In Go Code Limited v Capita Business Services Limited [2015] IEHC 673, the Irish High Court considered whether proceedings should be stayed pending arbitration.

Speedread

The Irish High Court has granted a stay of court proceedings pending arbitration pursuant to section 6 of the Arbitration Act 2010 and Article 8 of the UNCITRAL Model Law.

The court referred to previous case law concerning the circumstances when a party may be estopped from invoking an arbitration clause to stay proceedings. In this case, there was no evidence to suggest that the arbitration agreement was null, void, inoperative or incapable of being performed. Further, McGovern J did not find anything that amounted to a promise or representation to the effect that the arbitration clause would not be relied upon. Accordingly, he ordered that the proceedings must be stayed pending arbitration.

Although the defendant succeeded in its application to stay the court proceedings in this case, the decision serves as a reminder of the need for a party relying on an arbitration clause to invoke that clause and/or request the court to stay litigation as early as possible in order to ensure that the right to rely on the arbitration clause is not forfeited.

Background

Section 6 of the Arbitration Act 2010 provides that the UNCITRAL Model Law has the force of law in Ireland and applies to both international commercial arbitrations and domestic arbitrations. Article 8(1) of the Model Law requires a court to stay proceedings pending arbitration "if a party so requests not later than when submitting his first statement on the substance of the dispute".

Facts

The defendant brought an application to stay court proceedings alleging that the matters complained of by the plaintiff should be determined by way of arbitration. The plaintiff argued that the proceedings should not be stayed because the defendant did not request the stay before submitting "his first statement", as provided in Article 8(1) of the Model Law. The plaintiff also relied on the decision of Hogan J in Mitchell v Mulvey developments Limited [2012] 4 I.R. 671 (Mitchell), where the High Court refused to grant a stay of the proceedings on the basis that the defendant's solicitors sought delivery of the plaintiff's statement of claim after an order had been made providing for an extension of time for the defendant for the entry of an appearance and the delivery of a defence. Hogan J had held that the particular facts of that case suggested an engagement by the defendant with the court process, and distinguished the facts from those in Furey v Lurganville Construction Company Limited & Ors [2012] 4 I.R. 655 (Furey), where the Supreme Court had stayed proceedings in similar circumstances.

On the facts of the present case the plenary summons had been issued on 9 June 2014, and an appearance was entered on 15 August 2014. The statement of claim was delivered on 18 December 2014 and the application to stay proceedings was brought by the defendant on 23 March 2015.

The defendant argued that apart from entering an appearance and calling for a statement of claim, it took no step in the proceedings nor did anything which might be considered a submission of its "…first statement on the substance of the dispute…" within the meaning of Article 8 of the Model Law.

Decision

The Irish High Court held that it was bound to stay the proceedings pursuant to Article 8(1) of the Model Law. There was no evidence to suggest that the arbitration agreement was null, void, inoperative or incapable of being performed.

McGovern J agreed with the meaning of Article 8(1) of the Model Law adopted by Mac Eochaidh J in P.Elliott & Co. Limited (In Receivership and In Liquidation) [2012] IEHC 361. In that case Mac Eochaidh J stated "…Article 8 of the Model Law does not create a discretion to refer or not to refer matters to arbitration but directs a court to grant or not to grant a stay, depending on the threshold issue of whether the parties to the proceedings are parties to an arbitration agreement." (Paragraph 56.)

The judge noted that there had been a number of cases where the courts have stayed proceedings on the basis of an arbitration clause despite the entry of an appearance and the delivery of a statement of claim. He referred to the case of In Framer Developments Limited v L&K Keating & Ors [2014] IEHC 295, where Ryan J granted a stay in relation to a construction dispute despite the fact that a statement of claim had been delivered. In Furey, the statement of claim was delivered, and there was a further 15-month period post-delivery before the arbitration clause was invoked. However, Clarke J still stayed proceedings, finding that in order to create an estoppel, which would render the arbitration clause inoperable, it was necessary to establish a clear unequivocal promise or representation to the effect that the arbitration clause would not be relied upon and also that the other party had acted on the basis of that representation.

McGovern J stated that there were a number of additional features in Mitchell that were not present in Furey, which influenced the court in Mitchell not to stay the proceedings. These included:

  • Correspondence from the defendant requesting a statement of claim.
  • Forbearance following delivery of the statement of claim. 
  • The fact that the delay was several months longer than in Furey.

McGovern J rejected the plaintiff's contention that letters from the defendant's solicitors to the plaintiff's solicitors constituted evidence of a clear, unequivocal promise or representation that the arbitration clause would not be relied upon. He held that the letters simply requested delivery of a statement of claim and indicated an intention to issue a motion to dismiss for want of prosecution if this was not done. Nothing in that correspondence amounted to a promise or representation to the effect that the arbitration clause would not be relied upon.

The judge also rejected the plaintiff's argument that it had acted to its detriment in delivering a statement of claim as it involved additional costs. He noted that there was nothing in the other cases to which he referred suggesting that the delivery of a statement of claim is to be deemed to be an act to the detriment of the plaintiff.

Comment

Although the defendant succeeded in its application to stay the court proceedings in this case, the decision serves as a reminder of the need for a party relying on an arbitration clause to invoke that clause and/or request the court to stay litigation as early as possible, in order to ensure that the right to rely on the arbitration clause is not forfeited.

Case

Go Code Limited v Capital Business Services Limited [2015] IEHC 673  (Bailii)