The court has decided that it has an
inherent jurisdiction to stay proceedings issued in breach of a
binding agreement to refer disputes to adjudication, so that a
defending party could insist on its right to have the dispute
referred to adjudication. The persuasive burden was on
the party seeking to resist the stay to show good reason why the
agreement to adjudicate should not be enforced.
His Honour Judge Coulson QC – Queen’s Bench Division,
Technology and Construction Court
Background
Cubitt, the contractor, engaged DGT, the sub-contractor, to carry
out external cladding works. The sub-contract contained an
adjudication clause that provided that “Any dispute, question
or difference arising under or in connection with the subcontract
shall, in the first instance, be submitted to
adjudication…”.
DGT referred to adjudication a claim in respect of sums allegedly
owed by Cubitt. The adjudicator found in Cubitt’s
favour. Subsequently, DGT commenced a second claim for
outstanding sums, this time in the TCC. Cubitt argued that
the second claim was very different to the first claim and that the
court should stay proceedings pending a referral of the dispute to
adjudication. DGT argued that the agreement to adjudicate was
not mandatory and that, in any event, there had been no breach, so
there should be no stay.
Issues
There were three issues before HHJ Coulson QC:
1) Was there a binding agreement to
adjudicate?
The judge found that the use of the word “shall” in the
adjudication clause meant that there was a binding agreement to
adjudicate. The court also held that it had an inherent
jurisdiction to stay any proceeding brought in breach of the
agreement to adjudicate any disputes.
HHJ Coulson QC dismissed the argument that because s.108 of the
HGCRA 1996 merely provided a party to a construction contract with
a right, not an obligation to refer a dispute to adjudication, the
adjudication clause should be construed in the same way.
Further, he noted that s.108 conferred the right to adjudicate a
dispute, not a claim, on any party to a construction contract, not
just the claiming party. Even if the claiming party had
started court proceedings, the defending party might be entitled to
a stay of the court proceedings on the ground that its right to
have the dispute adjudicated had been denied.
2) Were these proceedings
brought in breach of the binding agreement to
adjudicate?
On the facts, the court found that the dispute was substantially
different to the dispute previously referred to adjudication and
therefore, by commencing proceedings without first referring the
new dispute to adjudication, DGT had breached the agreement to
adjudicate.
3) Was there a good reason
why the stay should not be granted?
The court noted that the persuasive burden was on the party seeking
to resist the stay to show good reason why the agreement to
adjudicate should not be enforced. The judge was not
persuaded by any of the reasons put forward by DGT as to why a stay
should not be granted. On the other hand, there were two
compelling reasons in favour of ordering a stay, namely that DGT
had not complied with the Pre-action Protocol for Construction and
Engineering Disputes and that the dispute related principally to
matters of valuation (it was a £242k final account claim). As
such, it was a dispute that would best be resolved through
adjudication by a construction professional, such as an experienced
quantity surveyor.
In conclusion, the HHJ Coulson QC found that there
was no good reason why the court should not exercise its inherent
jurisdiction to stay these proceedings for adjudication.
See another article on this case: Adjudication:
the compulsory first port of call?
For full judgment, please click
here
Interested in
Adjudication issues? If so, click here to go to our online
search facility dedicated to Adjudication cases.