The Supreme Court has set aside an arbitrator’s award made in favour of a construction company in a dispute with Galway City Council over withdrawing funds relating to a €6.3 million contract for the redevelopment of Eyre Square.
Mr Justice Donal O’Donnell found arbitrator Geoffrey F. Hawker had “misconducted” the arbitration in the technical sense and this required the setting aside of his October 2007 award on the dispute between the Council and Samuel Kingston Construction Company (SKC) arising from a contract of April 5th 2004 for the redevelopment of Eyre Square.
On that basis, the court ordered the removal of Mr Hawker as arbitrator and directed, unelss the parties can resolve their dispute themelves, the matter to be heard before a different arbitrator.
“This is a result which I cannot contemplate with any enthusiasm but which is, I believe, regrettably unavoidable,” the judge said.
He was giving the three judge court’s unanimous judgment allowing the Council’s appeal against the High Court’s 2008 rejection of the Council’s challenge to the award of the arbitrator.
The Kingston company was engaged by the Council under a contract of April 5th 2004 for the redevelopment of Eyre Square.
Work started in February 2004 with 78 weeks for completion but ran into delays. GCC wanted the work completed before Christmas 2005 at the latest but delays continued. On June 4th 2005, GCC withdrew all sums previously paid under an earlier “acceleration” agreement.
SKC ceased work on the site on June 27th 2005 and returned the site keys to the GCC engineer who on the same day issued a certificate allowing entry onto the site and expulsion of the contractor in circumstances such as bankruptcy or abandonment.
The dispute went to arbitration and Mr Hawker found the acceleration agreement was wrongly repudiated by GCC with the wrongful withdrawal of funds in June 2005 which directly resulted in the withdrawal of SKC’s overdraft facility and left it at the risk of trading while insolvent if it completed its works. .
Today, in his detailed judgment, Mr Justice O’Donnell said it was not disputed the Eyre Square project had encountered significant delays.
For the arbitration, the Council retained an expert witness who had prepared an 80 page report on those delays and sought to call him. It complained the arbitrator later reached conclusions on the issue of delay, including that it was outside SKC’s control, without allowing the Council call its expert.
Mr Justice O’Donnell found the arbitration was misconducted in that regard and went “signficantly awry” as a result of the delay findings.
The exclusion of a relevant witness without addressing the admissibility of their evidence and the maintenance of that position without even addressing the substance of the complaint was “so far removed” from the basic procedural fairness a party is entitled to expect that the decision must be set aside, he ruled.
The arbitrator’s conclusion the action of SKC in abandoning the site amounted to a non-repudiatory breach of the contract was “a clear error of law” which was “so fundamental” it could not be allowed stand, he also ruled. This finding was central to the structure of the arbitrator’s award, he said.
While entitled to take a poor view of the conduct of an engineer who purported to certify a deduction of sums previously certified and paid to SKC under the 2005 acceleration agreement, the arbitrator’s view that was done at the behest of the Council led to him making fundamental errors of law, the judge also found.
On complaints Mr Hawker had fallen asleep at stages of the eight day arbitration hearing, the judge said the court was left with the impression this was a reasonably serious matter in the course of the arbitration.
There was inadequate evidence before the court to overcome any concern on the sleeping incidents, it was not satisfactory the issue was not raised at the time with the arbitrator himself and there was no material from the arbitrator about it, he said. In the circumstances, if that complaint stood alone, he would not set aside the award on that ground.
