Stay of Third Party Proceedings Because of Arbitration Agreement

Wealands v CLC Contractors Limited and Another (QBD (Commercial Court)), NLD 6 June 1998

Commentary

This decision shows that the courts are prepared to give strict effect to the principle of party autonomy in the Arbitration Act 1996 and will stay court proceedings in favour of arbitration even in circumstances where this may give rise to a risk of conflicting decisions being reached by the court and by the arbitral tribunal and where procedural disadvantages may arise.

Decision

In the Wealands case the Commercial Court held on appeal from the Master that a third party subcontractor, who was joined by the defendant as third party to High Court proceedings, was entitled as of right to a stay of proceedings pursuant to Section 9(4) of the Arbitration Act 1996 because the contract between the defendant main contractor and the third party sub contractor contained an arbitration clause. This was held to apply both to contractual claims and to claims for contribution.

Background

The Defendant contracted the third party to errect scaffolding and proceedings for negligence and breach of statutory duty were commenced against the Defendant following a fatal accident. The Defendant joined the subcontractor alleging breach of the sub-contract or breach of a duty of careowed to the Defendant. The subcontract contained an indemnity clause in favour of the Defendant and also an arbitration clause. On the basis of that arbitration clause the third party subcontractor applied for a stay of the third party proceedings.

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