The High Court has dismissed Dunnes Stores’ application to set aside an arbitration award requiring it to pay Holtglen Limited more than €20.2 million under a development agreement for Ferrybank Shopping Centre in Co. Kilkenny.
Mr Justice Kelly ruled on 27 March 2012 that Dunnes had not shown an error of law so fundamental that the award could not stand. The application challenged the arbitrator’s interpretation of the agreement’s payment provisions, not the earlier determination of Dunnes’ claims that Holtglen had breached the agreement.
The arbitrator had found that several alleged breaches were remedied within the time allowed, so Dunnes was not entitled to terminate the agreement on those grounds. In the later counterclaim, Holtglen sought stage payments for the store and centre, as well as other sums. Dunnes argued that Holtglen’s insolvency meant it had failed to comply with the agreement and could not recover payments under clause 17.
The arbitrator rejected that interpretation when refusing Dunnes permission to amend its pleadings. The parties had agreed that he should first decide whether the proposed insolvency argument could succeed as a matter of contractual interpretation. He concluded that the agreement did not impose an express obligation to remain solvent, and that insolvency was treated separately from contractual breaches in the termination clause. The arbitrator then awarded Holtglen €20,269,732.81 under clauses 17.1.5, 17.1.6, 17.1.8 and 17.3, plus €15,905.55 under clause 12, with ancillary orders on interest and costs.
Mr Justice Kelly said the termination clause gave Dunnes a potential right to end the agreement following an insolvency event, subject to the funder’s right to substitute itself as developer. That right did not allow Dunnes to avoid liabilities already incurred for work carried out. The judge also rejected the claim that the arbitrator’s interpretation lacked commercial sense, noting that the store had been certified practically complete in June 2009 and that the disputed payments related to completed work.
After the award, Dunnes served a notice on the funder. NALM, a subsidiary of NAMA, later issued a notice substituting itself for Holtglen as developer under the agreement. The judge said this made the insolvency issue irrelevant to future obligations, but considered Dunnes’ challenge on its merits and dismissed it. He said that even if Dunnes had succeeded, he would have remitted the matter to the arbitrator for further consideration.