Contractual Restrictions on Right to Litigate – High Court Ruling

CranesThere is nothing commercially absurd about contractual restrictions on the right to litigate. The High Court made that point in dealing a blow to a subcontractor’s hopes of winning an additional £1 million for its work on a major infrastructure project.

During the project, there were four sets of adjudication proceedings between the subcontractor and the main site contractor. Following completion, however, the former wished to litigate certain issues which it hoped, if decided in its favour, would increase the sums due to it under the subcontract.

The contractor, however, pointed to a clause in the main contract that required the service of a notice of dissatisfaction with adjudication awards before either party could resort to litigation. The subcontractor argued that it was not bound by the clause in that it was not incorporated in the subcontract. That potentially decisive issue was referred to the Court for a preliminary decision.

In ruling in the contractor’s favour, the Court noted that there was nothing contrary to common sense in an agreed restriction on the right to litigate. The obligation created by the clause was bilateral and there were obvious reasons why the parties might have found certainty and finality advantageous. The meaning of the clause was clear and it was plainly incorporated in the subcontract.