Bowen Construction Limited (in receivership) and Somague Engenharia Sociedade Anomina v. Kelly’s of Fantane (Concrete) Limited (in receivership)

At a glance

Parties

Bowen Construction Limited (in receivership) and Somague Engenharia SA, trading as Bowen Somague JV (respondent in the arbitration, applicant in court), v. Kelly's of Fantane (Concrete) Limited (in receivership) (claimant in the arbitration)

Case no.

High Court, 2018 No. 76 MCA; [2019] IEHC 861

Forum and rules

Domestic arbitration under the Arbitration Act 2010 and UNCITRAL Model Law; Engineers Ireland Arbitration Procedure 2000, then 2011

Treaty

Contract clause: clause 13(a) of the subcontract of 19 January 2009

Court

High Court of Ireland, David Barniville J.

Underlying award(s)

Arbitrator Siobhan Fahey's ruling on jurisdiction of 9 March 2018

Sector

Construction (road surfacing subcontract, N7 Castletown to Nenagh Scheme)

Outcome

The court rejected the joint venture's Article 16(3) application and held that the arbitrator has jurisdiction over the disputed clause 12 issues.

Amount

The 9 March 2011 claim was for €13,798,995.00. The joint venture had set the termination value at nil and the termination amount at €768,911.27.

The dispute

Kelly's of Fantane was a road surfacing subcontractor to the Bowen Somague joint venture on the N7 Castletown to Nenagh road scheme. On 9 March 2011 it claimed €13,798,995.00, and the joint venture rejected the claim. After Kelly's went into receivership, the joint venture terminated the subcontract under clause 12(a). Under clause 12.2 of the main contract, which applied to the subcontract, it then set the termination value at nil and the termination amount at €768,911.27. Kelly's notice to refer of 13 March 2015 cited the 9 March 2011 claim and listed thirteen issues, but it did not mention clause 12 or the determinations. The joint venture accepted that it could rely on the determinations as a defence. It argued, however, that Kelly's could not challenge them, because that challenge had not been referred to arbitration. The arbitrator ruled on 9 March 2018 that she had jurisdiction, and the joint venture asked the High Court to decide the matter under Article 16(3) of the Model Law.

Key holdings

1. Under Article 16(3), the court exercises an original jurisdiction, not an appellate one. It rehears the question of jurisdiction de novo, applies 'full judicial consideration' on the balance of probabilities, and shows no deference to the arbitrator, though it may find her reasoning helpful. ¶¶ 94, 201
2. The court set out guiding principles for construing a notice to refer. The notice is read objectively and not legalistically, as at the date of the reference, and against the factual matrix of the dealings between the parties. No ambiguity is needed before that background can be considered. ¶¶ 123, 148
3. Procedural fairness works both ways. If a respondent may raise any defence that the notice does not mention, the claimant may respond to it. The response must arise directly from the defence and fall within the arbitration agreement. ¶¶ 139, 148(7), 179
4. The correspondence of November–December 2014, read objectively, showed that Kelly's disputed the termination value and termination amount before the notice to refer. The challenge to those determinations was therefore within the dispute referred. ¶¶ 160–181
5. The notice complied with clause 13(a)'s requirement to 'state the issues in dispute'. Even a failure to state issues raised in response to a defence would not deprive the arbitrator of jurisdiction. Rules 2.1, 2.3 and 5.2 of the 2000 Procedure did not change the result. ¶¶ 189–196
6. The arbitrator was correct, though on slightly different grounds: she had required an ambiguity before looking at the correspondence. The application was rejected. The court expressed no view on the merits, nor on whether clause 12.2 substantively alters the parties' rights. ¶¶ 108, 199, 204–205

Procedural history

1. 9 March 2011Kelly's submits a claim for €13,798,995.00. The joint venture rejects it on 23 March 2011.
2. 12 April 2011The joint venture terminates the subcontract after a receiver is appointed to Kelly's. It sets the termination value at nil (3 June 2011) and the termination amount at €768,911.27 (21 October 2011).
3. 13 March 2015Kelly's serves its notice to refer to arbitration.
4. December 2015A conciliator recommends a payment to Kelly's. The joint venture gives notice of dissatisfaction.
5. 1 June and 31 July 2017The High Court (McGovern J.) refuses a stay and grants Kelly's summary judgment on the conciliator's recommendation.
6. 9 March 2018Arbitrator Siobhan Fahey rules that she has jurisdiction over the clause 12 issues.
7. 20 March 2019The Court of Appeal dismisses the joint venture's appeal against the summary judgment.
8. 6 December 2019High Court judgment rejecting the joint venture's Article 16(3) application.

Tribunal, counsel and experts

Decided by

• David Barniville Judge, High Court of Ireland
• Siobhan Fahey Sole arbitrator — appointed by the parties jointly (arbitrator whose jurisdiction ruling of 9 March 2018 was challenged)

For the claimant

Hussey Fraser

For the respondent

Maples and Calder

Run a conflict check on these names →

Keywords

• Article 16(3) Model Law
• challenge to arbitrator's jurisdiction
• scope of reference
• notice to refer
• factual matrix
• de novo review
• no deference to arbitrator
• procedural fairness
• termination value
• termination amount
• Public Works Contract
• Engineers Ireland Arbitration Procedure 2000
• construction subcontract
• Arbitration Act 2010
• Ireland
• Dallah
• Fiona Trust

Summary generated with AI from the published documents — refer to the award for the authoritative text.