Delargy v Hickey & anor

Factual and Procedural Background

The Applicant entered into a combined contract for sale and building agreement with the Respondents on 2nd September 2008, whereby the Respondents agreed to sell a site and build a crèche for a sum of €550,000 inclusive of VAT. Subsequently, on 7th August 2009, the parties executed a separate deed of indemnity in which the Respondents covenanted to rectify all major defects in the building notified during the defects period. The combined agreement contained an arbitration clause for resolving disputes.

After taking possession in 2009, the Applicant noticed alleged defects and initiated arbitration proceedings. The parties could not agree on an arbitrator, and one was appointed by the President of the Law Society. The arbitration was conducted by written submissions following a preliminary meeting in November 2011. The Respondents failed to comply with discovery orders and ceased active participation, leading to their defence being struck out in March 2014.

The arbitrator issued an interim award in April 2014 and a final award in October 2014, awarding the Applicant €101,202.07 comprising damages, loss of earnings, interest, and costs. The Applicant sought leave to enter judgment and enforce the award, while the Respondents sought to set aside the award under Article 34 of the UNCITRAL Model Law, alleging the arbitrator exceeded jurisdiction and procedural irregularities.

Legal Issues Presented

1. Whether the arbitral award deals with a dispute not contemplated by or falling outside the terms of the submission to arbitration, pursuant to Article 34(2)(a)(iii) of the Model Law.
2. Whether the arbitrator failed to provide reasons for the award as required by Article 31(2) of the Model Law.
3. Whether the arbitrator conducted the proceedings in accordance with the parties’ agreement and the Model Law, including procedural fairness and due process.
4. Whether the award should be set aside or remitted under the discretionary powers of the Court pursuant to Articles 34 and 36 of the Model Law.

Arguments of the Parties

Applicant's Arguments

• The Respondents’ refusal to participate in arbitration after filing points of defence constitutes a waiver of any procedural objections.
• The arbitrator was entitled to proceed and make an award in the absence of the Respondents, who had reasonable notice and opportunity to participate.
• The grounds to set aside or resist enforcement under Articles 34 and 36 of the Model Law are discretionary, and the Court should exercise discretion in favour of enforcing the award.
• The arbitrator sufficiently articulated reasons for the award, akin to a default judgment, particularly given the Respondents’ non-participation.
• The Respondents failed to object to jurisdiction or procedure during arbitration and cannot raise such objections post-award.
• The alleged letter from the Respondents to the arbitrator requesting submissions was never received by the arbitrator or the Applicant and cannot be relied upon.

Respondents' Arguments

• The award deals with disputes beyond the scope of the arbitration agreement, particularly claims relating to “major defects” excluded by the deed of indemnity and consequential loss.
• The arbitrator lacked jurisdiction to award damages for loss of earnings and interest, which fall outside the indemnity's scope.
• The arbitrator failed to provide reasons for the award as mandated by Article 31(2) of the Model Law.
• The arbitrator breached procedural fairness by proceeding without affording the Respondents an opportunity to respond to submissions on quantum.
• The award includes costs purportedly awarded without notice or opportunity for taxation, and the sum is excessive.
• The Respondents attempted to engage with the arbitrator by letter requesting submissions, but received no response.
• The Court should set aside or remit the award due to jurisdictional excess, procedural irregularities, and failure to provide reasons.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court carefully examined the arbitration agreement, the deed of indemnity, and the arbitration proceedings. It acknowledged the Respondents’ contention that the arbitrator exceeded jurisdiction by awarding damages for "major defects" and consequential losses excluded under the indemnity. However, the Court found that both parties had expressly submitted to arbitration the disputes arising from both the combined agreement and the deed of indemnity, with no jurisdictional objection raised during arbitration.

The Respondents’ failure to comply with discovery orders and their cessation of participation led to their defence being struck out. The Court held that the Respondents, having been given reasonable notice and opportunity to present their case, waived their right to object to procedural matters or jurisdictional issues by failing to engage further.

The Court considered the requirement under Article 31(2) of the Model Law for reasons to be provided in awards. It found that while the arbitrator could have given more detailed reasons, the circumstances—particularly the Respondents’ default—made the reasons sufficient, comparable to a default judgment. The Court rejected the Respondents’ claim that the arbitrator failed to provide reasons mandatorily.

Regarding the alleged letter from the Respondents to the arbitrator requesting submissions, the Court found no credible evidence that the arbitrator received it, and thus it could not impact the procedural fairness analysis.

The Court emphasized the narrow construction of grounds for setting aside arbitral awards under Article 34 of the Model Law and the strong presumption that arbitrators act within their mandate. The Court declined to revisit the merits of the arbitrator’s findings or second-guess his jurisdictional interpretation.

Finally, the Court noted the discretionary nature of setting aside or remitting awards and concluded that the Respondents’ conduct and failure to participate justified enforcing the award without remitting or setting it aside.

Holding and Implications

The Court REFUSED the Respondents’ application to set aside the arbitral award and granted the Applicant leave to enter judgment and enforce the award.

The direct effect is that the Applicant may now enforce the arbitrator’s award for €101,202.07 against the Respondents. The Court did not establish any new precedent but reaffirmed the principles of limited judicial intervention in arbitration, the importance of procedural participation, and the discretionary nature of setting aside awards under the Model Law. The Respondents’ failure to participate effectively barred them from challenging the award post hoc.