Part 8 Guidance: are the facts clear? ISG Retail Ltd v FK Construction Ltd [2024] EWHC 878 (TCC)

The Technology and Construction Court recently provided further judicial guidance on when the alternative procedure in Part 8 of the Civil Procedure Rules (“CPR”) can be used.   Part 8 provides for a straightforward and quicker determination procedure when compared to the claims process more commonly followed under Part 7 CPR (save for adjudication enforcement business).

When to use Part 8?

The Court addressed the proper approach to Part 8 proceedings in Berkeley Homes (South East London) Ltd v John Sisk and Son Ltd [2023] EWHC 2152 and briefly summarised the key principles as follows:

a) The Part 8 procedure is to be used where the Claimant seeks the Court’s decision on a question which is unlikely to involve a substantial dispute of fact: CPR 8.1(2)

b) The Court may at any stage order the claim to continue as if the Claimant had not used the Part 8 procedure and, if so, the Court may give any directions it considers appropriate: CPR 8.1(4)

c) The Part 8 procedure is designed for the determination of relevant claims without elaborate pleadings: White Book 8.0.1; ING Bank NV v Ros Roca SA [2012] 1 WLR 472.

Background

The Claimant, ISG Retail Limited (“ISG”), was the main contractor.   The Defendant, FK Construction Limited (“FK”), was the roofing and cladding sub-contractor appointed by ISG.   The project concerned the construction of six new industrial units and associated works in Bristol.

By way of wider context, the Judge observed that the “…parties are serial litigants… the disputes between them had produced 12 adjudications, eight sets of High Court proceedings and two appeals to the Court of Appeal…”[1].   This dispute concerned an extension of time adjudication.

In May 2022, FK had lodged an extension of time application on ISG.   FK generally notified ISG of delays via standard form documents which were referred to as Early Warning Notices (“EWNs“). The document issued provided the information prescribed by the first part of clause 9(5) of the Sub-Contract between the parties but had omitted the proviso details on the circumstances causing delay and the likely impacts.   On 7 September 2022, ISG served its response – this referred to the proviso, but there was no suggestion that FK had failed to comply with the contractual requirements.   FK lodged its reply later in September 2022.  FK had served a total of 106 EWNs between September 2021 and April 2022.

ISG subsequently referred the proper gross valuation of FK’s works to adjudication on 15 March 2023.   At paragraph 7.4.3 of its Referral Notice, dated 17 March 2023, ISG raised that FK had failed to comply with Sub-Contract clause 9(5) (which it asserted was a condition precedent) and took the point that it had not waived this requirement.   This appeared to be the first time that non-compliance with clause 9(5) was raised.   In its Response, FK asserted that it had issued EWNs in accordance with the contractual notice requirements.   FK further argued that ISG had waived its entitlement to rely on clause 9(5) and/or was estopped from doing so since no failure to issue compliant notices had been raised by ISG. Instead ISG had responded substantively to the extension of time claim.   ISG’s Reply in the adjudication rejected these waiver and estoppel arguments.

On 14 April 2023 the adjudicator decided that clause 9(5) was a condition precedent and that FK had complied with it.  The adjudicator made an award on the extension of time and prolongation costs, but did not consider it necessary to decide the issues raised concerning waiver or estoppel.

The Issues

ISG commenced Part 8 proceedings seeking five specific declarations following the adjudication decision.   Specifically, ISG had contended that two short points needed to be determined by the Court: first, whether the relevant contractual term is a condition precedent, and second, whether this was breached.

FK argued that the question of compliance involved the examination of substantial factual material.   It also raised arguments around waiver and estoppel and submitted that these points were wholly unsuitable for Part 8 determination by the Court.   FK relied upon 25 authorities and argued that the one day time estimate for the proceedings was inadequate.   However, ISG’s response suggested that FK was seeking to obfuscate the issues and deploy “every conceivable argument”[2] in a bid to persuade the Court not to decide the case on a Part 8 basis.

Court’s Decision

From the Judgment the Judge considered the following points[3]:

(a) FK provided repeated early warnings of delay to ISG;

(b) ISG engaged with those early warnings;

(c) ISG made no contemporaneous complaint that the warnings were inadequate or non-compliant;

(d) FK thereafter continued to issue EWNs in the same format;

(e) FK arguably relied on ISG’s stance in doing so; and

(f) FK subsequently expended costs on its extension of time claim.

Whether clause 9(5) was a condition precedent: The Judgment confirms that Part 8 proceedings are suitable for determining discrete issues, such as contractual construction (i.e. whether a clause operates as a condition precedent).  Whilst this issue had not been fully pleaded out, and notwithstanding his “misgivings”, the Judge indicated that he would have decided this point at the hearing had there not been other “impediments”[4].   The Judge acknowledged that the parties’ respective positions needed to be articulated.

Breach: Where the issues concern notification provisions, and compliance with the same, it is unlikely that the factual context will make the matter suitable for final determination using Part 8 proceedings.  In this case the Court would have to consider FK’s EWNs/communications and whether these complied with the contractual requirements.  The Court also had to assess what a reasonable recipient of these communications would have objectively understood, including by reference to the factual circumstances (such as discussions/meetings and revised programme).  The Judge was of the view that the parties’ respective positions on breach had to be pleaded out.

Waiver and Estoppel: The Judge recognised that ISG might have arguments around whether they made any representation by word or conduct, and/or, if so, whether this was unequivocal. In addition, there may have been an issue as to whether it would prove unconscionable for ISG to rely on its contractual rights. The Judge concluded that FK had an arguable case on waiver and/or estoppel which had a real prospect of success.  It was also clear that such arguments were likely to involve substantial disputes of fact.  The Judge had considered Stanley Burton LJ’s dictum in ING Bank[5] in reaching this view. In summary, therefore, it was unsatisfactory and unfair to the parties for the Court to be asked to determine multiple formulations of estoppel and waiver based upon a disputed factual background and without the parties’ respective cases having been pleaded out.

Conclusion: The Judge did not make any determinations or declarations, concluding that the proceedings were unsuitable for Part 8 proceedings.

It was noted that the Court has discretion to order a claim be transferred and continue under Part 7 under CPR 8.1(4) and so the parties were invited to consider how to proceed. Case management directions would follow this.

Comment

This case provides helpful guidance to parties who are considering which procedural processes may apply to their claims and disputes. To succeed in a Part 8 claim, the Claimant must therefore generally first establish that the matter is unlikely to involve a substantial dispute of fact, i.e. that the issues to be determined are relatively straightforward and the supporting evidence narrow and self-contained. The Judge recognised that it is not unusual for a Defendant to emphasise potential factual disputes in support of submissions that the proceedings should be dismissed. This case was described as “a rather extreme example of the genre” however.

The Judge pointed to an earlier decision he had made in CLS Civil Engineering Limited v WJG Evans and Sons. In that case he had been able to deal with matters of estoppel in Part 8 proceedings on the basis that the alleged estoppels were “clearly articulated, the factual background was largely non-contentious, and it could be seen that the estoppels stood no real prospect of success“[6].

As an obiter comment, the Judge noted on a point of law that Part 8 proceedings may be commenced for determination on one aspect of an adjudicator’s decision provided that this issue was otherwise suitable.  Such a point would therefore need to avoid any substantial dispute of fact, which is particularly likely to be the case where the balance of the adjudicator’s decision is uncontentious.  This observation may be of interest to parties considering future adjudication enforcement options or actions.

If you’re interested in finding out more about the issues covered in this article, please contact the authors. For more information on other key trends impacting the construction, engineering, and infrastructure sector, please visit our website and look out for our future webinar on adjudications and the impact of case law in July 2024!

[1] Paragraph 5, Judgment

[2] Paragraph 1, Judgment

[3] Paragraph 45, Judgment

[4] Paragraph 26, Judgment

[5] ING Bank NV v. Ros Roca SA [2011] EWCA Civ 353

[6] Paragraph 36, Judgment