Sunday, 19 October 2008

Council loses Eyre Square renovation case

GALWAY CITY Council has lost a High Court case about its handling of €6.3 million in funding for the Eyre Square renovation.

The High Court yesterday rejected the city council's legal moves to overturn an arbitrator's finding that it behaved unreasonably towards a construction company and wrongfully withdrew funds for the Eyre Square project.

Mr Justice Bryan McMahon also rejected the council's application for the appointment of a new arbitrator to complete the hearing of issues in its dispute with Samuel Kingston Construction Company.

Both sides accept that arbitrator Geoffrey F Hawker had fallen asleep a number of times during the arbitration hearing.

The proceedings arose from a contract of April 5th, 2004, between Galway City Council and SKC for the redevelopment of Eyre Square.

Work started in February 2004, 78 weeks were set aside for the project but it ran into delays. The city council wanted the work completed before Christmas 2005 and the sides reached an unwritten "acceleration agreement" in March 2005.

The exact terms of that agreement were disputed, delays continued and it appeared when the sides agreed at a site meeting in May 2005 the acceleration agreement was no longer achievable.

On June 4th, 2005, the council withdrew all sums paid under the acceleration agreement.

SKC ceased work on the site on June 27th, 2005, and returned the site keys to the council engineer.

The engineer issued a certificate under the conditions of contract governing entry on to the site and allowing expulsion of the contractor in circumstances such as bankruptcy or abandonment.

Clause 63 provided the termination rights "shall not be exercised unreasonably".

The dispute went to arbitration. In December 2007 the arbitrator, Mr Hawker, found the acceleration agreement was wrongly repudiated by the council. He found that the wrongful withdrawal of funds in June 2005 left the company at risk of insolvency.

The arbitrator also ruled that the city council's actions on June 4th, 2005, did not repudiate the original contract.

SKC's withdrawal from the site was a breach of contract, he said, but the breach was not fundemental or a repudiation of contract. He found the council's overall conduct was unreasonable.

Mr Justice McMahon upheld all those findings.

Among the upheld findings was that SKC withdrew from the site only because it considered there was a risk of trading while insolvent.

The judge also rejected the claim for the removal of Mr Hawker as arbitrator.

The judge said it was accepted by both sides that Mr Hawker fell asleep a number of times during the hearing. However, the lawyers had not raised this with Mr Hawker but took steps to ventilate the hearing room and take more coffee breaks.

There was no way of verifying that the arbitrator's decision would not have been different had he remained awake, he said.

Taking into account the cost and logistics of removing Mr Hawker, the judge said he was not convinced it would be just to remove him. He considered it unlikely Mr Hawker would expose himself to such criticism again.

The Irish Times


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