In Furey v Lurganville Construction Company Limited and others (Irish Supreme Court, 21 June 2012, [2012] IESC 38), the plaintiff house buyers sued the builder, the owner and the architect. Their contract with the builder contained an arbitration clause, on which the builder sought to rely, asking the court to stay the proceedings pending arbitration. The plaintiffs argued that to send the claim against the builder off to arbitration, but to keep the claims against the owner and the architect in court, would give rise to a multiplicity of separate legal actions, leading to the possibility of conflicting findings of fact and potential injustice.
The plaintiffs relied on the decision of Lord Denning MR in Taunton-Collins v Cromie & ors [1964] 1 WLR 633, which concerned a similar fact pattern. There, the Master of the Rolls had said: “It seems to me most undesirable that there should be two proceedings in two separate tribunals … to decide the same questions of fact. If the two proceedings should go on independently, there might be inconsistent findings … There would be much extra cost involved in having two separate proceedings going on side by side; and there would be more delay. … if the action went on by itself … without the builders being there, there would be many procedural difficulties.” On that basis he refused a stay to arbitration.
The Irish Supreme Court had no criticism of Lord Denning’s logic, or his decision. But it did not follow him. Why? The difference lies in the text of the statutory provisions. Lord Denning decided Taunton-Collins on the basis of Section 4 of the UK Arbitration Act 1950, which provided that the court may stay proceedings “if satisfied that there is no sufficient reason why the matter should not be referred” to arbitration. He therefore had a discretion to take into account general considerations such as the risks inherent in multiple actions. The Irish court, however, had to apply Section 5 of the Irish Arbitration Act 1980, which provided that the court shall stay proceedings “unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred”. The Irish judge thus had no discretion to consider the wider impact of multiple proceedings.
While applauding the good sense of Lord Denning’s decision, we must report that the UK has since fallen in line with the Irish legal position. The UK Arbitration Act 1996 removed the court’s discretion to refuse a stay, replacing it with an obligation to stay save in the tightly-defined circumstances of the arbitration agreement being “null and void, inoperative or incapable of being performed.” Meanwhile, the Irish Act of 2010, implementing the UNCITRAL Model Law, maintains the strict position of the previous Act. So cases under the new Act should be decided along the same lines as Furey v Lurganville. Parties wishing to avoid fragmentation of their disputes, in either jurisdiction, need to ensure at the contract-drafting stage that all disputes will go to the same forum.
