Given the increase in new house building, it is timely to remind the profession of the ex tempore judgment of Mr Justice Peter Kelly on 15 June 2009 in a case of Derek Healy and Geraldine Healy v Whitepark Developments Limited and Paul Feeney.

In this case, the plaintiffs had entered into a contract with a building contractor (the first defendant) to build their house. The contract incorporated the arbitration clause contained in the standard Building Agreement issued jointly by the Law Society and the Construction Industry Federation.

A dispute arose between the parties; the plaintiffs issued court proceedings against the first-named defendant. The first-named defendant sought to have the proceedings stayed on the basis that the arbitration clause contained in the contract provided that any dispute between the parties be referred to arbitration, and further provided that if the parties could not agree on an arbitrator that the arbitrator “be appointed on the application of either party by either the president of the Law Society or the president of the Construction Industry Federation, such arbitrator to be appointed from a list of arbitrators approved jointly by the president of the Law Society of Ireland and the president of the Construction Industry Federation” (emphasis added).

Mr Justice Kelly refused to stay the proceedings on the basis that it did not appear to the court fair that a plaintiff be forced to arbitrate under an arbitrator who must be approved by a body to which the first-named defendant belonged. Mr Justice Kelly expressed the view that this offended the notion of natural and constitutional justice, and further that it fell foul of the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995. Mr Justice Kelly did go on to say obiter that if the said list of arbitrators was to be approved by the Law Society only, the court would consider the clause to be valid.

The Law Society, through the Conveyancing Committee and the ADR Committee, has agreed with the CIF an amended wording of General Condition 11 of the Building Agreement (the arbitration clause) as follows:

“Any dispute between the parties hereto shall be referred to arbitration by an arbitrator who shall in default of agreement between the parties be appointed on the application of either party by the president for the time being of the Law Society of Ireland (or if the said president is unable or unwilling to act, by the next senior officer of the Society), such arbitrator to be appointed from a list of arbitrators approved by the president of the Law Society of Ireland.”

A similar change would also be needed in General Condition 12(d) of the Building Agreement, which deals with a ruling by an ‘expert’, on minor defects, which would now read:

“In the event of a dispute between the parties as to the existence of such defects or as to whether they are of a minor nature, any such dispute shall be referred to an expert for determination who shall in default of agreement between the parties be appointed on the application of either party by the president for the time being of the Law Society of Ireland (or if the said president is unable or unwilling to act, by the next senior officer of the Society), such an expert to be appointed from a list of experts approved by the president of the Law Society of Ireland. The decision of the expert shall be final and binding on both parties, and he or she shall have power to award costs of the determination against either party.”

The 2001 edition of the Building Agreement as issued jointly with the CIF is under review. The above amendments should be incorporated by special condition pending the issue of the next edition.

The committees gratefully acknowledge the assistance provided by the CIF.