Dgt Steel and Cladding Ltd v Cubitt Building and Interiors Ltd
| Jurisdiction | England & Wales |
| Judge | HIS HONOUR JUDGE PETER COULSON QC |
| Judgment Date | 04 July 2007 |
| Neutral Citation | [2007] EWHC 1584 (TCC) |
| Date | 2007 |
| Docket Number | Case No: HT-07-130 |
| Year | 2007 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2007] EWHC 1584 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St. Dunstan's House
133137 Fetter Lane
London EC4A 1HD
His Honour Judge Peter Coulson Qc
Case No: HT-07-130
Mr. Edward Sawyer (instructed by Messrs. Fenwick Elliott) for the Applicant/Defendant
Mr. William Webb (instructed by Messrs. Birketts LLP) for the Respondent/Claimant
Approved Judgment
Digital Transcription of Marten Walsh Cherer Ltd.6 th Floor, 12–14 New Fetter Lane, London EC4A 1AG.Telephone No: 020 7936 6000 Fax No: 020 7427 0093 DX: 410 LDE Email: info@martenwalshcherer.com Website: www.martenwalshcherer.com
A: Introduction
This application raises a short but important point of principle in connection with the law relating to adjudication. In what circumstances, if any, should a temporary stay be granted to restrain court proceedings until an adjudication of the underlying dispute has taken place? Rather to my surprise, it does not appear that there is any reported case directly on this issue although, as we shall see, there are a number of authorities that indicate clearly the proper approach that a court should adopt on such an application.
Pursuant to a subcontract dated the 14 th February 2006, the defendant, Cubitt Building and Interiors Limited (“Cubitt”) engaged DGT Steel and Cladding Limited (“DGT”) to carry out external cladding works at Telephone House, 69 to 77 Paul Street, London EC2, a site where Cubitt were themselves engaged as main contractors. The subcontract contained an adjudication provision.
Pursuant to that provision of the subcontract, on 12 th February 2007 DGT referred to adjudication a claim that Cubitt owed to DGT the sum of £193,815 plus VAT. The claim was resisted by Cubitt. By decision dated 12 th March 2007 the adjudicator found in Cubitt's favour and rejected the entirety of DGT's claim.
On 20 th April 2007 DGT commenced proceedings in the TCC seeking £242,547 plus VAT and interest. There is a major dispute between the parties as to the degree of overlap between the unsuccessful claim in the adjudication and the claim now brought by DGT in these proceedings. Cubitt say that the claim in the proceedings is very different to the claim in the adjudication and that, as a result of the binding adjudication agreement in the contract, the litigation should be stayed until the new claim has been the subject of adjudication. DGT argue that there was no mandatory adjudication provision and, even if there was, there was no breach of that agreement and that there therefore should be no stay. They submit that the new claim is essentially the same as that which has already been adjudicated. If they are wrong about that, they say that the court should exercise its discretion against granting a stay in any event.
B: Principles of Law
(a) The Court's Jurisdiction To Grant A Stay
If the parties have agreed on a particular method by which their disputes are to be resolved, then the court has an inherent jurisdiction to stay proceedings brought in breach of that agreement. In Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] AC 334 court proceedings had been commenced, despite a term of the contract which provided for the initial reference of disputes to a panel of experts, and which also stipulated that any remaining disputes would be the subject of arbitration in Brussels. The House of Lords held that the court had an inherent, albeit discretionary power to stay proceedings brought before it in breach of an agreement to decide disputes by an alternative method. Lord Mustill, who gave the leading speech, said at pages 352B-C and 353A-D:
“Nevertheless I am satisfied that this is the correct route and that the court not only possesses a discretion to grant a stay in cases such as the present but also that this is a remedy which ought to be exercised in the present case. ….
This is not the case of a jurisdiction clause purporting to exclude an ordinary citizen from his access to a court and featuring inconspicuously in a standard printed form of contract. The parties here were large commercial enterprises, negotiating at arms length in the light of a long experience of construction contracts, of the types of disputes which typically arise under them, and of the various means which can be adopted to resolve such disputes. It is plain that clause 67 was carefully drafted and equally plain that all concerned must have recognised the potential weaknesses of the two-stage procedure and concluded that, despite them, there was a balance of practical advantage over the alternative of proceedings before the national courts of England and France. Having made this choice I believe that it is in accordance, not only with the presumption exemplified in the English cases cited above that those who make agreements for the resolution of disputes must show good reason for departing from them, but also with the interests of the orderly regulation of international commerce, that having promised to take their complaints to the experts and if necessary to the arbitrators, that is where the appellants should go. The fact that the appellants now find their chosen method too slow to suit their purpose is to my way of thinking quite beside the point.”
That principle was applied in Cott UK Ltd. v. FE Barber Ltd. [1997] 3 All ER 540. In that case, the contract contained an agreement that any dispute should be referred to an expert for determination. The judge concluded that it was therefore open to him to grant a stay of the court proceedings. He referred to Channel Tunnel Group and said:
“It seems quite plain that in such cases Lord Mustill took the view that generally the courts would require the parties to pursue the alternative dispute resolution to which they had bound themselves by the terms of their contract. That is, I think, the explanation of his use of the word 'presumption' ….
I take the view, therefore, that even where there is no arbitration clause, in the light of the observations of Lord Mustill in the Channel Tunnel Group case and in the light of the changing attitudes of our legal system, the court plainly has a jurisdiction to stay under its inherent jurisdiction, where the parties have chosen some alternative means of dispute resolution.
I also take the view that where there is some such clause which is contractually binding, there is a burden on the person opposing the stay to show grounds for opposing it. It seems to me that, insofar as the word 'presumption' used by Lord Mustill has any application to cases such as the present, it should reflect simply the burden of persuasion in the way in which I have just stated that burden.”
Although, having reviewed the contract in Cott, the judge declined to order a stay, that was because he concluded that the expert determination procedure provided for in the contract was so unclear as to be unenforceable. It is plain from the judgment that, but for that particular difficulty, a stay would have been granted.
There are two cases on this topic where the underlying agreement was the adjudication of any dispute that might arise under the contract. In Cape Durasteel Ltd. v. Rosser and Russell Building Services Ltd. [1995] 46 Con LR 75, a case decided before the Housing Grants, Construction and Regeneration Act 1996, His Honour Judge Lloyd QC was concerned with a contractual agreement to adjudicate. He concluded that, as a matter of construction of the contract, there was a binding agreement to adjudicate any disputes that arose, and that having regard to all the circumstances, it was appropriate to order that the action be stayed pending adjudication.
The other reported case concerning adjudication, which has at least some relevance to the issue before me, is Herschel Engineering Ltd. v. Breen Property Ltd. [2000] BLR 272, in which Dyson J (as he then was) refused the defendant's application for an injunction restraining an adjudication which had been commenced at a time when court proceeding in respect of the same dispute were already on foot. He said at paragraph 19 of his judgment:
“If Parliament had intended that a party should not be able to refer a dispute to adjudication once litigation or arbitration proceedings had been commenced, I would have expected this to be expressly stated. The relationship between adjudication on the one hand and litigation and arbitration on the other, was what informed the content of section 108(3) of the Act. The aggrieved claimant should not have to wait many months, if not years, before his dispute passed through the various hoops of a full blown action or arbitration.”
Dyson J was not concerned in that case with the specific question that I have to decide, as to whether the court proceedings should be the subject of a temporary stay until after the adjudication.
It should be noted that the courts have exercised their inherent jurisdiction to grant a stay of ongoing proceedings even where the term of the contract, of which the claiming party is said to be in breach, is a general agreement to refer disputes to alternative dispute resolution. In Cable & Wireless PLC v. IBM United Kingdom Ltd. [2002] EWHC 2059 (Comm); [2002] 2 All England (Comm) 1041 the relevant clause of the contract provided that, if disputes or claims arising out of the contract were not resolved by negotiations, the parties would attempt in good faith to resolve the dispute through ADR. Colman J held that the ADR procedure envisaged by the contract was of sufficient certainty to be enforceable. A stay was therefore granted in respect of the court proceedings that had been started in breach of the ADR agreement.
(b) Does The Court Have A Discretion...
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