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Sat October 24 2020

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Concurrent Adjudication & Arbitration Proceedings

24 Sep 10 The claimant was the employer and the defendant the contractor under a contract for the construction of a multi-storey car park. Initially work was due to be completed on 23 July 2007, but two extensions were granted taking the date to 24 February 2009.

However, disputes arose between the parties in late 2008, and the defendant issued a notice of its intention to suspend the works under clause 11.2 of the contract, alleging that a “Contractor Termination Event” had occurred. The claimant responded that the defendant was in breach of contract which entitled it to terminate the contract. The defendant refused to accept that the claimant was entitled to terminate the contract and maintained that the claimant’s purported termination was in itself a breach of contract. In a letter dated 31 December 2008, the claimant attempted to clarify the situation stating that the notice of termination should have referred to clause 11.1(b) and the termination would take place ten working days after the receipt of the notice. The defendant then took the position that that it was not open to the claimant to both unilaterally and retrospectively seek to change the grounds upon which the contract was terminated. 

The defendant reacted by commencing adjudication proceedings as provided for by the contract, serving a notice of adjudication on 17 December 2008. Mr. Anthony Hussey was appointed as adjudicator by the Chairman of the Chartered Institute of Arbitrators, Irish Branch. Mr. Hussey decided that the notice of termination of 4 December 2008 had been wrongful. After this decision, the claimant issued two notices of referral to arbitration. One of these notices concerned whether the claimant had wrongfully terminated the contract, which had been the subject of Mr. Hussey’s decision. The second arbitration notice related to the notice of suspension of 27 November 2008 and whether the defendant had been entitled to abandon or suspend the works.

Mr. Nael Bunni was appointed as arbitrator in respect of all the disputes. The defendant agreed to Mr. Bunni’s terms and conditions but stated that its participation in the arbitration was without prejudice to its rights to commence further adjudications whilst the arbitration was proceedings. In fact, the defendant had already commenced a second adjudication process in which it was seeking payment of €4,456,302.50 which it alleged was due as a result of the claimant’s wrongful termination of the contract. The claimant submitted that the essence of this dispute was the same as the third matter in the defendant’s notice of arbitration. Mr. Hussey was appointed as adjudicator to hear what was to become called the quantum claim. Having failed to obtain an undertaking that the defendant would cease to have its quantum claim resolved at adjudication, the claimant commenced the present proceedings seeking an interlocutory injunction restraining the defendant from continuing with the adjudication proceedings.

“Subject to the provisions of the Disputes Resolution Procedure, if any Dispute arising out of or inconnection with this Contract cannot be settled amicably between the Parties within 7 (seven) Working Days after written notice that such a situation exists, then at the election of either Party the matter may be referred to arbitration. Any such arbitration will be governed by the Arbitration Acts 1954 to 1998 as amended from time to time. The language of the arbitration will be English and the seat of the arbitration will be Dublin, Ireland.”

“Unless the Parties have agreed in writing that the Adjudicator’s decision will be final, either Party may, at any time within 15 (fifteen) Working Days after both Parties have received the decision of the Adjudicator together with his reasons, refer the Dispute to arbitration in accordance with Clause 26 ….”

The claimant argued that the defendant’s referral of the quantum issue to adjudication was an abuse of the process and contrary to the parties’ contractual arrangements. The claimant submitted that it is not open to a party to a contract to refer a dispute to arbitration and subsequently to refer the same dispute to adjudication, relying upon the principle that a litigant cannot air the same issue in two different fora. Having opted for arbitration, the claimant maintained that the defendant could not then refer the same matter to adjudication.

Whilst the court did not offer a definitive view, it considered that disputes such as the present one came within the Sixth Schedule, being referred to adjudication as a preliminary to it being referred to arbitration. Clause 26.2 provided that the provisions set out in the Sixth Schedule were to be utilised to resolve all disputes except as expressly provided elsewhere in the contract. The entitlement to refer a dispute to arbitration was subject to the provisions of the Sixth Schedule which provided a three stage process: attempted resolution through liaison, adjudication and finally arbitration. Although clause 26.3 did appear to envisage a freestanding arbitral process following an attempt to amicably settle the dispute, it might be that within the four walls of the contract, which was a very comprehensive document, a particular type of dispute did not come within the Sixth Schedule.

Given that clause 13 of the contract expressly provided that disputes in relation to the consequences of termination, including quantification of compensation on termination, were to be referred to adjudication by the fast track procedure, the claimant’s argument that the matter of quantification was not suitable for adjudication did not stand up. Therefore, as a matter of construction of the contract, the defendant was entitled to pursue the reference to adjudication on foot of the May Adjudication Notice, notwithstanding its notice of 13 March, 2009 referring the same dispute to arbitration.

Related Information

Clark Quarries Ltd. v PT McWilliams Ltd., [2009] IEHC 403

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Was a call on a Performance Guarantee a Breach of the Underlying Contract

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