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Authored by: KK Cheung
Children’s Ark Partnerships Ltd v (1) Kajima Construction Europe (UK) Ltd & (2) Kajima Europe Ltd  EWHC 1595(TCC), concerned the enforceability and effect of a contractual dispute resolution procedure (DRP) and what the court should do in circumstances where one party has not activated that procedure and has commenced court proceedings instead. The 1st and 2nd Defendants (Kajima) had applied to strike out or set aside proceedings on the grounds of failure to comply with the DRP, said by Kajima to be a condition precedent to the commencement of proceedings. England’s Technology and Construction Court (TCC) dismissed the application. Although it found that, properly interpreted, the DRP was a condition precedent to the commencement of court proceedings, it found it to be unenforceable, because it was not sufficiently clear and certain. The Court of Appeal ( EWCA Civ 292) has dismissed Kajima’s appeal against the TCC decision.
For the background to this case and TCC decision, please refer to our previous article.
Court of Appeal Decision
Was the DRP enforceable?
The Court of Appeal referred to the general principles applicable to determining whether a DRP is enforceable, namely:
The Court of Appeal agreed with the TCC that the DRP was not sufficiently clear and certain and was therefore unenforceable, for the following reasons:
Appropriate remedy – stay or strike out?
The court also considered what the appropriate remedy is where a party ignores a contractual dispute resolution procedure and commences court proceedings instead – should the court proceedings be struck out or stayed? Kajima had argued that a strike out was appropriate or else it would be deprived of a limitation defence if the action was stayed. The Court of Appeal acknowledged that deprivation of a limitation defence is an important element of the balancing exercise, but said that it cannot alone be decisive.
The Court of Appeal said that although a stay of proceedings is not the “default remedy” in the sense of it being automatic or inevitable relief which the court will grant to a party when the other party ignores a contractual dispute resolution procedure, it is the usual remedy, although the right remedy, it said, will always turn on the facts of the case.
In the present case, the Court of Appeal held that had the DRP been found enforceable, a stay of proceedings would have been the appropriate remedy, rather than a striking out of the proceedings.
In this case, the requirement in the contract that on one hand, the Liaison Committee had to resolve the parties’ dispute amicably without the participation of one party and on the other hand, that its decision shall be final and binding on the parties was fatal to the enforceability of the DRP. In some standard forms of contracts, the decision of the architect/main contractor is final and binding and has to be sought before the main contractor/sub-contractor (as the case may be) can proceed to the next tier of dispute resolution procedure. Such provision is likely to be enforceable, since it does not require the architect/main contractor to resolve the dispute amicably.
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