Deciding whether to litigate or arbitrate

On 9 October 1998 it was announced that the term 'Official Referee' is to be dropped with immediate effect. The Official Referees Court is now to be known as the Technology and Construction Court.

Judges are no longer to be known as Official Referees but as Judges of the Technology and Construction Court. The jurisdiction of the court effectively remains the same and includes any claim which involves issues or questions which are technically complex.

In what appears to be the first judgment made under the title of the Technology and Construction Court, between Ahmad Al-Naimi and the Islamic Press Agency, his Honour Judge Bowsher QC was asked to consider an application for a stay of proceedings in accordance with section 9 of 1996 Arbitration Act.

Section 9 concerns the powers of the court to stay (effectively suspend) court actions until the disputed matters are decided by an Arbitrator.

arbitration

Section 9(1) provides that "a party to an arbitration agreement against whom legal proceedings are brought may apply to the court to stay the proceedings." Paragraph 9(4) provides "on an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed." Ahmad Al-Naimi (trading as Buildmaster Construction Services) entered into a JCT Minor Works contract to undertake alteration and refurbishment works at a property in Buckinghamshire belonging to the Islamic Press Agency.

The contract expressly excluded works of a second fix and finishes nature, but it was alleged by Al-Naimi that a subsequent oral contract had been entered into under which second fix works had been carried out. Disputes arose concerning payments due, and the nature of the agreements entered into by the parties. The employer's contract administrator and the contractor produced sworn affidavits giving conflicting accounts of their respective dealings.

Al-Naimi contended that whilst the first contract did contain an arbitration agreement in the standard form, the subsequent oral contract did not contain an arbitration agreement. This contention was particularly important to him because he would be able to obtain access to Legal Aid to conduct these proceedings in court, whereas Legal Aid would not be available to him in an arbitration.

specified

Counsel for the Islamic Press Agency countered that either the work carried out had been specified under the original contract, or it was the subject of a valid variation to that contract. In either case the arbitration agreement would apply.

Reference was made to the 1997 decision in Halki Shipping Corporation -v- Sopex Oils Limited. In that case the court had to decide whether all disputes, whether genuine or otherwise, would fall to be decided by an arbitrator where section 9 of the 1996 Arbitration Act applied.

It was decided that the term "dispute" should be given the widest possible interpretation.

The judge stated, "All that the charterers have to do is to say that they dispute the amount due, or indeed to fail to pay anything. In either of those events there is in ordinary language a dispute as to the amount due."

Elsewhere in the judgment, the Judge stated that he was of the opinion that, however indisputable the plaintiff's claim, there remained a dispute between the parties which they had agreed to refer to arbitration. It followed that the defendants were entitled to a stay of the action under section 9(4) of the Arbitration Act 1996.

In considering the present case, his Honour Judge Bowsher QC appears to have taken a rather softer approach by questioning whether there were "genuine disputes" between the parties.

On evidence put before him he was satisfied that there were indeed genuine disputes concerning the construction of the original contract and, for example, whether certain items of work fell within the description of work contained within that original contract.

There could be no doubt in his mind that those disputes were disputes which the parties had agreed should be submitted to arbitration, and they were therefore not matters for decision by the court. Accordingly, he ordered that the proceedings be stayed for arbitration. This meant that the first issue for the arbitrator to decide would be to construe the original agreement between the parties. In other words, the arbitrator would be required to decide which, if any, of the disputes between the parties were disputes arising in connection with the original contract, and therefore within his jurisdiction.

If the arbitrator were to decide that any matters disputed between the parties were beyond his jurisdiction, then the stay on proceedings could be lifted to enable the claim with respect to those disputes to be pursued in the courts.

Such a procedure was entirely consistent with section 30 of the 1996 Arbitration Act which gave the arbitration tribunal the competence to rule on its own jurisdiction.