The case of Breakshore Ltd v Red Key Concepts Ltd, as heard in the TCC earlier this year, reconfirms the court’s position in respect of when it is appropriate to use Part 8 claims to resist adjudication enforcement hearings.
Breakshore Ltd v Red Key Concepts Ltd
Like many others in the TCC, this case concerns a claim to enforce an adjudicator’s decision.
The dispute arose out of a JCT contract dated 17 February 2020 for a mixed-use development at Ballast Wharf, Erith, Kent. In August 2021, during construction, the contractor (Red Key) suspended its works and demobilised from site on the basis that the employer (Breakshore) had failed to obtain the appropriate revised planning permissions for the increased height of the building. Breakshore instructed Red Key to remobilise during this time, but this did not occur.
In the adjudication that followed, the adjudicator found that Red Key was not obliged to cease work on a building it had already built higher than that approved by the planning permission without an instruction from Breakshore to do so while a resolution was found. On this basis, the adjudicators decision (dated 22 January 2022) found that Red Key was liable to pay Breakshore £285,523.41 plus the adjudicator’s costs. These sums represented liquidated damages plus interest as stipulated under the contract, payable for delay beyond the contractual completion date of 24 May 2021 until 19 October 2021.
Enforcement proceedings and Part 8 claim
As often happens, Red Key did not agree with the adjudicator’s decision and failed to comply with its terms. Accordingly, Breakshore applied to the TCC for summary judgment enforcing the adjudicator’s decision. Red Key sought to resist enforcement by arguing that the adjudicator’s decision was obviously wrong. It simultaneously sought determination on the substance of the parties’ dispute as part of its Part 8 claim, namely that, due to Breakshore’s failure to discharge planning conditions, Red Key were impeded from achieving practical completion, and that the adjudicator’s decision was unenforceable and should not be enforced by the court.
Red Key originally sought 14 declarations as part of the Part 8 claim. However, ten of these were dropped, with Red Key conceding that these should be dealt with by way of a Part 7 claim. The remaining 4 declarations sought by Red Key as part of the Part 8 claim were:
“Declaration 4: Breakshore was obliged to obtain an amendment to the planning permission in respect of the development so as to permit the increase in height to the development instructed by Breakshore to Red Key on 28 January 2020.
Declaration 11(1): Pursuant to Red Key’s obligation under clause 2.1.1 to complete the works in accordance with the statutory requirements, Red Key cannot achieve practical completion in respect of the works unless and until the planning conditions have either been satisfied or discharged.
Declaration 12: On account of Breakshore not discharging or satisfying the above planning conditions (1) Breakshore has impeded or prevented Red Key from achieving practical completion; (2) These acts or omissions of impediment, prevention or default constitute relevant events for the purposes of clause 2.26; and (3) The date for completion of the works cannot be fixed under clause 2.25 unless and until Breakshore ceases the acts or omissions or prevention.
Declaration 14: The adjudicator’s decision of 27 January 2022 is unenforceable and should not be enforced by the court.”
The court decided that the declarations sought by Red Key were not an appropriate use of the Part 8 procedure. In doing so, it:
- Cited Hutton Construction Ltd v Wilson Properties (London) Ltd, outlining that only in very limited circumstances can substantive issues be determined at an adjudication enforcement hearing.
- Relied on CPR 8.1(2)(a), which states that “a Claimant may use the part 8 procedure where (a) he seeks the court’s decision on a question which is unlikely to involve a substantial dispute of fact”.
The issues to be considered by the court, namely whether it was reasonable for Red Key to suspend and whether that issue was cause of the delay itself, were clearly questions of fact. Therefore, they could not be disposed of by way of a Part 8 claim.
Interestingly, the court did comment on the issue of the delay itself, stating that showing the presence of a relevant event was not enough to justify an extension of time. The court, citing Adyard Abu Dhabi v SD Marine Service, stated that for an extension of time, the causation of the delay itself must also be shown. However, in this instance, as causation was a dispute of fact, the court did not comment further.
Overall, as there was no clear-cut issue for which the adjudicator was obviously wrong, Breakshore’s application for summary judgment was successful.
As practitioners will know, many respondent parties consider issuing a Part 8 claim strategically to resist enforcement of an adjudicator’s decision. This case highlights when a Part 8 claim is and is not suitable to resist enforcement. It reminds us all that the courts will take a strict approach to the narrow criteria for when this would be appropriate.
A Part 8 claim can only be used in limited circumstances in respect of an adjudication enforcement hearing, namely in circumstances where there is a self-contained issue that arose in the adjudication, where an issue requires no oral evidence, or where, on a summary judgment application, the issue would be unconscionable for the court to ignore.
None of these clearly applied in this case and the Part 8 claim was rejected, upholding what Coulson J (as he was then) said in Hutton Construction Ltd v Wilson Properties:
“If the decision was within 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.”
This latest case clearly demonstrates the courts’ unwillingness to deviate from these principles and stance.
Although section 9.2.1 of the TCC Guide allows Part 8 applications to be used in various ways in respect of adjudication enforcement hearings, this case is a reminder that this route is not as broad as some practitioners have been looking to suggest, and the courts’ views on this remain steadfast.
This case clearly shows the strict approach taken by the courts, and also shows the dismay that the courts now have for parties trying to tactically misuse the Part 8 process in an attempt to resist enforcement. The court made this clear and ordered costs against Red Key amounting to £77,000 on an indemnity basis due to the inappropriate use of Part 8, a significant cost for an adjudication enforcement hearing.
It is clear that practitioners cannot look to overturn an adjudicator’s decision that they do not agree with by using the Part 8 procedure. This case clearly shows that any actions like this will not be well received by the courts and may in turn have significant cost consequences for the client. As the judge commented, the correct strategy for Red Key to have followed would have been to bring all the declarations as a Part 7 claim. Although Red Key did decide to do that with a number of their declarations, the decision to keep going with the remaining four declarations as a Part 8 application was an ultimately unsuccessful and costly one.