UK: Adjudication: The Compulsory First Port Of Call?

The Construction Act permits a party to a construction contract to start an adjudication at any time. But what if a party doesn't want to adjudicate a dispute, and instead commences court proceedings. Can those proceedings be stopped, to allow an adjudication to take place first? This issue arose in DGT v Cubitt.

Cubitt engaged DGT to carry out cladding works. Unusually the subcontract contained a clause providing that ‘any dispute..shall, in the first instance, be submitted to adjudication’, followed by court proceedings if necessary.

DGT sued Cubitt in the TCC for money it claimed was outstanding. Cubitt applied to the court to stop the proceedings, on the basis DGT had breached the agreement to adjudicate. The Court allowed the application and ordered a stay. A key issue was whether there was a binding agreement to adjudicate. The court held that:

• the word ‘shall’ meant adjudicating first was compulsory;

• where the agreement to adjudicate is optional (as it usually is), a party can still seek a stay because the Construction Act confers a right on both parties to refer a dispute to adjudication, and by going directly to court one party is being denied that right;

• the court is more likely to exercise its discretion in favour of a stay where the agreement to adjudicate is compulsory as opposed to optional.

In this case there was an express agreement to adjudicate and the court held the parties to their bargain by staying the proceedings. But other questions arise: will the court grant a stay if the contract is silent on adjudication, but the adjudication regime is written into the contract by the Construction Act? If so, this would essentially make adjudication compulsory for any dispute under a constructions contract covered by the Act. DGT suggests this is at least arguable even though the rationale for a stay (making the parties honour their bargain) does not come into play where adjudication is implied.

In DGT the stayed proceedings concerned a final account dispute (worth over £240k). As the courts have said that such disputes (and professional negligence claims) are often unsuitable for adjudication, large complex claims that have yet to be adjudicated will presumably be less susceptible to a stay. Another question is: when should court proceedings be objected to? The recently amended Construction and Engineering Disputes Pre-Action Protocol does not currently require the defendant to say pre-proceedings that he will seek a stay (as he should if he will seek a stay to arbitration), but if he does not it may harm his later application to stay the court proceedings. The Protocol also does not say whether, if the defendant requires the claimant to adjudicate first, there should still be a full letter of response and pre-action meeting.

This case empowers a defendant threatened with court proceedings over a construction contract dispute to require the claimant to adjudicate first. The claimant must then decide whether to do so, to go to court for guidance or to commence full court proceedings and risk a stay. In DGT a key factor in granting the stay was the suitability of the dispute for adjudication. It remains to be seen to what extent this case will make adjudication compulsory.

For further information please contact Rupert Choat, Laura Wood or Julian Bailey.