MBE Electrical Contractors Ltd v Honeywell Control Systems Ltd

Where a construction contract contains both an adjudication scheme and an arbitration clause, the arbitration clause does not ordinarily justify staying proceedings to enforce an adjudicator’s decision. The statutory scheme requires immediate compliance with the decision and makes it binding until the dispute is finally determined by litigation, arbitration or agreement. That pay now, argue later policy would be defeated if arbitration could interrupt enforcement. Matters going to the adjudicator’s jurisdiction must be raised in the enforcement proceedings. The underlying merits remain available for determination in arbitration.

MBE sought summary judgment to enforce an adjudicator’s decision awarding it £26,694.07, interest, compensation and fees following a dispute over a subcontract. Honeywell applied under section 9 of the Arbitration Act 1996 for a stay, arguing that its objections to the adjudicator’s jurisdiction and the interpretation of a contractual time-bar clause were matters for arbitration. The contract contained an arbitration clause and incorporated the Scheme for Construction Contracts because it did not itself provide for adjudication. The issue was whether the arbitration clause required enforcement proceedings to be stayed pending arbitration.

1. The stay was refused. The court assumed, for the purpose of the stay application, that the contract was within the Construction Act and that the Scheme applied.
2. The relationship between arbitration and adjudication was governed by paragraphs 21 and 23(2) of the Scheme. An adjudicator’s decision had to be complied with immediately and remained binding until the dispute was finally determined by legal proceedings, arbitration or agreement.
3. This gave effect to the statutory pay now, argue later policy. A reference to arbitration could not put a brake on enforcement. Honeywell could pursue its available arguments in arbitration, but could not use arbitration to suspend enforcement of the adjudicator’s decision.
4. Objections to the adjudicator’s jurisdiction, including the alleged absence of a contract in writing under section 107 of the Construction Act, had to be advanced in the enforcement proceedings if relied upon to resist enforcement. Questions concerning the merits of the dispute were for arbitration.
5. The approach was supported by Macob Civil Engineering Ltd v Morrison Construction Ltd, where a party could not treat an adjudicator’s decision as capable of arbitration while denying that it was binding and enforceable pending that arbitration. The reasoning in Absolute Rentals Ltd v Gencor Enterprises Ltd was likewise accepted. Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd was distinguished because it concerned an ordinary final-account action, not enforcement of an adjudicator’s award.
6. The alternative argument based on paragraph 23(1) of the Scheme and section 42 of the Arbitration Act was rejected as unattractive. The adjudicator’s order did not state that it was peremptory, and a mandatory injunction was not considered appropriate for enforcing a simple payment obligation.

The remaining jurisdiction and time-bar issues were to be listed for hearing.