Collins (Contractors) Limited carried out work for Baltic Quay Management under a JCT Minor Works Building Contract. Baltic did not pay an interim certificate and also amounts in respect of the final account but failed to serve a withholding notice. The contractor then determined the contract and issued proceedings in respect of the amounts. Baltic applied to the court for a stay of the litigation pursuant to Section 9(4) of the Arbitration Act 1996 on the basis that the contract between the parties contained an arbitration agreement. The contractor argued that there was no arguable defence to the proceedings in the absence of the service of a withholding notice, and therefore there was no “dispute” which was a pre-requisite to the operation of Section 9 of the Arbitration Act 1996.

Baltic argued that a dispute arose for the purposes of Section 9 quite simply by a refusal to pay (Halki v Sopex [1998] 1 WLR 726). The Court of Appeal held that the arbitration clause in the JCT Minor Works Building Contact was drafted in extremely wide terms such that if there was a dispute then it must be referred to arbitration. A dispute would be found to exist once a claim had been made that was not admitted. Discussions and negotiations in respect of issues were more likely to demonstrate the existence of a dispute. Section 111 of the Housing Grants, Construction & Regeneration Act 1996 simply dealt with the issue of withholding notices. Section III did not deal with how those disputes should be settled, nor did it specifically state that disputes arising in connection with withholding notices should be referred to arbitration.

However, it was clear to the Court of Appeal that Baltic did not admit the contractor’s claim and there was as a result a dispute. Baltic was, because of the existence of a dispute, entitled to stay the litigation proceedings pursuant to Section 9(4) of the Arbitration Act 1996. The appeal was therefore dismissed. Collins (Contractors) Limited was left to pursue the failure for Baltic to pay the interim certificate and the final account, even in the absence of a withholding notices, by way of arbitration pursuant to the JCT Minor Works Contract.