Ealing Care Alliance Ltd v London Borough of Ealing

A court may stay proceedings brought in breach of a binding adjudication agreement, but the discretion must be exercised proportionately and with regard to the circumstances of the particular dispute. A stipulation requiring a contractual market-testing process to carry a warning about a threatened legal challenge is not necessarily a comment on the substance of the market-testing proposal or a tender requirement. Where an adjudicator has directed that the process proceed, conduct which makes the process commercially impossible may amount to non-compliance with the adjudicator’s decision. A declaration may be granted where there is a real dispute, the relief is precise, it serves a useful purpose and no special reason makes it inappropriate.

The claimant provided care-home services to the defendant under a long-term PFI Framework Agreement. Following a benchmarking adjudication, the adjudicator decided that either party was entitled to require market testing. The defendant served a Notice of Dissatisfaction and threatened proceedings on the underlying merits, but did not commence them.

The defendant insisted that tender information include a warning stating that the claimant’s right to conduct market testing, and the validity of the process, were subject to legal challenge. The claimant sought a declaration that it could proceed without that qualification. The defendant sought a stay to adjudication, contending that the dispute concerned the market-testing proposal under the contractual dispute-resolution procedure.

1. Stay application. The court adopted the principles stated in DGT Steel & Cladding Ltd v Cubitt Building & Interiors Ltd [2007] EWHC 1584 (TCC). The court has jurisdiction to stay proceedings issued in breach of a binding adjudication agreement, but the discretion must be exercised in accordance with the agreement and the circumstances of the case.
2. The dispute was not within the mandatory adjudication provision in clause 14.2.6. The proposed warning was not a comment on the substance of the market-testing proposal, nor was it objectively a tender requirement. The fact that the letter post-dated the proposal did not make it part of that contractual process. The court would in any event have refused a stay because the matter had been fully argued, a further adjudication would create disproportionate wasted costs and delay, and the defendant had delayed acting on its Notice of Dissatisfaction.
3. Declaration. The court adopted the guidance in Office Depot International (UK) Ltd v UBS Asset Management (UK) Ltd and Others [2018] EWHC 1494 (TCC). Declaratory relief requires a real dispute and precise terms, and remains discretionary. The court should consider justice to the claimant, whether the declaration serves a useful purpose and any special reasons against granting it.
4. The warning would make market testing commercially impossible and therefore frustrated the benefit of the adjudicator’s decision that market testing should proceed. A Notice of Dissatisfaction was materially different from pursuing a legal challenge, and the proposed wording could itself mislead tenderers. The court therefore granted the declaration that the claimant was entitled to proceed to market testing without the qualification. The underlying merits of the adjudicator’s decision were not determined.