The High Court has refused KD Mechanical Engineers Limited’s application for an interim order requiring P.J. McLoughlin & Sons Limited to pay €314,880 into the client account of KD Mechanical’s solicitor, pending arbitration.
Mr Justice Twomey, in a judgment delivered on 11 November 2020, found that KD Mechanical had given notice referring the dispute to arbitration, as required by the contract. But he ruled that the solicitor’s undertaking offered by KD Mechanical was not the form of security required under the contract’s payment clause. Both requirements had to be met for the requested injunction to be granted.
The dispute arose from a public works contract for mechanical and installation works at a swimming pool complex in Castlebar. Mayo County Council entered the contract with KD Mechanical in November 2015 and novated it to P.J. McLoughlin the same day. After a dispute arose, the parties went to conciliation. The conciliator recommended that P.J. McLoughlin pay KD Mechanical €314,880. P.J. McLoughlin issued a notice of dissatisfaction and said it wanted the dispute referred to arbitration.
KD Mechanical then issued a Notice of Arbitration and sought payment of the recommended sum, offering an undertaking that its solicitors would hold the money in their client account and not use it pending the arbitration’s outcome. P.J. McLoughlin did not accept the undertaking, and no payment was made.
The contract required payment of a conciliator’s recommended sum after a notice of dissatisfaction if the other party first referred the dispute to arbitration and provided a bond. The judgment said the contract contained no prescribed bond form for this purpose. The question was whether the alternative provision, allowing a form approved by the paying party, covered any form of security or only a form of bond.
The judge held that the wording, read literally and in the context of the clause, referred to a form of bond. He said a wider, purposive reading could include a solicitor’s undertaking, but was not required by the text. Other contract provisions referring to bonds, and provisions expressly naming other forms of security, supported that interpretation.
On service, the court noted that P.J. McLoughlin had not updated the contract’s notice address after the novation. KD Mechanical sent notices by registered post and emailed the Notice of Arbitration to two addresses used during conciliation. The judge found that KD Mechanical had complied with the notice requirement.
Because the undertaking did not satisfy the bond requirement, the court refused the mandatory interlocutory injunction. The judgment did not determine the underlying dispute or make a final decision on the recommended payment. It asked the parties to discuss outstanding matters and said the case could be listed for mention one week later at 10.30am to address final orders.