Whether a particular matter is within the reference will
be determined as a matter of construction of the notice of arbitration, giving the
words used their natural meaning in the context in which they were used and
applying an objective test. The scope of matters that can be referred will normally
be constrained by the scope of the agreement to arbitrate, although the parties
may agree that the reference should be broader and can agree an ad hoc
submission of issues enlarging the scope of the tribunal’s jurisdiction beyond their
original agreement to arbitrate. The scope of the reference may include both claims
by a claimant and counterclaims brought by a respondent, which again must be
within the agreement to arbitrate. The factual background to the giving of the
notice and any previous communications between the parties concerning the issues
between them will also be relevant in construing the scope of the reference to
arbitration. If, by the time the notice of arbitration is given, the parties’ previous
communications indicate that it would be natural to expect the reference to include
all the outstanding disputes, that fact may be taken into consideration. The
reference may also include claims arising subsequent to the commencement of the
arbitration if the notice of arbitration demonstrates the parties’ intention to do so.
Provided they are within the scope of the reference, the tribunal has a discretion
whether to permit new claims to be introduced in the course of the arbitration, but
if they are outside the scope of the reference, new claims cannot be entertained
without agreement of the parties.” (pp. 205-206)
118. In one of the leading Irish texts, Hutchinson “Arbitration and ADR in Construction
Disputes” (2010), the author addresses the question of the adequacy of the notice to
refer to arbitration as follows:-
“6-11 In every case, the notice must provide sufficient details so as to identify the dispute
or disputes to which it relates with sufficient particularity. The leading cases
Interbulk Limited v. Ponte DEI SOSPIRI Shipping Co (The “Standard Ardour”)
[1988] 2 Lloyd’s Rep 159, where Saville J. held that the notice must not only
‘require’ the recipient to appoint or concur in the appointment of an arbitrator, but,
further said (emphasis added):-
‘In my view, when the question arises whether an arbitral tribunal constituted
as in the present has jurisdiction to determine a particular dispute or claim it
is necessary to look objectively at what passed between the parties to the
reference, and on that basis to determine whether or not any particular
matter is included in the reference… It is not sufficient for a party privately to
seek to invest his arbitrator with power to determine a particular claim unless
this is also made clear to the other party’
6-12 Thus, it is not possible to defeat the time limits by issuing a ‘general’ notice to refer
in respect of an unknown dispute so as to constitute a valid reference for a dispute
not yet arisen…
6-13 Once sufficient detail has been provided in the notice, however, it is not essential
that it be an exhaustive catalogue of all the issues in dispute in issue between the
parties – further issues can be introduced at a later stage provided they are
founded in the same fact pattern and contractual claim (Panchaud Freres S.A. v.
Etablissements General Grain Co [1970] 1 Lloyd’s Rep 159).”
119. Both parties referred to and relied upon these passages from Russell and Hutchinson. I
agree that the statements of principle set out in the passages from both texts quoted
above represent the law in this jurisdiction. I should observe, however, that the
respondent submitted that the statement in Hutchinson that further issues could be
introduced in an arbitration after the notice to refer, provided those further issues are
“founded in the same fact pattern and contractual claim”, is incorrect and is not
consistent with the decision of the Court of Appeal of England and Wales in Kenya
Railways v. Antares Pte Limited [1987] 1 Lloyd’s Rep 424. The respondent relied in
support of that contention on the emphasis placed in the decision in that case on the
consensual basis of arbitration which undermined the contention by the appellant in that
case, that the court had the power to add or substitute a new party to an existing
arbitration. Having so found (on an issue which arose in the case before it), the Court of
Appeal went on to state (in the judgment of Lloyd L.J.) as follows:-
“I have equal difficulty in seeing how the court could order the addition or
substitution of a new cause of action, for the arbitrator’s jurisdiction is confined to
the dispute or disputes which have been referred to him. He has no jurisdiction to
decide disputes which have not been referred to him even though they may arise
out of the same facts or substantially the same facts…. If the new cause of action
falls outside the reference, then, unless the parties agree to refer the new cause of
action, the arbitrator would have no jurisdiction to deal with it.” (per Llyod L.J. at
p.432)
120. That statement is fine as far as it goes. It does, however, beg the question as to whether
the particular dispute or disputes at issue fell within the scope of the reference made. I do
not myself see how these obiter dicta of Lloyd L.J.in Kenya Railways are inconsistent with
what Hutchinson said in the impugned passage of para. 6-13 of his text. He made clear
that further issues could be introduced after the notice to refer provided they are founded
not only on the same fact pattern but also on the same “contractual claim”. Thus,
Hutchinson was not talking about the introduction of a new cause of action as such but
rather an additional issue or aspect as part of the same contractual claim which has been
referred to arbitration. The case cited by Hutchinson in support of the principle referred to
by him in the passage, criticized by the respondent in the present case is the decision of
the Court of Appeal of England and Wales in Panchaud Fréres S.A. v. Établissements
General Grain Company [1970] 1 Lloyd’s Rep 159. In that case the court held that
original claim made within time was that there was entitlement on the part of the buyers
to reject a shipment of goods on the basis that the goods did not conform to the
contractual description. That claim was made within the contractual time for the
arbitration. However, the buyers sought to make an additional claim (outside the relevant
contractual time limit) to the effect that they were entitled to reject the goods for late
shipment. The Court of Appeal held (obiter) that the claim to reject for late shipment was
a different claim to the claim to reject the goods as not being within the contractual
description. They were, therefore, different contractual claims. I do not, therefore, agree
that the statement of principle in Hutchinson is incorrect. However, it should be said that
not a great deal turns on that point for the purposes of my ultimate conclusion on the
issues in this case.
121. Both parties relied on the judgment of Saville J. in Interbulk Limited v. Ponte dei sospri
Shipping Co (The “Standard Ardour”) [1988] 2 Lloyd’s Rep 159. In that case, the court
held that the particular reference to arbitration at issue in the case referred a claim to
arbitration but did not refer a counterclaim. The judgment is important for present
purposes in that Saville J. identified the test to be applied in determining whether a
particular dispute or claim has been referred to arbitration. He said as follows:-
“In my view, when the question arises whether an arbitral tribunal constituted as in
the present case has jurisdiction to determine a particular dispute or claim it is
necessary to look objectively at what passed between the parties to the reference,
and on that basis to determine whether or not any particular matter is included in
the reference. This seems to me to be the approach of Mr. Justice Neill in The World
Ares [1984] 2 Lloyd’s Rep 481 and one which I adopt. It is not sufficient for a party
privately to seek to invest his arbitrator with power to determine a particular claim
unless this is also made clear to the other party. That was not done in the present
case.” (p.162)
122. I agree that this is the approach to be taken in interpreting the notice to refer in the
present case. It will be necessary for me to look objectively at what passed between the
claimant and the respondent and, on that basis, to determine whether issues in relation
to clause 12 of the main contract as applied to the subcontract and issue concerning the
validity of the determinations made by the respondent in relation to termination value
and termination amount were included in the reference.
123. The claimant contended that adopting this approach entitles the court to look at the
background to or factual matrix in relation to the reference to arbitration. The respondent
did not accept that the court should look at the factual background or matrix unless the
description of the dispute being referred in the notice to refer is ambiguous. In any event,
it contended that even if the court can look at the factual background or matrix, it does
not support the construction of the notice to refer urged on the court by the claimant. In
my view, it is appropriate for the court to look at the factual background or matrix leading
up to the notice to refer and it is not necessary to establish an ambiguity in the language
used in the notice to refer before regard can be had to that background or matrix.
124. That conclusion is, I believe, supported by another judgment to which both parties
referred, Lesser Design & Build Limited v. University of Surrey (1991) 56 BLR 57. In that
case, Hirst J. had to construe a reference to arbitration in circumstances where the
respondent to the arbitration challenged the jurisdiction of the arbitrator to determine
certain matters which it claimed had not been referred to arbitration. The court,
therefore, had to construe the reference to arbitration. Hirst J. noted that:-
“It is common ground that the matter must be decided on the normal rules of
construction, i.e. giving the words their natural meaning in their context, and
applying an objective test.” (at p. 67)
125. This is similar to what Saville J. had said in The “Standard Ardour”. In approaching the
exercise of construction, Hirst J. looked at the background or matrix and, in particular,
the correspondence passing between the parties prior to the reference to arbitration. Hirst
J. observed that in reaching his conclusions on the scope of the reference, it was
“convenient first to consider the probabilities in the light of the background or matrix” (p.
71). He concluded that “the background or matrix strongly supports [the claimant’s]
submission on the inherent probabilities” (p. 72). The court then analysed the terms of
the reference letter and concluded that the arbitrator had jurisdiction in respect of the
disputed issues.
126. In a commentary on the judgment by the editors of the Building Law Reports, a number
of useful observations can be identified. In commenting on the judgment, the editors
observed:-
“…It is clear from the approach adopted by Hirst J. that a court will not approach
the construction of a letter referring certain matters to arbitration as if it were a
statute. It is to be considered in the light of the claims which the parties have made
during the course of the contract and the differences which existed between them.
Hirst J. attached considerable importance to the factual matrix within which the
[reference letter] had been written…” (p. 59)
It should be noted, however, that the editors felt that the judge may have placed a little
too much emphasis on the desires of the contractor to include all outstanding issues
within the scope of the arbitration.
127. I agree with the two important points made by the editors in their commentary. First, I
agree that the court should not construe the notice to refer as if it were a statute and
should not approach the construction of the notice in an excessively legalistic fashion.
This point was also strongly made in Cantillon Limited v. Urvasco Limited [2008] EWHC
282 (TCC) to which I will refer later. Second, it is open to a court in construing a
reference to arbitration to consider the factual matrix in respect of the reference. The
outcome of Lesser Design indicates that recourse to the factual matrix can be of
considerable assistance in determining the scope of the dispute referred.
128. A similar point was made by Judge Lloyd QC in KNS Industrial Services (Birmingham)
Limited v. S Limited [2000] All ER (D) 1153 (an adjudication case). Judge Lloyd QC
commented as follows:-
“When the jurisdiction of a person appointed to make a decision under a contract
(such as an adjudicator) is called into question, it is always necessary to ascertain
with precision what the decision-maker was authorised to do. The events leading up
to [the notice to refer] have to be examined in order to understand what dispute
the adjudicator was appointed to resolve.” (para. 14).
The court adopted the approach taken by Judge Thornton QC in Fastrack Contractors
Limited v Morrison Construction Limited [2000] 75 Con LR 33 where (again in the context
of an adjudication) the judge stated that it is generally a question of fact as to what is in
dispute between the parties and the dispute is “whatever claims, heads of claims, issues
or contentions or causes of action that are then in dispute which the referring party has
chosen to crystallise into an adjudication reference.”. Judge Thornton QC then stated:-
“A vital and necessary question to be answered, when a jurisdictional challenge is
mounted, is: what was actually referred? That requires a careful characterisation of
the dispute referred to be made. This exercise will not necessarily be determined
solely by the wording of the notice of adjudication since this document, like any
commercial document having contractual force, must be construed against the
background from which it springs and which will be known to both parties.” (para.
20)
129. While KNS and Fastrack were both adjudication cases, and while there are undoubtedly
differences between arbitration and adjudication (which takes place in a particular
statutory context in England and Wales), in my view, the observations made by both
judges have equal force in the case of a reference to arbitration. The reference must, in
my view, be construed against the background from which it emerges which is of course
known by both parties.
Scope of Dispute: Legal Principle
130. I was referred to several further decisions of the Courts of England and Wales on the
approach which should be taken by a court to ascertain the ambit or scope of a dispute
referred to arbitration. There is a vast number of cases on this issue and it is unnecessary
to refer to them all. However, two further points clearly emerge from these cases.
131. First, the point in time on which the court must focus in determining the ambit or scope of
a dispute referred to arbitration is the date of the commencement of the arbitration
process which will generally be the date of the reference to arbitration. That is clear from
several of the cases to which I have referred including Fastrack and Allied P&L Limited v.
Paradigm Housing Group Limited [2009] EWHC 2890. As noted earlier, in Fastrack Judge
Thornton QC observed that:-
“…The ‘dispute’ is whatever claims, head of claim, issues, contentions or cause of
action that are then in dispute which the referring party has chosen to crystallise
into an adjudication reference” (para. 20)
132. In Allied P&L (an adjudication case), Akenhead J. noted that it was necessary for the court
to “analyse what if any dispute has been referred at the time that the procedure to refer,
laid down in the contract or by statute, is initiated” (para. 29(c)).
133. I agree with these statements of principle. The scope or ambit of the dispute referred by
the claimant to arbitration must be determined by reference to the state of affairs
between the parties at the date of the notice to refer, 15th March, 2015.
134. The second important point which emerges from the English cases is that it is generally
unnecessary to specify in the document referring the dispute to arbitration the particular
defences or responses which the other party has advanced or wishes to advance in
opposition to the claim being made. As observed by Judge Lloyd QC in KNS:-
“A party to a dispute who identifies the dispute in simple or general terms has to
accept that any ground that exists which might justify the action complained of is
comprehended within the dispute for which adjudication is sought.” (para. 21)
135. In Cantillon (an adjudication case), Akenhead J. said:-
“It is, I believe, accepted by both parties, correctly in my view, that whatever
dispute is referred to the Adjudicator, it includes and allows for any ground open to
the responding party which would amount in law or in fact to a defence of the claim
with which it is dealing. Authority for that proposition includes KNS…” (para. 54)
136. Akenhead J. continued:-
“There has been substantial authority, both in arbitration and adjudication, about what
the meaning of the expression ‘dispute’ is and what disputes or differences may arise on
the facts of any given case. Cases such as Amec Civil Engineering Limited v. Secretary of
State for Transport [2005] EWCA Civ 291, [2005] 1 WLR 2339… and Collins (Contractors)
Ltd v. Baltic Quay Management (1994) Limited [2004] EWCA Civ 1757, 99 Con LR 1…
address how and when a dispute can arise. I draw from such cases as those the following
propositions:
(a) Courts (and indeed adjudicators and arbitrators) should not adopt an over legalistic
analysis of what the dispute between the parties is.
(b) One does need to determine in broad terms what the disputed claim or assertion
(being referred to adjudication or arbitration as the case may be) is.
(c) One cannot say that the disputed claim or assertion is necessarily defined or
limited by the evidence or arguments submitted by either party to each other
before the referral to adjudication or arbitration.
(d) The ambit of the reference to arbitration or adjudication may unavoidably be
widened by the nature of the defence or defences put forward by the defending
party in adjudication or arbitration.” (para. 55)
137. Akenhead J. continued:-
“In my view, one should look at the essential claim which has been made and the
fact that it has been challenged as opposed to the precise grounds upon which that
it has been rejected or not accepted. Thus, it is open to any defendant to raise any
defence to the claim when it is referred to adjudication or arbitration. Similarly, the
claiming party is not limited to the arguments, contentions and evidence put
forward by it before the dispute crystallised. The adjudicator or arbitrator must then
resolve the referred dispute, which is essentially the challenged claim or assertion
but can consider any argument, evidence or other material for or against the
disputed claim or assertion in resolving that dispute.” (para. 55)
138. In my view, these are significant observations by Akenhead J. as they are expressly
stated to refer not just to adjudication cases but also to cases involving arbitrations. The
judge was careful to expressly apply the statements of principle to arbitrations. The judge
also made clear that it would not be appropriate for a court to analyse the ambit or scope
of a dispute referred to arbitration in an overly legalistic manner. He also made the point
that not only was it open to a respondent to raise any defence to the claim which has
been referred to arbitration but also that the claimant was not limited to arguments,
contentions and evidence put forward by it before the dispute crystallised by the
reference to arbitration and that the arbitrator was entitled to consider “any argument,
evidence or other material for or against the disputed claim or assertion in resolving that
dispute”. I accept and agree with those statements of principle. In my view, they also
reflect the position in this jurisdiction.
139. Furthermore, as the respondent in the present case correctly maintained, procedural
fairness requires that a respondent should be entitled to raise any point or argument by
way of defence or response to the claim. This is particularly so, but not exclusively the
case, where the respondent has not had any input into the preparation of the reference.
However, it seems to me that procedural fairness requires more than that. It also requires
that a claimant who is faced with a point or argument raised by a respondent in response
to the claim should be entitled to deal with that point or argument and should not be
precluded from doing so or hamstrung in its response, provided that such response
directly arises from the defence advanced by the respondent and concerns an issue which
falls within the scope of the arbitration agreement and could have been referred to
arbitration at the outset. In my view, this is a fundamental requirement of procedural
fairness for a claimant.
140. Akenhead J. returned to this theme in Allied P&L (an adjudication case), where having set
out some further statements of principle, he reiterated what he had said earlier that the
court should not adopt an “overly legalistic analysis” of what the dispute between the
parties is and should instead “determine in broad terms what the disputed claim,
assertion or position is” (para. 30(c)). He continued:-
“It follows from the above that if a basic claim, assertion or position has been put
forward by one party and the other disputes it, the dispute referred to adjudication
will or may include claims for relief which are consequential upon and incidental to
it and which enable the dispute effectively to be resolved…” (para. 30(d))
141. It seems to me that these observations apply equally in an arbitration context and I do
not accept the argument advanced on behalf of the respondent that they must be
confined to adjudication in the context of the particular statutory scheme applicable to
that procedure in England and Wales. As I pointed out earlier, Akenhead J. made clear
that the statements of principle which he was setting out applied equally to arbitration.
142. The main reason why the respondent contended that the principles set out in these
English cases had to be seen in their proper context, being cases involving adjudication
under a particular statutory regime is that the governing statute precluded a multiplicity
of disputes being referred to adjudication. It is possible under that regime only to refer a
single dispute to adjudication. The respondent contended that, bearing that context in
mind, the court should be cautious about directly applying the propositions contained in
the adjudication cases to arbitration. The respondent is undoubtedly correct that the
statutory adjudication procedure in England and Wales differs in a number of respects
from arbitration. However, as I observed earlier, many of the propositions seen in the
cases are expressly stated to refer both to adjudication and arbitration. That is why I am
satisfied that the principles and propositions seen in those cases are applicable to
arbitration and correctly represent the position under Irish law.
143. In that regard Akenhead J. returned to the issue of the scope of a dispute referred to
adjudication and the adjudicator’s jurisdiction in Whitney Town Council v. Beam
Construction (Cheltenham) Limited [2011] EWHC 2332 (TCC). In comments expressly
applicable to adjudication and arbitration, Akenhead J. observed that:-
“It is almost impossible to give a definition which will work in every case as to what
a dispute is. It will usually involve a claim or assertion which is expressly or by
implication challenged or not accepted. It may be broad or narrow. It may be a one
or a multiple issue dispute.” (para. 32)
144. Having discussed the particular issue which arises in adjudication (namely, that a single
dispute only may be referred to adjudication), the judge went on to discuss how a dispute
can generate issues and sub issues as it proceeds. He said:-
“A particular dispute, somewhat like a snowball rolling downhill gathering snow as it
goes, may attract more issues and nuances as time goes on; the typical example in
a construction contract is the ever increasing dispute about what is due to the
contractor as each monthly valuation and certificate is issued; a later certificate
may accept amounts in issue previously not certified but then reject some more
items of work. One may in the alternative have a dispute, like the proverbial rolling
stone gathering no moss, which remains the same and unaffected by later events…”
(para. 33)
145. The rolling snowball is a useful metaphor for present purposes as it vividly demonstrates
that many issues or sub issues may arise in the context of a particular dispute which may
arise or develop as time goes on.
146. Akenhead J. referred to many of the cases which I have just mentioned including
Cantillon and Fastrack and then sought to draw together the various threads of principle
arising in those cases. Having done so, he drew the following conclusions:-
“(i) A dispute arises generally when and in circumstances in which a claim or assertion
is made by one party and expressly or implicitly challenged or not accepted.
(ii) A dispute in existence at one time can in time metamorphose into something
different to that which it was originally.
(iii) A dispute can comprise a single issue or any number of issues within it. However, a
dispute between parties does not necessarily comprise everything which is in issue
between them at the time that one party initiates adjudication; put another way,
everything in issue at that time does not necessarily comprise one dispute,
although it may do so.
(iv) What a dispute in any given case is will be a question of fact albeit that the facts
may require to be interpreted. Courts should not adopt an overly legalistic analysis
of what the dispute between the parties is, bearing in mind that almost every
construction contract is a commercial transaction and parties cannot broadly have
contemplated that every issue between the parties would necessarily have to
attract a separate reference to adjudication.
(v) The Notice of Adjudication and the Referral Notice are not necessarily determinative
of what the true dispute is or as to whether there is more than one dispute. One
looks at them but also at the background facts.
(vi) …
(vii) …” (para. 38)
147. Leaving aside the issue arising in adjudication under the statutory scheme in England and
Wales and the prohibition on referring more than one dispute to an adjudicator, it seems
to me that the conclusions expressed by Akenhead J. in Whitney are applicable to
arbitration and should be applied in the assessment of whether the respondent is correct
in its contention that issues in relation to clause 12 of the main contract as applied to the
subcontract, including issues concerning the validity of the determinations made by the
respondent as to termination value and termination amount are within the scope of the
reference to arbitration in the present case. I intend to apply those principles and
propositions as well as the others I have identified from the case law.
Summary of Guiding Principles
148. The following seem to me to be the guiding principles in the construction of a reference to
arbitration and in the ascertainment of the scope or ambit of the dispute referred to
arbitration:-
(1) The words of the notice to refer should not be construed as if they were contained
in a statute. The words used should not be analysed in an over legalistic manner.
(2) The relevant point in time for the purpose of ascertaining the scope of the dispute
referred to is the time of the reference to arbitration itself.
(3) In determining whether a particular dispute or claim has been referred, it is
necessary to look objectively at what has passed between the parties to the
reference up to the date of the reference. The words used must be given their
natural meaning in their context applying an objective test. The court can and
should have regard to the factual background or matrix of fact leading up to the
reference to arbitration.
(4) The focus should be on the essential claim which has been made and the fact that it
has been challenged as opposed to the precise grounds on which the claim has
been rejected or not accepted.
(5) The disputed claim or assertion is not necessarily defined or limited by the evidence
or arguments submitted by either side to each other before the reference to
arbitration.
(6) It is not necessary to set out in a reference to arbitration all of the grounds or
points of defence or response which the respondent may wish to rely upon in
resisting the claim. It is open to a respondent to raise any point or argument by
way of defence to the claim being made in the arbitration notwithstanding that the
point is not referred to in the reference to arbitration. This is a matter of procedural
fairness for a respondent.
(7) Procedural fairness works both ways. If it is open to a respondent to raise any
defence to the claim notwithstanding that it is not referred to in the reference to
arbitration as a matter of procedural fairness, so too should it be open to the
claimant to respond to any such defence sought to be relied upon by the
respondent. That too is a matter of procedural fairness for the claimant. Provided
such response directly arises from the defence raised and concerns an issue which
falls within the scope of the arbitration agreement.
(8) A particular dispute may comprise one issue or several issues. Or there may be
several disputes between the parties. A dispute or disputes may attract more issues
and may become more nuanced as time goes on. In order to identify the dispute or
disputes and the issue or issues arising, it is appropriate to consider the exchanges
between the parties prior to and up to the point of the notice to refer. It is not
necessary for the words used in the notice to refer to be ambiguous before the
arbitrator or a court can consider these exceptions.
(9) The court will also have to consider whether the terms of the contract between the
parties on its proper construction disapplies any principles or propositions.
149. I will now proceed to apply these principles to the particular facts and circumstances of
this case.
Application of Principles
Findings on Construction of Notice to Refer and Scope of Dispute Referred
150. There is no dispute between the parties on the relevant facts. I set out earlier the
relevant factual background on the basis of the facts set out in the affidavits sworn by the
parties for the purposes of the respondent’s application.
151. As the relevant legal principles require, it is necessary to look not only at the notice to
refer itself but also to the factual background or matrix of fact leading up to the date of
the notice to refer, including the correspondence and other interactions between the
parties up to that point in time. While I referred to these exchanges earlier in the
judgment, it is necessary to return to them now in order to ascertain what was referred to
the arbitrator in the notice to refer.
152. The claimant submitted the 9th March, 2011 claim seeking payment of €13,798,995.00.
That claim sought to recover sums allegedly unpaid from previous applications and also
claimed for an extension of time and additional costs which the claimant alleged had been
incurred as a result of delays to the works under the subcontract which were beyond its
control. Four folders of documents were enclosed with that claim. The 9th March, 2011
claim was rejected by the respondent by means of the 23rd March, 2011 rejection. As
explained earlier, in its rejection letter, the respondent noted that the claim was being
advanced by the claimant more than two years after some of the alleged events occurred.
It was further asserted by the respondent that clause 10(a)(1) of the subcontract
contained a condition precedent which required that notice be given by the claimant
within a particular period of time in circumstances where the claimant considered that it
was entitled to an adjustment to the subcontract sum or that it had any other entitlement
under or in relation to the subcontract. The respondent maintained that the claimant had
not complied with that condition precedent. In those circumstances, the respondent
rejected the 9th March, 2011 claim in its totality.
153. Thereafter, following the appointment of a receiver to the claimant, the respondent
terminated the subcontract in accordance with clause 12(a) by letter dated 12th April,
2011. As pointed out earlier, the provisions of clause 12.2 of the main contract as applied
to the subcontract then came into effect. The respondent wrote to the claimant on 3rd
June, 2011 informing it that the respondent had determined that the termination value
was nil. The claimant did not respond to that letter and did not, at that stage, expressly
dispute the respondent’s determination as to termination value.
154. The respondent wrote to the claimant on 21st October, 2011 informing it that the
respondent had determined the termination amount at €768,911.27 and provided a
breakdown of that sum. The respondent demanded the payment of that sum and
informed it that a claim would be made on foot of the performance bond provided by the
claimant. The claimant did not respond to that letter either and did not, at that stage,
expressly dispute the respondent’s determination as to the termination amount.
155. The respondent then made a claim under the performance bond. The bondsman was
Hiscox. Prior to the determination by the respondent of the termination amount, the
bondsman informed the respondent’s solicitors on 5th October, 2011 that the bondsman
did not accept that the termination value was nil and further stated that the bondsman
would not be bound by any agreement which might be reached with the receiver to the
claimant in that regard. That letter made express reference to a letter from the
respondent’s solicitors to the receiver dated 16th September, 2011 which referred back to
the respondent’s letter of 3rd June, 2011 informing the claimant of the determination of
the termination value and indicated that the respondent was in the process of
determining the termination amount. While the bondsman responded to that letter (which
was copied to it), the receiver to the claimant did not. The respondent proceeded to
determine the termination amount and so informed the claimant in the letter of 21st
October, 2011 (which was copied to the bondsman).
156. The respondent called on the bondsman to pay the sum of €768,911.27 (being the
termination amount) and advised that additional defects in the subcontract works had
been discovered which had not been taken into account in the determination of the
termination amount. Thereafter, the bondsman appointed Andrew P. Nugent & Associates,
Chartered Quantity Surveyors, to liaise with Anthony Kelly, the claimant’s managing
director, in order to obtain information in relation to the claim and for the purpose of
liaising directly with the respondent and subsequently with the quantity surveyors
appointed by the respondent. The bondsman’s quantity surveyors worked closely with Mr.
Kelly. The respondent had put forward a statement of account which purported to confirm
an overpayment to the claimant of €9,426.94. That claim was challenged by the
bondsman’s quantity surveyors. In a final claim submission dated 3rd October, 2012, the
respondent purported to disallow entirely the sum previously allowed for variations in the
amount of €849,891.20 (including €742,528.79 for variations which were paid by the
respondent on foot of issued payment certificates). The respondent advanced a claim in
that submission for overpayment in the sum of €653,037.29.
157. There followed further engagement between the respective quantity surveyors for the
bondsman and for the respondent. No agreement was reached in relation to the value of
the claim or as to the amount allegedly due to the respondent by way of set off.
Thereafter, the respondent commenced proceedings against the bondsman in 2013. I was
provided with a set of the pleadings in the bondsman proceedings where, as noted earlier,
the respondent in its statement of claim pleaded the fact of the determination of the
termination value and the termination amount. In its defence to the bondsman
proceedings, the bondsman disputed the determination of the termination value and of
the termination amount. The bondsman expressly pleaded in its defence that the
termination amount determined by the respondent did not take into account all sums
properly due, or which might become due, to the claimant under the subcontract and
contended that the termination amount had not been properly calculated in accordance
with the terms of the agreement. It is clear from my review of the pleadings in the
bondsman proceedings that the bondsman (working with Mr. Kelly of the claimant
company) was disputing that any monies were owing by the claimant to the respondent
and was disputing the determinations made by the respondent under clause 12. In my
view, this is relevant as part of the background or matrix of fact. I accept of course that
these points were being agitated by the bondsman in the proceedings brought against it
rather than, at that point, at least, by the claimant.
158. That brings me to the correspondence between the claimant’s solicitors and the
respondent’s solicitors in November and December, 2014. This correspondence forms an
important part of the relevant factual matrix. I am satisfied that I am required to have
regard to this correspondence, notwithstanding the respondent’s contention to the
contrary. It is precisely the sort of material which the authorities indicate must be
considered when seeking to determine what was the scope of the dispute between the
parties in order to ascertain what was referred to arbitration.
159. The respondent’s fallback position was that the correspondence discloses that the
claimant was not maintaining any claim under clause 12 or disputing the validity of the
determinations made by the respondent under that provision. I do not agree with that
contention. In my view, it is based on an unduly narrow and legalistic reading of the letter
which runs counter to the approach which a court is required to take in considering
exchanges of this sort with a view to ascertaining what was in dispute between the
parties and what was referred to arbitration.
160. While it has to be acknowledged that the Hussey Fraser letter of 13th November, 2014
could have been clearer, it seems to me that the respondent could have been in no doubt
from that letter that the claimant was disputing the determinations made by the
respondent under clause 12 in relation to the termination value and the termination
amount. It must, of course, also be acknowledged that the letter was sent some three
and a half years ago after the respondent determined the termination value at nil and,
more than three after it determined the termination amount at €768,911.27. That delay,
while most unfortunate, does not detract from the fact that, notwithstanding the failure
expressly to challenge those determinations when they were made, the Hussey Fraser
letter of 13th November, 2014 was conveying to the respondent that the claimant did not
accept those determinations and was maintaining claims for additional monies from the
respondent under the subcontract.
161. While the respondent is correct in stating that the Hussy Fraser letter of 13th November,
2014 records the claim being made by the respondent against the bondsman based on
certain contentions, including contentions which relied upon the determinations as to the
termination value and the termination amount. However, it is, in my view, a misreading
of the letter to suggest that what follows in the first three and a half pages of the letter
relates exclusively to the claim being made by the respondent against the bondsman.
That contention by the respondent was based on the following statement at p. 4 of the
letter under the heading “KOF’s Claims Against BSJV”, namely:–
“The above comments relate to the claim being made against Hiscox. We do not act
for that company. Our remarks are made on behalf of KOF and not on behalf of
Hiscox. We now turn to the claims against your client.”
162. It would, in my view, be an incorrect and excessively narrow reading of the letter to
ignore what was said by the claimant’s solicitors in the previous three pages of the letter,
albeit that those comments were stated to relate to the claim being made by the
respondent against Hiscox. What is, however, relevant is the information contained in
those pages rather the heading under which that information appears. It is clear on my
reading of the letter, that the information contained under the heading “Valuation of the
Works to Completion” on pages 1 and 2 of the letter is directed to the contention that the
claimant was not accepting that the termination value was nil or that the claimant had
been overpaid by any amount. The letter further makes clear that the claimant did not
accept the respondent’s attempt to reverse variations that had allegedly previously been
agreed (and for the most part paid) or the deductions of “unsubstantiated contra-
charges” by the respondent. The letter contained an explanation on behalf of the claimant
as to why the purported deduction of the variations which had been agreed was not
accepted and an assertion was made that the respondent had waived the notice of
requirements in clause 10 of the subcontract by reason of the manner in which the
subcontract had been operated from the outset. The letter went on to observe that the
contra-charges put forward by the respondent would be considered in more detail “in due
course”. However, some explanation was given as to why it was said on behalf of the
claimant that those contra-charges were not correctly applied by the respondent and were
wrongly based on the supposition that the claimant was contractually liable for them. The
letter made clear that the claimant did not accept that it had any such contractual liability
for those contra-charges stating:-
“Suffice it to say, for the purpose of this letter, that the [contra-charges] will be
vehemently defended”.
163. Those comments were made in a part of the letter which was said by the respondent only
to concern the respondent’s claim and proceedings against the bondsman.
164. The letter then went on to comment, under the heading “The Cost of Completion
(€768,911)”, on the claim by the respondent that the claimant was liable for such cost.
This, of course, is the amount which the respondent determined as the termination
amount. The letter contains the claimant’s response to the contention that the claimant is
liable for that sum. The claimant made the point that the works carried out by it were
completed by November, 2010, that it understood that the amount claimed by the
respondent was referable to works carried out by Roadstone (although further details
were awaited by the claimant), that the claimant’s understanding was that there were no
works outstanding on its part and that Roadstone may have been employed to carry out
additional works which were never part of the claimant’s duties under the subcontract. My
reading of this part of the letter is that the claimant was clearly indicating that it did not
agree with the termination amount as determined by the respondent. The claimant had,
earlier in the letter, signaled its disagreement with the termination value determined by
the respondent.
165. The letter then commented on the alleged defects in the claimant’s works. In that part of
the letter, there was a clear denial on behalf of the claimant that works which it carried
out were in any way defective or that there was breach of contract on the part of the
claimant. It was asserted that the works were carried out in accordance with the required
specification and that while the works were damaged by the respondent and its
subcontractors, both prior to and subsequent to completion by the claimant, that was not
the responsibility of the claimant. Some further detail was set out in support of the
claimant’s position on that point.
166. The letter then addressed the claimant’s claims against the respondent and contained the
words which I quoted above and on which the respondent relies in support of its assertion
that the comments contained in the first three pages or so of the letter were purely by
way of commentary on the respondent’s claim against the bondsman. However, much too
much emphasis, and excessive weight, has been placed by the respondent on those
words. In doing so, the respondent has sought effectively to airbrush out of the letter the
comments contained in the first three pages. From those comments, it is quite clear, in
my view, that the claimant was disputing the determinations made by the respondent
under clause 12 and was setting out some reasons why it did not accept that those
determinations were correct.
167. Having made those comments in the letter, the claimant’s solicitors then turned to
consider the claims being made by the claimant against the respondent. The comments
on that claim commenced with an assertion that a sum allegedly agreed as being due to
the claimant (€1,329,670.00), remained due for payment and an assertion that that sum
did not include additional compensation payable to the claimant in respect of certain other
matters which were then set out. Those other matters included sums in respect of tack
coat, accommodation works, additional movements, delay, and disruption. Under a
heading “Further Claims”, the claimant’s solicitors noted that the items just mentioned
appeared to be the main headings of the claim but that there might be additional claims.
The letter then stated:-
“You will be aware that our client submitted a claim on 9th March, 2011 in the sum
of €13,798,995. We have yet to examine that claim in detail but to the extent that
elements of that claim may not be covered by the above, we reserve the right to
include such elements in the process hereinafter discussed. The client also reserves
the right to claim for VAT, interest and costs.”
168. The letter concluded by referring to the dispute resolution provisions contained in clause
13(a) of the subcontract and requested confirmation as to whether the respondent’s
solicitors had authority to accept service of a notice to refer to arbitration and mentioned
the conciliation process under the subcontract.
169. In my view, an objective reading of that letter demonstrates that not only did the
claimant not accept the determinations made by the respondent under clause 12 as to the
termination value and the termination amount, but that the claimant was advancing
additional claims under various headings including, potentially, the claims made in the 9th
March, 2011 claim which the claimant’s solicitors had not by that time examined in detail.
170. Another important part of the background or matrix of fact is the Maples 1st December,
2014 letter in response. I quoted extensively from that letter earlier in the judgment and
it is unnecessary to do so again here. On any reading, the letter was somewhat
intemperate in its terms and accused the claimant’s solicitors of attempting to “leverage
nuisance money out of our client by attempting to interfere with and/or stall High Court
litigation in which our client is engaged”. This was a reference to the bondsman
proceedings. Notwithstanding its intemperate tone, the letter does rightly complain about
the delay on the part of the claimant in seeking to advance its claim and about the
apparent failure by the claimant’s advisers fully to examine the 9th March, 2011 claim by
that stage. It is clear, however, from the letter that the respondent’s solicitors were
aware that the claimant did not accept the respondent’s position in relation to the
claimant’s account and did not accept the respondent’s determinations in relation to that
account. At point 6 of the letter, the respondent contended that the lack of merit of the
claimant’s claim was evidenced by:-
“The fact that your letter is littered with various factual inaccuracies regarding the
works performed and not performed by your client, the status of your client’s
account at the time that our client terminated its obligation to complete the works,
and the manner in which the subcontract was performed by the parties. These
inaccuracies further evidence the abject lack of bona fide inquiry by your client to
date in the matters that it purports to justify an entitlement on its behalf to be paid
nearly €16m by our client.”
171. For reasons mentioned earlier in the judgment, the respondent’s solicitors declined to
comment further on the matters set out in the Hussey Fraser letter of 13th November,
2011. They did, however, confirm that they had authority to accept service of a notice of
any dispute resolution proceedings commenced by the claimant under the subcontract.
172. I regard the Maples letter of 1st December, 2014 as another significant part of the matrix
of fact to which the court is required to have regard in considering the state of affairs
between the parties as of the date of the notice to refer. Leaving aside the indignant and
somewhat intemperate tone of the letter and the decision by the respondent not to
engage in the detail as set out in the Hussey Fraser letter of 13th November, 2014, it is
clear from the terms of their letter that the respondent’s solicitors had read and
considered the letter to which they were replying. The respondent and their solicitors
were, therefore, aware of the fact that the claimant was not accepting the position taken
by the respondent and was not accepting the respondent’s determinations as to the
termination value and the termination amount. The respondent’s position, as is evident
from point 6 of the letter, was that the Hussey Fraser letter contained factual inaccuracies
about various matters including the status of the claimant’s account when the respondent
terminated the subcontract. The respondent, therefore, could not but have been aware of
the fact that the claimant did not accept that it was precluded from maintaining its claim
by reason of the steps taken or determinations made by the respondent under clause 12.
173. The position is made even more clear in the Hussey Fraser letter of 19th December, 2014
in response to the Maples letter of 1st December, 2014. At the very outset of that letter,
the claimant’s solicitors stated:–
“Our client does not intend to interfere with the High Court proceedings as
suggested by you. Insofar as your client maintains in those proceedings that our
client is indebted to it, we thought it appropriate to start with that alleged debt by
demonstrating that far from our client being indebted to yours, substantial monies
are due by your client to ours.”
174. This could not be clearer. The claimant was disputing the assertion that monies were due
by the claimant to the respondent. Since the respondent’s contention that such monies
were due by the claimant to the respondent was based, in part at least, on clause 12 and
on the steps taken by the respondent under that provision, it must have been clear to the
respondent that the claimant was not accepting the respondent’s contention and, on the
contrary, was continuing to assert that substantial monies were due by the respondent to
the claimant. The respondent must have understood, therefore, that the steps which it
had taken under clause 12, including the determinations made by it, were being put in
issue, at least in the correspondence emanating from the claimant’s side at that stage.
Again, it seems to me that this is a significant part of the matrix of fact to which the court
must have regard in assessing the state of affairs between the parties as of the date of
the notice to refer.
175. The correspondence between the parties ended with the Hussey Fraser letter of 19th
December, 2014. The notice to refer dated 13th March, 2015 then followed.
176. I have referred earlier to the notice to refer which contains four recitals. For present
purposes, the two critical recitals are:-
“III. The claimant submitted a claim for payment to the respondent on or about the 9th
March, 2011 for a total sum of €13,798,955.
IV. The respondent disputes said claim.”
177. Having set out the four recitals, the notice to refer then stated that the claimant was
referring the “said dispute” to arbitration pursuant to clause 13(a) of the subcontract. The
notice then set out the “issues in dispute”. A series of ten issues were then identified. The
first issue referred to was:-
“The balance due to the claimant on foot of the contract without reference to
variations, extras, contra-charges or additional sums.”
Several further issues were identified including the sum due on the variation account, the
amount due in respect of additional moves, sums in respect of delay and disruption,
standing time and inefficiencies identified in a particular annex and so on.
178. The respondent claimed that recitals III and IV identify the dispute between the parties
which arose by the submission by the claimant of the 9th March, 2011 claim and by the
rejection by the respondent of that claim by means of the 23rd March, 2011 rejection.
That, the respondent said, is the dispute between the parties and that is the dispute (i.e.
the “said dispute” referred to in the notice to refer) which the claimant referred to
arbitration under clause 13(a) of the subcontract by means of the notice to refer. The
respondent understandably pointed out that the notice to refer does not make any
reference to clause 12 of the main contract as applied and adapted to the subcontract or
to the determinations made by the respondent as to the termination value and the
termination amount under that clause. The respondent did, however, maintain that all
defences which the respondent could rely on in order to resist the claimant’s claim also
travel with the reference so that the arbitrator would have jurisdiction to entertain all
such defences. The claimant accepted that that is the case and it is certainly supported by
the authorities discussed earlier. Among the defences which the respondent has sought to
rely upon before the arbitrator, as appears from the respondent’s statement of defence, is
the preliminary defence based on want of jurisdiction in reliance on clause 12 and the
non-disputation by the claimant of the termination value and the termination amount. In
addition, the respondent has sought to rely on another preliminary defence based on the
“undisputed, and unreviewable herein, determinations of the termination value and
termination amounts” which it contended amounts to a full and complete defence to all of
the claimant’s claims, in the event that it were to fail on the preliminary defence based on
a want of jurisdiction having regard to clause 12 (paras. 82 to 85 of, and schedule C to,
the respondent’s statement of defence). Schedule C contains the legal submissions
advanced by the respondent as part of its statement of defence on the “undisputed and
unreviewable determinations of the termination value and termination amount as a
complete defence to the claimant’s claims”. The respondent, therefore, has sought to rely,
as a fallback position, on this defence and it is accepted by the claimant that it is entitled
to do so before the arbitrator (the merits of that defence being a matter for the
arbitrator). The basis upon which the respondent contended (and the claimant accepted)
that it is entitled to rely upon these defences even though they are not expressly referred
in the notice to refer is that procedural fairness requires that it be so entitled. Where the
parties differ, however, is as to what the claimant can then do in response to such
defences which the parties have agreed are before the arbitrator.
179. It seems to me that the respondent’s suggested interpretation of the notice to refer in
terms of the scope of the dispute referred by that notice to arbitration is far too narrow. It
ignores, or at least gives insufficient weight to, the guiding principles on the construction
of a reference to arbitration and on the ascertainment of the scope or ambit of the dispute
referred to arbitration, which I considered and summarised earlier in my judgment. In my
view, the respondent’s suggested interpretation seeks to apply a construction of the
notice to refer as if it were a statute and to construe the words used in the notice in an
overly legalistic manner. It ignores the requirement that the relevant point in time to
ascertain the scope of the dispute referred to arbitration is the time of the reference to
arbitration itself and that, in determining whether a particular dispute or claim has been
referred, it is necessary to look objectively at what has passed between the parties to the
reference up to that point. I have referred earlier to the exchanges between the parties
up to the point of the notice to refer and have set out my conclusions as to what ought to
have been understood by the respondent from what passed between the parties. While,
as just observed, it is open to the respondent to raise any point or argument by way of
defence to the claim being made notwithstanding that that point or argument is not
referred to in the notice to refer, as a matter of procedural fairness for the respondent,
however, the respondent’s proposed interpretation overlooks the requirement for
procedural fairness for the claimant also. It seems to me that if the respondent is entitled
to raise clause 12 and the determinations as to termination value and termination amount
under that provision by way of defence to the claim, then, having regard to the guiding
principles discussed and summarized earlier, so to as a matter of procedural fairness
should the claimant be entitled to seek to address those defences in whatever way it
considers appropriate. That must include an entitlement to challenge the validity of the
determinations made by the respondent under clause 12. To permit the respondent to
rely upon these defences by way of defence but to preclude the claimant from dealing
with them in response would itself, in my judgment, be contrary to procedural fairness.
180. It seems to me that the notice to refer should be construed, and the scope of the dispute
referred by that notice ascertained, by reference to these guiding principles, the most
relevant of which, for present purposes, are, first, the requirement to construe the notice
to refer by reference to the state of the dispute as of the date of the reference and taking
into account the exchanges between the parties up to that point and, second, the
principle that the reference to arbitration carries with it all defences which the respondent
wishes to raise and, in my view, any responses which the claimant may wish to raise in
response, subject to the limitations referred to earlier.
181. I have concluded by reference to the exchanges between the parties culminating in the
exchange of correspondence in November and December, 2014 (which represent the
state of the parties’ respective positions up to the date of the notice to refer on 13th
March, 2015), that it was clear that the claimant was not accepting the position taken by
the respondent and was not accepting its determinations as to the termination value and
the termination amount. The respondent could not but have been aware that the claimant
was not accepting that it was precluded from maintaining its claim by reason of clause 12
or by reason of any of the determinations made by the respondent under that provision.
It must also have been clear to the respondent that the claimant was disputing that any
monies were due by it to the respondent and that steps which the respondent had taken
under clause 12 (including the two relevant determinations) were being put it issue by the
claimant. All of that represented the position, and the state of affairs between the parties,
at the time the notice to refer was sent by the claimant’s solicitors on 13th March, 2015.
182. In my view, applying the guiding principles discussed and summarised earlier, it would be
an excessively narrow interpretation of the notice to refer, and would ignore the position
adopted by the parties in correspondence up to the date of that notice, to confine the
claimant to the claims expressly set out in the 9th March, 2011 claim and to preclude the
claimant from attempting to deal with the points of defence raised by the respondent in
its statement of defence in reliance on clause 12 and on the determinations made by it
under that provision.
183. While the claimant confirmed in the course of the submissions at the hearing that the
dispute referred to arbitration was the claim set out in the 9th March, 2011 claim, I did
not understand the claimant to make the case that it was not open to the arbitrator, or to
a court, to examine the exchanges between the parties in order to determine what was in
issue between the parties as of the date of the reference to arbitration. Indeed, the
claimant strongly urged the arbitrator, and the court, to consider the exchanges between
the parties including the Hussey Fraser letters of 13th November, 2014 and 19th
December, 2014 and the Maples letter of 1st December, 2014. It made submissions on its
suggested interpretation of that correspondence in response to those advanced by the
respondent. I have, for the most part, accepted the submissions advanced by the
claimant as to the interpretation of that correspondence. I do not believe, therefore, that
the claimant’s submission that the claim sought to be made by the claimant was as set
out in the 9th March, 2011 claim undermines the case which it was making as to the
entitlement of the court to look at the exchanges between the parties in order to
determine the scope of the dispute actually referred to arbitration.
184. The respondent also argued that if the arbitrator had jurisdiction to consider the
claimant’s responses to the defences raised by the respondent in reliance on clause 12
and on the determinations made by it under that provision, whether by challenging those
determinations or otherwise, it would never be possible to challenge jurisdiction before an
arbitrator. I do not accept that that is so. I am, of course, dealing with the particular
jurisdiction challenge made by the respondent on the facts of this case. In my view, the
arbitrator does have jurisdiction to deal with the points which the claimant seeks to make
in response to the preliminary defences on jurisdiction and otherwise advanced by the
respondent in reliance on clause 12 and on its determinations under that provision. Those
responses fall squarely within the wide provisions of clause 13(a) of the subcontract in
terms of the disputes which may be referred to arbitration under that provision (namely
disputes “in connection with or arising out of the subcontract”). Furthermore, the case
which the claimant seeks to make is in response to the defences asserted by the
respondent (which points of defence, it is agreed, do not expressly have to be referred to
in the notice to refer). If a claimant sought to advance a case which fell outside the scope
of the arbitration clause or agreement and was not in response to a point or argument
relied upon by a respondent by way of defence to a claim, then an arbitrator, and a court,
may well find that the arbitrator has no jurisdiction in relation to the points sought to be
raised by the claimant. However, that is not the position in the present case.
185. While it is perhaps surprising that the claimant did not make express reference to clause
12 and to the determinations made by the respondent under that provision in the notice
to refer, I have concluded that on a proper construction of that notice in accordance with
the guiding principles derived from the authorities, those issues do fall within the scope of
the arbitration initiated by the notice to refer. It is also surprising that the claimant did
not make reference to those issues in its statement of case. It sought to do so for the first
time in its statement of reply on 8th November, 2017 in response to the respondent’s
statement of defence of 7th September, 2017 which sought to rely, both by way of a
preliminary defence on jurisdiction and by way of a substantive preliminary defence on
clause 12 and on the determinations. However, as those issues were properly before the
arbitrator (for the reasons just outlined), it was a matter for the arbitrator to decide
whether she would permit the claimant to amend its statement of case expressly to
impugn the validity of the respondent’s determinations under clause 12. The arbitrator
permitted the respondent to deliver an amended statement of claim on 29th March, 2018
in directions given by her following her ruling on jurisdiction of 9th March, 2018. In my
judgment it was entirely a matter for the arbitrator as to whether she could permit those
amendments and it was within her jurisdiction to do so.
186. I should make clear that in holding that the arbitrator has jurisdiction in relation to the
issues concerning clause 12 which have now been expressly raised by the applicant in the
amended statement of case, I am not commenting in any way on the substantive merits
of the respective contentions of the claimant and of the respondent on those issues. That
is exclusively a matter for the arbitrator.
Clause 13(a)
187. Having set out my conclusions on the question of jurisdiction by applying the guiding
principles to the construction of a reference to arbitration, I should now consider whether
there is anything in clause 13(a) of the subcontract which would require me to alter those
conclusions. In this context, I must consider the express provisions of clause 13(a) and
the provisions of clause 13(c) and the 2000 Procedure which the parties agreed would
apply to any arbitration under clause 13 of the subcontract.
188. The respondent contended that the notice to refer did not comply with the provisions of
clause 13(a) of the subcontract in that it did not set out any issues between the parties
concerning clause 12 or the determinations made by the respondent and did not,
therefore, “state the issues in dispute” as required by clause 13(a). The respondent
contended that the requirement to “state the issues in dispute” is a jurisdictional
requirement which, if not complied with, means that the arbitrator does not have
jurisdiction in relation to any issues not stated in the notice. The claimant’s position was
that the notice did adequately refer to the dispute and state the issues between the
parties. It relied on the 13 issues set out in the notice as amounting to the various
different bases on which the claimant was asserting a right to be paid the amounts
claimed. The claimant maintained that the construction of clause 13(a) urged by the
respondent is too strict and goes too far.
189. In my view, the notice to refer does comply with the provisions of clause 13(a) of the
subcontract. It specifies the dispute (and must be interpreted by reference to the guiding
principles discussed earlier). It then refers to several issues in dispute including a claim
for the balance due by the respondent to the claimant. Since it was agreed between the
parties that notice does not have to specify the points of defence on which the respondent
will seek to rely in resisting the claimant’s claim and the failure to specify those points of
defence in the notice does not amount to a breach of clause 13(a) or render the notice
ineffective in respect of those issues raised by way of defence, it would indeed be a very
harsh interpretation and application of the requirement in clause 13(a) to “state the
issues in dispute” to find that the failure to specify the points which the claimant wishes
to rely upon in response to those points of defence renders the notice ineffective and
derives the arbitrator of jurisdiction in relation to those issues. That would not, in my
view, be a reasonable or sensible interpretation of clause 13(a). I do not accept that the
notice to refer fails to comply with the requirement to “state the issues in dispute” under
clause 13(a) of the subcontract. However, even if it did, I am not at all convinced that a
failure to comply with that provision would go to the jurisdiction of the arbitrator to deal
with issues not expressly stated in the notice, provided they arose by way of a response
to a point or argument raised by way of defence by a respondent which itself was not
stated in the notice. A failure to state an issue sought to be raised by a claimant in
response to a point or argument raised by way of defence would not, in my view, amount
to a breach of clause 13(a) and would not deprive the arbitrator of jurisdiction to deal
with that issue. Even if it did amount to a breach of clause 13 (a), I am not satisfied that
such a breach would go to the jurisdiction of the arbitrator or preclude her from dealing
with the particular issue or issues.
190. In my view, there is nothing in clause 13(a) of the subcontract which would affect or
undermine the conclusion which I have reached that the arbitrator does have jurisdiction
to deal with the points which the claimant wishes to advance in response to the points of
defence raised by the respondent in reliance upon clause 12.
Clause 13 (c) and 2000 Procedure
191. I now turn to clause 13(c) which provided that the 2000 Procedure was to govern the
arbitration. As I have already explained, the arbitrator directed (with the agreement of
the parties) that the 2000 Procedure would apply up to the date of the preliminary
meeting held by the arbitrator on 7th April, 2016 but that, thereafter, the 2011 Procedure
would apply. Since the notice to refer was dated 13th March, 2015, the relevant
provisions of the 2000 Procedure applied to the notice to refer. As a fallback argument,
the claimant sought to rely on certain provisions of the 2000 Procedure in order to defeat
the respondent’s jurisdictional challenge. The claimant relied in particular on Rules 2.1,
2.3 and 5.2. I have set out those provisions earlier in this judgment.
192. Having considered the rules relied upon and the respective arguments of the parties in
relation to the interpretation and application of those rules, I have reached the conclusion
that there is nothing in the 2000 Procedure which undermines the conclusions I have
already reached in relation to the jurisdiction of the arbitrator to deal with the issues
which the claimant wishes to raise in relation to clause 12 and the determinations made
by the respondent under that provision.
193. It might be argued that Rule 2.1 assists the claimant in that that provision deems a
dispute or difference to arise between the parties where a claim is made by one party and
not responded to by the other within a period of 28 days thereby entitling either party to
proceed to arbitration by serving a notice to refer on the other party, subject to the
observance of any condition precedent in the relevant contract. However, I do not see
how this provision in any way affects the conclusions I have already reached in relation to
the state of the dispute or the issues in dispute between the parties as of the date of the
notice to refer. While it could be argued that the failure by the claimant to respond to the
determinations as to termination value and termination amount when those
determinations were made meant that a dispute or difference was deemed to arise within
28 days of those determinations being provided to the claimant, I have in any event
concluded that those determinations were in dispute between the parties at the time of
the reference in light of the correspondence exchanged between their respective solicitors
in 2014 and in light of the involvement of the claimant’s personnel in assisting the
bondsman in defence of the bondsman proceedings. Furthermore, there is no issue
between the parties as to the entitlement of the claimant to serve a notice to refer on the
respondent. It did so as it was entitled to do under clause 13(a). The issue between the
parties concerns the ambit of the dispute and the issues or sub-issues within that dispute
which were referred to arbitration. In my view, Rule 2.1 does not advance matters at all.
194. Nor, in my view, does Rule 2.3, which provides that the notice to refer must list the
matters which the referring party wishes to be referred to arbitration and that nothing in
the notice to refer restricts the referring party as to the manner in which it presents its
case. It seems to me that the first part of Rule 2.3 mirrors the provisions of clause 13(a)
in terms of the requirement to state the issues in the notice to refer. The second part of
Rule 2.3 adds nothing, in the context of the issues between the parties on this
application. It has not been suggested that the notice to refer restricts the claimant “as to
the manner in which it subsequently presents its case”. The dispute between the parties
which has led to this application does not concern the “manner” in which the claimant
presents its case. It concerns the scope or ambit of the dispute referred and the issues
(and sub-issues) which the arbitrator has jurisdiction to consider. I have addressed those
already without reference to Rule 2.3 of the 2000 Procedure. In my view, Rule 2.3 does
not advance matters at all.
195. It might be argued that Rule 5.2 confers an arbitrator with jurisdiction over an issue not
expressly set out in the notice to refer as it provides that the arbitrator has jurisdiction
“over any issue connected with and necessary to the determination of any dispute or
difference already referred” to him or her “whether or not any condition precedent to
referring the matter to arbitration had been complied with”. While this might be of
assistance to the claimant in conferring jurisdiction on the arbitrator to deal with issues
which are “connected with and necessary to” a dispute or difference already referred to
the arbitrator even though those issues may not have been expressly set out in the notice
to refer (assuming the requirement to do so is a condition precedent), it is unnecessary to
reach a concluded view on that question in light of the conclusions which I have already
reached without reference to clause 5.2. The important point is that clause 5.2 is an
enabling rather than a restricting provision and does not, therefore, assist the respondent
in its contention that the arbitrator does not have jurisdiction over the disputed issues.
196. In summary, therefore, I do not believe that the provisions of the 2000 Procedure relied
upon by the claimant advance matters at all. They do not in any way undermine or
detract from the conclusions I have already reached in relation to the jurisdiction of the
arbitrator to deal with the disputed issues.
Other Observations
197. While not determinative in any way of this application, I cannot conclude this judgment
without observing that it would be surprising if I had reached a different conclusion on the
scope of the arbitrator’s jurisdiction in light of the approach which the Irish courts have
taken to the interpretation and enforcement of arbitration agreements. The Irish courts
have consistently applied the principles derived from the decision of the House of Lords in
Fiona Trust & Holding Corporation & ors v. Privalov & ors [2007] 4 All ER 951. The Irish
decisions which applied those principles and the principles themselves were discussed by
me in a number of judgment including K & J Townmore Construction Limited v. Kildare
and Wicklow Education and Training Board [2018] IEHC 770 (‘Townmore (No. 1)’), K & J
Townmore Construction Limited v. Kildare and Wicklow Education and Training Board
[2019] IEHC [insert] (‘Townmore (No. 2)’) and XPL Engineering Limited v. K & J
Townmore Construction Limited [2019] IEHC [665].
198. One of the principles discussed in those cases is that, when construing an arbitration
agreement, the court should start from an assumption or presumption that the parties are
likely to have intended any dispute arising out of the relationship between them to be
decided by the same body or tribunal. In other words, there is an assumption or
presumption that the parties intended a “one–stop shop” for adjudicating their disputes.
While not directly relevant to the matters in dispute on this application, as the respondent
accepted that the disputed issues could have been referred to arbitration but were not,
the principles discussed and applied in these cases are instructive. It would be a
surprising (but not impossible) outcome if the respondent were permitted to rely on
points or arguments by way of defence but that the claimant was not permitted to
respond to those points of defence by raising issues which both parties accept fall within
the scope of the arbitration agreement. As it happens, I have concluded that, properly
construed, the notice to refer did refer all of the issues which the respondent has sought
to raise by way of defence and also those points which the claimant has sought to raise
by way of response to those defences.
Arbitrator’s Ruling
199. I have reached these conclusions without reference to the arbitrator’s ruling on
jurisdiction. The arbitrator and I have reached the same conclusion, namely, that the
arbitrator does have jurisdiction in relation to the issues concerning clause 12 of the
subcontract and the determinations made by the respondent under that provision. We
have done so for similar but not identical reasons. The main point of departure, I think, is
the route adopted by the arbitrator in examining the exchanges between the parties after
the 9th March, 2011 claim. The arbitrator came to the view that the description of the
“said dispute” in the notice to refer was ambiguous and that she was entitled, therefore,
to look at the subsequent exchanges between the parties. I have concluded that it is not
necessary to find an ambiguity in order to consider the exchanges between the parties as
to the reference to arbitration and that such exchanges form part of the background or
matrix of fact to which regard may be had in the construction of the reference,
irrespective of any ambiguity. This is a minor point of difference between the approach
taken by the arbitrator and the approach taken by me. We have reached the same
conclusion but by a slightly different route. There is no doubt that the route taken by me
took considerably longer than the route taken by the arbitrator, with commendable
expedition and efficiency on her part.
Summary of Conclusions
200. In summary, I have reached the following conclusions:-
201. In deciding an application in relation to jurisdiction under Article 16(3) of the Model Law,
the court is exercising an original and not an appellate jurisdiction. It is not conducting an
appeal or a review but a complete de novo rehearing on the question of jurisdiction. The
court’s function under Article 16(3) is “to decide the matter”. In doing so, the court
applies the “full judicial consideration” approach. The standard to be applied by the court
in deciding the question of jurisdiction is the normal standard applied in civil cases,
namely, the court must decide the question of jurisdiction on the balance of probabilities.
The court may consider such evidence as it sees fit and is not bound by the submissions
made to the arbitrator or the evidence before him or her. The court does not exercise any
deference to the decision of the arbitrator. The court may have regard to the reasoning
and findings of the arbitrator, if they are helpful, but the court is neither bound nor
restricted by them.
202. In deciding the question of jurisdiction, I have considered a large number of authorities
and have set out in this judgment what appeared to me to be the guiding legal principles
applicable to the construction of a notice referring a dispute to arbitration and to the
ascertainment of the scope or ambit of the dispute referred.
203. I have applied these guiding principles to the facts of this case. Having done so, I have
concluded that, on the correct construction of the notice to refer, the contested issues
were referred to arbitration by the claimant and that the arbitrator does have jurisdiction
to consider the issues which are now set out in the amended statement of case delivered
on 29th March, 2018 on foot of the further directions given by the arbitrator that day
following her ruling on jurisdiction.
204. I have concluded that the arbitrator was correct in ruling that she had jurisdiction in
relation to those contested issues and that the arbitrator has jurisdiction in relation to
those issues, albeit on slightly different grounds to those relied upon by the arbitrator.
205. For these reasons, I reject the respondent’s application for an order deciding that the
arbitrator does not have jurisdiction over the contested issues.
206. Finally, I wish to thank counsel and solicitors for the parties for the excellent written and
oral submissions which I received in this case for which I am very grateful.Result: It was held that the arbitrator did have jurisdiction.
