Sunward Holdings Limited -v- Teqnion AB: Court Upholds ADR Clause in Share Dispute

The Commercial Court has warned against the issuing of “wasteful” and “premature” applications to the Courts in circumstances where there is an alternative dispute resolution clause in place in a contract between two parties.

Alternative dispute resolution (ADR) clauses, which outline how parties will resolve disputes other than through traditional litigation, are now the norm in most commercial agreements.  One subspecies of same, clauses stating that in the event of a (usually a particular form of) dispute that an expert will be nominated by the parties to adjudicate on that issue, are now also becoming increasing popular. In a judgement delivered by Mr. Justice Twomey on the 23^rd of May 2025, the High Court considered the effect of such clauses.

Background

The Plaintiff acquired the entire share capital of Reward Catering Limited from the Defendant under the terms of a Share Purchase Agreement in 2022.  Under the SPA, the Plaintiff received a purchase price plus a defined Earn-Out. The Earn-Out consisted of three potential further payments. A dispute as to how to calculate the second Earn Out tranche resulted in a difference of nearly two million euro between the parties’ respective calculations.

The SPA contained a term that if the parties could not agree to any adjustments to the relevant Earn-Out Statement, the matter would be referred to an Expert. The parties were unable to reach agreement and referred the dispute to an accounting expert as per the terms of the SPA. Notwithstanding this agreement, the Plaintiff issued proceedings seeking a declaration that the agreed expert was not entitled to refer to certain accounting standards in reaching her decision and that she is bound by a definition of “Gross Profit” contained in the agreement between the parties.

Decision

Mr. Justice Twomey considered the precedent set by the Supreme Court in Dunnes Stores v McCann and concluded that the Court should not interfere with the expert process in this matter.  

The Judge observed that the reasons for respecting the agreement of the parties to refer to a matter to a defined ADR mechanism are even stronger when the decision-maker is an expert in a field in which the dispute has arisen. If a judge was to determine this issue, the judge would have to hear evidence from expert accountants instructed by both parties, which would be less efficient and more costly than the expert determination previously agreed.

The Judge noted that if the expert went outside her remit, Sunward would have a remedy by challenging the legality of the decision after it had been taken.

The Judge also highlighted that there are very good public policy reasons why courts do not get involved in the expert determination process. This way of resolving disputes is cheaper and more efficient than litigation. He noted that the ADR process would be pointless if parties could still ask the Courts to effectively do the expert’s job.

Mr. Justice Twomey concluded that while there may be good commercial reasons why the Plaintiff wanted the Courts to interfere in this case, there is no legal basis for the Courts to do this. The Judge dismissed the application and took the preliminary view that the Plaintiff should be liable for the Defendant’s legal costs.

Conclusion

This judgment highlights the reluctance of the Courts to intervene in matters where there is an agreed expert appointed to adjudicate on an issue.  However the Judge appeared to suggest the same rationale applies generally to the Courts interfering where there is an ADR agreement generally in place. Parties should be mindful when entering into commercial contracts that they will likely be bound by the terms of any ADR clause and the Courts will not interfere except in exceptional circumstances. If a party wants to be able to have first recourse to the Courts in the event of dispute, they should draft their agreements to reflect this.