The High Court refused Regan Civil Engineering Limited an extension of time to refer a payment dispute with the Minister for Defence to arbitration, finding that the company’s prolonged inaction could not be excused in the circumstances.
The application was brought under section 45 of the Arbitration Act 1954. Mr Justice Hogan delivered judgment on 6 November 2012. The parties agreed that the 1954 Act applied to the application, although any arbitration proceeding, if permitted to go ahead, would be governed by the Arbitration Act 2010.
Regan entered a contract with the Minister in October 2002 to carry out engineering works. It said the completed works were worth more than €1.3 million excluding VAT, while the contract administrator, Ryan Hanley Consulting Engineers, certified €640,756 excluding VAT. Regan raised a dispute in October 2006. The engineer issued a decision on 2 January 2007, after which the contract allowed three calendar months to serve a notice referring the dispute to arbitration.
Regan sent a notice to the engineer on 2 April 2007. The engineer told the company that the notice had to be sent to the Minister, and Regan sent it there on 30 April. The Minister did not challenge the notice’s validity at the time. In a letter on 31 May, the Minister disputed the claim’s merits and invited Regan to provide supporting evidence.
No further action was taken until February 2011, when Regan’s solicitors sought conciliation. The Minister then raised the validity and timing of the notice, saying the department considered the matter closed. Regan applied to court for an extension in April 2012.
Justice Hogan said the notice had not been served on the correct party within the required period, making an extension necessary. He considered that the initial service errors were minor and that a prompt application in 2007 could have succeeded. But Regan’s proprietor said the company had prioritised other projects and arbitration work, without telling the Minister it was putting this dispute aside.
The judge treated the ensuing delay of more than three and a half years as inordinate and prejudicial in a commercial arbitration. The department had reasonably assumed the claim was dormant, he said. Applying the statutory test of whether refusal would cause “undue hardship”, the judge concluded that refusing an extension was proportionate to the company’s responsibility for the delay. He declined to extend the time. The judgment therefore refused the extension application; it did not determine the underlying payment claim on its merits.