How often have you been tempted to try a quick route when there seems to be just one or a limited number of issues which could determine a dispute? What if a decision in your client's favour on one issue could 'solve' the dispute and produce a swift result? Where there does not seem to be a substantial dispute of fact, an application for a declaration under CPR Part 8 is a logical option worth considering. However, approach this path with caution as the Part 8 procedural track is fairly narrow!
The recent case of Berkeley Homes (South East London) Limited v John Sisk and Son Limited [2023] EWHC 2152 (TCC) illustrates the potential pitfalls of Part 8 proceedings. The project involved the construction of 3 bridges over the Jubilee Line and Dockland Light Railway and a new station entrance at Twelve Trees Park, London. There was a dispute over who was responsible for errors and omissions in the tender design. The Employer (Berkeley) applied under Part 8 for declarations that the Contractor (Sisk) was responsible for the design under the Building Contract, on the basis that the issue was one of pure contractual interpretation.
Berkeley's case was that the terms of the Building Contract meant that Sisk took responsibility for the tender design. This had been developed while it was party to a Pre-Contract Services Agreement. It was argued that this was also borne out by novation agreements with the consultants under which they accepted liability to Sisk for any negligent act, default or breach of their Appointments both before and after the date of novation.
Sisk objected to the use of the Part 8 procedure, primarily on the basis that there were significant disputes of fact for the Court to grapple with. As a precaution, it also set out its case on construction of the contract and served a substantial witness statement in evidence. The Court ruled that it was not appropriate for it to determine contractual construction issues 'in a vacuum' (ie – without a full examination of witness and contextual documentary evidence) and declined to permit the matter to proceed as a Part 8 claim. We discuss the Court's rationale below.
The Court's view was that facts that were relevant to the issues of construction should have been agreed in the preliminary stages of the Part 8 claim, as recommended in the White Book (Introduction to CPR 8 Section 8.0.1). In this case, the factual disputes emerged for the first time after Sisk responded to the claim.
Berkeley's case was that Sisk had adopted the tender design when it signed the Building Contract and that it had had every opportunity to consider it before it did so. Sisk's evidence was that the tender design was developed by Berkeley's consultants and that it had been "kept at arm's length" during this process. Sisk disputed that it had "every opportunity" to consider the tender design before it signed the Building Contract.
Sisk also submitted that earlier versions of the Employer's Requirements constituted representations on which it had relied. This raised another factual issue on which evidence was required.
The Court found that this raised a substantial disputes of fact as to the circumstances known to the parties at the time the contract was executed, which gave rise to arguments that were detailed and sophisticated. Accordingly, it held that the parties' claims needed to be pleaded out. The Court said it could not decide the issues of construction without evidence about how the tender design was developed and the Employer's Requirements were drawn up. Both went to the circumstances known to the parties when the Building Contract was signed - the factual matrix - and were therefore relevant to the question of construction. Sisk wanted to call further evidence and the Court was unwilling to shut this out.
The Court was mindful of the warning given by Jefford J in Merit Holdings Limited v Michael J Lonsdale Limited [2017] EWHC 2450 (TCC) that "there is a real risk of the Part 8 procedure being used too liberally and inappropriately with the risks of prejudice to one or other of the parties … and of the court being asked to reach ill formulated and ill-informed decisions." The Court decided that it should for these reasons proceed cautiously, particularly when the underlying claim had not been fully quantified.
Hence, the Court decided that the claim was not suitable for determination under Part 8 and invited the parties to agree directions so the claim could continue under Part 7. The Part 8 claim in this instance turned out to be just the "treacherous short cut" described by Lord Scarman in Tilling v Whiteman [1980].
What lessons can we learn from this case?
For a Part 8 Claim to be appropriate, the declaration sought must be capable of being determined "within the four corners of the contract". In other words, there should be no dispute as to factual context in terms of witness or documentary evidence. Those underlying factual issues should be identified and agreed in advance.
The decision is somewhat reminiscent of how the Court treats applications for trial of a preliminary issue. In some cases, that may be appropriate and helpful, but where the issue would involve detailed interrogation of factual evidence then it is not usually deemed appropriate for preliminary determination. A 'miniature' trial before the actual trial is something that the Court generally seeks to avoid.
A final point worth mentioning, not discussed in this judgment, but raised in an earlier County Court case - Breakshore Limited v Red Key Concepts Limited (6 May 2022): deliberate misuse of the Part 8 procedure - in that case to resist the enforcement of an Adjudicator's decision – may be sanctioned by the award of costs – in that case, on an indemnity basis.
