Our regular review of the court designs of most relevance to construction comes from Andrew Croft and Ben Spannuth, focusing on a case which serves as a reminder of the courts' approach to strike-out and summary judgment applications; and another that highlights the courts' robust support of the 'pay now, argue later' principle of the Construction Act.
Sportcity 4 Management Limited and Others v Countryside Properties (UK) Limited
 EWHC 1591 (TCC); HHJ Eyre QC
Sportcity 4 Management Limited (Sportcity) are the management companies of the blocks forming the Sportcity Living complex development in Manchester (the Development). Countryside Properties (UK) Limited (Countryside), a property developer, built the Development, which was completed in 2010 at the latest.
AMEC Developments Ltd (AMEC), the leaseholder of the land, subdemised the individual apartments by a series of underleases (the Leases) to which Sportcity and Countryside were parties in addition to the proposed sub-lessees of the apartment in question. Clause 6 of the Leases began with the words 'Covenants by the Landlord with the Management Company and the Tenant'. AMEC subsequently also assigned its headlease to Sportcity.
In late-2013, Sportcity asserted that there were cladding problems at the Development. Whilst Countryside did not accept that there were problems, it was accepted that Countryside attended the Development in 2014 to undertake some works and also in 2017 (although the purpose of that attendance was disputed).
Sportcity issued proceedings in May 2019 asserting three separate causes of action in respect of 'life-threatening defects in the design and/or construction of the cavity barriers and fire-stopping measures in the properties', namely: (i) a claim under the Leases on the basis that Countryside was the landlord and as such owed certain obligations to Sportcity or was otherwise responsible for ensuring compliance with such obligations; (ii) a claim under the Defective Premises Act 1972 (the Act) in respect of allegedly defective works undertaken in 2014 and 2017; and (iii) a claim that there was a breach of a duty of care in tort owed to Sportcity. Sportcity sought damages of c.£16m in total for recladding works and cavity barrier and firestopping works.
Countryside denied any breach of the Act and asserted that any claim became statute-barred before the commencement of proceedings. Countryside further denied that it was the landlord for the purpose of the Leases or that it had any obligation to Sportcity and that there was any breach of such obligations. Countryside applied to strike out the claim pursuant to CPR 3.4(2)(a) as disclosing no reasonable grounds for bringing the claim and/or for summary judgment.
HHJ Eyre QC struck out the claim in tort and granted summary judgment in respect of the claims under the Leases and the Act.
HHJ Eyre QC explained that the test for summary judgment 'is whether there is a claim which has a real rather than fanciful prospect of success'. HHJ Eyre QC further noted that a potentially statute-barred claim 'is not liable to be struck out if the claim otherwise discloses reasonable grounds for bringing the claim', although 'a limitation defence can be a proper basis for an award of summary judgment if there is no real prospect of that limitation defence being defeated at trial'.
HHJ Eyre QC found that Sportcity's claim under the Leases 'is simply untenable and has no real prospect of success' on the basis that Countryside could not be deemed to be the landlord and owe the alleged obligations to Sportcity. The common law tort claim was also struck out on the basis that the alleged losses were pure economic loss and therefore irrecoverable such that there were no reasonable grounds for bringing the claim. In relation to the claim under the Act, HHJ Eyre QC considered Sportcity's argument that 'the effect of the works done in 2014 was that the cause of action [...] "recommenced as at April 2014"' and that the same was true of the allegedly defective works undertaken in 2017. HHJ Eyre QC considered s1(5) of the Act, which confirms that 'it is the cause of action in respect of the further works which accrues on the completion of those works'. However, Sportcity's pleaded claim was in respect of the original construction only, which was time-barred, and was not saved by events in 2014 and 2017. These gave rise to separate causes of action which would not 'revive an existing but statute-barred cause of action'.
This decision is a reminder of the courts' approach to strike-out and / or summary judgment applications. This decision also confirms the limitation position under the Act in circumstances where further works are undertaken post-completion as the further works will not extend the cause of action in relation to previous work carried out. Parties should be mindful of s1(5) of the Act and plead their cases accordingly and not rely on a more recent cause of action to 'revive' an otherwise statute-barred cause of action.
Kew Holdings Ltd v Donald Insall Associates Ltd
 EWHC 1862 (TCC); O'Farrell J
Donald Insall Associates Ltd (the Architect), a company providing architectural services, was retained by Kew Holdings Ltd (Kew), the registered proprietor of The King's Observatory, Richmond (the Property) in connection with the conversion and refurbishment of the Property to form a private residence.
In 2018, disputes arose between the parties concerning the Architect's entitlement to unpaid fees. The Architect referred the dispute to adjudication and obtained an adjudication award in its favour in the sum of £202,509 including interest and the adjudicator's fees but excluding VAT (the Award). Kew failed to pay the sums due under the Award.
The Architect commenced enforcement proceedings. On 5 February 2019, summary judgment was granted to the Architect in the sum of £208,287.84 inclusive of VAT, together with interest, the adjudicator's fees, and costs summarily assessed in the sum of £24,400 (the Judgment Sum). Kew failed to make payment of the Judgment Sum.
In March 2020, Kew commenced proceedings against the Architect in respect of allegedly late and inadequate drawings, inadequate advice, and overcharging for the Architect's services claiming damages of c.£2m.
The Architect made an application to strike-out Kew's claim or alternatively for Kew's claim to be stayed pending payment of the Judgment Sum.
O'Farrell J refused the Architect's strike-out application but stayed Kew's claim pending payment of the Judgment Sum.
O'Farrell J noted the approach taken by the courts to robustly enforce adjudicators' decisions in furtherance of the 'pay now, argue later' principle in the Construction Act 1996. It was therefore held that Kew's commencement of proceedings without honouring the Award and the subsequent judgment was 'in flagrant disregard of the "pay now, argue later" regime of the [Construction Act 1996]' and amounted to 'unreasonable and oppressive behaviour'. Whilst this was sufficient to justify a stay pending payment of the Judgment Sum, the strike-out application was dismissed on the basis that '[to] strike out the claim would be contrary to that regime since it would deprive [Kew] of the ability to "argue later"'.
This decision is a reminder of the courts' robust approach to the 'pay now, argue later' principle in the Construction Act 1996 further to Grove v S&T and the importance of maintaining cash flow in the construction industry. The court further confirmed that this principle applies equally to court proceedings as well as 'true value' adjudications, although it was mindful of balancing the rights of the parties and careful not to deprive Kew of its right to access justice.
Parties are therefore obliged to make payment in respect of sums awarded before commencing further proceedings in respect of allegedly inadequate work. However, a failure to pay sums previously awarded will not result in the claim being struck out and therefore once the award is paid the subsequent claim will continue.
This article was first published in Construction Law.
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