MillChris Developments Ltd v Waters
 4 WLUK 45 (TCC); Jefford J
In 2017, Waters (the Employer) engaged MillChris Developments Ltd (MillChris) to undertake works to her property. MillChris ceased trading in November 2019.
The Employer was unhappy with the works undertaken, alleging that they had been overcharged by £45,000 and that there were defects in the works. On 23 March 2020, the Employer commenced adjudication proceedings against MillChris for the recovery of the alleged overpayment.
An adjudicator was appointed and directions were given for the exchange of evidence. A site inspection was to take place on 14 April 2020. MillChris argued that it would be impossible to comply with those directions due to the COVID-19 restrictions imposed by the UK Government, notably the self-isolation and social distancing measures.
The adjudicator rejected MillChris's submissions and directed for the adjudication to proceed, albeit with a two-week extension to the timetable. MillChris subsequently applied for an injunction to prevent the adjudication from continuing. MillChris argued that:
- it would be a breach of natural justice for the adjudication to continue given the fact that MillChris had ceased trading months ago;
- it would require time to obtain evidence from the appropriate witnesses (especially given its trading position);
- its solicitor was self-isolating, making it difficult to obtain the necessary evidence; and
- it did not have sufficient time to attend or instruct an independent surveyor to attend the site inspection that the adjudicator had directed.
Jefford J refused to grant the injunction requested by MillChris.
Jefford J acknowledged the court's jurisdiction to prevent an adjudication from proceeding, but confirmed that it would exercise that jurisdiction only in exceptional circumstances. In order to do so, the court would have to be satisfied that there was a serious issue to be tried and that the adjudication would necessarily be conducted in breach of natural justice, with the inevitable consequence that the decision would be unenforceable. Jefford J held that these thresholds had not been met, noting:
- MillChris had not provided any suitable reason as to why papers could not be scanned and sent to its solicitor;
- there is no right for a party to attend a site visit in an adjudication, especially in circumstances where MillChris could provide a list of matters for the adjudicator beforehand;
- MillChris had failed to contact its project manager to obtain evidence, undermining its argument that evidence could not be obtained; and
- MillChris's difficulty communicating with its former managing director was not a consequence of the outbreak of COVID-19.
Jefford J thus confirmed that the adjudicator's proposed two-week extension to the timetable was sensible and reasonable in the circumstances and would allow MillChris sufficient time in which to counter any repercussions of COVID-19.
Whilst Jefford J did not consider that MillChris's grounds for seeking an injunction satisfied the relevant tests, she did not rule out injunctive relief in cases where there are genuine difficulties in complying with directions due to COVID-19.
It remains to be seen what approach the courts will take where a party is encountering difficulties due to COVID-19 to the extent that proceeding might lead to a breach of the rules of natural justice. In the meantime, adjudicators are likely to be sympathetic to any reasonable proposals for extensions to the adjudication timetable.
PBS Energo AS v Bester Generacion UK Ltd &
 EWHC 223 (TCC); Cockerill J
Bester Generacion UK Ltd (Bester), which specialises in the provision of renewable energy projects, was engaged to design, construct, install, and commission a biomass fired energy plant in Wrexham. Bester engaged PBS Energo AS (PBS) to engineer, procure, construct, and commission the plant pursuant to a sub-contract dated 10 May 2016 based on the FIDIC 1999 Silver Book (the Sub-Contract).
The Sub-Contract provided that payment was to be made by reference to milestones, which were set out in Schedule 4 to the Sub-Contract. Furthermore, clauses 17.3 and 17.4 of the FIDIC 1999 Silver Book, which set out the Employer's risks and the consequences of them, were deleted and substituted with a new regime suggested by PBS regarding apportionment of risk for ground conditions.
The Sub-Contract was further amended on 14 July 2016, which included a replacement of Schedule 4 to the Sub-Contract.
The performance of PBS's obligations was secured by the 'Performance Guarantees' in a form of a counter-guarantee agreed between the parties and further secured by a parent company guarantee from PBS's parent company.
The project commenced on 10 May 2016. However, various deadlines were not met. Disputes quickly arose and the parties fell out. Both Bester and PBS purported to terminate the Sub-Contract and claim damages.
PBS commenced court proceedings, claiming entitlement to terminate on the basis that Bester: (i) failed to determine a claim for an extension of time by PBS and thereby committed a material breach and exposed PBS to liquidated damages for delay; (ii) failed to make payment to PBS in respect of Milestone 5 when it fell due under the terms of the contract; and (iii) prevented PBS from fulfilling its obligations under the Sub-Contract by preventing access to the site.
Bester counterclaimed, claiming liquidated damages and alleging that PBS failed to comply with a Notice to Correct as regards delay to the project and abandoned the project or demonstrated a lack of intention to perform such that Bester was entitled to terminate the SubContract.
Cockerill J found in Bester's favour.
Cockerill J found that PBS was in breach and that Bester was therefore entitled to terminate the Sub-Contract. In particular, Cockerill J held that:
- Clause 17.3 of the Sub-Contract was 'not well or clearly drafted' and was 'unnecessarily complex' such that the risk of unforeseen ground conditions still fell to PBS. In any event, the rejection of an extension of time was not a 'material breach' – PBS could have referred the issue to adjudication had it so wished.
- PBS had not demonstrated that Milestone 5 was achieved and, in any event, PBS had not issued an invoice for Milestone 5. Therefore, no entitlement to terminate had arisen. Cockerill J noted that, even if Bester's alleged non-payment was a breach, this would not necessarily trigger a right to terminate as the alleged breach in respect of a single instalment representing only 5% of the Sub-Contract price was not 'substantial' in accordance with the Contract terms.
- PBS was not entitled to terminate the Sub-Contract as time for payment after accrual had not expired by the date of PBS's purported termination.
Cockerill J concluded that Bester had been entitled to terminate on the grounds of PBS's abandonment of the works. The Court found that it was PBS, not Bester, who had locked the site, and only after a period of time during which no attempt had been made by PBS to resume work.
This decision provides a useful reminder of the importance of clearly drafted, unambiguous contract provisions. Any misapplication of the terms can have detrimental consequences for all parties. In particular, an express right to terminate for non-payment should be included if a party will want to be able to do so.
This case also highlights of dangers of amending standard forms of contract which may encourage a dispute. Parties should take care to ensure that the effects of such changes and the manner in which risk is apportioned between them is understood.
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