“Preliminary Issues” can be such a useful way of resolving disputes that the TCC Guide specifically deals with them in section 8. Further, there are plenty of TCC cases in which preliminary issues have been ordered. Therefore, there is a good deal of guidance as to the correct test to apply in deciding whether it is sensible to order preliminary issues to be heard.
However, in the midst of all this guidance, it can be helpful to recall some of the issues that can vex the court.
Larkfleet Ltd v Allison Homes Eastern Ltd
Larkfleet Ltd v Allison Homes Eastern Ltd concerned damage in foundations to a housing development. The claimant alleged that the defendant was liable for the damage. The defendant denied liability and contended that the claims were statute barred. The case reached the court by way of the defendant’s application to strike out the claimant’s claim on limitation grounds. The court decided to order the limitation issues to be dealt with by way of a preliminary issues hearing (the PI hearing).
The first lesson to take, therefore, is that the court may use its case management powers to order a PI hearing when one was not previously on the parties’ agenda. In such circumstances, the court would order a timetable for submissions for the hearing.
The second lesson from the judgment is that it seems the judge who actually presided over the PI hearing (Fraser J) did not have a full picture of what had been intended by the directions given, nor why they had been given in the form used (HHJ Raeside QC had made that order). This was the first ground for concern expressed by the court.
The second concern arose from the steps taken (or not taken) by the parties in the run-up to the hearing. The claim was pleaded in contract and in tort, and there were many issues of fact in dispute. For limitation purposes, these included the date the damage to the foundations occurred and the date upon which the claimant had the relevant knowledge for the purposes of section 14A(5) of the Limitation Act 1980. Despite this, the parties had failed to finalise (and perhaps had failed to try to finalise) a schedule of agreed or assumed facts. Further, witness statements had been filed, including in relation to what, on one view, were issues of expert evidence, and the court had not provided directions to cover such matters. As a result, at the PI hearing, the court took the view that it could not decide those issues that turned on fact.
All the above notwithstanding, the court actually did go on to decide the PI hearing in relation to the contractual claim and the claimant was successful. Therefore, the decision does not mean that PI hearings should not be sought in those circumstances but it is a cautionary warning as to how they should be approached:
“The undesirability of hearing and deciding preliminary issues where the wording of the issues themselves is not only not agreed or ordered by the court, but the approach to the issues is different, is obvious.”
McLoughlin v Jones
The court in Larkfleet referred to the Court of Appeal’s judgment in McLoughlin v Jones (which is also known as McLoughlin v Grovers). In particular to David Steel J’s judgment to the effect that the correct approach for a trial of preliminary issues is that the issues should usually concern questions of law and should be decided on the basis of a schedule of agreed or assumed facts.
London Borough of Southwark v Gallagher
In another TCC case, London Borough of Southwark v Gallagher and another (unreported, 19 February 2016), Fraser J ordered a PI hearing to decide preliminary issues concerning the scope of an insurance policy and whether it extended to afford cover in respect of damage caused by a fire in the claimant’s offices in south London. This time there was a specific direction for an agreed statement of facts or, failing such agreement, for the parties to apply to restore the case management conference (CMC).
There again, Fraser J specifically drew attention to the decision in Court of Appeal’s judgment in McLoughlin v Jones.
Walter Lilly & Co Ltd v Clin
A third case, Walter Lilly & Co Ltd v Clin, concerned liability for delay on a construction project caused by the (possibly erroneous) statement in a letter from the relevant local authority that the proposed demolition amounted to “substantial demolition” under section 74 of the Planning (Listed Buildings and Conservation Areas) Act 1990, such that conservation area consent was required before it could be lawfully executed.
A PI hearing was ordered to address the question of contractual liability between the contractor and employer for the delay. Edwards-Stuart J expressed concern about the extent of oral evidence called for the hearing and its relevance to the issues, as well as concern at what appeared to be one party’s attempt to go beyond the scope of the issues ordered. Finally, the court also was concerned that one important issue, whether the local authority’s letter was or was not a requirement with which the contractor had to comply (even if based on a false premise), had not been clearly identified in the list of preliminary issues drafted for the court.
Lessons from the courts
The effect of the cases referred to above is not that a PI hearing is less appropriate in the TCC than in other courts. On the contrary, the TCC appears to have taken the view that a PI hearing was appropriate in each case and that at least some of the issues could be decided on the available material. In one of the cases, the court itself initiated the PI hearing.
What does concern the TCC is the possibility that the facts of the case get in the way. After all, a PI hearing is supposed to enable the court to determine what can be determined without getting into detailed disputes of fact. A PI hearing will only help if the facts can be agreed and that agreement set out in writing before the PI hearing takes place. Moreover, a point made in London Borough of Southwark v Gallagher is that the court must feel confident that the decision on the legal issues is not going to be the starting point for one or more of the parties to assert other facts in order to try to circumvent the result of the PI hearing. If that is likely to be the case, such a hearing would merely add to the costs. Parties therefore need to try to agree the relevant assumed facts so that the court can see how the PI hearing could resolve matters in a cost effective way.
It seems that, above all, parties need to ask whether the issues and the way they are likely to be able to manage them are going to meet the concerns expressed by David Steel J in McLoughlin v Jones. The relevant passages are summarised (with emphasis) by Fraser J in his judgment in Larkfleet. We would not be surprised to see that summary appear in the next edition of the TCC Guide.
