Supreme Court: Dunnes Stores premature in bringing proceedings against developer before expert’s determination
Dunne Stores have lost an appeal against the grant of a stay halting proceedings issued against a developer until the dispute between the parties is determined by an independent expert pursuant to the Development Agreement.
Stating that Dunnes’ decision to challenge the role of the independent expert was “premature”, Ms Justice Elizabeth Dunne dismissed the appeal, but said that the Court of Appeal was wrong to dismiss the entire proceedings as an abuse of process.
In February 2008, Dunnes Stores and Point Village Development Ltd (PVDL) entered into a contract wherein Dunnes agreed to be the anchor tenant in Point Square, the retail centre of Point Village – a development at North Side Quay, Dublin 1.
Dunnes was to pay PVDL €46 million in return for the construction of the anchor unit in the retail centre, payable in stages in accordance with the terms of the original Development Agreement.
The development did not proceed as planned, and the consequent dispute resulted in litigation between the parties. Thereafter, the parties reached a compromise wherein certain terms of the original Development Agreement were amended by the terms of settlement in July 2010 and by supplemental terms of settlement in November 2010.
Under the Settlement Agreement, the contract sum payable by Dunnes to PVDL was reduced from €46m to €31m.
The present dispute arose in circumstances in which a sum of €3m was said to be due by Dunnes to PVDL – a payment which arose from the terms of Clause 11(d) of the Settlement Agreement, which stated that this sum (plus accrued interest) “…shall be released within five working days of receipt by Dunnes of a certificate by PVDL’s architect (or in the event of a dispute, the independent architect within the meaning of the Development Agreement) confirming that the Point Square has been completed in accordance with the Development Agreement”.
It was common case that in March 2013, PVDL’s architect produced a certificate pursuant to Clause 11(d) which certified that “the Point Square has been completed in accordance with the Development Agreement.” This certificate was sent to Dunnes together with a letter from PVDL’s solicitors demanding the release of €3m in accordance with the Settlement Agreement.
Dunnes did not release the sum of €3m from the nominated account as requested, and stated in a letter to PVDL that it refused to do so because “no supporting documentation or verification whatsoever has been supplied to either our client or to Dunnes’ representatives… to vouch the contents of the certificate or to provide evidence that Point Square has been completed”.
Although there was no requirement in Clause 11(d) for the production of any such “documentation or verification”, Clause 4.14 of the Development Agreement contained a covenant to inter alia, “…provide Dunnes’ representative with such plans, information, papers and explanations so that Dunnes’ representative may reasonably satisfy itself that the developer is complying fully with its obligations under [the Development Agreement] or which Dunnes representative may otherwise reasonably request”.
The ensuing dispute was referred to an independent expert to determine whether Point Square had been completed in accordance with the Development Agreement, particularly Clause 7.2.2 which provided that:
“The design and specification for Point Square shall be to a first class standard appropriate to a prestigious shopping centre commensurate with the newly re- developed Eyre Square in Galway and Grand Canal Square Dublin and the Civic Plaza, Dundrum Town Centre.”
In November 2014, Dunnes issued proceedings seeking, inter alia, a declaration that Point Square did not comply with PVDL’s obligations under Clause 7.7.2 of the Development Agreement, and a declaration that Clause 7.7.2 of the Development Agreement and the design and specification and requirements therein were to be “interpreted, applied and implemented in accordance with the factual matrix as of the date of execution of the Development Agreement”.
Order dismissing the proceedings
One issue for determination was the order dismissing the proceedings as an abuse of process.
When Dunnes commenced the proceedings, PVDL applied for a stay to prevent Dunnes from taking further steps in circumstances where the issue in dispute was the subject of an alternative dispute resolution clause, and the matter had in fact been referred to an independent architect for resolution of the dispute between the parties. In the High Court in June 2016, Mr Justice Donald Binchy refused the application for a stay.
The Court of Appeal allowed the appeal brought by PVDL and, rather than simply staying the proceedings, Mr Justice Gerard Hogan struck out the proceedings as an abuse of process stating that they were “entirely without merit”.
In the Supreme Court, Ms Justice Dunne said that this was “somewhat unusual”, in that the application originally before the Court was simply for a stay. Dunnes argued that the question of a dismissal of the proceedings never actually arose before the Court of Appeal, and that it was inappropriate for the Court of Appeal to grant such an order in the context of an appeal against a stay application.
Ms Justice Dunne said there was no basis for labelling Dunnes’ conduct as an abuse of process – this had never been contended by PVDL and there was no evidential basis for coming to such a conclusion.
Ms Justice Dunne said that the case gave rise to an issue not previously determined Ireland, regarding the principles to be applied when parties to a contract have agreed that, in the event of a dispute, they would refer the dispute to an independent expert for resolution. She said that the case focused on “the extent to which an expert can decide questions of law, or whether a court can be asked in advance to determine questions of law which may arise in the course of the resolution of the dispute”.
Considering the terms of the Development Agreement and Settlement Agreement, Ms Justice Dunne said it was clear that the parties had agreed to resolve relevant disputes for determination by an independent expert, who, although not acting as an arbitrator, could make decisions which shall be “final and binding on the parties”.
Ms Justice Dunne said that this did not mean the parties were precluded from going to court, for example if the expert goes outside his remit. However, it was clear that the parties agreed that a determination falling within the scope of the expert’s remit “shall be final and binding on them”.
In this case, the independent expert had been appointed and submissions had been furnished to him. Ms Justice Dunne said that he should be allowed to proceed with his function, which “necessarily involves the resolution of mixed questions of law and facts”.
Concluding that the within proceedings were issued prematurely, Ms Justice Dunne said “it would have been preferable to allow the expert to complete his function” before considering whether proceedings were necessary.
In those circumstances, she dismissed the appeal against the stay.
© Irish Legal News Ltd 2020