ISG Retail Ltd v FK Construction Ltd [2024] EWHC 878 (TCC) (18 April 2024)

This is a case involving a dispute between the Claimant, ISG Retail Limited ("ISG"), and the Defendant, FK Construction Limited ("FK"), regarding a construction project. The Claimant argues that two specific points need to be determined: whether a contractual term is a condition precedent and whether it was breached. The Defendant, on the other hand, claims that the issues involve a significant amount of factual material and should not be resolved through Part 8 proceedings.

The case involves the construction of six industrial units and related works. ISG was the main contractor, while FK was the roofing and cladding sub-contractor. The project, referred to as "Project Barberry," began in late 2021. The parties have a history of litigation, with multiple adjudications, High Court proceedings, and appeals.

The current dispute stems from FK's Application for Payment 21 ("AFP21") for the period ending February 28, 2023, which was subjected to adjudication. The adjudicator, Mr. Matthew Molloy, determined that FK was entitled to an extension of time and awarded prolongation costs. The Part 8 claim focuses on Mr. Molloy's decisions regarding the extension of time and prolongation costs. ISG argues that FK failed to comply with a specific clause in the sub-contract, which it considers a condition precedent, while FK denies this and raises alternative arguments such as estoppel and waiver.

Part 8 proceedings are mentioned, and the judge refers to the proper approach to such proceedings as outlined in a previous case. The judge emphasizes that Part 8 is intended for claims that do not involve substantial factual disputes and allows for a more streamlined process.

The judge then provides an overview of relevant clauses in the sub-contract, particularly clauses 9 and 20, which are central to the present dispute. Clause 9 pertains to progress and practical completion, including provisions related to extensions of time and delays. The judge highlights specific provisions relevant to the issues at hand.

The reimbursement of loss and/or expenses incurred by a sub-contractor in the execution of a sub-contract:

1. The sub-contractor can claim reimbursement for direct loss and/or expenses if the progress of the works is materially affected by: (a) Variations to the works ordered by the contractor. (b) Breach or acts of prevention by the contractor. (c) Other circumstances or occurrences entitling the contractor to loss and/or expense under the main contract.
2. The sub-contractor must submit a written application to the contractor within 14 days of becoming aware or reasonably should have become aware that the progress of the works is or will be affected.
3. If the sub-contractor makes a valid application, the amount of direct loss and/or expense incurred will be determined by the contractor, unless the sub-contract explicitly excludes the operation of this clause.
4. The sub-contractor must: (a) Make the application as soon as it becomes aware or reasonably should have become aware of the impact on the works. (b) Provide requested information and details to the contractor. (c) Provide any required notices, documents, and information to enable the contractor to claim loss and/or expense under the main contract.
5. The sub-contractor will not be reimbursed for loss and/or expense covered by other provisions of the sub-contract. Failure to comply with the provisions of the clause or negligence or breach of the sub-contract by the sub-contractor may result in a denial of reimbursement.
6. Both parties made submissions regarding the interpretation and compliance of clause 9(5) of their contract. Mr. Brannigan, representing ISG, argued that clause 9(5) was a condition precedent and that FK failed to comply with it. He claimed that only one out of the 106 Early Warning Notices (EWNs) served by FK complied with the clause. Mr. Hargreaves, representing FK, argued that ISG's Part 8 proceedings were flawed because they did not address the entire dispute and could be considered an abuse of process. He contended that the 14-day time limit in clause 9(5) was not mandatory and that FK had complied with the clause through other means such as correspondence and on-site discussions. He also raised arguments of estoppel and waiver by ISG. The court declined to decide on the construction points of clause 9(5) and emphasized the need for clarity in the parties' contentions. Regarding the breach, ISG claimed that the EWNs did not comply with the clause, while FK argued that compliance was achieved through various forms of notification and that the context and knowledge of ISG should be taken into account. The court determined that the breach issue was not suitable for Part 8 determination due to the likelihood of substantial disputes of fact and the need for pleaded-out cases from both parties.
7. Waiver and estoppel: The court discusses the suitability of Part 8 proceedings for resolving estoppel issues and emphasizes the importance of carefully pleading a disputed claim of estoppel.
8. In a different case, CLS Civil Engineering Limited v. WJG Evans and Sons, Part 8 proceedings were used to decide on estoppel allegations. The court found that Part 8 proceedings were appropriate in that case because the alleged estoppels were clearly stated, the factual background was mostly uncontested, and the estoppels had no real chance of success. However, in another case called Sleaford, the court determined that arguments of waiver based on site practice were not suitable for Part 8 determination.
9. The court in the present case found the articulation of the arguments on waiver and estoppel by one of the parties to be unsatisfactory. The court pressed for clear legal propositions and their application to the facts of the case, but found the principles and their application to be unclear.
10. The court referred to a summary of the requirements for an estoppel by convention, which includes the need for an expressly shared common assumption between the parties, the assumption being conveyed in a way that the party alleged to be estopped is understood to expect the other party to rely on it, actual reliance by the party alleging estoppel, reliance occurring in connection with subsequent mutual dealings, and some detriment or benefit resulting from the reliance that makes it unjust for the party alleged to be estopped to assert the true legal or factual position.
11. The court also adopted propositions from another case, Westbrook Resources Ltd v Globe Metallurgical Inc, which established that if a party represents that it is willing to accept performance of an obligation out of time and the other party relies on that representation, the party making the representation cannot insist on performance by the original stipulated date.
12. The party making the estoppel arguments in this case claimed that ISG had waived the obligation to provide notification of delay or was estopped from insisting on certain notices under the contract due to its conduct and engagement with the other party. The party also argued that ISG's failure to raise the notice issue when responding to a formal extension of time claim constituted a waiver or estoppel. Additionally, the party claimed that ISG's statement in a Payless Notice indicated a waiver of the obligation to provide certain notices within 14 days.
13. During the proceedings, documents were presented by both parties to support their arguments. The court acknowledged that there may be arguments regarding the existence and nature of any representation made by ISG, as well as the issue of reliance and whether it would be unconscionable for ISG to rely on its contractual rights. However, the court concluded that the party making the estoppel arguments had an arguable case with a real prospect of success. It determined that the arguments on waiver and estoppel raised substantial disputes of fact and needed to be properly pleaded out, as it would not be fair to decide these issues based on a disputed factual background without clear presentation of the parties' cases.
14. Seeking the final determination of one aspect of an adjudication through Part 8 proceedings would be permissible under certain circumstances. The key factor is whether the issue in question is suitable for Part 8 determination, meaning it is unlikely to involve a substantial dispute of fact.
15. If the issue can be isolated and does not require extensive examination of factual disputes, it may be appropriate to pursue final determination through Part 8 proceedings. This approach can be particularly useful when the remaining parts of the adjudicator's decision are not contentious, as it avoids unnecessary litigation on matters that are not in dispute.
16. It is worth noting that the opinion expressed aligns with the conclusion reached by Edwards-Stuart J in the case of Geoffrey Osbourne Ltd v Atkins Rail Ltd [2009] EWHC 2425 at [18]. However, please keep in mind that legal matters can be complex and heavily dependent on specific facts and circumstances. Therefore, it is always advisable to consult with a qualified legal professional for precise advice tailored to your situation
17. Conclusion: In summary, the proceedings being discussed are deemed unsuitable for determination under Part 8. The conclusion reached is that there are significant factual disputes regarding whether FK breached clause 9(5) and whether ISG has waived its right to rely on any breach or is estopped from doing so. No declaration is made regarding clause 9(5) being a condition precedent. It is considered unnecessary to decide the construction points without addressing the breach and waiver/estoppel issues simultaneously. It is suggested that the construction issues should be properly pleaded out.