The High Court refused to stay proceedings brought by Mike and Margo Mitchell over alleged defects in their home, finding that the National House Building Guarantee Company Ltd (Homebond) was precluded by its conduct from invoking an arbitration clause.
In a judgment delivered on 20 December 2012, Mr Justice Hogan ruled on Homebond’s application under section 6 of the Arbitration Act 2010. The ruling concerned whether the proceedings should be stayed in favour of arbitration; it did not determine the homeowners’ claims about the property’s condition or liability for any defects.
The Mitchells bought a property at Ocean Links, Strandhill, County Sligo, in 2005. They alleged it was seriously defective and sued the developer, the architect and other defendants. Homebond had provided a guarantee covering repairs to defectively constructed private dwellings in specified circumstances. The parties did not dispute that the Home Bond Agreement contained an arbitration clause, though the plaintiffs challenged its validity and applicability.
The court first rejected the plaintiffs’ argument that a change in a minister’s title had made the clause ineffective. It held the change was one of nomenclature and did not alter the identity of the legal entity referred to in the agreement.
Homebond had been notified of complaints by 2005 and wrote in November that year that a defect in the dwelling fell within its cover. It later arranged a contractor to assess and attempt repairs. The contractor was discharged by the plaintiffs before significant work was done. The court noted that some delay might be attributable to the plaintiffs, including their decision to discharge the contractor.
Proceedings were served on Homebond in March 2010, but it did not enter an appearance until April 2011. After the court ordered it to file an appearance and defence, Homebond sought the statement of claim, which was sent in August 2011. In September, its solicitors asked the plaintiffs not to bring a motion for judgment in default of defence “for now” and said their client did not intend to delay. Homebond first invoked arbitration in December 2011, after the plaintiffs had again threatened a motion.
Justice Hogan found that this correspondence and the further request for forbearance led the plaintiffs to believe Homebond intended to defend the claim on its merits. The plaintiffs acted on that assumption by holding off on a motion. The judge distinguished the circumstances from the Supreme Court’s decision in Furey v Lurgan-ville Construction Co Ltd, pointing to the additional correspondence and the longer delay.
The court held Homebond had forfeited its right to invoke arbitration and refused the requested stay. The proceedings were therefore not halted by this application.