THE SUPREME Court has set aside an arbitrator’s award in favour of a construction company in a dispute with Galway City Council over a €6.3 million contract for the redevelopment of Eyre Square.
Mr Justice Donal O’Donnell found arbitrator Geoffrey Hawker had “misconducted” the arbitration in the technical sense. This required the setting aside of his October 2007 award in 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.
The court ordered the removal of Mr Hawker as arbitrator and directed that unless the parties could resolve their dispute themselves, the matter had 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.
The council wanted the work completed before Christmas 2005 at the latest but delays continued. On June 4th, 2005, the council 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 council engineer who, on the same day, issued a certificate allowing entry on to 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 the council 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 work.
Mr Justice O’Donnell said yesterday it was not disputed that 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 that the arbitrator later reached conclusions on the delay, including that it was outside SKC’s control, without allowing the council to call its expert.
Mr Justice O’Donnell found the arbitration was misconducted in that regard and went “significantly awry” as a result of the delay findings. The exclusion of a relevant witness was “so far removed” from basic procedural fairness that a party was entitled to expect that the decision must be set aside, he ruled.
The arbitrator’s conclusion that 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 to 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 it was done at the behest of the council led to him making fundamental errors of law, the judge also found.
