Citation: [2023] EWHC 969 (TCC)
Abstract
SBS initiated Adjudication proceedings against Isoplus regarding the quality of its work and sought advice from the Adjudicator on the status of a contingent payment obligation. The Adjudicator found in favour of Isoplus and held that whilst compliance with the contingent payment obligation was a prerequisite to payment of subcontractor sums, she could not determine if it had been complied with. SBS sought Part 8 declarations that: (a) the contingent payment obligation was a condition precedent to payment of sums due to subcontractors, and (b) that Isoplus was in breach of the same. Isoplus sought to enforce the Adjudicator’s decision (“the Decision”) under Part 7. The court decided that SBS’ claims were not suitable for Part 8 and enforced the Decision. The court declined to determine whether the contingent payment obligation contravened s110(1A) of the Construction Act in the context of a Part 8 claim.
Summary of Facts
SBS instigated Adjudication proceedings to determine various issues concerning the quality of Isoplus’ works, including whether Isoplus was entitled to payment. The Adjudicator was also asked to provide ‘advice’ on whether Isoplus had complied with clause 21.4 of the Contract.
The Adjudicator found in favour of Isoplus with respect to the amount payable. She also directed that her ‘advice’ regarding clause 21.4 was not necessarily enforceable and distinguished this matter from the binding aspects of the Decision. However, the Decision noted that compliance with clause 21.4 was required as a precondition to payment of any amounts related to a sub-subcontractor, and on the basis of the evidence before her, it was not feasible to ascertain whether Isoplus had fulfilled this obligation on the balance of probabilities.
Held – Alexander Nissen KC
The Part 7 claim
SBS accepted that the Decision was enforceable (subject to a final determination) and that Isoplus was entitled to payment unless its Part 8 declarations were granted. The court examined the case law on parallel proceedings in adjudication enforcement and concluded that Part 7 enforcement proceedings should be dealt with first at an enforcement hearing and it was only then that the court would consider: (a) the suitability of the parallel proceedings for Part 8, and (b) if suitable, the impact of the same on any adjudicator’s decision.
The Part 8 issue
SBS maintained that its claims for declarations could be resolved through Part 8 proceedings. Isoplus argued that the matter was not suitable for Part 8 due to the breadth of the issue, which necessitated a more comprehensive legal, factual and likely expert analysis. In particular, Isoplus argued that the clause was not a condition precedent to payment, that there were allegations of breach raised but no proper particulars had been provided, as well as that clause 21.4 was inoperable in circumstances where the contract contained a milestone payment regime and there was no guidance as to how deductions of payments to subcontractors could be made in such circumstances.
The court also highlighted the distinction between the two types of claims referred to in paragraph 9.4.5 of the TCC Guide, i.e. those where pre-emptive Part 8 proceedings are commenced in adjudication enforcement proceedings and those where none is commenced but the court is still asked to make determinations that undermine an adjudication decision. The additional criteria in paragraph 9.4.5 of the TCC Guide that must be met only apply in cases falling within the latter category. Thus, the criteria in paragraph 9.4.5 of the TCC Guide did not apply here as pre-emptive Part 8 proceedings had been commenced. Nevertheless, SBS’ claims were unsuitable for Part 8 determination anyway, as identified above.
In the premises, the Part 8 claims were dismissed and SBS was ordered to commence proceedings again (if so advised).
Section 110 (1A) of the Construction Act
As one of the grounds for objecting to SBS’ claims for Part 8 declarations, Isoplus argued that clause 21.4 contravened section 110(1A) of the Construction Act. Section 110(1A) provides that payment provisions in construction contracts that are contingent upon obligations being fulfilled under other contracts do not meet the requirements of the Construction Act. A determination to that effect would rendered clause 21.4 unenforceable and meant that it was to be replaced with the relevant provisions of the Scheme.
Isoplus argued that compliance with clause 21.4 required obligations under the sub-subcontractors to be performed. The court declined to determine this issue, acknowledging the absence of case law on the subject and that it would be better to decide such a question with full pleadings.
Charlie Thompson acted for the Part 8 Defendant/Part 7 Claimant.
