Article 8(1) of the UNCITRAL Model Law, incorporated into Irish law by the Arbitration Act 2010, provides that if a dispute between parties to proceedings is the subject of an arbitration agreement, then if one party so requests, the Court shall stay the proceedings and refer the dispute to arbitration.
In the recent case of Maguire & Anor –v- Motor Services Limited t/a MSL Park Motors & Anor1 the High Court heard an appeal of a Circuit Court decision relating to the scope of an arbitration agreement. The plaintiffs, Mr and Ms Maguire, contracted to purchase a car from MSL Park Motors. The new car presented with difficulties and the plaintiffs instituted court proceedings claiming relief for inter alia breach of contract, misrepresentation and negligence against both MSL Park Motors and Mazda Motor Ireland (as manufacturer of the car). At the time of purchase, only Ms Maguire signed the standard terms and conditions (“T&Cs”) issued by MSL Park Motors. Those T&Cs contained an arbitration agreement that the Court held was binding on Ms Maguire and MSL Park Motors only.
In the Circuit Court an order was granted staying the proceedings in their entirety pending arbitration. While section 11 of the Arbitration Act 2010 states that there can be no appeal of a court determination to grant a stay, the plaintiffs lodged an appeal challenging the scope of the stay on the proceedings.
Pursuant to Article 8(1) of the Model Law, a stay can only apply to an action which is the subject of an arbitration agreement. Though it is possible for an arbitration agreement to apply to a non-party where there is a sufficient connection, the High Court in this case determined that as between the first and second named defendants, there was not “more than….bare commercial or legal connection between two entities”.2 Therefore, the arbitration agreement did not extend beyond Ms Maguire and MSL Park Motors, being the parties to the T&Cs which contained the arbitration agreement.
Mr Justice Max Barrett then considered whether the remainder of the claims (i.e. Mr Maguire’s claim against both the defendants and Ms Maguire’s claim against Mazda Motor Ireland) should be stayed pending the arbitration of Ms Maguire’s claim against MSL Park Motors but ultimately held that:
“If parties have validly agreed that a legal dispute should go to arbitration, then to arbitration that dispute must go. But if parties have not agreed that a legal dispute should go to arbitration, then to the courts that dispute should go”.
This judgment offers further guidance on the application of “stays” to proceedings and is an endorsement of the decision of the High Court in P Elliot & Company Limited v FCC Elliot Construction Limited 3. In that case Mac Eochaidh J. provided the first Irish decision on the interpretation of Article 8 and endorsed the test formulated in Gulf Canada Resources Ltd v Arochen International Limited4 :
“…a stay of proceedings should be ordered where it was arguable that the subject dispute falls within the terms of the arbitration agreement; and where it is arguable that a party to the legal proceedings is a party to the arbitration agreement”.
Barrett J. held that if related parties wishing to avail of the arbitration agreement cannot meet the “sufficient connection” test, separate proceedings must be issued and did not see any reason why the related but substantively different claims could not be separately adjudicated upon.
In practice, however, the cost implications arising from the duality of arbitration and court proceedings would be significant and likely to surpass the value of the car. On another practical level, while the full contractual matrix is not set out in the judgment, the case highlights the importance to ensure contracting parties execute all documentation including any terms and conditions.
This case also serves as a reminder that identical dispute resolution clauses be mirrored in suites or related contracts and in such circumstances that the arbitration clauses contain a provision for the consolidation with other arbitral proceedings, including arbitral proceedings involving a different party or parties5.
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2 At para 5 endorsing the dicta of McEochaigh J. in P. Elliot & Co. Ltd v. FCC Elliot Construction Limited IEHC 361, at para. 46
3 P. Elliot & Co. Ltd v. FCC Elliot Construction Limited IEHC 361at para 49
4 BCJ 500
5 Section 16 of Arbitration Act 2010