Brookhouse Group Limited v Lancashire County Council
[2023] EWHC 2921 (TCC)
Lancashire Schools SPC Phase 2 Limited v Lendlease Construction (Europe) Limited & Ors
12 January 2024
[2024] EWHC 37 (TCC)
High Court
A school construction dispute ended up in court even though the contract said to try solving it through a special process (adjudication) first. The judge said that because the case was complicated and involved many parties, forcing them to use the special process first would just waste time and money. So, the case can proceed in court.
Key Facts
- •Lancashire Schools SPC Phase 2 Ltd (Claimant) sued Lendlease Construction (Europe) Ltd, Lendlease Construction Holdings (Europe) Ltd, Equans Buildings Ltd, and Lancashire County Council (Fourth Defendant/Applicant).
- •The claim concerns alleged defects in a school building project under a PFI agreement.
- •The Fourth Defendant (Lancashire County Council) applied to set aside service or strike out the claim, arguing that the claim breached a contractual adjudication requirement (Clause 68) before litigation.
- •The Project Agreement (Clause 68) requires dispute resolution through consultation and adjudication before court proceedings.
- •Parallel litigation exists concerning Phase 1 of the project.
- •The Claimant sought declaratory relief against the Authority to avoid liability if the defects were due to the other defendants' breaches.
Legal Principles
An agreement must create an enforceable obligation to engage in ADR; this obligation must be clearly expressed as a condition precedent to court proceedings or arbitration; the dispute resolution process must be sufficiently clear and certain; the court has discretion to stay proceedings commenced in breach of an enforceable dispute resolution agreement.
Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC)
A mandatory and enforceable ADR provision is sufficient, even if not explicitly a condition precedent.
Children’s Ark Partnership Ltd v Kajima Construction Europe (UK) Ltd [2022] EWHC 1595
The court has inherent power to stay proceedings brought in breach of an agreement to decide disputes by an alternative method.
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334
The burden is on the party resisting the stay to demonstrate why it should not be granted.
DGT Steel and Cladding Ltd v Cubitt Building and Interiors Ltd [2007] EWHC 1584 (TCC)
The usual order for breach of a mandatory contractual dispute resolution mechanism is a stay of proceedings.
Children’s Ark Partnerships Ltd v Kajima Construction Europe (UK) Ltd [2023] EWCA Civ 292
Valid ADR machinery requires certainty, defined administrative processes, and a set-out process or model.
The Interpretation of Contracts 7th Ed., Chapter 18 - Dispute Resolution
Clear words are needed to oust the court's jurisdiction, even temporarily.
Children’s Ark Partnerships Ltd v Kajima Construction Europe (UK) Ltd [2023] EWCA Civ 292
Outcomes
The application to set aside service or strike out the claim was dismissed.
The court found that adjudication was a condition precedent to litigation under Clause 68 of the Project Agreement. However, exercising its discretion under CPR Part 11, the court considered a stay inappropriate due to the multi-party nature of the dispute, the potential for procedural complications in a bilateral adjudication, the interference with the progress of related litigation, and the Authority's ability to initiate its own adjudication.
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