The High Court has ruled that a building owner cannot pursue a building contractor over alleged defective work by a nominated subcontractor, after finding that the owner’s 2007 compromise of an arbitration amounted to an accord under the Civil Liability Act 1961.
Mr Justice Hedigan delivered the judgment on 4 September 2012 in proceedings brought by David Arnold against Duffy Mitchell O’Donoghue, an architectural firm. BAM Building Limited, formerly known as Rohcon Limited, was joined as a third party. The court was deciding a preliminary issue raised by BAM; it did not determine the underlying claim against the architects or settle the form of its order.
Arnold had contracted with BAM in 1999 to build an office building at Ballymoss House, Sandyford Industrial Estate. SIAC Architectural Limited was the nominated subcontractor for cladding, curtain walling and windows. The works were completed in May 2000.
In September 2001, the architects treated €618,807.05 as no longer due to BAM, on the basis that SIAC’s work was defective. BAM had already paid SIAC. Arnold also brought proceedings directly against SIAC in 2002 under a collateral warranty.
BAM later referred its dispute with Arnold to arbitration. In August 2007, Arnold agreed to pay BAM €891,796.15 held on joint deposit, while proposing that arbitration continue only on interest. BAM accepted those terms, with costs also left for the arbitration. The principal sum was paid in September 2007; contractual interest was subsequently determined and paid in 2008.
BAM argued that the compromise covered the wider dispute, including any claim that BAM was liable for SIAC’s alleged defective work. Arnold argued that the settlement concerned only his obligation to pay the disputed money and interest, not BAM’s liability for SIAC’s workmanship. He also submitted that any broader accord lacked consideration.
The judge found that BAM’s arbitration notice and statement of case had put its alleged liability for the workmanship in issue, and that Arnold had not accepted BAM’s position. He concluded that the August 2007 correspondence showed Arnold no longer intended to pursue the contention that BAM bore liability for the alleged defects. BAM, in return, gave up having that issue determined in the arbitration, which the judge found was valid consideration.
The court held that the partial compromise was a valid and complete accord under section 17 of the 1961 Act. It concluded that Arnold could no longer contend that BAM was liable for SIAC’s alleged defective work. The judge said he would grant the relief sought by BAM and hear counsel on the form of the order; the judgment does not specify the final order’s terms.