Agreement to have dispute resolved by expert determination disapplied contractual arbitration provisions

Executive Summary

In K & J Townmore Construction ltd. v. Kildare and Wicklow Education and Training Board [2019] IEHC 666 the High Court refused to refer a dispute to arbitration on the basis that an agreement between the parties to have the disputes resolved by way of expert determination had the effect of disapplying not only the conciliation provisions of the original contract but also the arbitration provisions. Barniville J found that the defendant had failed to establish the existence of an arbitration agreement for the purposes of Article 8(1) of the Model law since the agreement to be bound by an expert determination rendered any such arbitration agreement "inoperative".

Background

The plaintiff, a building contractor, and the defendant, a statutory board, entered a building contract in 2015 to carry out construction works at St. Conleth’s Community College in Newbridge, Co. Kildare. The parties have been in dispute in relation to a whole range of issues concerning the contract since 2016. This included an expert determination. The expert determination procedure led to a number of determinations being issued in favour of the plaintiff who then sought to have the dispute entered into the Commercial Court for the purposes of seeking summary judgment for €3 million. The defendant opposed the plaintiff’s application for entry of the proceedings in the commercial list and sought an order under Article 8(1) of the Model Law referring the dispute between the parties to arbitration in reliance on a provision of the contract.

While the defendant’s application for an order under Article 8(1) of the Model Law was awaiting hearing, the parties engaged in a conciliation procedure on certain agreed terms. That conciliation procedure encompassed the disputes between the parties which were the subject of the expert determination procedure.

Issues

While the parties concurred that the agreement for expert determination either amended, replaced or supplanted the arbitration provisions provided for in the building contract the difference between the parties was the extent to which it did. The defendants contended that the arbitration provisions were left intact while the plaintiff argued that that the agreement for expert determination amended, supplanted or replaced both the conciliation provisions and the arbitration provisions. The Court also examined whether the conciliation agreement made between the parties in 2018 affected the defendant’s entitlement to seek to rely on the arbitration provisions.

Decision

Barniville J held that he must give effect to the parties' agreement and the effect of that was that the decision to agree to an expert determination disapplied the arbitration agreement. The Court noted that this finding in no way undermined or diminished the supportive approach which the Irish courts take to arbitration and the arbitral process. The Court held that the even though the agreement for expert determination did not expressly provide for it to be "final and binding" it must be treated as being so in law.

Barniville J also concluded that the agreement for expert determination disapplied the conciliation provisions of the original building contract. There was no wording in the conciliation agreement which reinstated or reapplied the contractual provisions so as to confer on the defendant an entitlement to refer those particular disputes to arbitration. 

In those circumstances the Court refused the defendant's application to refer the matters to arbitration pursuant to Article 8(1) of the Model Law since the agreement to an expert determination rendered any such arbitration agreement "inoperative".

Comment
As noted by the judge the Irish Courts are generally very receptive to applications to refer matters to arbitration under Article 8(1) of the Model Law where the parties have previously agreed to be bound by arbitration clauses. In this particular case the nature of the parties' agreement to use an expert determination to resolve the disputes between them acted as an instrument which nullified the agreement to arbitrate and took the controversy outside the remit of Article 8 (1).

For further information plase contact Ciaran Joyce, Knowledge Lawyer in the Litigation and Dispute Resolution Department.

Date published: 5 December 2019