Signing up for arbitration will not stop you going to court
If your contract includes an arbitration clause, are you bound to take your dispute to arbitration or can you still go to court? Earlier editions of the JCT building contracts chose arbitration as the forum for dispute resolution, like it or not - and many did not. The current versions of the JCT forms allow the parties to choose between arbitration and litigation, with arbitration as the default option. Most building professionals, including architects, sign up to arbitration. Having done so, when it comes to the crunch and they want to sue for their fees, can they still issue a quick claim form and go for summary judgment, or must they go to an arbitrator?
The law of arbitration was radically overhauled by the no longer new but still recent Arbitration Act 1996. One of its objectives was to streamline arbitration procedures, and to empower arbitrators in default of the parties agreement. It also reduced arbitration's dependence on the courts, and made arbitration a self -sufficient dispute resolution process. Its basic premise is that if you agree to take your dispute to arbitration, arbitration is where your dispute should end up.
There was a short flurry of activity from the 'no dispute' camp, who argued that if there was no defence to a claim, there was nothing to argue about - and nothing, therefore, to refer to arbitration. This approach was stymied by Lord Saville's famous Oxford Boat Race analogy. He explained the fact that it was easy to find out who won the Oxford Boat Race, but that that fact did not preclude an argument about it.
But Lord Saville's message may not have reached everyone and claim forms are still issued in the courts rather than notices served in arbitration. What to do if you find yourself at the wrong end of a court action which ought, by rights, to be an arbitration? Here, defendants have a choice. They can either respond to the court proceedings, thereby ensuring that the action stays in court, or they can apply to the court to stay the action for arbitration. Before the 1996 Act, the court had discretion as to whether to keep the action in court or to send it off to arbitration: and a hundred and one ingenious arguments were put forward by those who would have cheerfully put their heads into a crocodile pit rather than experience another construction arbitration. Things have moved on since then. Both the 1996 Act and the userfriendly arbitrators who have emerged, almost Venus-like, from out of the statute, have caused disputing parties to fall over themselves in their rush to arbitration. And anyway, the Act has taken away the option. Now, if defendants want arbitration, the court is obliged to support them.
Unless, that is, the defendant has 'taken a step' in the court proceedings.
What amounts to 'a step in the proceedings' under the 1996 Act was considered by the Court of Appeal in the case of Patel v Patel (1999). The defendant builder was sued by the claimant for breach of a building contract with an arbitration clause. The claimant then obtained judgment. The builder asked the court to set aside the judgment and asked to be allowed to defend the claim. The builder also applied for the action to be stayed for arbitration. The claimant argued that by applying to the court to be allowed to defend the claim, the builder had taken a 'step' in the proceedings and had thereby prevented an arbitration. The court disagreed and held that merely asking for permission to defend the claim did not amount to a 'step' in the proceedings and did not prevent the builder from taking the dispute to arbitration.
The Arbitration Act does not prevent you from proceeding in court, even if your contract has an arbitration clause, but you will not be able to stay there, unless the opposition agrees or takes a step in the action, deliberately or otherwise. As with all things, the trick is for contracting parties to think about where they want any dispute to end up before they fall out - that is, when the contract is entered into, not when it is broken.