Costain Ltd v Tarmac Holdings Ltd

An arbitration agreement is not rendered inoperative merely because parties engage in pre-action correspondence or a court protocol. Abandonment requires an express or implied agreement to dispense with arbitration; repudiation requires repudiatory conduct and acceptance; estoppel requires a clear representation or shared assumption, reliance and detriment. A mutual trust and co-operation clause may require correction of an obviously false assumption, but does not require a party to surrender legitimate contractual rights.

Where a contract contains separate dispute-resolution provisions for distinct aspects of the parties’ relationship, the provisions should be construed coherently by identifying the dispute’s centre of gravity. A contractual adjudication time bar may govern a supply dispute even though statutory adjudication would otherwise be available. A null adjudication decision caused by excess of jurisdiction does not necessarily prevent a contractually agreed subsequent arbitration.

The claimant supplied defective concrete for motorway safety-barrier works under a sub-contract incorporating amended NEC3 Framework Contract conditions and NEC3 Supply Short Contract conditions. The Framework Contract contained a right to adjudicate at any time and an English jurisdiction clause. The Supply Contract contained a staged adjudication and arbitration regime, including a notification and referral time bar.

An adjudicator decided that the claimant’s claim for the cost of more extensive remedial works was time-barred. The claimant then issued proceedings seeking damages of approximately £5.87 million. The defendant applied under section 9(1) of the Arbitration Act 1996 for a stay. The central issues were whether the Supply Contract contained an applicable arbitration agreement, whether the claim was within its scope, and whether the agreement was inoperative or null and void under section 9(4).

1. Stay granted in principle. The sub-contract contained an arbitration agreement applicable to disputes concerning the supply and quality of the concrete. The Framework Contract and Supply Contract dealt with distinct aspects of the parties’ relationship. Their dispute-resolution clauses therefore complemented each other rather than creating an unrestricted choice between adjudication, arbitration and litigation.

2. Contractual construction required the language, documentary and commercial context, the overall purpose, and commercial common sense to be considered together. The court should avoid rewriting an agreement or making a clear term redundant. The claimant’s construction would neutralise the Supply Contract’s express time bar and produce uncertainty as to the appropriate forum.

3. The damages claim arose under or in connection with the Supply Contract and was a matter to be referred to arbitration under section 9(1). The claimant could not avoid the staged procedure by omitting the first stage and asserting that the second stage had not arisen. The adjudicator’s determination of the time-bar issue was sufficient to engage the contractual arbitration stage.

4. The arbitration agreement was not inoperative. Abandonment required an express or implied agreement that arbitration would no longer be the final dispute-resolution mechanism. No such agreement existed. Participation in the pre-action protocol did not amount to repudiation or abandonment because the protocol contemplated arbitration.

5. No estoppel was established. There was no clear representation or common assumption that the defendant would not rely on clause 93 or its time bar. The defendant had not engaged in sharp practice, and the claimant had suffered no relevant detriment. The mutual trust and co-operation obligation did not require the defendant to explain the contractual time bar or put aside its own legitimate interests. It required, at most, that the defendant should not mislead the claimant or knowingly allow an obvious false assumption to continue.

6. The arbitration agreement was not null and void merely because the adjudicator’s decision was alleged to be a jurisdictional nullity. Clause 93.4 expressly permitted arbitration where no adjudicator’s decision had been notified within the time allowed. The same contractual right applied where the alleged nullity arose from excess of jurisdiction. In any event, the adjudicator had been validly appointed and had jurisdiction to decide the discrete time-bar issue.

7. The application succeeded under sections 9(1) and 9(4). Consequential matters were reserved for hand-down.