TCC’s approach to Part 8 claims that are not adjudication enforcement

The case of CLS Civil Engineering Ltd v WJG Evans and Sons [2024] EWHC 194 (TCC) (“CLS” and “Evans” respectively), concerned a dispute over the final value of works for the construction of a library, retail unit and apartments in Narberth.

Works had been instructed under a letter of intent (LOI), extended multiple times to a value of £1,100,000. Disputes arose principally over: (i) the final valuation of the works; and (ii) whether the LOIs had incorporated JCT Intermediate contract terms.

Whilst this case turned on its facts, the Technology and Construction Court (TCC) offered useful guidance as to where Part 8 – intended for use to enforce adjudication proceedings – could be appropriate where a relatively simple decision of fact or interpretation would assist in deciding a dispute rather than requiring lengthy and expensive Part 7 proceedings.

Background

CLS issued an LOI to Evans in August 2021 to begin the works, initially limited to £150,000. Whilst not signed by Evans, they commenced works. There were further discussions around the contract in October at which point the value of the works was approaching the LOI cap.

Draft JCT Intermediate Contract documents were issued to Evans shortly after. These were not acceptable to Evans who contended they included items not tendered, such as liquidated damages, a design portion, and a schedule of amendments to the JCT form.

Progress

Work continued on site without agreement on the contract, and a further LOI was issued in November for £300,000. Further correspondence discussed the JCT terms, but without agreement. The LOI was then further extended to £500,000 in March 2022 and then £800,000 in July with further promise of contract documents being issued, and £1,100,000 in October 2022.

Evans then issued a loss and expense claim in October 2022 taking the value of the works over the last LOI cap. In February 2023 they began to demobilise in the absence of payment. CLS then instructed Evans that they would not extend the LOI or enter into a contract and terminated site licence. Evans then issued a final account claim referring to clause 4.17 of a JCT contract for some £300,000 in excess of the last LOI value.

Claim

CLS sought a declaration under Part 8 that the basis of the contract was under the LOIs, and accordingly their liability was capped at £1,100,000.

Evans contended that the contract was on JCT terms, and that CLS was estopped from denying that: (i) the contract was on JCT terms; and/ or (ii) that CLS’ liability was capped at £1,100,000. Evans also submitted that directions should be given under Part 7 due to there being substantial disputes of fact, and not Part 8 (intended for adjudication enforcement).

Decision

Neil Moody KC held that whilst there was frequent discussions and correspondence referencing to the JCT terms, there was no agreement as to their incorporation into the LOIs. The contract was on the terms of the LOIs and, therefore, subject to the £1,100,000 cap by CLS. There was clear evidence in both correspondence and Evans’ witness statements that the cap was agreed. The Deputy Judge dismissed both of Evans’ estoppel claims. Evans were entitled to the value of the LOI cap but not the remainder of their claim.

Part 8 v Part 7

The application was brought under Part 8 of the Civil Procedure Rules and raised issues as to the proper scope of Part 8 claims and the correct approach to be taken where there are alleged to be disputed facts.

The court was concerned that claims should not be wrongly endorsed as adjudication business because such cases are listed for expedited hearings. There had been no adjudications in this matter, however CLS contended the claim was suitable for Part 8 because it was a short point of construction, with the only dispute of fact being whether the JCT terms were incorporated. Precedent for deciding such a dispute under Part 8 is found in OD Developments v Oak Dry Lining Limited [2020] EWHC 2854 (TCC).

Evans originally contended the case was unsuitable for Part 8 because it involves substantial disputes of fact and submitted that CLS had failed to comply with the guidelines relating to Part 8 claims in Cathay Pacific Airlines Ltd v Lufthansa Technik [2019] EWHC 484.

In particular, as there were grounds for arguing estoppel, this would inevitably involve an examination of disputed facts. ING Bank NV v Ros Roca SA [2012] 1 WLR 472 cited that: “Part 8 proceedings are wholly unsuitable for a trial on the issue of estoppel”.

Neil Moody KC considered that whilst a great deal of the argument was directed to whether JCT terms applied, the key issue was really whether the cap was agreed. It was clear on Evans’ evidence that it had been accepted, and so the difference between the parties was around £300,000, modest by the standards of the Court.

Given that, the Court considered whether the dispute could be determined in accordance with the Overriding Objective within the limitations of the Part 8 procedure – and felt that a decision on the cap would be a significant step to resolve the dispute.

It was open to the Court to scrutinise the disputed facts and arguments and assess whether Evans had a real prospect of success on the relevant issues given the evidence currently available and the evidence that could reasonably be expected to be available at trial.

In respect of the estoppel arguments, the Deputy Judge held that even if both were valid it would not invalidate the cap – both arguments went to the incorporation of the JCT terms – and Evans agreed to the cap in both correspondence and evidence. Estoppel had no reasonable prospects of success.

Accordingly, there were no disputed issues of fact or estoppel impediment to determining the claim under Part 8.

Costs

Whilst CLS was wholly successful, there was disagreement on costs on the basis CLS had not followed the guidelines in Cathay Pacific and Evans contended that the Part 8 procedure had been incorrectly used. Despite that, the Deputy Judge held that the failure to follow the guidelines would not have led to a different outcome, and did not penalise CLS on cost. The Deputy Judge also pointed out that Evans had relied on new arguments in the hearing that were not previously raised in either evidence or correspondence, and so were not free of criticism. This may have been a persuading factor on costs.

Analysis

The case, like most “battle of the forms” arguments, turned on its own facts and evidence. However, this is a timely reminder of the uncertainty that Letters of Intent can generate, and the importance of very clear documented correspondence when communicating on these issues.

The approach to Part 8 shows a level of flexibility by the Court, particularly where this is proportionate to costs it was willing to exercise its discretion under the Overriding Principle to cut through the issues to what was critical to the dispute and decide the claim efficiently.