Collins (Contractors) Litd carried out work for Baltic Quay Management under a JCT Minor Works Building Contract. Baltic did not pay an interim certificate and also amounts in respect of the final account but failed to serve a withholding notice. The contractor then determined the contract and issued court proceedings in respect of the amounts.
Baltic applied to the court for a stay of the litigation pursuant to Section 9(4) of the Arbitration Act 1996 on the basis that the contract between the parties contained an arbitration agreement. The contractor argued that there was no arguable defence to the proceedings in the absence of the service of a withholding notice, and therefore there was no “dispute” which was a pre-requisite to the operation of Section 9 of the Arbitration Act 1996.
Did a dispute arise for the purposes of Section 9 of the Arbitration Act 1996 quite simply by a refusal to pay?
Reference
Yes, according to the Court of Appeal, which held that the arbitration clause in the JCT Minor Works Building Contact was drafted in extremely wide terms such that if there were a dispute then it must be referred to arbitration. A dispute would be found to exist once a claim had been made that was not admitted. Discussions and negotiations in respect of issues were more likely to demonstrate the existence of a dispute. Section 111 of the Construction Act simply dealt with the issue of withholding notices and not specifically deal with how those disputes should be settled, it did not specifically state that disputes arising in connection with withholding notices should be referred to arbitration.
However, it was clear to the Court of Appeal that Baltic did not admit the contractor’s claim and there was as a result a dispute. As a result Baltic was entitled to stay the litigation proceedings pursuant to Section 9(4) of the Arbitration Act 1996. The appeal was therefore dismissed. Collins (Contractors) Ltd was therefore left to pursue the failure for Baltic to pay the interim certificate and the final account, even in the absence of a withholding notices, by way of arbitration pursuant to the JCT Minor Works Contract.
*Full case details
Collins (Contractors) Ltd vs Baltic Quay Management (1994) Ltd, 7 December 2004, CA (Civ), Brooke LJ, Clarke LJ and Neuberger LJ
Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk
Postscript
The arbitration clause in the JCT Minor Works (and indeed most other standard forms of contract) are drafted in such wide terms that any dispute no matter how minor is to be referred to arbitration and cannot be dealt with by the court. The simple test set out in Halki v Sopex [1998] is whether the parties appear to be in dispute. It does not matter that the dispute could be quickly or easily resolved; if there can be said to be a dispute and there is an arbitration clause in the contract then the court will refuse to hear the dispute. The parties are then left to deal with the matter in arbitration.
