The High Court has ruled that Mero-Schmidlin (UK) PLC and Michael McNamara and Company are bound by an arbitrator’s decision on whether payment under their subcontract depended on the contractor first receiving payment from the employer. The ruling resolved a preliminary issue only; it did not determine the applications to set aside or remit the arbitration award.
The dispute arose from subcontract works at MacDonagh Junction, a commercial development in Kilkenny. Mero-Schmidlin claimed €1,862,579.77, including VAT, was due. After a certificate for that amount was issued in May 2009, the company sought payment from Michael McNamara and Company. The contractor’s position was that it had no obligation to pay until it received the corresponding payment from the employer, Cedar Tree Construction Limited.
The parties referred the dispute to arbitration. In an award dated 19 March 2010, the arbitrator concluded that, under the subcontract, the contractor had no liability to pay until it had been paid by the employer. He also found the architect’s certificate valid. The contractor’s separate allegations about defects in the subcontract works were outside the arbitrator’s jurisdiction in that arbitration.
Mero-Schmidlin then applied to the High Court for alternative relief: setting aside the award under the Arbitration Acts, remitting it to the arbitrator for reconsideration, or obtaining relief at common law for an alleged error of law on the face of the award. The court admitted the proceedings to its Commercial List and directed that a preliminary issue be tried first: whether the legal issues said to have been wrongly decided had effectively been referred to the arbitrator, making the parties bound by his answer.
Ms Justice Finlay Geoghegan held that the notice of arbitration specifically referred the question of the contractor’s contractual liability to pay the certified sum without first receiving payment from the employer. She said that question was one of contract construction and therefore a question of law. The court concluded that an alleged error in deciding a specific legal question referred to an arbitrator could not, by itself, justify court interference, even where other disputes were also referred.
The judge answered the preliminary issue in favour of the contractor: the parties were bound by the arbitrator’s determination of that question. She also said that courts could retain jurisdiction over alleged errors on separate legal questions that were not specifically referred, but found that Mero-Schmidlin had not identified such a distinct error in this case. The judgment does not state the final disposition of the applications for setting aside or remitting the award.