Ardentia Ltd v British Telecommunications Plc

A contractual dispute-resolution procedure requiring escalation and consideration of mediation may validly restrict the commencement of court proceedings. An exception permitting an application for an interim injunction does not generally release the parties from the agreed procedure or confer jurisdiction to determine every substantive claim. It permits the court to decide issues necessary to determine the interim application, including issues also relevant to monetary relief.

Where a contract requires notice of an intention to commence proceedings and gives the other party a period in which to require arbitration, a general warning made during the contractual negotiation process is not necessarily such notice. If the contractual notice is not given before proceedings are commenced, the arbitration requirement may still be communicated within the contractual period after service of the claim form.

Ardentia and BT entered into an agreement concerning the development and licensing of software for the NHS national programme for information technology. A dispute arose over licence fees, and a further dispute arose concerning BT’s proposed engagement of a third party in alleged breach of an exclusivity clause.

Ardentia commenced proceedings and sought interim and permanent injunctive relief, payment or specific performance, and related declarations. BT applied under section 9 of the Arbitration Act 1996 for a stay, relying on the agreement’s Dispute Resolution Procedure in Schedule 7.1.

The central issues were whether the interim-injunction exception enabled the court to determine all the claims, and whether Ardentia had given the contractual notice required before BT could require arbitration.

1. Stay granted. The court held that all matters in the action were covered by an agreement to refer them to arbitration, and ordered a stay of the proceedings.
2. The Dispute Resolution Procedure imposed three restrictions on Ardentia’s institution of court proceedings: the preliminary procedures, including consideration of mediation where applicable, had to be exhausted; Ardentia had to give 15 business days’ notice of its intention to commence proceedings; and BT could require arbitration by serving the appropriate notice within that period (paras [5]–[7]).
3. The exception in paragraph 2.2 of Schedule 7.1 was confined to an application for an interim injunction. Its final sentence permitted the court, when deciding whether to grant interim relief, to determine issues necessary for that decision even if those issues were also relevant to claims for monetary relief. It did not allow an interim application to bring the permanent injunction claim or the licence-fee dispute generally before the court in disregard of the agreed procedure (paras [8], [14]–[15]).
4. Ardentia’s letter of 14 December 2007 was not a notice under paragraph 7.1.3. It was sent during the contractual escalation process, expressed only that Ardentia would have little alternative but to commence proceedings, and was followed by further participation in the mediation stage. A definite intention to commence proceedings would have been inconsistent with the continuing obligation to pursue a consensual solution in good faith (paras [9]–[13], [16]–[17]).
5. BT’s failure to serve an arbitration notice before commencement did not prevent a stay. Ardentia had failed to give the contractual notice of intention to commence proceedings, and BT’s application for a stay communicated its requirement for arbitration within 15 days after service of the claim form. The court therefore made an order staying the proceedings under section 9 of the Arbitration Act 1996 (paras [18]–[19]).

First-instance decision. No prior appellate decision is stated in the judgment.