Ocean Point Development Company Ltd. (in receivership) v Patterson Bannon Architects Ltd & ors

Factual and Procedural Background

This judgment concerns an application by the fifth defendant, referred to as Defendant E, for an order under Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (the "Model Law"), which has force of law in the State by virtue of the Arbitration Act 2010. Defendant E sought a referral of the dispute between the Plaintiff, Company A (in receivership), and Defendant E to arbitration pursuant to an arbitration agreement contained in clause 38 of a written contract dated 2 March 2007.

The contract was for construction works at a development site in The City. The Plaintiff engaged Defendant E as the contractor, with other defendants engaged as architect, consulting engineers, project managers, and quantity surveyors.

In 2008, disputes arose between the Plaintiff and Defendant E concerning the quality and valuation of the works. The parties attempted conciliation under the contract but failed to resolve the issues. Defendant E then initiated summary proceedings in October 2008 seeking payment pursuant to an architect’s certificate, which resulted in judgment in December 2009. Concurrently, Defendant E sought to invoke arbitration under the contract for other disputed issues. The arbitration did not progress significantly, partly due to the appointment of a receiver over the Plaintiff’s assets in March 2009.

Despite the judgment, the Plaintiff commenced plenary proceedings against Defendant E and others in September 2014, alleging defects and losses related to the works. Defendant E applied for a court order referring the dispute with the Plaintiff to arbitration under the Model Law.

Legal Issues Presented

1. Whether the commencement of summary proceedings by Defendant E in 2008 constituted a repudiation of the arbitration agreement, thereby rendering the arbitration agreement inoperative.
2. Whether the arbitration agreement is incapable of being performed because the arbitration would involve only the Plaintiff and Defendant E, excluding other defendants involved in the plenary proceedings.
3. Whether the court is obliged to refer the parties to arbitration under Article 8(1) of the Model Law, given the existence of the arbitration agreement and the absence of disapplying factors.

Arguments of the Parties

Defendant E's Arguments

• The disputes raised by the Plaintiff fall within the scope of the arbitration agreement in clause 38(b) of the contract.
• The summary proceedings initiated in 2008 did not repudiate the arbitration agreement because Defendant E simultaneously sought arbitration for other disputes.
• The arbitration agreement is capable of being performed even if only Plaintiff and Defendant E participate, and the court has a mandatory obligation to refer the matter to arbitration under Article 8(1) of the Model Law.

Plaintiff's Arguments

• Defendant E repudiated the arbitration agreement by commencing summary proceedings in 2008 seeking payment under an architect’s certificate, and the Plaintiff accepted this repudiation by initiating plenary proceedings in 2014.
• The arbitration agreement is incapable of being performed because arbitration would involve only Plaintiff and Defendant E, excluding other defendants, creating practical difficulties and rendering the arbitration ineffective.
• The absence of other defendants in arbitration complicates apportionment of liability and evidence gathering, undermining the arbitration process.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the scope of the arbitration agreement in clause 38(b) of the contract, which broadly covers disputes arising from the contract except for certain limited exclusions. The court found that disputes concerning non-payment of amounts certified by the architect are excluded from the arbitration agreement because clause 38(b) specifically covers disputes about the withholding of certificates, not non-payment of certified sums.

The court then considered whether Defendant E’s commencement of summary proceedings in 2008 seeking payment under certificate no. 16 repudiated the arbitration agreement. Applying established contractual principles and English case law, the court held that repudiation requires a clear and unequivocal intention not to be bound by the arbitration agreement. Defendant E’s simultaneous pursuit of arbitration for other disputes evidenced no such repudiation. The court distinguished the facts from cases where repudiation was found and concluded no repudiation occurred.

Regarding the Plaintiff’s contention that the arbitration agreement is incapable of being performed because the arbitration would involve only Plaintiff and Defendant E, the court referred to the decision in Franmer Developments Ltd. v. L&M Keating Limited, which rejected similar arguments. The court emphasized that the focus under Article 8(1) is on the arbitration agreement itself, not the practical difficulties of arbitration. The court found no basis to hold the arbitration agreement incapable of performance due to the exclusion of other defendants from arbitration.

The court also addressed the Plaintiff’s concerns about evidentiary and liability apportionment difficulties, concluding that these do not affect the capability of the arbitration agreement to be performed. The court noted that evidence from non-arbitrating parties could be obtained if necessary and that liability issues among multiple defendants could be resolved in the court proceedings independently.

Finally, the court confirmed the mandatory nature of the obligation to refer disputes to arbitration under Article 8(1) of the Model Law, absent nullity, inoperability, or incapability of the arbitration agreement, none of which the Plaintiff successfully established.

Holding and Implications

The court’s final ruling was to grant the order sought by Defendant E under Article 8(1) of the Model Law, referring the dispute between Company A and Defendant E to arbitration pursuant to clause 38(b) of the contract.

Holding: The application to refer the dispute to arbitration was GRANTED.

Implications: The decision mandates arbitration of the dispute between the Plaintiff and Defendant E, notwithstanding the presence of other defendants in the plenary proceedings who are not parties to the arbitration agreement. The court emphasized that practical difficulties or multiplicity of proceedings do not invalidate an arbitration agreement. No new precedent was established beyond the affirmation of existing principles governing arbitration agreements and Article 8(1) of the Model Law.