In Lancashire Schools SPC Phase 2 Ltd v Lendlease Construction (Europe) Ltd and others [2024] EWHC 37 (TCC), the Technology and Construction Court considered whether a dispute resolution clause (DR clause) which required the parties to engage with adjudication before proceeding to litigation, ousted the jurisdiction of the court.

The fourth defendant local authority applied for an order against the claimant pursuant to Civil Procedure Rule 11(1)(b) and CPR 11(6)(b) (disputing the court’s jurisdiction) to set aside service of the claim form against it; alternatively for an order striking out the claim pursuant to CPR 3.4(2)(a). In essence, the fourth defendant argued that the court should exercise its discretion by declining jurisdiction to entertain the claim because it had been brought in breach of a DR clause that all disputes must first be determined by adjudication. The claimant argued that the DR clause was not mandatory. The matter came before Mr Alexander Nissen KC.

The judge considered the relevant authorities. The first step was to construe the meaning of the DR clause. In Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2246 (TCC), O’Farrell J set out the following principles in circumstances where one party sought to stay proceedings in favour of a DR clause:

  • The agreement must create an enforceable obligation requiring the parties to engage in alternative dispute resolution.
  • The obligation must be expressed clearly as a condition precedent to court proceedings or arbitration (although see Children’s Ark Partnership Ltd v Kajima Construction Europe (UK) Ltd [2022] EWHC 1595 in which the court held that it was not necessary for the DR clause to have been expressed as a condition precedent; it was enough if it was expressed in mandatory terms).
  • The dispute resolution process did not have to be formal but must be sufficiently clear and certain by reference to objective criteria, including machinery to appoint a mediator or determine any other necessary step in the procedure without the requirement for any further agreement by the parties.
  • The court has a discretion to stay proceedings commenced in breach of an enforceable DR clause. In exercising its discretion, the court will have regard to the public policy interest in upholding the parties’ commercial agreement and furthering the overriding objective in assisting the parties to resolve their disputes.

The judge then explained that the next step is for the court to consider the impact of the DR clause on its jurisdiction (Children’s Ark Partnership Ltd). The judge observed that it was common ground that the court is not bound to give effect to a mandatory DR clause by ousting, or refusing to exercise, its jurisdiction even if that was the intended contractual effect of the provision. Rather, non-compliance with the DR clause gives rise to a discretion to order a stay of proceedings having regard to, inter alia, the overriding objective (see for example DGT Steel and Cladding Ltd v Cubitt Building and Interiors Ltd [2007] EWHC 1584 (TCC)). It was clear to the judge that the authorities demonstrated that each case would turn on its own facts and the particular features which arise for consideration in the exercise of discretion.

Although the judge found that the DR clause was a condition precedent to litigation, he exercised his discretion in finding that it would be inappropriate to order a stay (or a strike-out order) because:

  • This was essentially a multi-party dispute and, as such, it was doubtful that a bilateral adjudication only between the claimant and fourth defendant would satisfactorily resolve matters.
  • A stay for adjudication would probably interfere with the progress of phase two of the litigation and, potentially, phase one of the litigation. Phase two of
  • The litigation was already under way against the other defendants. Overall, the ultimate disposal of those proceedings would probably be delayed if the matter went to adjudication. This would be contrary to the overriding objective.
  • The claimant submitted that, if the application is dismissed, the fourth defendant was free to begin its own adjudication. The judge noted that, if that was right, the significance of the court refusing a stay now is less significant than may first appear.
  • Multi-party mediation may be impacted by sending the dispute between the claimant and fourth defendant down a different track

The decision is a helpful reminder of the key authorities and principles which govern the approach the courts will take when considering applications to stay litigation proceedings in favour of a DR clause (see in particular Ohpen Operations UK Ltd). The decision also demonstrates that the courts will carefully construe the meaning of DR clauses in light of the specific circumstances of each case, and the overriding objective will play a significant role in how applications are ultimately determined. (This article was published in Law Society Gazette on 2 February 2024 and is available here.)

About the Author

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Lal Akhter

Lal Akhter is the chief executive of DocketLive. He read law at the University of Leicester and completed his post-graduate diploma in barristers training from the BPP University and subsequently called to the Bar at Lincoln’s Inn. He also holds another undergraduate degree in Mathematics and a master's in computer science. He writes on topics of civil procedure rules, expert witnesses, costs, and various other topics. He can be reached at or through his LinkedIn profile.