Archive:April 6, 2023

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BREAKSHORE LTD V. RED KEY CONCEPTS

BREAKSHORE LTD V. RED KEY CONCEPTS

By: Camilla de Moraes, James Jago and Samuel Gordon

In Breakshore Ltd v Red Key Concepts [2022] 5 WLUK 677 (“Breakshore”), K&L Gates successfully acted for the Claimant in resisting a Part 8 claim challenging the decision of an adjudicator and thereby enforcing the decision by way of summary judgment. The decision of the TCC reaffirms that the use of Part 8 to resist enforcement of an Adjudicator’s decision will only be appropriate in a very limited set of circumstances and that it must not be used to obtain a tactical advantage.

Background Facts

The dispute in question arose out of an amended JCT D&B contract (“Contract”) entered into by the Claimant as the Employer, and the Defendant as the Contractor, for works in connection with a mix-used development in Kent.

Under the Contract, the Claimant was entitled to liquidated damages if the works were not completed by the completion date, originally 15 March 2021. As a result of Covid-19, the completion date was extended to 24 May 2021. The Defendant made further applications to the Claimant for extensions of time, but these were rejected. On 24 May 2021, the Claimant issued a non-completion notice to the Defendant.

In August 2021, the Defendant unilaterally suspended work and demobilised from site and completed no further work, despite instructions from the Claimant to proceed with the works.   The Defendant’s position was that it was obliged to suspend works due to the Claimant’s breaches of planning conditions, including in relation to the height of the building included in the Contract works.

In December 2021, the Claimant commenced an adjudication to recover the liquidated damages.  The issues for the Adjudicator to determine included:

i.    Whether the Defendant had unlawfully suspended works and demobilised;

ii.    Whether the Defendant was entitled to further extensions of time; and

iii.  Whether the Claimant was entitled to liquidated damages, and/or had failed to obtain revised planning permission for an increase in height.

The Adjudicator found in favour of the Claimant and awarded liquidated damages plus interest totalling £285,523.41. The Adjudicator decided that the Defendant “was not obliged to cease work on the building it had already built higher than approved planning permission, without an instruction by Breakshore to cease works whilst a resolution to the planning permission was sought [….]”.

The Defendant failed to comply with the Adjudicator’s decision and the Claimant initiated enforcement proceedings in the TCC (the case was subsequently transferred to the Central London County Court’s TCC list). In reply, the Defendant made a Part 8 application to the Court challenging the enforcement  of the adjudication decision and seeking 14 declarations.

Enforcement Proceedings

The Claimant’s summary judgment application and the Defendant’s Part 8 claim were heard together (despite the Claimant not agreeing to this).  The Court noted that where there is no consent to the determination on a Part 8 claim of substantive issues, it is only in very limited circumstances that it will be right to determine substantive issues at an adjudication enforcement hearing.

The case was heard by HHJ Johns QC (as he was then).  He referred to the principles that were set out in Hutton Construction Ltd v Wilson Properties (London) Ltd [2017] EWHC 517 (TCC) (“Hutton”), relatingto Part 8 challenges to adjudication enforcement.

In Hutton, Coulson J stated “many defendants consider that the adjudicator got it wrong. As I said in Caledonian Modular, in 99 cases out of 100, that will be irrelevant to any enforcement application. If the decision was with the adjudicator’s jurisdiction, and the adjudicator broadly acted in accordance with the rules of natural justice, such defendants must pay now and argue later.”

The Court confirmed that, in most cases, a Part 8 challenge is most appropriate for situations where the adjudicator either:

i.    Did not possess the appropriate jurisdiction; or

ii.    Breached the rules of natural justice.

The Court also confirmed the following legal principles for determination of Part 8 claims on substantive issues:

i.    The issue must be short and self-contained, and have arisen in the adjudication which the Defendant continues to contest;

ii.    That issue must require no oral evidence or any other elaboration beyond that which is capable of being provided during an interlocutory hearing to set aside enforcement; and

iii.   The issue must be one which, on a summary judgment application, would be unconscionable for the court to ignore.

In Breakshore, the Defendant did not make a Part 8 application on the above grounds. Instead, it it argued that the decision was obviously wrong and should be set aside.

HHJ Johns QC highlighted this fact, and determined that the Court were not able to make the declarations sought by the Defendant. The declarations sought by the Defendant were all interwoven and contained issues of fact and evaluation, and could not be dealt with at the enforcement proceedings. There was no clear-cut issue from which it could be seen that the adjudicator was obviously wrong to decide that liquidated damages were due for the relevant period. The exceptions in Hutton therefore did not apply, Part 8 was not appropriate at all and could not be used to defeat the summary judgment application.The Defendant had taken the wrong course of action in bringing the Part 8 claim for tactical advantage. If the claim had been brought under Part 7 as it should have been, it would have needed to wait for a defence, and then applied, giving 14 days’ notice of any points on which summary judgment was sought. Instead, it brought a Part 8 claim and announced the day before the hearing the points it wanted disposed of summarily.  HHJ Johns QC highlighted that this was a particularly bad example of a Defendant using a Part 8 claim for tactical advantage.   Accordingly the Court rejected the Defendant’s Part 8 claim and awarded the Claimant its costs on an indemnity basis.

This case is a useful reminder that adjudication decisions are robustly enforced.  It also raises an important point of conduct.  When using Part 8 to resist enforcement, parties must make sure their claim falls within Hutton’s narrow exceptions and must not be used with the aim of obtaining a tactical advantage.

How We Can Help

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