In the recent case of ISG Retail Limited v FK Construction Limited [2024] EWHC 878 the Court determined ISG's Part 8 claim seeking declarations as to whether (i) a contractual term was a condition precedent; and (ii) FK was in breach of that term.
The project
The claim arises from the construction of six new industrial units and associated works at Phase 2 More+, Central Park, Avonmouth, Bristol ("the Sub-Contract"). The Claimant, ISG Retail Limited ("ISG"), was the main contractor. The Defendant, FK Construction Limited ("FK"), was the roofing and cladding sub-contractor. The Sub-Contract sum was £3,400,000.
Previous disputes
The names of the parties may feel familiar – there have been many reported decisions concerning the two in recent years. The disputes between them have produced 12 adjudications, eight sets of High Court proceedings and two appeals to the Court of Appeal.
The current dispute
The dispute related to FK's Application for Payment 21 ("AFP21") for the period ending 28th February 2023. The matter was referred to Mr Matthew Molloy for adjudication. By his decision dated 14 April 2023, he valued the work at £3,736,679.72.
One of the issues he decided was that FK was entitled to an extension of time ("EoT") of 188 days. This arose from delays to units 6 and 7. Mr Molloy also awarded prolongation costs of £198,000.
This Part 8 claim concerned the decisions on the EoT and prolongation costs.
Essentially, ISG said that, before FK could be awarded an EoT, they had to comply with clause 9(5) of the sub-contract which required certain particulars as to the delay to be delivered to ISG. ISG said that compliance was a condition precedent and that FK was in breach. FK denied that clause 9(5) was a condition precedent, alternatively argued that it complied with the term and, in the further alternative, said that ISG was estopped from relying on the term and/or waived its entitlement to rely on it.
Clause 9(5)
5) If the Sub-Contractor shall be delayed in the practical completion of the Works and/or any section thereof:
(a) by any circumstance or occurrence (other than a breach of this Sub-Contract by the Sub-Contractor) entitling ISG to an extension of time under the Principal Contract; or
(b) by the ordering of any variation to the Works as defined in clause 18(2); or
(c) by any breach or act of prevention on the part of ISG; or
(d) by a valid suspension by the Sub-Contractor of performance of its obligations pursuant to clause 2(15)(b),
then in any such event the Sub-Contractor shall be entitled to a fair and reasonable extension to the Completion Date(s) for the Works and/or the section(s) of the Works affected by such delay provided that the Sub-Contractor has given written notice to ISG of the circumstance or occurrence which is delaying him and details of the effects or likely effects of such delay with a best estimate of the continuing extent of such delay and its impact on practical completion of the Works and/or the relevant section within fourteen days of such circumstance or occurrence first occurring (or in the case of a variation, within the period specified in clause 18).
Issues to be decided:
1. Was clause 9(5) a condition precedent?
The judge said the question as to whether clause 9(5) was a condition precedent is one of pure construction and so in principle it should be capable of determination on a Part 8 basis.
However, he could not determine the issue. The problem was that the question as to whether all four limbs of clause 9(5) were conditions precedent, and the relationship with clauses 9(2) (another limb for EoT) and 20 (loss and expense) were barely addressed at the hearing and not properly pleaded.
The judge said that if the issues of construction were the only ones before the Court he may have allowed the parties to make further submissions / amendments / applications on the day, but as they were not, he declined to determine the construction points.
2. Breach
The Judge referred to Sleaford Building Services v. Isoplus Piping Systems Ltd [2023] EWHC 969, a Part 8 case, and it was noted at [58] of that judgment "a submission that allegations of breach of conditions precedent would not give rise to substantial disputes of fact is one to be approached with caution."
The witness statements given in these proceedings showed (as was to be expected) there was regular and routine engagement on site between the parties as to the progress of the works. The Judge therefore considered that the question of breach was not suitable for Part 8 determination because it is likely to give rise to substantial disputes of fact as to whether and, if so, how notification was given other than by way of EWNs. He also considered that the parties' cases on breach needed to be pleaded out.
3. Waiver/ Estoppel
The Judge began this part of the judgment by referring to ING Bank NV v. Ros Roca SA [2011] EWCA Civ 353 Stanley Burton noted [77]:
"In general Part 8 proceedings are wholly unsuitable for the trial of an issue of estoppel. Once such a claim is disputed, save in exceptional cases, the proceedings will cease to comply with CPR r 8.1(2)(a), since they will cease to be proceedings in which the parties do not seek the court's decision only on questions which are 'unlikely to involve a substantial dispute of fact'. A disputed claim of estoppel should be carefully pleaded."
The Judge conceded that in CLS Civil Engineering Limited v. WJG Evans and Sons [2024] EWHC 1194, he was able to decide Part 8 proceedings which involved allegations of estoppel. That was in circumstances where the alleged estoppels were clearly articulated, the factual background was largely non-contentious, and it could be seen that that the estoppels stood no real prospect of success. By contrast, in Sleaford the Deputy Judge held at [63] that arguments of waiver based on site practice were unsuitable for Part 8 determination.
The judge said that he did not find FK's articulation of its case on waiver and estoppel to be altogether satisfactory. That being said, he concluded FK had an arguable case of waiver and/or estoppel which has a real prospect of success.
Key takeaway
It may be appealing to try and use Part 8 proceedings as a way to get a 'quick' determination as to whether one party has failed to comply with a condition precedent. However, this judgment demonstrates that parties should be wary of making such applications and it will only be in limited circumstances that they can succeed.
The Judge's final comments are a poignant reminder:
It is clear to me that the arguments on waiver and estoppel are likely to involve substantial disputes of fact and that they need to be properly pleaded out. Stanley Burton LJ's dictum in ING Bank is applicable here. It is not satisfactory and it is not fair to either side for the Court to be asked to decide multiple formulations of estoppel and waiver on the basis of a disputed factual background and without the parties' cases being pleaded out.
