In Wise Construction (Limerick) Limited v Donal Ryan Motor Group (Roscrea) Limited (2012, unreported), the Irish High Court upheld the binding nature of a conciliator’s recommendation and acknowledged the mandatory nature of conciliation as a first step in the dispute resolution process under the Royal Institute of the Architects of Ireland (RIAI) contract.
In March 2008, the plaintiff, Wise Construction Limited (the contractor) agreed to carry out certain construction works at the employer’s business premises in Tipperary, including an extension to its existing car sales showroom and the construction of ancillary office accommodation. The conditions of contract entered into by the parties were the standard RIAI conditions with quantities (2002 edition) with some minor amendments.
When the works reached practical completion, the architect issued two payment certificates (including one in respect of the first tranche of retention monies) certifying the combined amount of €74,363.01 as due and owing to the contractor. The contractor duly raised invoices which were met with a letter from the employer refusing to pay on the basis of alleged defects in the works.
The contractor sought to have the payment certificates enforced by way of summary judgment. The employer resisted this, asserting that:
- a dispute existed between the parties under the contract; and
- in accordance with clause 38 of the contract, the dispute should be referred to conciliation.
With a view to expediting resolution of the issues, the contractor instigated a conciliation process with respect to the recovery of the certified sums. The parties did not agree on the appointment of a conciliator and a conciliator was appointed by the RIAI upon the request of the contractor.
Despite being written to by the contractor’s solicitors on numerous occasions and also by the conciliator, the employer and its solicitors refused to engage in any manner in the conciliation process including:
- failing to sign the conciliator’s form of appointment;
- not responding to the contractor’s submission despite being called on to do so; and
- not discharging its share of the conciliator’s fees
Since the contract provided for conciliation as a mandatory first step before arbitration could be initiated, the contractor discharged the conciliator’s fees on behalf of both itself and the employer and requested that the conciliator issue a recommendation.
In the absence of any participation or submission on behalf of the employer, the conciliator issued a recommendation to both parties in which he recommended that the employer should pay the contractor the sum of €74,363.01 pursuant to the architect’s certificates together with the conciliator’s fees. The contract allowed ten working days following issue of the recommendation within which either party could reject the recommendation. In the event that the recommendation was not rejected within this time, the contract provided that it “shall be final and binding on the parties”. Despite being issued with the recommendation and written to separately by the contractor’s solicitors following receipt of the recommendation, the employer did not reject the recommendation and, accordingly, the recommendation became final and binding on the parties. The employer failed to pay the sums due in accordance with the recommendation.
The contractor proceeded to issue a motion for summary judgment to enforce payment of the conciliator’s recommendation. The employer contested the motion on the basis that the conciliator lacked jurisdiction, arguing that he had failed to arrange for his appointment to be executed by the employer and issued a recommendation having received no submission from the employer or its representative. The employer also argued that the conciliator gave no consideration to the defective works allegedly carried out by the contractor.
The contractor counter-argued that despite suggesting the conciliation process in the first instance, the employer refused (without any explanation) to play any part in the process and thereby attempted to rely on its own inaction to negate the process in circumstances where conciliation was a mandatory contractual requirement. The contractor also argued that the conciliator had no option but to issue the recommendation, since conciliation was a mandatory first step of the RIAI contract dispute resolution clause which required to be exhausted before either of the parties could proceed to the next step or any other dispute resolution forum.
Justice MacMenamin delivered judgment in the High Court on 30 March 2012 and held that the contractor was entitled to “judgment in the sum claimed” (upholding the binding nature of a conciliator’s recommendation pursuant to the RIAI contract) but qualified the judgment by placing a stay on its execution by the contractor in light of the alleged defective works claim which remained to be resolved (notwithstanding that the merits of such claim had not been presented before the court). The court noted that it would hear the parties on a subsequent date in order to clarify the terms of the stay. On the subsequent hearing, the court ruled that unless the amount of the summary judgment was lodged into court within 10 days, the stay would automatically be lifted and the contractor could enforce its judgment.
This judgment is a seminal decision in Irish construction law since there is little precedent on the RIAI form of contract. It confirms the binding nature of a conciliator’s recommendation under the RIAI contract if not rejected by either party within the specified time-frame, irrespective of whether both parties have participated in the conciliation process, and thereby upholds the mandatory nature of conciliation as a first step under the RIAI standard form of contract. The decision also confirms that the contractual dispute resolution mechanism adopted by the parties will be upheld and respected by the Courts.