Ardentia Ltd v British Telecommunications Plc [2008] EWHC B12 (Ch)

Ardentia and BT entered into a project agreement relating to the provision of information technology to the NHS. A dispute arose in respect of licence fees. Ardentia also believed that BT was intending to engage others to develop new software in breach of an exclusive supplier clause. Ardentia sought an injunction against BT who replied with an application for a stay under section 9 of the Arbitration Act 1996. What this meant was that Judge Donaldson QC had to decide whether the parties had followed their own dispute resolution procedure. By clause 66.1 of the contract any dispute was to be resolved in accordance with a Dispute Resolution Procedure ("DPR"). The DPR was a dispute escalation clause, initiated by a notice in writing. Two nominated representatives then met. If they could not resolve the dispute, it would move to management level, and finally to CEO level. If that failed the parties could then "consider mediation".

Paragraph 7 of the DPR said that the parties should not institute court proceedings until the applicable procedures had been exhausted save that BT could at any time prior to court proceedings serve a notice requiring that the dispute be referred to arbitration and that if Ardentia intended to start court proceedings it had to serve notice on BT who then had 15 days to serve its own notice requiring arbitration. Paragraph 2.2 of the schedule to the DRP said that nothing in the DRP would prevent a court from having jurisdiction to give an interim order.

The Judge held that paragraph 7 imposed three restrictions on the commencement of court proceedings by Ardentia:

  • The procedure up to and including the "consideration" of mediation must have been exhausted;
  • Ardentia must have given a 15 day notice of its intention to commence court proceedings; and
  • If BT served a notice within the 15 day period, then the matter was to be referred to arbitration, and so a stay under section 9 would have to be given.

From the facts of the case it appeared that the parties had followed the initial procedure, and then considered mediation. They had also considered referring the dispute to an early neutral evaluation process. However, as the dispute was not resolved, the key questions were whether the appropriate notices had been given and whether the 15 day period had expired. The Judge held that paragraph 2.2 had to be read within the context of DRP. Interim relief was only to be given in very limited circumstances and in order to support the DRP process. It was not there to avoid the DRP process, and an injunction was not available. Ardentia had not served the initial notice; however BT had served a notice requiring a reference to arbitration and the Judge duly granted an order under Section 9 to stay the proceedings pending arbitration. Here, the court's support was only available to provide interim relief, not to deal with the substance of the dispute that was progressing through the dispute resolution process. In other words, Ardentia could not use the courts to avoid the contractual dispute resolution process that the parties had agreed.