The Technology & Construction Court (‘TCC’) has provided some further guidance as to when the Part 8 procedure can be used as a mechanism to avoid the enforcement of an adjudication decision. In the case of Sleaford Building Services Limited (‘SBS’) v Isoplus Piping Systems Limited (‘Isoplus’) [2023] EWHC 969 (TCC) which considers the interplay between the Part 7 and Part 8 procedures, David Banks (Legal Director) assisted by Chris Keating (Senior Associate) acted for Isoplus.
The outcome of the case demonstrates that adjudication remains a vehicle for swift payment in the construction industry and that the decisions it generates have the continued support of the TCC.
Background
Isoplus sought to enforce the Decision of an Adjudicator which directed that it should be paid the sum of £323,502.32 by SBS. SBS resisted payment and sought declaratory relief that clause 21.4 of the parties’ (sub)contract (‘Contract’) contained a pre-condition to payment that had not been satisfied by Isoplus and that the Adjudicator had confirmed that this was the case (notwithstanding the direction that payment be made to Isoplus).
For the benefit of readers unfamiliar with construction litigation, a claim in the TCC will usually be started by way of either Part 7 or Part 8 of the Court rules. The Part 7 process generally deals with contested matters in terms of both facts and the law. The Part 8 procedure is targeted at discrete issues of fact or law and is usually a faster process (albeit there is also an expedited Part 7 process supported by the TCC that allows adjudication decisions to be quickly enforced).
The litigation in question flowed from an adjudication, commenced by SBS, that SBS ultimately lost. The Adjudicator directed that there be financial relief in favour of Isoplus having been given authority to do so.
The litigation that followed the adjudication saw both the Part 7 and Part 8 procedures utilised by the parties. SBS was the Claimant in the Part 8 proceedings and the Defendant in the Part 7 claim. Isoplus was the Part 8 Defendant and Part 7 Claimant. Alexander Nissen KC was the presiding Judge.
The case has a number of relatively unusual features in that:
- The party seeking to enforce the Decision, Isoplus, was the Responding Party in the Adjudication.
- SBS conducted the Adjudication itself rather than instructing solicitors/consultants.
- The Part 8 claim was issued prior to the Part 7 claim and was therefore the dominant proceedings. The 2 sets of legal proceedings were combined by the Judge and heard at the same hearing.
- SBS offered no evidence in response to the Part 7 claim.
- The claim considered the application of section 110 (1A) of the Housing Grants, Construction and Regeneration Act 1996 (‘the Construction Act’), upon which there is a limited amount of law. This provision relates to contractual payment clauses in construction agreements that are linked to performance under other contracts.
Facts
The facts of the matter are that SBS commenced the Adjudication to determine a number of issues as to the quality of Isoplus’ works, to include whether or not Isoplus was entitled to payment. The Adjudicator was also asked to ‘advise’ whether Isoplus had acted in accordance with the Contract in respect of clause 21.4.
The Adjudicator found in favour of Isoplus in terms of the amount payable. She also directed that her ‘advice’ in relation to clause 21.4 was not necessarily enforceable and separated this issue from the binding aspects of the Decision. However, the Decision does state at paragraph 170 that:
‘I am satisfied on a balance of probabilities that compliance with clause 21.4 is required as a precondition to payment of any sums related to a sub-subcontractor. Based on the information provided I am not able to confirm whether IPS have complied with this obligation.’
and at paragraph 174:
‘… I am not able to confirm that all pre-requisites for payment have been complied with in respect to payment for sub-subcontract works.’
Isoplus, in response to the Part 8 claim, contended that the second sentence of paragraph 170 and paragraph 174 above flowed from an absence of particularisation of the claim being made out by SBS (bearing in mind that SBS had the evidential burden). SBS on the other hand relied on those statements from the Adjudicator in her Decision to resist payment.
The Part 7 claim
It was ultimately accepted by SBS that the Decision was enforceable (subject to final determination) and that Isoplus were entitled to payment unless the concurrent Part 8 declarations were granted. The Judge considered the surrounding case law given the parallel proceedings and confirmed that:
‘Either if the Part 8 proceedings are unsuitable, or the Court is not able to make a final determination at that hearing, judgment in the enforcement proceedings should ordinarily be given.’
The Part 8 issue
SBS took the view that this issue was capable of determination by way of Part 8 proceedings. Isoplus disagreed and asserted that Part 8 was the incorrect forum given the extent of the issue which required a wider legal and factual analysis.
The Judge was required to decide whether the Part 8 issue referred by SBS constituted a “short and self-contained” issue, noting the guidance given at paragraph 9.4.5 of the TCC Guide.
The Judge ultimately decided that:
‘It is obvious … that the issues relating to clause 21.4 are by no means short and self-contained. Moreover, their resolution depends on evidence beyond that which is presently before the Court.’
The Judge agreed with Isoplus that no determination was necessary in relation to the Part 8 claim and that there was therefore no impact on the Part 7 enforcement claim raised by Isoplus. He indicated that any claim brought by SBS should be dealt with in an alternative forum.
Section 110 (1A) of the Construction Act
Isoplus also raised a preliminary issue as to whether clause 21.4 fell foul of section 110 (1A) the Construction Act.
That section directs that payment provisions in construction contracts that are conditional upon obligations being performed under other contracts does not satisfy the requirements of the Construction Act. A finding by the Judge in that respect would have rendered the clause void and unenforceable.
Isoplus contended that clause 21.4 was conditional upon obligations due under other contracts as well as a decision from SBS as to whether any such obligations had been fulfilled.
On this issue the Judge declined to make a decision in the Part 8 forum, recognising that there was an absence of case law on the issue and also that a wider analysis of the law was required that was perhaps unsuitable for the Part 8 forum.
The above outcome is understandable in the circumstances. However, we do not consider that it will be too long before the issue is tested once again in the TCC. Given that such clauses are relatively common in construction agreements, judicial guidance on the point would certainly be useful.
Takeaway points
The judgment reinforces a number of particular points:
- The circumstances in which Part 8 proceedings will be a suitable means of determining an issue flowing from an Adjudication are limited and must fall into the bracket of being “short and self-contained”. Any challenge to whether that is the case may in itself suggest otherwise.
- Parties to adjudication should be mindful as to how their cases are pleaded and particularised. The Judge made reference to issues that arose in this case flowing from a lack of particularisation, notably at paragraph 59 of the judgment.
- The general rule remains that decisions resultant from the adjudication process will be enforced.
- The issue flowing from Section 110 (1A) of the Construction Act requires further legal judicial analysis and may result in wider issues as to the validity of payment mechanisms in construction contracts.
It is once again clear that parties seeking to avoid enforcement of adjudication decisions have an unenviable task in most circumstances. Although it is clear that the specific facts of each matter before the TCC will be given careful consideration, parties should give thought to whether they incur the cost of resisting enforcement before going down that route.
For further information or support, get in touch.
For further information, please contact:
David Banks, Hill Dickinson
david.banks@hilldickinson.com
