The facts
Breakshore Ltd (Breakshore) employed Red Key Concepts Ltd (Red Key) to construct a six-storey tower block in Kent under a JCT contract. The contractual completion was expected to take place May 2021, however, Red Key suspended works in August 2021 on the grounds that the tower block had been built 1.5m taller than the height approved in the planning permission. This pushed back the completion date to October 2021, prompting Breakshore to claim liquidated damages at adjudication.
The adjudicator decided that Red Key should not have paused works without Breakshore’s instructions, regardless of the pending revision to the planning permission. Breakshore was awarded £285,523 in liquidated damages for the delayed completion. However, Red Key refused to pay, leading Breakshore to seek enforcement of the adjudicator’s decision at the Central London County Court. In turn, Red Key raised a Part 8 claim resisting enforcement of the adjudicator’s decision.
Part 8 claims
Under Civil Procedure Rules in England and Wales, Part 8 claims are an alternative way of raising court actions to the standard Part 7 route. Part 8 claims can be utilised where there is no substantial dispute over matters of fact. It is designed to be shorter, simpler and less adversarial.
Pleadings and decision
Red Key asked the court to declare that, without the revised planning permission, it was unable to continue works and was entitled to suspend works under the contract, and further, that the adjudicator’s decision to award liquidated damages was unenforceable.
In its judgment, the court followed the case of Hutton Construction Ltd v Wilson Properties, which decided that an adjudicator’s decisions can only be challenged in very limited circumstances. Hutton held that the party resisting enforcement proceedings must show that:
- it contests a short and self-contained issue that arose in the adjudication;
- the issue requires no oral evidence or elaboration, except that which is provided at the enforcement hearing; and;
- the issue is one which would be unconscionable for the court to ignore.
In the Breakshore case, the two key matters were 1) whether it was reasonable for Red Key to suspend works given the height issue; and 2) whether this issue was, in fact, the cause of delay. The court found that both matters involved questions of fact, making them unsuitable for a Part 8 claim. The judge highlighted that the height of the building might not have been the true reason for the suspension of the works, given that the local authority did not measure the tower block until two months after Red Key had demobilised. The judge found that there was ‘no clear-cut issue from which it could be understood that the adjudicator was obviously wrong to decide that liquidated damages were due.’ Breakshore was awarded summary judgment.
The judge criticised Red Key for improperly choosing Part 8 procedure to gain tactical advantage, namely, being able to make changes to their claim the day before the hearing, without the risk of facing defences. The court ordered Red Key to pay £77,000 in costs on an indemnity basis.
Key takeaways
- The courts are alive to the strategic use of Part 8 claims to resist enforcement and will react to improper use of procedure by ordering significant costs against the party at fault. Cost implications can be high compared with the short-term gain of resisting payment.
- The courts will only interfere with the decision of an adjudicator in limited circumstances. The correct approach to challenge an enforcement would be to utilise Part 7 procedure, which allows for a detailed consideration of the facts.