English Court Considers Steps In Legal Proceedings Which Prevent A Successful Stay Application

• Published date: 07 April 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Chris Parker and Elizabeth Kantor

In Fairpark Estates Ltd and others v Heals Property Developments Ltd [2022] EWHC 496 (Ch), the English High Court upheld an order dismissing the appellants' application for a stay of legal proceedings. The Court found that the appellants had taken steps in the proceedings to answer the substantive claims, so could not apply for a stay under s.9(3) of the Arbitration Act 1996 (Act).

HHJ Richard Williams held that the appellants took a step in the proceedings to answer the respondent's claims by:

1. providing final undertakings in a Consent Order which effectively disposed of an application for injunctive relief and
2. requesting and obtaining a further extension of time to respond to the monetary claims, and failing to reserve their rights to apply for a stay when doing so.

Background

The first and second appellants entered into a joint venture agreement (JVA) with the respondent to develop land on a specified site (the Site). The JVA expressly provided that any dispute arising between the parties in connection with the JVA should be referred to arbitration. The respondent then engaged a contractor to complete the works on the Site.

A dispute subsequently arose, and the respondent issued court proceedings against the appellants and the contractor, together with an application for an urgent interim injunction. The respondent's claims were for (i) possession and injunctive relief to recover and secure the Site, and (ii) damages.

The following steps were then taken:

1. Consent Order: the parties entered into a Consent Order, under which the appellants gave final undertakings agreeing to an injunction. The Consent Order also set a procedure for the remaining claims, including regarding the date for service of the appellants' defence and counterclaim; and
2. Further extension of time: the appellants subsequently sought and obtained by agreement a further extension of time for the filing of their defence and counterclaim.

On the day the further extension was due to expire, the appellants made an application for a stay of (i) the whole of the proceedings, or alternatively (ii) all monetary claims arising in the proceedings, on the basis of the arbitration agreement. The court dismissed the application, and the appellants then appealed the decision to the High Court.

Decision

HHJ Richard Williams dismissed the appeal, finding that the appellants had taken steps in the legal proceedings to answer the substantive claims, thus barring an application for a stay under s.9(3)...