Circuit Court refusal to direct arbitration quashed in motor vehicle dispute

In Cavanaghs of Charleville Ltd. v. Fitzpatrick [2019] IEHC 161  a refusal to direct arbitration was quashed and remitted to the Circuit Court by the High Court in judicial review proceedings. It was held that the Circuit Court must examine the applicability of an arbitration clause in light of the circumstances surrounding the case.

Background

The dispute arose from the purchase of a motor vehicle which was allegedly defective (by allowing water ingress during wet weather). The purchaser sought to resolve the dispute by arbitration according to the terms and conditions of the contract for sale and pursuant to the provisions of the Arbitration Act 2010. The dealership and the manufacturer were the defendants to the claim and were made aware of the impending arbitration. The purchaser subsequently changed his legal representation and began legal proceedings through the court system by serving a civil bill on the defendants. The defendants entered an appearance only on the basis that the proceedings would be stayed pending arbitration and accepted an arbitrator suggested in earlier correspondence. 

No agreement as to the applicability of arbitration was reached between the parties so the defendants applied to the Circuit Court seeking a direction that arbitration was the appropriate course of action. When the Circuit Court refused to do so judicial review proceedings were initiated to quash the order.

High Court

Quinn J. looked at the Arbitration Act 2010 and recent jurisprudence on the applicability of arbitration clauses. The Court held that during the busy motion list before the Circuit Court the Judge failed to consider whether the arbitration clause was null and void, inoperative or incapable of being performed. The Circuit Court Judge should not have considered that the purchaser was "without a car since 2015" when assessing the potential operation of an arbitration clause. The failure to apply the correct test rendered the decision erroneous and one which must be quashed.

The Court also declined to follow the purchaser's argument that the Arbitration Act 2010 precluded judicial review proceedings by providing that there was no appeal from a stay application. Quinn J. found that it is precisely because there is no remedy appeal that the court must be vigilant to ascertain whether the judge made a fundamental error which brought him outside his jurisdiction. 

Remit

The High Court stated that the correct course of action (rather than make an order requiring the Circuit Court to refer the matter to arbitration) was to remit the motion to the Circuit Court to weight the evidence, apply the correct test and determine whether the arbitration clause was operative. The Court noted that there were evidential matters in dispute regarding whether the contract was actually signed and the issue of delay which would require examination before any decision could be made.

Comment

The case demonstrates that while arbitration clauses will be respected by the courts it is important that the correct test is applied in deciding the applicability of those arbitration clauses.

For more information on this topic please contact Ciaran Joyce, Knowledge Lawyer, or any member of the Litigation and Dispute Resolution team.

Date published: 4 April 2019