Construction contract — Clause providing for referral of disputes to adjudication — Adjudicator determining dispute — Claimant subsequently bringing court proceedings — Whether proceedings to be stayed as breach of adjudication agreement — Whether adjudication mandatory — Whether subject matter of proceedings substantially different from that previously adjudicated — Claim stayed
The defendant was the main contractor on a construction project, in the course of which it engaged the claimant as a subcontractor to carry out external cladding works to a property. An adjudication clause in the subcontract provided that “Any dispute, question or difference arising under or in connection with the subcontract shall, in the first instance, be submitted to adjudication… and thereafter to the exclusive jurisdiction of the English Courts”. The claimant referred to adjudication a claim for £193,815 plus VAT said to be owed by the defendant. The adjudicator found in the defendant’s favour and rejected the entirety of the claimant’s claim.
The claimant then brought a claim against the defendant in the High Court for £242,547 plus VAT and interest. The defendant contended that those proceedings should be stayed until the new claim had been the subject of adjudication pursuant to the binding adjudication clause in the subcontract. The claimant argued that: (i) the adjudication provisions in the subcontract were not mandatory; (ii) even if they were, there was no breach since the proceedings related not to a new claim but to one that was essentially the same as that which had already been adjudicated; and (iii) even if that were wrong, the court should exercise its discretion against granting a stay. The central issue was as to the circumstances in which a temporary stay should be granted to restrain court proceedings until an adjudication of the underlying dispute had taken place.
Held: The claim was stayed.
If the parties had agreed on a particular method by which their disputes were to be resolved, the court had an inherent jurisdiction to stay proceedings brought in breach of that agreement: Cape Durasteel Ltd v Rosser & Russell Building Services Ltd [1995] 46 Con LR 75 applied. That jurisdiction was discretionary: see Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. In exercising the discretion, there was a presumption in favour of the parties’ agreement to adjudicate and the persuasive burden was upon the party seeking to resist the stay to justify that stance: see Cott UK Ltd v FE Barber Ltd [1997] 3 All ER 540 and Cable & Wireless plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm); [2002] 2 All ER (Comm) 1041. The court would not grant an injunction to prevent one party from commencing and pursuing adjudication proceedings, even if court or arbitration proceedings had already begun in respect of the same dispute: Herschel Engineering Ltd v Breen Property Ltd [2000] BLR 272 applied.
Applying those principles to the instant case, the adjudication clause in the subcontract made it mandatory, by the use of the word “shall”, to submit any dispute to adjudication in the first instance. That was not merely an option available to the parties – it was compulsory. Accordingly, if the dispute that was the subject of the present proceedings was substantially different from that previously adjudicated, the claimant was in breach of the adjudication agreement by referring it to court first. The present dispute was substantially different: the previous adjudication had been a technical dispute concerning the operation of the terms of the subcontract, whereas the instant dispute principally concerned the validity of the claimant’s valuation of the entirety of its subcontract work. The defendant was therefore entitled to a stay of the proceedings. The matters raised, largely relating to valuation, were more suitable for determination by a construction professional. There was no good reason why a stay should not be granted.
It made no difference to that outcome that section 108 of the Housing Grants, Construction and Regeneration Act 1996 provided parties with merely a right, not an obligation, to go to adjudication. Section 108 was irrelevant where, as here, the contract was clearly mandatory as a matter of construction. Even if that were wrong, the 1996 Act conferred a right on both parties to refer a dispute to adjudication; if the claiming party began court proceedings instead of referring a dispute to adjudication, the responding party might well be entitled to have the court proceedings stayed on the ground that they were a breach of its own right to have the dispute adjudicated. Moreover, even where an adjudication agreement imposed no mandatory provision and conferred no more than an option to refer to adjudication, that agreement was still binding upon the parties such that the responding party was entitled at least to ask the court for a temporary stay in the exercise of its discretion.
William Webb (instructed by Birketts LLP, of Ipswich) appeared for the claimant; Edward Sawyer (instructed by Fenwick Elliott) appeared for the defendant.
Sally Dobson, barrister
