Interaction between applications for an interim mandatory injunction and for a stay of proceedings under the Arbitration Act 1996

Matt Perry

In Jacobs E&C Limited v Laker Vent Engineering Ltd, the High Court considered the interaction between two applications which had been made to the court in respect of a dispute which was subject to arbitral proceedings:

  • an application for an interim mandatory injunction in support of arbitration under sections 44(2)(e) and 44(3) of the Arbitration Act 1996 (the “1996 Act”); and
  • a cross-application for a stay of the injunction proceedings pursuant to section 9 of the 1996 Act.

Facts

The parties entered into four subcontracts on various dates whereby the defendant agreed to carry out certain works at a plant in Fife. These subcontracted works formed part of the works the claimant was responsible for under the main contract.

The claimant brought arbitration proceedings seeking specific performance of the defendant’s obligation to deliver up certain documents, including Quality Certification Dossiers, which the claimant argued were needed so it would be able to obtain the necessary taking-over certificate required by the main contract. It argued that a failure by the defendant to provide the Dossiers would result in substantial liquidated damages becoming payable by the defendant.  The defendant challenged the validity of the taking-over certificates issued by the claimant, stating that these should have been issued two years previously.

The claimant applied to the court for an interim mandatory injunction under sections 44(2)(e) and 44(3) of the 1996 Act that the defendant be obliged to deliver up the documents, including the Dossiers.  The defendant cross-applied for a stay of the injunction proceedings under section 9 of the 1996 Act.

Jurisdiction of the court in relation the the claimant’s application

The judge considered the jurisdiction of the court to grant the type of relief sought. Overall, he recognised that the court did have power to grant an interim injunction on the application of a party subject to arbitral proceedings where such an injunction would support the arbitral proceedings and where the arbitral tribunal was unable for the time being to act effectively. He also made it clear, highlighting the case of Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618, that the power to grant an interim injunction under section 44(3) of the 1996 Act was limited to cases of urgency, where the purpose of the injunction was to preserve evidence or assets.

That said, the judge also held (again referring to Cetelem) that this power could even extend to an “extreme situation” where to grant the interim injunction would be to allow the applicant to obtain the whole of the relief which was sought at arbitration. However, in that situation, the court would have to ensure that appropriate undertakings were obtained from the claimant that the substantive rights of the parties would ultimately be resolved by arbitration.

Application to stay proceedings

The judge then turned to the defendant’s application to stay the injunction proceedings. The defendant contended that the claim for an injunction conflicted with the parties’ right to have the dispute dealt with at arbitration. The claimant argued that section 9 and section 44 of the 1996 Act needed to be read together, in that section 9 would only operate to allow a stay where proceedings were brought in reference to a matter which should be decided at arbitration. The power to grant interim injunctions under section 44 was something that was part of the court’s power to support arbitral proceedings, and was as such not a matter which was to be referred to arbitration under the arbitration agreement reached between the parties. The judge agreed with the latter view, stating that if the defendant’s view was adopted, this would require the court to refer every application for an interim injunction to an arbitrator.

Merits of the claimant’s application

The judge held that the claimant’s application was not sufficiently urgent to fall within section 44. Later that afternoon, arbitration directions were to take place and the judge held that part of these directions could be to ensure that the claim was dealt with in good time so that the dispute was resolved prior to the date on which the claimant planned to take over the works. As such the application was rejected.

The judge also went on to state obiter that if the case had have been urgent, in deciding whether to grant an injunction, he would have had to take into account the self-inflicted delay of the claimant in the issue of the taking-over certificates. Careful consideration would also have to have been given to the fact that to grant the injunction would have been to grant the relief sought at arbitration.  The court would also have had to take into account the limited assets of the defendant and its ability to meet any liquidated damages which might fall due.

Jacobs E&C Limited v Laker Vent Engineering Ltd [2015] EWHC 4818 (TCC)

The judgment in this case is available to Practical Law subscribers here.  Although the judgment was handed down in May 2014, it was only made available in June 2015.

Post By Matt Perry (3 Posts)

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