Kajima Construction Europe (UK) Limted & Anor v Children’s Ark Partnership Limited

A contractual dispute resolution procedure which conditions access to the court must be sufficiently certain to be enforceable. The court considers the procedure as a whole. The contract must define the parties’ minimum participation obligations and enable the court to determine how and when the process is completed.

Where proceedings breach an enforceable procedure, the appropriate remedy depends on all the circumstances. A stay is usual but not automatic. Striking out may be disproportionate even if a limitation defence would otherwise arise. The court must balance that consequence against the claimant’s conduct, the utility of the contractual process and the overriding objective.

Limitation ordinarily bars the remedy without extinguishing the underlying right. A separately enforceable primary guarantee may therefore remain actionable although limitation prevents recovery from the contractor.

The respondent engaged the first appellant to design and construct a hospital under a construction contract. The second appellant guaranteed the contractor’s obligations. Schedule 26 required disputes first to be referred to a Liaison Committee, although the contractor had no representative on that committee and the contract did not clearly prescribe how or when its process ended.

After fire-safety defects were identified, the parties entered into successive standstill agreements while remedial works continued. When the final extension approached expiry, the respondent commenced proceedings without first activating the dispute resolution procedure. It later sought a stay. The appellants sought to set aside or strike out the claim under the Civil Procedure Rules 1998.

Joanna Smith J held in [2022] EWHC 1595 (TCC) that the procedure was a condition precedent but was too uncertain to enforce. She would in any event have stayed, rather than struck out, the proceedings. The appeal concerned enforceability, the proper discretionary remedy and whether the claim under the separate guarantee remained valid.

1. Appeal dismissed. Coulson LJ, with whom Holroyde LJ agreed, held that the dispute resolution procedure was unenforceable. Although courts endeavour to uphold contractual bargains, a procedure relied upon to delay access to the court must prescribe a sufficiently certain process. It must permit the court to identify the minimum participation required and determine when the process has been exhausted.

2. The procedure had to be considered as a whole. It was inappropriate to isolate the initial referral and treat that step alone as enforceable. The contractor had no representative on the Liaison Committee, no contractual right to attend or make representations, and no access to its documents. Yet the imported terms purported to permit a final and binding decision. The contract also failed to define the parties’ minimum participation obligations or specify when the process ended. The ten-day period was aspirational and applied only to construction disputes. Ground 1 therefore failed.

3. Assuming that the procedure had been enforceable, the judge properly exercised her discretion under rule 11(1)(b) of the Civil Procedure Rules 1998. A stay is the usual response to proceedings brought in breach of a mandatory contractual dispute resolution mechanism, but it is neither automatic nor inevitable. The appropriate order always depends on the facts. The judge was entitled to find that the respondent had acted reasonably, that the claim could not be fully quantified before completion of the remedial works, and that delay in resolving liability had occurred for understandable reasons, including requests made by the contractor.

4. The assumed loss of a limitation defence was important but not decisive. It had to be balanced against the claimant’s conduct, the overriding objective, proportionality and the practical utility of the contractual procedure. On these facts, striking out would have been disproportionate. The proper order would have been a stay even on a fresh exercise of discretion. Grounds 2 and 3 therefore failed.

5. The respondent’s notice was allowed. Limitation bars the remedy but does not extinguish the underlying claim or liability. The guarantee imposed a primary, standalone obligation and did not contain the dispute resolution procedure. The guarantor could not rely on the contractor’s procedural limitation defence to defeat a claim brought against the guarantor in time.

6. Popplewell LJ agreed in the result but considered that only uncertainty about completion made the procedure unenforceable. Holroyde LJ expressly agreed with Coulson LJ’s reasoning in full.

1. Court of Appeal (Civil Division): The appeal was dismissed on all three grounds. The court also allowed the point raised by the respondent’s notice, holding that the claim against the guarantor remained valid: [2023] EWCA Civ 292.

2. High Court, Technology and Construction Court: Joanna Smith J held that the contractual procedure was a condition precedent but was unenforceable for uncertainty. She also held that, had it been enforceable, the proceedings should have been stayed rather than struck out: [2022] EWHC 1595 (TCC).