In Ohpen v Invesco, the High Court held that the parties’ contractually agreed alternative dispute resolution procedure operated as a condition precedent to litigation. As a result, court proceedings were stayed to allow mediation to take place.
Invesco engaged Ohpen to develop a platform for investments. The contract included a multi-tiered dispute resolution procedure. The penultimate step was mediation. Invesco issued a notice of termination. Following a failure of a “without prejudice” meeting, Ohpen countered by starting proceedings for wrongful termination. Invesco applied for a stay, contending that the proceedings breached the contractual ADR procedure.
The court derived the following principles from the authorities as applicable when a party seeks to enforce an ADR clause through an order to stay court proceedings:
- the clause must create an enforceable obligation requiring the parties to engage in ADR;
- the obligation must be expressed clearly as a condition precedent to court proceedings;
- the ADR process must be sufficiently clear and certain; and
- the court has a discretion to stay the proceedings, and it will consider the public policy interest in upholding the parties’ commercial agreement and the overriding objective of the Civil Procedure Rules.
Applying each of these the court noted:
- Enforceable obligation: The requirement to submit to ADR was written in mandatory terms (eg “the Dispute shall be referred… to mediation…”), and the procedure was intended to apply to all disputes arising during the development and implementation phase. Even though the contract was terminated, the ADR clause (being similar to arbitration clauses) survived the discharge of the parties’ primary obligations.
- Condition precedent: The term “condition precedent” does not have to be used in the clause. The clause clearly provided that the parties must first attempt mediation before commencing court proceedings.
- Clear process: The ADR clause referred to mediation under the Model Mediation Procedure of the Centre of Dispute Resolution. This was sufficiently clear, as it contained rules on the selection of mediators and the conduct of the mediation. The court would be able to determine whether the parties had participated in mediation and whether their dispute remained unresolved at the end of this mediation.
- Discretion to stay: There was a strong policy in favour of enforcing ADR clauses and encouraging parties to resolve their disputes through ADR. A court will not usually permit litigation commenced in breach of an ADR clause and therefore granted a stay.