Court of Appeal Permission Granted: Children’s Ark v Kajima
Date: 7 October 2022
The Court of Appeal has granted permission to appeal the first instance decision of Smith J in Children’s Ark Partnerships Ltd v Kajima Construction (Europe) UK Ltd and another [2022] EWHC 1595 (TCC). The TCC held that, despite amounting to a condition precedent, ADR provisions in a construction contract were unenforceable because the dispute resolution procedure was not sufficiently clear and certain. The judgment is summarised below.
Facts
The Claimant, Children’s Ark Partnerships Limited, had entered into a construction contract with the First Defendant, Kajima Construction Europe (UK) Limited, to redevelop a children’s hospital in Brighton. The contract contained a dispute resolution procedure (DRP) which mandated that disputes should be referred to a Liaison Committee before court proceedings were commenced. Following disputes between the parties, and shortly before the expiry of a contractually agreed limitation period, Children’s Ark initiated court proceedings.
Kajima applied to strike out, or set aside, the claimant’s claim form, relying on CRP 11(1), arguing that the Court should not exercise, or did not have, jurisdiction in relation to the dispute. Kajima contended that referral to the Liaison Committee was a condition precedent to litigation, and the Children’s Ark had failed to comply with the DRP.
Held
Kajima’s application was dismissed.
The Court held that the authorities did not support a distinction between mandatory obligations and condition precedents when deciding whether to enforce an ADR clause (Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, and Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm) considered; Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC) not followed).
Was the DRP a Condition Precedent?
The DRP was properly to be construed as a condition precedent. It was not necessary for the words “condition precedent” to be used, as long as the words were clear that the right to commence proceedings was subject to the failure of the DRP. The obvious purpose of the relevant provisions in the DRP, objectively construed, was to require the mandatory referral to the Liaison Committee for resolution before the parties became entitled to institute proceedings.
Was the DRP enforceable?
The DRP was not sufficiently clear and certain to be enforceable. In particular: i) it contained no meaningful description of the process to be followed; ii) there was therefore no unequivocal commitment to engage in any particular ADR procedure; iii) it was unclear how a dispute was to be referred to the Liaison Committee; iv) it was unclear how a decision of the Liaison Committee would impact the Defendant; v) it was unclear when the condition precedent was satisfied.
Accordingly, the commencement by the Claimant of legal proceedings neither merited a stay of the proceedings on conventional principles nor a refusal of the court to exercise jurisdiction under r.11(1)(b).
CRP 11(1)
Had the DRP been enforceable, a failure to comply with them would not have engaged CRP 11(1)(a), which appeared to be confined to cases where there was a ‘technical issue around the commencement of the claim’.
However, as the condition precedent gave rise to a ‘jurisdictional issue’, CPR 11(1)(b) would be engaged, meaning that the court could use its discretion not to exercise jurisdiction. Nonetheless, the court would not have exercised its discretion under r.11(1)(b) and r.11(6) to do anything more than stay the proceedings. The claimant’s decision to issue proceedings to avoid expiry of the limitation period and thereafter to seek an extension of time to facilitate compliance with the pre-action protocol and with the contractual DRP was an entirely sensible approach. It was better that the parties issued proceedings on time and engaged in ADR in a meaningful way at a later date when ready to do so than that they were rushed into pointless compliance with an ADR provision which would never bear fruit.
William Webb acted for the Claimant.
Simon Hargreaves KC acted for the Defendants.
