DGT Steel and Cladding Ltd v Cubitt Building and Interiors Ltd

The court has an inherent, discretionary jurisdiction to stay proceedings brought in breach of a binding agreement to adjudicate. Where such an agreement exists, the party resisting a stay bears the persuasive burden of showing good reason to proceed directly to litigation. A contractual provision requiring disputes to be submitted to adjudication in the first instance is mandatory where its language and structure require that construction. The dispute referred to adjudication must be distinguished from the underlying monetary claim: a later claim may involve a substantially different dispute if it depends on different contractual issues, facts or valuation evidence. A temporary stay does not deprive a party of access to the court. It may be appropriate to stay the whole action to permit adjudication and compliance with the applicable pre-action protocol.

DGT Steel and Cladding Ltd subcontracted with Cubitt Building and Interiors Ltd for external cladding works. DGT first referred a claim for approximately £193,815 to adjudication. The adjudicator rejected the claim on the basis that Cubitt had issued a valid interim payment certificate and withholding notice.

DGT subsequently issued TCC proceedings claiming approximately £242,547, principally representing a valuation of the subcontract works and challenging Cubitt’s deductions. Cubitt applied for a temporary stay, relying on the subcontract’s adjudication clause. The central issues were whether the clause created a binding obligation to adjudicate first, whether the court claim was substantially the same dispute as the earlier adjudication, and whether there was any good reason to refuse a stay.

1. Jurisdiction and burden. The court possesses an inherent discretionary jurisdiction to stay proceedings commenced in breach of an enforceable agreement for alternative dispute resolution. Where a binding adjudication agreement is established, the persuasive burden lies on the party resisting the stay to show good reason against enforcement.
2. Construction of the clause. Clause 19.1 required any dispute under or connected with the subcontract to be submitted to adjudication in the first instance and thereafter, if necessary, to the exclusive jurisdiction of the English courts. The use of “shall”, together with the word “thereafter”, made adjudication mandatory rather than optional. The AICA Rules did not create an inconsistency. Even if the clause had conferred only a right to adjudicate, that right belonged to both parties under section 108 of the Housing Grants, Construction and Regeneration Act 1996. Cubitt could therefore seek a stay to protect its right to have the dispute adjudicated.
3. Nature of the disputes. The first adjudication concerned the technical operation of the interim payment mechanism, particularly the validity of Cubitt’s notice of 5 December 2006. The court proceedings principally concerned the detailed valuation of all work and materials, Cubitt’s deductions, delay and retention. The same financial claim did not mean that the disputes were the same. A claim and the dispute explaining why that claim was denied are distinct concepts.
4. Exercise of discretion. There was no good reason to refuse a stay. The new valuation dispute had not been subjected to the TCC pre-action protocol, and the protocol could conveniently be completed during the stay. A construction professional was a suitable tribunal for the valuation issues, and the dispute was not too complex for adjudication. The temporary stay would not bar access to the court; any residual dispute could proceed after adjudication.
5. Order. The proceedings were stayed pursuant to the court’s inherent jurisdiction.

This was a first-instance decision. The court granted Cubitt’s application for a temporary stay of the TCC proceedings.