Contract

Building contract arbitration - claim by subcontractor - contractor not entitled to delay pending settlement of separate disputeLafarge Redland Aggregates Ltd v Shephard Hill Civil Engineering Ltd: HL (Lord Hope of Craighead, Lord Cooke of Thorndon, Lord Clyde, Lord Hobhouse of Woodborough and Lord Millett): 27 July 2000

The contractor was engaged by the employer to construct a by-pass under a contract incorporating ICE standard form, 5th ed (Jan 1979 rev) which, by clause 66, set out a procedure for arbitration of disputes between employers and contractors.

The contractor engaged a subcontractor using FCEC standard form of subcontract (Sept 1984 ed), which provided by clause 18(1) for arbitration of disputes between contractors and subcontractors but, by clause 18(2), allowed the contractor to serve a notice requiring any subcontract dispute to be dealt with jointly with a related main contract dispute under the clause 66 procedure.

Disputes arose under both contracts.

The subcontractor sought to refer its dispute with the contractor to arbitration under clause 18(1), but the contractor issued a clause 18(2) notice.

It failed to proceed under clause 66, however, as it wished to first try to settle its dispute with the employer by negotiation.

The subcontractor issued an originating summons seeking a declaration that the contractor had waived its right to rely on clause 18(2).

The deputy official referee dismissed the summons, but the Court of Appeal allowed the subcontractor's appeal.

The contractor appealed.

David Friedman QC and Stephen Dennison (instructed by Eversheds) for the contractor.

Vivian Ramsey QC and Louise Randall (instructed by Winward Fearon) for the subcontractor.

Held, dismissing the appeal, that where a clause 18(2) notice was served the contractor had to initiate the clause 66 procedure under the main contract within a reasonable time; that what amounted to a reasonable time was a question of fact in each case but it was no answer to delay that the contractor had sought to defer invoking the clause 66 procedure owing to a wish to reach a settlement with the employer; and that, accordingly, since there had been a failure by the contractor to invoke the clause 66 procedure within a reasonable time, the subcontractor had been entitled to the appointment of an arbitrator under clause 18(1).

(WLR)