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Court discretion trumps mandatory ADR

29 February 2024

In a recent case the Technology and Construction Court opted not to strike out proceedings where a mandatory adjudication clause within the governing contract had not first been complied with. Our construction law experts examine the case.

Lancashire Schools SPC Phase 2 Limited v Lendlease Construction (Europe) Limited and others


Lancashire Schools SPC Phase 2 Limited ("LSSPL") was engaged by Lancashire County Council ("LCC") to deliver the provision of serviced accommodation at a school known as Sir John Thursby & Ridgewood. Defects were alleged as regards to certain matters including acoustics, wall ties, fire, energy, architectural, civil and structural, mechanical and electrical, energy and render. 

LSSPL sought damages from Lendlease Construction (Europe) Limited ("First Defendant"), Lendlease Construction Holdings (Europe) Limited ("Second Defendant"), Equans Buildings Limited ("Third Defendant") and LCC as the fourth defendant in parallel but in relation to the different phases of the works.
LCC applied under CPR 3.4 for an order to strike out the claim brought against it on the basis that the court did not have jurisdiction to hear the dispute because the relevant contract contained a mandatory requirement for adjudication as a pre-condition to litigation, which LSSPL failed to pursue in the first instance.

The decision of the court

When considering the court's power to exercise its discretion under CPR Part 11, the court concluded that the application failed. The court decided that the temporary deprivation of the Claimant's entitlement to advance its substantive claim pending adjudication was not a basis for striking out the claim. That would amount to a draconian remedy or as expressed by Coulson LJ in Children's Ark, an "overkill". 

The litigation proceedings were already underway with the other defendants and therefore agreeing to a disposal of the proceedings to adjudicate would be contrary to the overriding objective to help the parties resolve their disputes. The proposed adjudication would not simply concern a short point of construction as implied by LCC. Whilst there were 'back-to-back' adjudication provisions in the building contract entered into between LSSPL and the First Defendant, there was potential for the First Defendant and Second Defendant to find each other responsible for the defects. As such the court concluded that it was not an abuse for LSSPL to have started legal proceedings without first adjudicating. 

Conclusions and implications 

This decision serves as a useful reminder of the court's discretion in relation to the reading and interpretation of dispute resolution clauses. Whilst parties' intentions can be expressly stated and interpreted as agreeing adjudication as a pre-requisite to resolving any dispute, the court will consider the overriding objective to ensure a pragmatic resolution of a dispute between the parties. 

In this case, the desire to achieve the effective resolution of the dispute tipped the balance away from a strict adherence to the dispute provisions of the contract. 

Our team understand the issues our clients are facing. Please speak to one our experts if we can assist you.

Reference: Lancashire Schools SPC Phase 2 Limited v Lendlease Construction (Europe) Limited and others [2024] EWHC 37 (TCC)

Further Reading