An application to strike out or set aside a claim form on grounds of failure to comply with a contractual ADR provision has failed in Children’s Ark Partnerships Ltd v Kajima Construction Europe (UK) Ltd and another [2022] EWHC 1595 (TCC).
In June 2004, CAP agreed with the Brighton and Sussex University Hospitals NHS Trust to design, build and finance the redevelopment of the Royal Alexandra Hospital for Sick Children. On the same date, CAP and Kajima entered into a contract whereby Kajima was appointed to design, construct and commission the hospital. The works commenced in 2004 and were completed on 2 April 2007.
The Trust was entitled to make deductions from CAP in respect of service failures arising from defects and Kajima was liable to reimburse those deductions under the terms of the contract. In September 2018, concerns around cladding and fire-stopping issues were notified to Kajima, which agreed to carry out remedial works. The works commenced in December 2018 but had to be sequenced over a long period of time to minimise disruption to the hospital.
The limitation period for a claim under the contract would have expired on 2 April 2019, but the parties agreed standstill agreements to 29 December 2021 when Kajima refused any further extensions. CAP issued its claim form on 21 December 2021, alleging design and/or construction defects in the works, seeking damages in excess of £300,000. It then sought a two-month stay of the proceedings to seek to resolve the dispute and pursue the dispute resolution procedure (DRP). Kajima claimed that the DRP was a condition precedent to the commencement of the proceedings and that under CPR 11 the court either had no jurisdiction to consider CAP’s application for a stay or should not exercise its jurisdiction to do so.
Any dispute under the contract was to be resolved in accordance with the DRP set out in Schedule 26. The DRP required disputes to be referred to a liaison committee comprising three representatives each of the Trust and CAP – but not of Kajima – whose decision would be final and binding unless the parties otherwise agreed. All disputes not resolved in accordance with the DRP should be referred to the High Court.
The court has an inherent jurisdiction to stay court proceedings for the enforcement of an alternative dispute resolution provision where the clause creates a mandatory obligation and where it is enforceable: Channel Tunnel v Balfour Beatty Ltd [1993] AC 334.
The DRP was properly to be interpreted as a condition precedent to the commencement of litigation because the right to commence court proceedings was subject to compliance with the DRP. However, it was not enforceable because it was neither clear nor certain. There was no meaningful description of the process to be followed and no unequivocal commitment to engage in any particular ADR procedure. Kajima was neither entitled nor obliged to take part in the process.
Consequently, the commencement of proceedings by CAP merited neither a stay of the proceedings on conventional principles nor a refusal by the court to exercise jurisdiction under CPR 11. Kajima’s application was dismissed.
Louise Clark is a property law consultant and mediator
