High Court dismisses jurisdiction plea as no arbitration agreement existed under the Model Law.

Neutral Citation [2013] IEHC 284

THE HIGH COURT

[2013 No. 8 MCA]

IN THE MATTER OF THE ARBITRATION ACT 2010

AND

IN THE MATTER OF AN INTENDED ARBITRATION

BETWEEN

JOHN G. BURNS LIMITED

APPLICANT

AND

GRANGE CONSTRUCTION & ROOFING COMPANY LIMITED

RESPONDENT

Judgment of Ms. Justice Laffoy delivered on 19th day of June, 2013.

The application

1. On this application, which was initiated by an originating notice of motion which issued on 10th January, 2013, the applicant seeks

an order pursuant to Order 56, rule 3(1)(f) of the Rules of the Superior Courts (the Rules) and s. 9 of the Arbitration Act 2010 (the

Act of 2010) deciding on the applicant’s plea that the arbitral tribunal does not have jurisdiction pursuant to Article 16(3) of the

Model Law and that the arbitrator erred in fact and in law in determining on 12th December, 2012 that he had such jurisdiction and

that he had been validly appointed by the President of the Construction Industry Federation (CIF).

Factual background

2. The dispute between the applicant and the respondent has arisen in circumstances where the applicant was retained as the main

contractor by the Board of Management of Mount Sackville Secondary School, Knockmaroon, Chapelizod in Dublin in relation to the

erection of a two storey extension to the existing Mount Sackville Secondary School and the respondent, which was one of the forty

sub-contractors involved in the project, was retained by the applicant as sub-contractor in connection with the project.

3. The main contract was created by Articles of Agreement dated 9th November, 2009 (the 2009 Agreement) made between the

Board of Management, referred to as “the Employer”, of the one part and the applicant, referred to as “the Contractor”, of the other

part, which was in the standard form of building contract where quantities form part of the contract issued by the Royal Institute of

Architects of Ireland (RIAI) in agreement with the CIF and the Society of Chartered Surveyors (2002 Edition, revision 1, print 3).

Clause 16 of the 2009 Agreement covered the situation where provision would be made in the contract documents for work to be

executed on site and/or material or goods to be supplied and fixed by a firm to be selected by the designated architect, Kieran Barry

of Kieran Barry & Associates (the Architect), and such firm was thereby “declared to be a Nominated Sub-Contractor employed by the

Contractor”. In other words, the Architect made the selection but the sub-contractor was employed by the main contractor.

4. The chain of events which led to the respondent being retained as a sub-contractor was as follows:

(a) The respondent submitted a completed standard form of tender (the tender) for the supply and erection of wall

cladding, associated stud work and steel supports, flashings and all works incidental thereto in relation to the

development, which was dated 7th December, 2009 and was addressed to the Architect. In the tender it was stated that

the respondent understood that the materials, goods and work, the subject of the tender, were or would be “covered by

a Prime Cost or Provisional Sum in the building Contract”, which was identified as the RIAI agreement which formed the

basis of the 2009 Agreement and was referred to as the Main Contract, to be entered into by the applicant and further

that the respondent would become a “Nominated Sub-Contractor under the Main Contract” and would “enter into a formal

Sub-Contract” which would “indemnify the [applicant] against the same obligations in respect of the Sub-Contract as

those for which the [applicant] is liable in respect of the Main Contract” and that it was understood that “the Conditions

contained in the Main Contract” would override all conditions to the contrary contained in the Sub-Contract.

(b) There were a number of documents appended to the one page tender. The first was Appendix 1, which was headed

“General Conditions and Contract Particulars for Sub-Contract Purposes”. The first two paragraphs of Appendix 1

reiterated, although not in the same words, what was stated in the tender, as recorded earlier. For instance, it was made

clear that the Main Contract was based on the standard Articles of Agreement issued by the RIAI which, in fact, had

been utilised in the 2009 Agreement. Appendix 1 then went on to set out some of the detail contained in the 2009

Agreement, for example, the identity of the Employer and the Architect. Appendix 1 then, under the heading “Appendix to

Main Contract” effectively replicated the Appendix in the Main Contract. That Appendix contained details by reference to

the 2009 Agreement, for example, the date for possession, the date for completion and suchlike. The final item in

Appendix 1 read as follows:

“Clause 35(i) Period of Serving Notice of Arbitration: 10 working days”.

It was then stated that any “other details of the Main Contract”, if required, might be obtained from, inter alia, the

Architect. It was stated that the Sub-Contractor would be deemed to have made himself familiar with all aspects of

the Main and Sub-Contracts, which affected his tender. Appendix 2, also appended to the tender, set out facilities

which would be made available to the Sub-Contractor free of charge and it was made clear that anything not

provided free of charge would be deemed to be provided by the Sub-Contractor in the tender sum. Finally, the

respondent attached a breakdown of its tender sum to the tender.

(c) By letter dated 13th December, 2009, the Architect sent a copy of the respondent’s tender to the applicant and,

subject to certain matters which are not relevant for present purposes, intimated that the applicant would be requested

to enter into a sub-contract with the respondent to perform the cladding, etc, sub-contract.

(d) By letter dated 18th December, 2009 to the respondent, the applicant confirmed its intention to enter into a sub-

contract with the respondent subject to confirmation of certain matters of detail.

(e) What counsel for the applicant characterised as the sub-contract and what counsel for the respondent characterised

as a contract document was a letter dated 19th January, 2010 from the applicant to the respondent. In this letter the

applicant stated that, as “Main Contractors”, it instructed the respondent “to proceed with all works associated with the

supply, delivery and installation complete of the Wall, cladding, Flat roof coverings, Fascias and Soffit nominated sub-

contract”. The agreed contract price was set out as per the respondent’s tender. The position in relation to VAT was set

out – VAT was to be accounted for by the Employer directly to the Revenue Commissioners. It was then stated:

“All other terms and conditions are based on all tender documents and post tender negotiations as per

the letter of nomination dated 13th December, 2009 and as noted below.”

There followed what were described as “additional conditions relating to this order”, which numbered seventeen in

all. For example, it was stated in Condition (1) that the commencement date was 8th March, 2009 and that the

works were to be completed in accordance with the Main Contractor’s programme.

(f) It was clearly envisaged that the letter of 19th January, 2010 would be signed on behalf of both the applicant and the

respondent at the foot thereof. It was signed on behalf of the applicant. While it would appear that it was not signed on

behalf of the respondent, as subsequent events clearly demonstrate, the terms set out therein were accepted on behalf

of the respondent, although the commencement date of 8th March, 2009 was not met by the respondent.

(g) By letter dated 16th March, 2010, the applicant wrote to the respondent noting that the commencement date of 8th

March, 2010 had been later revised during discussions to 15th March, 2010, “due to knock on delay effects on structional

steel and other elements of the construction works due to the failure of” the respondent to produce working drawings and

to attend the site and suchlike. In essence, the letter was a letter of complaint on the part of the applicant in which it

was emphasised that the respondent was aware of the main contract programme and the requirement that the contract

work be completed in full by August 2010. The applicant officially requested the respondent to commence on-site

immediately and gave notice that all and any loss and expense incurred by the applicant in relation to the delay would be

detailed and submitted to the respondent as part of the valuation and certification process. That letter clearly suggests

that the applicant considered that the parties were contractually bound before that letter issued, presumably, on foot of

the letter of 19th January, 2010.

(h) The next letter, which has been relied upon by counsel for the respondent in support of the respondent’s position,

was also a letter of complaint, which was dated 23rd June, 2010, to the respondent from the applicant complaining of

delay on the part of the respondent. In the letter it was stated that on 26th May, 2010 a further revised realistic

programme was tabled by the respondent and accepted by the applicant and the Architect showing a final revised and

agreed completion date for 18th June, 2010. In essence, the complaint was that the respondent had not met the agreed

completion date. The paragraph in the letter on which the respondent relies in support of its contention that any dispute

between the parties was to be referred to arbitration, is the penultimate paragraph in which it was stated:

“[The applicant], as main contractor, hereby notifies you under Clause 29(a) of the Main Contract and

under Clause 7(a) of this sub-contract and hereby determines that the work ought reasonably to have

been completed by this agreed and extended date of 18th June, 2010 and accordingly you should pay

or allow to the Main Contractor the sum named and the rate stated in the Appendix, or part thereof, as

‘Liquidated or Ascertained Damages’ for the period during which the works shall so remain and have

remained incomplete in breach of the said sub-contract.”

Clause 29(a) of the 2009 Agreement dealt with damages for non-completion and envisaged the Architect, if of

opinion that the works ought reasonably to have been completed, to certify that the applicant should pay or allow

to the Employer the sum named and the rate stated in the Appendix as “Liquidated and Ascertained Damages”, the

rate stated in the Appendix to the 2009 Agreement being at the rate of €5,000 per week. The reference to “Clause

7(a) of this sub-contract” is not a reference to any of the additional conditions set out in the letter of 19th

January, 2010 and its provenance will become obvious later.

(i) The next letter of complaint from the applicant to the respondent was dated 13th June, 2011 and was a response to

the letter dated 7th June, 2011 from the respondent to the applicant seeking to have its account discharged within seven

days; otherwise it would be issuing legal proceedings. In the letter of 13th June, 2011 (which it would appear was wrongly

dated 13th June, 2010) the applicant referred to “letters dated 15 March and the 23rd June, 2010 noting a breach of

contract for the performance of the works”. I assume that the reference should have been to the letter dated 16th

March, 2010 referred to at (g) above and that the letter of 23rd June, 2010 is the letter referred to at (h) above. As I

understand the position, in June 2011, the respondent was contending that the applicant had wrongfully withheld from it

the sum of €35,065 (excluding VAT), which had been certified by the Architect. In identifying the dispute between the

applicant and the respondent at that juncture, the applicant stated as follows:

“We wish to confirm that the costs in the sum of €31,121.00 excluding VAT pertain to the failure of [the

respondent] to perform the terms of this nominated sub-contract as per the order dated 19th January,

2010. Specifically, this matter is with regard to the timescale contracted to carry out the works and the

breach of same critical terms. You obviously disagree with these costs and so we have a dispute

between the parties.”

The applicant went on to state that it wished to resolve the dispute “by amiable means” and suggested a meeting.

It then stated:

“Should you continue to refuse to meet [with the applicant] and issue legal proceedings please note

that we will put a stay on these proceedings, invoke Clause 38 of the sub-contract and refer the

matter to the dispute resolution mechanism.”

There is no Clause 38 in the letter of 19th January, 2010, but Clause 38 is the arbitration clause in the 2009

Agreement.

(j) On 11th August, 2011 the respondent presented an itemised claim dated 10th August, 2011 to the applicant claiming

in total the sum of €76,526.28 and in a letter of 12th August, 2011 confirmed that the quantum items related “to errors,

incorrect set out of the building and building not constructed to our drawings in a number of areas by [the applicant]”.

The response of the applicant was a three page letter dated 26th August, 2011, wherein the respondent’s claim was

rejected by the applicant for a variety of reasons, including reliance on Condition (17) in the letter of 19th January, 2010,

noting that the previous payment made by the applicant was “in full consideration of the Architect’s Certificate 11 save

for the matter in dispute as per cost details attached”. The applicant stated that it had honoured all payments up to that

date, “save for the matter as has arisen in the performance by [the respondent] on this project”.

Referral to arbitration by the respondent

5. The dispute between the applicant and the respondent continued through the remainder of 2011 and into 2012. The next

significant feature was that the respondent engaged Ken O’Connor Associates, Chartered Quantity Surveyors, to deal with what was

asserted as the failure of the applicant to discharge the balance of the monies due under the Sub-Contract. By letter dated 15th

June, 2012, Ken O’Connor Associates wrote to the applicant asserting, inter alia, as follows:

“The Contract agreed between [the respondent] and [the applicant] provides that any dispute arising between the

Contractor and Subcontractor under the Contract shall be referred to Arbitration in accordance with clause 26 of the

Standard CIF Subcontract.”

The applicant was called upon to concur within fourteen days in the appointment of one of three nominated persons as arbitrator,

failing which an application would be made to the President of the CIF to nominate an arbitrator.

6. The response of the applicant by letter dated 29th June, 2012, in essence, although this terminology was not used, was that the

respondent had no valid claim. However, the applicant did not take the line at that stage that the respondent was not entitled to

have the matter referred to arbitration. On the contrary, it stated that it was its company policy to expedite all avenues possible to

try to resolve matters in an amicable fashion, prior to and without recourse to costly dispute resolution processes. It then requested

a meeting with the respondent in accordance with that policy “and prior to concurring with the provision of clause 26 of the executed

contract employed”.

7. Ultimately, Ken O’Connor Associates, by letter dated 26th August, 2012, requested the President of the CIF to appoint an

arbitrator. A copy of the relevant contract was sought by the CIF on 7th September, 2012. In response, by letter dated 10th

September, 2012, Ken O’Connor Associates informed the CIF that the executed contract between the parties was “the CIF form of

Sub-Contract (for use with the RIAI Main Contract Form) 5th Edition 1989”, but that the applicant had not returned a copy of the

executed form to the respondent. That statement was not correct, because no such Sub-Contract had been executed by the

parties. However, the letter further stated that “the executed contract” was referred to by both the Architect and the applicant in

various correspondence and the following items of correspondence were attached: the letter of 13th December, 2009 referred to at

para. 4(c) above; the letter of 23rd June, 2010 referred to at para. 4(h) above; and the letter of 29th June, 2012 referred to at 6

above, the manner of inclusion of which will be outlined later.

8. By letter dated 14th September, 2012 on behalf of the President of the CIF, Ken O’Connor Associates was informed that Mr. Joe

Behan of J.P. Behan & Associates had been appointed arbitrator to deal with the dispute between the applicant and the respondent

“pursuant to Clause 26 of the Sub-Contract for use [with] the RIAI main contract form, 5th Edition dated October 1989”. On the

same day the applicant was notified of the appointment.

9. By letter dated 26th September, 2012, the applicant’s solicitors, Beauchamps, having asserted that no arbitration agreement

existed between the applicant and the respondent, sought clarification from the President of the CIF as to the dispute which was

referred to in the letter of 14th September, 2012. The response on behalf of the President of the CIF, which was dated 1st October,

2012 , was that the CIF had sought clarification from Ken O’Connor Associates to ensure that there was jurisdiction to appoint an

arbitrator and that CIF had received copies of correspondence between the parties referring to Clause 26 and which also indicated

the existence of a dispute. Beauchamps persisted in the view that the President of the CIF did not have jurisdiction to nominate an

arbitrator. Further, their position was that there was no arbitration agreement in existence between the parties and that the matter

should be dealt with by the courts.

10. Mr. Behan recognised that there was a fundamental issue in relation to his appointment. Both sides, the respondent through Ken

O’Connor Associates, and the applicant through Beauchamps, engaged in correspondence with Mr. Behan, which included a long letter

of 28th November, 2012 from Ken O’Connor Associates citing case law. By letter dated 12th December, 2012, the liquidator informed

both sides that, having considered the submissions made by both parties, he was satisfied that he had jurisdiction to act as arbitrator

in the matter, having stated:

“I note that there is no signed contract between the parties. I also note that there is no agreement to Arbitrate between

the parties.”

Ken O’Connor Associates took issue with the second sentence in that quotation by letter dated 30th January, 2013 and, invoking

Article 33 of the Model Law, sought an order “correcting any clerical error, typographical error or error of a similar nature which may

be contained in the Tribunal’s award of 12th December, 2012”, specifically referring to the second sentence quoted above. The

response of the arbitrator was that the request was out of time. However, by that stage the applicant had initiated this application.

Standard form of Sub-Contract

11. The CIF standard form Sub-Contract, a blank copy of which has been put before the Court, which the respondent contends

governs the relationship of the applicant and the respondent, is described on the front sheet as a sub-contract for use with the RIAI

Main Contract Form. The version put before the Court is the fifth edition, obviously published in October 1989. At the commencement

it is recited as being supplemental to “the Main Contract”, the parties to which are to be identified. Counsel for the respondent drew

the Court’s attention to Clause 7 because “Clause 7(a) of this Sub-Contract” was referred to in the applicant’s letter of 23rd June,

2010. Clause 7 deals with completion and sets out the obligation of the Sub-Contractor to complete the works by reference to the

period specified in Part III of the Appendix and provides that, in the event of default of the part of the Sub-Contractor, “he shall pay

to the Contractor any loss or damage suffered or incurred by the Contractor and caused by the failure of the Sub-Contractor as

aforesaid of which loss or damage the Contractor shall at the earliest opportunity give notice to the Sub-Contractor that the same

has been suffered or incurred”. Clause 7(b) deals with the situation where delay is attributable to the Contractor or where the

Contractor may obtain an extension under the Main Contract, in either of which events the Contractor shall apply for a fair and

reasonable extension of the period for completion under the Main Contract, having received notice from the Sub-Contractor. It would

not be unreasonable to infer that the author of the letter of 23rd June, 2010 believed that Clause 7 of the CIF standard form Sub-

Contract governed the relationship of the applicant and the respondent.

12. The arbitration clause in the CIF standard form Sub-Contract is Clause 26 which provides for the appointment of an arbitrator by

the President of the CIF at the request of either party, if both sides have failed to agree such appointment. Clause 26 contains two

provisos which clearly link the standard Sub-Contract to the Main Contract.

13. However, it was to Clause 38 of the Main Contract (i.e. the 2009 Agreement) that the applicant referred in the letter of 13th

June, 2011, erroneously as it contends. Clause 38(a) of the Main Contract envisages a dispute being referred to a conciliation process

first and then to arbitration in accordance with Clause 38(b). Under Clause 38(b), if the parties fail to agree as to who shall be the

arbitrator, the appointment may be made, at the request of either party, by the President for the time being of the Royal Institute of

Architects of Ireland after consultation with the President of the CIF. Again, it would not be unreasonable to infer from the letter of

13th June, 2011 from the applicant that the author believed that the relationship of the applicant and the respondent was governed

by an arbitration clause, although the reference to “Clause 38 of the sub-contract” was clearly erroneous; Clause 38 is to be found in

the 2009 Agreement.

14. However, despite what, in the absence of evidence to the contrary, might reasonably be inferred, in the grounding affidavit on

this application sworn on 9th January, 2013 by Gareth Brady, a director of the applicant, it was averred that the standard CIF

standard form Sub-Contract for use with the RIAI Main Contract form “was never agreed between the parties as governing their

contractual relations”. Later, Mr. Brady averred that at the time of the contract, meaning, presumably, the Sub-Contract between

the applicant and the respondent, “there was no reference to the CIF form of subcontract in any correspondence passing between

the parties”. Further, the references in the letters of 23rd June, 2010 and 13th June, 2011 were made in error. Mr. Brady averred that

he “inadvertently referred to the clauses in the Construction Industry Federation sub-contract without checking back to the contract

between the parties of 19 January, 2010”.

15. The replying affidavit on behalf of the respondent was sworn by Gregory Crinion, a director of the respondent, on 14th February,

2013. Mr. Crinion has referred to the letter of 13th December, 2009 from the Architects, which he called the “letter of nomination”

and he has specifically averred as follows:

“The letter of nomination also sets out the terms of the RIAI Main Contract which form part of the Sub-Contract between

[the applicant] and [the respondent] including, but not limited to the period for the serving of notice of arbitration in case

of dispute of 10 working days.

Arising from the foregoing I say that [the respondent] understood and assumed that the standard terms and conditions of

the RIAI (sic) Standard Form Subcontract would form part of the subcontract to be entered into between [the

respondent] and [the applicant].”

Mr. Crinion also averred that on the basis of over twenty six years experience as a sub-contractor in the construction industry, the

use of the standard terms and conditions of the “RIAI (sic) Standard Form Subcontract” in the contractual arrangements between a

main contractor and a sub-contractor is customary “where the Employer and the Main Contractor are using the RIAI Main Contract

form”. Further, he averred that such customary incorporation “is particularly habitual where the Sub-Contractor is made a Nominated

Sub-Contractor under condition 16 of the RIAI Main Contract”. Mr. Crinion averred that at all material times he believed that any

disputes arising between the applicant and the respondent in the context of the Sub-Contract would ultimately be settled by

arbitration, which is the usual and customary dispute resolution mechanism employed in such sub-contracts.

16. Mr. Crinion’s reference to the “terms of the RIAI Main Contract” in what he described as the “letter of nomination” of 13th

December, 2009 “including, but not limited to the period for service of notice of arbitration in case of dispute of 10 working days”

appears to be a reference to Appendix I attached to the tender and, in particular, to the part thereof which replicated the Appendix

to the 2009 Agreement, specifically the last item thereof, which is quoted at para. 4(a) above. The item in the Appendix was intended

to stipulate a period of time if it was intended to vary standard Clause 35 in respect of the relevant timeframe. However, paragraph

(i) of Clause 35 was not varied, because it stipulated when the Architect was to issue the Final Certificate “unless the Architects

receive a notice of arbitration within ten working days or such other period as may be stated in the Appendix”. All one can say in

relation to Appendix I attached to the tender is that, in referring to Clause 35(i) of the Main Contract, i.e. the 2009 Agreement, it did

refer to arbitration. However, when one looks at the context in which the word “arbitration” appears, which is governing the

relationship between the Employer and the Main Contractor through the involvement of the Architect, there is no basis for concluding

that what was intended by the reference was that an arbitration clause would be part of the sub-contract between the applicant and

the respondent.

17. In his second affidavit sworn on 5th March, 2013, Mr. Brady disputed Mr. Crinion’s contention that it is customary to use the CIF

form Sub-Contract where the RIAI form of Main Contract is used. He averred that, in actual fact, it is often the case that the

contract between a main contractor and a sub-contractor “is evidenced in correspondence and that there is never any intention to

enter into a standard form sub-contract”. The majority of the contracts he has been involved with in such circumstances have not

involved the incorporation or execution of standard form contracts. In the case of the Mount Sackville project, the letters of

engagement to the other sub-contractors were almost identical or very similar to the letters provided to the respondent, some of

which he exhibited. Notwithstanding that averment, it is clear that the CIF standard form Sub-Contract, which the respondent

contends applies, is the industry standard where the form of Main Contract used in the 2009 Agreement is in place. Having said that,

the issue here is whether there was an agreement between the applicant and the respondent that its terms would be incorporated in

the Sub-Contract between the applicant and the respondent in a manner which complies with the Model Law.

The law

18. By virtue of s.6 of the Act of 2010, which commenced on 8th June, 2010, the Model Law, the text of which is set out in Schedule

1 to the Act of 2010, has force of law in the State. As regards the definition and form of arbitration agreement, the Act of 2010

applies Option 1 in Article 7 of the Model Law. Article 7(1) defines arbitration agreement as meaning –

“an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise

between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in

the form of an arbitration clause in a contract or in the form of a separate agreement.”

However, it is expressly provided in paragraph (2) that the arbitration agreement shall be in writing and that is explained in paragraph

(3) as follows:

“An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or

contract has been concluded orally, by conduct, or by other means.”

Paragraph (6) provides:

“The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in

writing, provided that the reference is such as to make that clause part of the contract.”

19. The principal provision of the Model Law at issue on this application is Article 16(3). Article 16(1) provides that the arbitral tribunal

may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. That

reflects the so-called doctrine of “competence-competence”. Article 16(2) deals with the time limitation on raising a plea that the

arbitral tribunal does not have jurisdiction and is not in issue here. Article 16(3) 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.”

What happened in this case is that, in essence, Mr. Behan ruled on jurisdiction as a preliminary question and the applicant brought

this application to this Court pursuant to s. 9(1) of the Act of 2010, which specifies the High Court for the purpose of Article 6.

20. The Court was referred to three authorities of the courts in this jurisdiction, which I will consider in chronological order, only the

last of which addresses the Act of 2010 jurisdiction.

21. The earliest is the decision of the High Court (Morris P.) in Lynch Roofing Systems Limited v. Bennett & Son Limited [1999] 2 I.R.

450. The application under consideration in that case was an application under s. 5 of the Arbitration Act 1980 (the Act of 1980) for

an order staying the proceedings on the basis that there was an arbitration agreement between the parties. As here, the dispute was

between a main contractor, the defendant, and a sub-contractor, the plaintiff. The defendant, which was seeking to stay the

proceedings, claimed that at the time of the negotiation of the contract, the price and the fact that the standard conditions of

contract RIAI (April 1998 edition), which contained an arbitration clause, would apply to the contract, were agreed between the

parties. A letter was later sent to the plaintiff confirming the contract as agreed and specifying that it would be subject to a written

receipt of the conditions and terms detailed on Form CBS/ACC (which form incorporated the standard conditions of contract RIAI).

The letter also stipulated that failure to respond would be viewed as acceptance of the conditions. No response was received from

the plaintiff, which went on site and commenced the sub-contract works. The position of the plaintiff was that at no time during the

negotiation of the contract was the existence of an arbitration clause brought to its attention. Morris P. held in favour of the

defendant and granted a stay on the proceedings. In so doing, Morris P. applied the principle enunciated by the Court of Appeal in the

United Kingdom in British Crane Hire v. Ipswich Plant Hire [1975] 1 QB 303. Morris P. quoted the finding in the case, which factually

was not concerned with the incorporation of an arbitration clause, that –

“where parties to a contract of hire were both in the trade and of equal bargaining power the conditions habitually

imposed in such contracts would be incorporated into the contract on the basis of the common understanding of the

parties that the usual conditions would apply; and that since the conditions set out in the plaintiffs’ printed form formed

part of the contract the plaintiffs were entitled under those conditions to the cost of recovering the crane …”

Morris P. applied that principle of incorporation to the facts before him and held that, as the plaintiff sub-contractor was sufficiently

familiar with the trade, it must be assumed that it was accepted that the general conditions of a building contract, which contained

an arbitration clause, would apply. In any event, he was satisfied that, having regard to the agreement reached at the negotiations

and the letter from the defendant which followed it, the plaintiff must have contemplated that the contract would be governed by the

appropriate building contract and, therefore, would include an arbitration clause.

22. The next authority cited was a decision of the High Court (Peart J.) in McCrory Scaffolding Limited v. McInerney Construction

Limited [2004] 3 I.R. 592. This was also an application under s. 5 of the Act of 1980 to stay the proceedings on the ground there was

an arbitration agreement governing the relationship of the parties. Once again, the defendant was the main contractor and the

plaintiff was the sub-contractor. The letter of appointment sent by the defendant informed the plaintiff that it intended to enter into

a signed contract which incorporated the GDLA 82 conditions of contract, which contained an arbitration clause. No follow up written

contract was ever signed by the parties but the plaintiff commenced the tasks agreed between the parties. The defendant contended

that there was a valid and subsisting arbitration agreement, which governed the dispute between them, as a result of the reference

to GDLA 82 conditions of contract in the letter of appointment, but the plaintiff contended that the letter of appointment did not

incorporate the arbitration agreement in that form. Peart J., in making an order staying the proceedings, followed the decision in

Lynch Roofing Systems Ltd. v. Bennett & Son Limited and held that it did.

23. Both of those decisions pre-dated the commencement of the Act of 2010. The final authority, the decision of the High Court in

Barnmore Demolition & Civil Engineering Ltd. v. Alandale Logistics Ltd. & Ors. (Unreported, High Court, Feeney J., 11th November,

2010), post-dated the commencement of the Act of 2010. The application before Feeney J. was for an order under Article 8 of the

Model Law, which provides as follows:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so

requests not later than when submitting his first statement on the substance of the dispute, refer the parties to

arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

Once again, it was the defendant main contractors who were arguing that there was an arbitration agreement with the plaintiff sub-

contractor and that an order should be made under Article 8 of the Model Law referring the parties to arbitration. The judgment of

Feeney J. is of considerable significance in that it analyses the standard to be applied by a court in determining whether there is an

arbitration agreement under Article 8: whether it is on a full judicial review basis; or on a prima facie or arguability basis. However, on

the facts of the case, Feeney J. found it was unnecessary to make a determination as to whether a prima facie or a full judicial

consideration should apply, because the defendants had not satisfied either test. In addressing the factual situation, Feeney J.

followed the approach adopted by Peart J. in McCrory Scaffolding v. McInerney Construction Limited stating that, when the Court

comes to consider the terms of an agreement to arbitrate, the Court should do so with due regard to business realities and should not

seek too much in aid by way of technicality, where it is clear on what basis the plaintiff went upon the site and commenced the work.

The application of the law to the facts

24. The question which the Court has to determine is whether, as he found, Mr. Behan has jurisdiction to act as an arbitrator in the

dispute between the parties. The core issue in the determination of that question is whether there exists an arbitration agreement

within the meaning of Article 7 of the Model Law between the parties in relation to the dispute. Mr. Behan, having ruled on the

matter, de facto as a preliminary question, that he has jurisdiction, the Court’s function under Article 16(3) is “to decide the matter”.

For present purposes, I am assuming that, in deciding a matter under Article 16(3), the standard to be applied by the Court is the

normal standard in determining matters in civil cases, on the balance of probabilities, but without definitively deciding that issue. It is

appropriate to record, however, that 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 Mr. Behan. He acknowledged that the Court may

consider such evidence as it sees fit and is not bound by the submissions made to Mr. Behan. In other words, the Court has

untrammelled jurisdiction to consider de novo the issue whether there is an arbitration agreement which binds the parties.

25. The determination of Mr. Behan contained in the letter of 12th December, 2012 is fundamentally illogical. It is true that there is

“no signed contract between the parties”, in the sense that there is no single document setting out the terms and conditions of the

sub-contractual arrangement, which is signed on behalf of both parties. However, if there is no agreement to arbitrate between the

parties, then Mr. Behan has no jurisdiction to arbitrate on foot of his appointment by the President of the CIF. Of course, it may be

that, as is implicit in the letter dated 30th January, 2013 from Ken O’Connor Associates to Mr. Behan, that there is a clerical error or a

typographical error or some error of a similar nature in the letter of 12th December, 2012. Even if there is, Mr. Behan has not set out

in the letter of 12th December, 2012 on what basis he is satisfied that he has jurisdiction to act as arbitrator, and in particular, what

aspects of the submissions made to him and the case law contained in the submissions support that conclusion. Therefore, this Court

must go back to first base.

26. At the point in time at which the respondent commenced the works it sub-contracted to execute, which cannot be identified from

the evidence before the Court with precision but which would appear to have been some time in April or May 2010, the documents

which evidenced the agreement entered into between the parties were the following documents:

(a) the tender submitted by the respondent and the attachments to it, including Appendix 1 and Appendix 2;

(b) the Architect’s letter of 13th December, 2009 confirming the intent to nominate the respondent as a sub-contractor in

relation to wall cladding, etc;

(c) the letter of 18th December, 2009 from the applicant to the respondent confirming the intention of the applicant to

enter into a sub-contract with the respondent and seeking confirmation of various matters; and

(d) the letter dated 19th January, 2010 which refers to and incorporates the tender documents and the letter of

nomination dated 13th December, 2009.

Counsel for the applicant was correct in emphasising there is no reference whatsoever in the foregoing documents to the contractual

relationship of the applicant and the respondent being governed by the CIF standard form Sub-Contract. While there is clearly no

express reference to it, moreover, in my view, there is nothing in that documentation from which it can be implied that the intention

was that the CIF standard form Sub-Contract would apply. On a plain reading of the letter of 19th January, 2010, in conjunction with

the documents referred to in it, the terms whereof are effectively incorporated in it, it seems clear that the intention was that all of

the terms and conditions applicable to the parties’ relationship were to be found in the documents referred to in it and in the letter

itself.

27. Accordingly, looking at the position as at 19th January, 2010, the relevant documentation strongly suggests that the entire

contract between the parties is contained in that documentation. That is supported by the fact that throughout the letter of 19th

January, 2010 there are references to “this contract” and “this sub-contract”. Apart from that, the CIF standard form Sub-Contract

is a very complex document which, on its face, is envisaged to be adapted to apply to particular agreed circumstances. While, at the

hearing, the parties did not conduct any comparison between the terms set out in the letter of 19th January, 2010 and in the CIF

standard form Sub-Contract, even a cursory comparison suggests that the intention was that the terms and conditions governing the

parties’ relationship were spelt out in the letter of 19th January, 2010 and the documents referred to in it, when read in the context

of the 2009 Agreement. To take one example, retention is dealt with in Condition (14) in the letter of 19th January, 2010, where it is

stated:

“Retention will be held at 3% until Practical Completion whereby it will be reduced to 1.5% until completion of the defects

liability period and release of the final architect’s certificate.”

That provision obviated the necessity to apply provisions such as Clause 11 and Part VI of the Appendix to the CIF standard form

Sub-Contract to the arrangement between the applicant and the respondent.

28. In reaching the conclusion that, when the respondent commenced the sub-contract works, the letter of 19th January, 2010 read

in conjunction with the documents referred to in it, on its face, constituted the contract between the applicant and the respondent, I

have not overlooked the submissions made by counsel for the respondent that the conditions in the letter of 19th January, 2010 and

in the documents referred to in it do not give the complete picture. Counsel referred, for instance, to Condition (15), which stated

that failure on the part of the respondent to co-operate with the applicant in the provision of information, shop drawings for approval

and all other documentation in a prompt manner would be “treated as delay to the Main Contract resulting in delay remedies” being

sought by the applicant, submitting that the documentation contained no guidelines in relation to the delay mechanism. Counsel for

the respondent also pointed to the narrative at the commencement of the letter dated 23rd June, 2010, in which the applicant aired

its complaints in relation to delay on the part of the respondent in producing an acceptable programme for the sub-contract works,

which involved the date for completion of the works being extended, although the respondent had never formally requested an

extension of time. Counsel for the respondent also pointed to an assertion by the applicant in the letter of 26th August, 2011 that

the respondent had not applied for an “Extension of Time” in accordance with the contract clauses. It is true that there was no

provision in the letter of 19th January, 2010 combined with the documents referred to in it, such as the provision contained in Clause

7(b) of the CIF standard form Sub-Contract, under which a sub-contractor is required to give notice in writing to the contractor if

completion is delayed, whereupon the contractor is obliged to grant a fair and reasonable extension for completion. However, that

does not mean that a contractual arrangement based solely on those documents was unworkable or that it was necessary to apply

the provisions of some standard form of contract to the contractual relationship of the parties, so as to give rise to an inference that

there must have been a mutual agreement between the parties that the CIF standard form of Sub-Contract would apply.

29. Of course, as I have already commented, subsequent letters which emanated from the applicant suggest that the applicant

considered that some provisions, whether in a standard form of sub-contract or otherwise, which were not set out in the letter of

19th January, 2010, applied to the contractual arrangement between the parties. Mr. Brady has attributed the references in question

to error and inadvertence. It was submitted by counsel for the respondent that the various references in the correspondence which

passed between the parties indicated a mutual understanding on the part of the parties that the CIF standard form Sub-Contract

would apply to the contractual relationship, notwithstanding that Mr. Brady rejected that as a fact on affidavit.

30. The difficult question for the Court is whether what Mr. Brady, on the basis of legal advice, now contends were errors in

correspondence from the applicant to the respondent supports the respondent’s contention that the terms of the CIF standard form

Sub-Contract, in particular, the arbitration clause, were by mutual agreement of the parties incorporated in the Sub-Contract.

Working back in time, I attach little weight to the reference to Clause 26 in the letter of 29th June, 2012 to Ken O’Connor Associates,

because the context was that the applicant was endeavouring to postpone dealing with the request to agree to the appointment of

an arbitrator. As regards the reference to Clause 38 in the letter of 13th June, 2011, that was clearly an error because Clause 38 was

the arbitration clause in the Main Contract (i.e. the 2009 Agreement), not in the CIF standard form Sub-Contract, although the

attitude adopted by the applicant suggested that it considered that arbitration was the appropriate process for resolving disputes.

There remains the reference to “Clause 7(a) of this Sub-Contract” in the letter of 23rd June, 2010. As Ken O’Connor Associates

correctly recognised, that was a reference to Clause 7(a) of the CIF standard form Sub-Contract. Indeed, in its letter dated 10th

September, 2012 to the CIF, in response to the request of the CIF to be furnished with a copy of the relevant contract, Ken O’Connor

Associates did not furnish the most important document, the letter of 19th January, 2010, but did furnish the letter of 23rd June,

2010, stating that the context of the reference to Clause 29(a) of the Main Contract and Clause 7(a) of the Sub-Contract “clearly”

showed that the Sub-Contract being referred to was the CIF standard form Sub-Contract, 5th Edition 1989, which, in my view, did

not really reflect the true situation. Aside from the fact that Mr. Brady has averred that the reference to Clause 7(a) was made in

error, the position is that the contract between the applicant and the respondent was already in place by 23rd June, 2010 and there

was no reference in the contract documentation then in place to any document containing an arbitration clause, so as to constitute

an arbitration agreement in writing within the meaning and for the purposes of Article 7 of the Model Law.

31. This case is clearly distinguishable on the facts from the pre-2010 Act authorities referred to above, not only because of the

unusual circumstance that it is the main contractor, not the sub-contractor, who is seeking to avoid having the dispute arbitrated,

but also for the following reasons. In the Lynch Roofing Systems Ltd. case, as the facts outlined earlier indicate, the letter confirming

the contract as agreed expressly stated that it was subject to conditions and terms detailed, which incorporated the RIAI standard

conditions, which contained an arbitration clause. Similarly, in the McCrory Scaffolding Ltd. case, the letter of appointment expressly

stated that the contract would incorporate certain standard conditions which, again, were identified and contained an arbitration

clause. In each of those cases, the Sub-Contractor, by its conduct in commencing and carrying out the Sub-Contract works,

implicitly accepted the Main Contractor’s offer to it on the terms specified and then concluded the contract by conduct. In contrast,

what the evidence establishes in this case is that the respondent commenced the Sub-Contract works on the basis of the terms

outlined in the letter of 19th January, 2010, which did not provide for the incorporation of the CIF standard form Sub-Contract or any

arbitration clause, and that action constituted acceptance of the terms offered by the applicant without any such incorporation and,

thus, completion of the contract by conduct.

32. For the same reason, in my view, the respondent has failed to establish the existence of an agreement by the parties to submit

their dispute to arbitration which complies with either paragraph (2), paragraph (3) or paragraph (6) of Article 7. In particular,

paragraph (6) cannot be invoked because there is no reference in any contract document to the CIF standard form Sub-Contract, nor

is there any reference to any arbitration clause, in a manner which makes either the CIF standard form Sub-Contract or any such

arbitration clause part of the contract between the parties.

Decision of the Court

33. Accordingly, the decision of the Court is that the terms and conditions set out in the standard CIF standard form Sub-Contract

have not been incorporated in the Sub-Contract between the applicant and the respondent and that there is no arbitration

agreement within the meaning of Article 7 of the Model Law in place governing the contractual relationship of the applicant and the

respondent. The President of the CIF did not have jurisdiction to appoint Mr. Behan as arbitrator, as he purported to do.

34. Despite that decision, I feel constrained to make the general observation that it would be infinitely preferable if the dispute

between the applicant and the respondent was resolved by some process of alternative dispute resolution, rather than by litigation.