Sleaford Building Services Ltd v Isoplus Piping Systems Ltd

[2023] EWHC 969 (TCC)

There were two claims before Mr Alexander Nissen KC. Isoplus sought enforcement of an adjudication decision for some £325k. It was common ground that the decision was valid. Whether judgment should be entered depended on the Part 8 proceedings brought by Sleaford who said that clause 21.4 of the subcontract contained a pre-requisite to payment with which Isoplus had not complied, such that Isoplus was not entitled to any further payment:

“21.4 The Subcontractor in subcontracting any portion of the subcontract works to a Sub-subcontractor:

• procures that the terms of each sub-subcontract are compatible with the terms of this subcontract; and
• as a precondition to payment of any sum related to their work provides to the Contractor within 7 days from the earlier of commencement of their work or the execution of the relevant sub-subcontract a certified copy of the sub-subcontract and compatible with the terms of this subcontract (save for particulars of the sub-subcontract sum or fee), together with evidence of the professional indemnity insurance (or where applicable product liability insurance) held by such sub-subcontractor complying with the terms of the sub-subcontract and the requirements of this subcontract.”

Isoplus said that these matters were unsuitable for resolution through Part 8 proceedings. Sleaford had commenced the adjudication alleging that Isoplus had installed incorrect fittings causing a catastrophic failure. The redress sought included asking that the Adjudicator, if awarding payment to Isoplus:

“advises if all pre-requisites for payment have been complied with in respect to insurances and provision of sub-subcontract conditions etc to enable payment to be made without being in breach of the Subcontract.”

In the Adjudication, Sleaford said that the sub-subcontracts provided were not compatible with the subcontract, no evidence of insurance had been provided and that, accordingly, no award of payment could be made. Isoplus said that no particulars had been given on either issue. Despite Sleaford having initiated the referral, the Adjudicator concluded that £325k was now due to Isoplus. The Adjudicator agreed that:

“I am satisfied on a balance of probabilities that compliance with clause 21.4 is required as a precondition to payment of any sums related to a sub-subcontractor. Based on the information provided I am not able to confirm whether IPS have complied with this obligation.”

In written evidence, Isoplus said that it was inconceivable that Sleaford could have been unaware of the involvement of the sub-subcontractors in carrying out a portion of the works between November 2020 and September 2021. Applications for payment were issued during that period. There was no assertion of non-compliance with clause 21.4 and payments were made in full. Sleaford said that it was clear that clause 21.4 was a pre-condition and, on the evidence before the Court, Isoplus was  incontrovertibly in breach. None of the sub-subcontracts were provided within 7 days; the purchase order from at least one sub-subcontract was not certified; and no insurance had been provided for any of the three sub-subcontractors. 

The Judge noted that it was “unfortunate” that Isoplus chose to issue its Part 7 proceedings in Manchester given that the Part 8 claim had already been issued in London. No satisfactory explanation for this was offered by Isoplus. As a result, public resource was needlessly spent resolving the question of where the proceedings would be heard. The Judge was clear that the proper approach to these two sets of proceedings was that identified by Coulson LJ in A&V Building Solutions Ltd v J&B Hopkins Ltd [2023] EWCA Civ 54:

“The proper approach to parallel proceedings was outlined by O’Farrell J in Structure Consulting Limited v Maroush Food Production Limited [2017] EWHC 962 (TCC). The judge should usually give judgment on the claim based on the adjudicator’s decision and then – to the extent possible – endeavour to sort out the Part 8 proceedings.”

It followed that the Judge should first determine whether there was there any defence to the Part 7 claim? It was accepted by Sleaford that the adjudicator’s decision was enforceable. 

Second the Judge had to consider whether the matters raised were suitable for determination by means of Part 8? Here, the Judge was not so satisfied, referring again to the A&V case and this time Coulson LJ’s comment that: 

“Warnings have continued to be given as to the over-liberal and inappropriate use of Part 8 in adjudication cases:”

In considering whether sub-clause 21.4 was operable, the Judge had to consider whether the requirements of a condition precedent are satisfied. Here, the Judge referred to another decision of Coulson J, Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd [2008] EWHC 2379 (TCC):

“It is trite law that, if one party’s obligation to do something under a contract is contingent upon the happening of a particular event, the circumstances of the event must be identified unambiguously in the contract. It must be clear beyond doubt how and in what circumstances the relevant obligation has been triggered …”

Sub-clause 21.4 contained multiple sub-elements within it. Here, it was possible that only some, but not all, of those elements contained conditions precedent. The Part 8 proceedings did not identify, still less draw any distinction between, the differing elements or allow for individual declarations to be given in respect of them. The multi-faceted elements within clause 21.4 were such that a properly particularised claim should be pleaded out so that each issue of construction can be separately resolved.

Second, it was necessary to consider whether, or not, Isoplus had, in fact, complied with such conditions precedent as may exist. The failure by Sleaford to have adequately particularised its breaches meant that there was no proper agenda for determination of the matter at this stage. It was also necessary to consider waiver. It was common ground that Sleaford had made at least three payments to Isoplus in respect of milestone achievements. Isoplus said that the making of these payments in full and with knowledge of any non-compliance with clause 21.4 amounted to a unilateral waiver of any preconditions. The Judge was satisfied that Isoplus had an arguable case that the payment in this case amounted to a waiver. But a good deal more evidence was required in order to finally determine the matter. Further, valuation evidence would be required because, at present, there was no basis upon which the Court could determine what part of any milestone payment related to the work of a given sub-subcontractor in respect of which a breach of clause 21.4 has been proven. 

The Judge concluded that it would be better for separate proceedings to be issued so that Sleaford could start afresh. The Part 8 claim was dismissed but that did not mean that Sleaford was shut out from advancing the same essential points again. 

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