HT-2023-000006 - [2024] EWHC 1510 (TCC)

Paragraph 5 of the Particulars of Claim alleges various breaches of the sub-contract.

Paragraph 5.0(a) alleges:

As set out above, Clause 7.4 entitles J&BH if “in the opinion of the Contractor, the Su-Contract Works are failing to progress in line with the Contract Programme requirements, then after due notice of 7 days being given, and if resultant actions are not undertaken” to “supplement the on-site labour requirements for the Sub-Contractor”.

The earliest date when notice was given under Clause 7.4 was 11 March 2021 when the 10 March 2021 letter was sent. Thus the 7 day notice period expired on 18 March 2021.

It follows that the case is made out by A & V that J&BH’s actions in deploying other labour to carry out A & V’s works on the basis that A & V would have to pay for such labour was a breach by J&BH of Clause 7.4.

On its own, this breach can be seen as doing no more than disentitling J&BH from recovering any costs of the supplementary labour before 18 March 2021. A & V submitted through Mr Judd that this matter needs to be read together with the other matters alleged. I return to this below.

The second part of this allegation is reliance upon Clause 15.1. In my judgment there was no breach of Clause 15.1. Clause 15.1 provides J&BH with a remedy, namely a right to terminate, in the event of breaches on the part of A&V. As J&BH did not purport to exercise any remedy under Clause 15.1, no claim for breach of Clause 15.1 can be sustained.

Paragraph 5.0 (b) alleges:

Clause 8 sets out the variation machinery in the sub-contract.

The terms of the sub-contract are weighted in J&BH’s favour. Whilst there is an extension of time clause (Clause 13), that Clause does not expressly allow the sub-contractor to recover its losses arising out of delays.

Whilst Clause 8 does provide for a variation to be issued which would compensate the sub-contractor for both time and expense flowing from a variation, the quotation mechanism in that Clause is ill-suited to a situation where delays for which the sub-contractor causes that sub-contractor to suffer loss which cannot be quantified for some time to come.

In my view A & V has not made out a claim for breach of Clause 8.5 or 8.6.

I consider below the claims under Clause 13 for an extension of time.

Paragraph 5.0 (c) alleges:

As I have pointed out above, the Parties are agreed that the works were suspended by reason of Covid.

That suspension was ordered by BYUK, but, as it seems to me, as between A & V and J&BH, it should be treated either as being a suspension ordered by J&BH or a suspension which ought to have been ordered by J&BH: it would be a nonsense for there to be an ordered suspension of work as between BYUK and J&BH, but not as between J&BH and A & V.

As a matter of common sense, I infer that J&BH informed A & V of BYUK’s suspension and thereby instructed A & V to suspend its works.

Thus I come to the conclusion that the breach on the part of J&BH was a failure to formalise the suspension by written notice under Clause 11.1, and accept that that was a breach of the sub-contract.

However, that breach in itself takes the matter nowhere: what matters is A & V’s case that the suspension was not reflected in J&BH’s treatment of A & V. This is the subject of the next alleged breach or group of breaches.

Paragraph 5.0 (d) alleges:

This paragraph rolls together a number of different strands, but seems to me to bring together the core of the case as to the termination of the sub-contract and as to whether A & V lawfully ceased work.

The first strand is “failure and/or breach of clause 13.2 and 13.3 to extend the contract period for delays clause 11.1 above”. The wording is a little garbled, but I read this as being an allegation that there had been a suspension in accordance with Clause 11.1 entitling A & V to an extension of time under Clause 13.2(3).

As I have accepted above, there does not appear to have been a formal suspension by J&BH under Clause 11.1, but there was a de facto suspension. In my judgment, J&BH cannot rely upon its failure to operate the machinery of the sub-contract to deny the extension of time which ought to have been given by J&BH.

J&BH rely upon the absence of formal notices in accordance with Clause 13.3 – however, given that J&BH did not comply with the suspension machinery, it seems to me that it cannot rely upon the failure to give notice.

I also note that in March 2021 no point was taken by J&BH as to a failure to comply with Clause 13.3.

The second strand relates to “issue of revised programmes and 2 weeks look ahead programmes”. I have set out above Mr Harman’s evidence as to the procedures followed on site once the suspension was over: those procedures inevitably made the works slower and less productive. Further, as I have found as a matter of fact, BYUK was late in handing over working areas and/or areas were handed over with obstructions. All of this would have hindered A & V and, as between A & V and J&BH, amounted to acts of prevention by J&BH falling within Clause 13.2(3), and were having a continuing effect right up to the 19^th March 2021.

Whilst A & V were slow to make formal application for an extension of time, on 15 March 2021 it did do so. At that stage J&BH knew that the sub-contract works (on its own estimation) were likely to take 5 months to complete, against a background when until March 2021 there had been no significant complaints about A & V’s progress and, to the contrary, Mr Hill had accepted in the telephone conversation on 5 March 2021 that A & V had not missed any dates.

In those circumstances, in my judgment J&BH was obliged to consider A & V’s legitimate application for an extension of time in respect of acts of prevention which were continuing through March 2021 and was in breach of the sub-contract in not issuing any extension of time.

The penultimate strand is “unreasonably and deliberately preventing any further works being undertaken by A&V by employing others to complete A&V works”. If J&BH is right that A & V was in repudiatory breach of contract in leaving site on 19 March 2021 (and that J&BH accepted that repudiation), it (J&BH) was not in breach of contract in employing others to complete A&V’s works. If, on the other hand, A & V was entitled to cease work on 19 or 22 March 2021, the fact that J&BH used other contractors to complete its works is irrelevant.

However, I do regard J&BH’s use of other contractors to carry out part of A & V’s works as being a significant part of the background to A & V’s withdrawal from Site.

The final strand is “removing A&V from the IAuditor system”.

I have set out at paragraph 138 above Mr Harman’s evidence as to the functions of the IAuditor system.

It is correct, as J&BH submits, that the use of and access to the IAuditor system was not a contractual requirement under the sub-contract, nor did A & V have any contractual right of access to it.

However, on the evidence before me, J&BH had required A & V to use that system, and it was a convenient way of recording progress and, importantly, completion of the QA process for parts of the works, and one upon which the whole QA process depended. The centrality of the IAuditor system was shown firstly by an email sent by Mr Wayne Reed of J&BH to its sub-contractors on 11 February 2020 (Footnote: ⁵⁴):

Specifically in respect of A & V, Mr Reed’s email of 10 July 2020 illustrates the importance of the IAuditor system (Footnote: ⁵⁵):

In the circumstances, removal of access to the IAuditor system evinced J&BH’s intention that A & V should not complete its sub-contract works particularly after Mr Paduraru’s protest on 22 March 2021 at being excluded from access to that system.

Tying all these threads together: firstly, by the beginning of March 2021 the sub-contract was significantly in delay for reasons which were in no way A & V’s responsibility. Secondly, at the beginning of March 2021, only 12 days of the original sub-contract period remained, but on J&BH’s estimation, months of work remained to be done. Thirdly, it must have been obvious to J&BH that progress of the works had been disrupted not only by the suspension, but also by the working methods adopted once works resumed and by BYUK’s delays in making working areas available. Fourthly, it was J&BH’s belief (well-founded despite A & V’s contemporaneous denials, as I discuss in greater detail below) that A & V was in cash flow difficulties.

It was against that background that the actions of J&BH are to be judged. Firstly, after initially offering on 5 March to supply labour free of charge, J&BH committed a volte face and insisted on providing labour at A & V’s expense. Not only was this not in compliance with Clause 7.4, but it introduced problems of responsibility for the works, and was likely to make A & V’s financial problems worse. Secondly, as I have found above, J&BH failed to grant an extension of time which was obviously justified. Thirdly, when on 11 March 2021 A & V asked for particulars of the alleged delays, and sensibly suggested a joint walk through of the Site (Footnote: ⁵⁶), there was no direct response to A&V’s request, and a failure to respond in any way to the suggestion of a walk through the Site. Finally, on 22 March 2021 J&BH excluded A & V from access to the IAuditor system.

As is often the case, the only circumstance referred to in the sub-contract expressly entitling A&V to terminate the sub-contract was if the main contract was terminated (Clause 16) whilst granting J&BH relatively wide rights of termination in Clause 15.

The question arises as to whether either party retained common law right to terminate the sub-contract. It seems to me impossible to construe the sub-contract as removing or restricting A & V’s common law rights to bring the sub-contract to an end in circumstances where the sub-contract conferred no rights for A & V to do so for J&BH’s breaches of the sub-contract. (I also accept that J&BH’s common law rights to terminate for repudiatory breach were not excluded.)

As to A & V’s right to treat the sub-contract as having been terminated, Mr Frampton drew my attention to the decision of H.H. Judge Coulson Q.C., as he then was, in Tombs v Wilson Connolly Ltd (Footnote: ⁵⁷). In that case the learned judge first considered the effect of the imposition upon a sub-contractor of additional labour. At paragraph [45] he referred to the earlier case of Sweatfield Ltd v Hathaway Roofing Ltd (Footnote: ⁵⁸), in which it had been held that the bringing to site of additional labour by the main contractor, in the teeth of the sub-contractor’s objections, was found to be repudiatory. By contrast, in the case before him, the sub-contractor had not withdrawn his labour in consequence of the decision to engage other sub-contractors to carry out part of the work, hence that action had not caused the repudiation of the sub-contract by the main contractor nor the acceptance of repudiation by the sub-contractor.

This part of the decision in Tombs is helpful in illustrating that taking work away from a sub-contractor and giving it to another sub-contractor may amount to repudiation of the sub-contract by the main contractor, but will not necessarily do so. Mr Frampton argues that in this case what J&BH did was purportedly carried out in exercise of rights granted by Clause 7.4 of the sub-contract, even if no right to supplement labour would arise until the seven day notice period had expired.

I do not regard the imposition of labour by J&BH as being on its own repudiatory conduct.

Secondly, in Tombs, the learned judge considered the implications of an alleged failure by the main contractor to pay the sub-contractor. This was considered in paragraphs [46] to [58] of the judgment. The learned judge held, first of all, that the main contractor was not in breach of the payment provisions in the sub-contract (paragraphs [47] to [53]). Secondly, the learned judge accepted a submission that generally a failure by an employer to pay one instalment would not amount to repudiation (paragraphs [54] and [55]). Finally, the learned judge held that the sub-contractor had failed to give seven days’ notice required under s. 112 of the Housing Grants, Construction and Regeneration Act 1996 (paragraphs [51] and [52]).

In this case, I accept that there was no failure by J&BH to pay a certified sum. I also accept that the intent of the Scheme set up under the 1996 Act is that rather than a payment dispute resulting in a repudiation of a contract, generally a failure to pay or to certify payment would not be a repudiatory breach, since the unpaid contractor or sub-contractor has a remedy through adjudication.

My conclusion is that J&BH’s combined breaches of contract and unreasonable position were an important part of the background against which its action in withdrawing access to the IAuditor system is to be judged: it had become clear during the morning of 22 March 2021 that J&BH had decided that A & V would not be permitted to complete its works.

I recognise that this conclusion is contrary to the position adopted in J&BH’s two letters of 19 March 2021, which were demanding that A & V complete its works. However, the position adopted in those letters, that A & V should return to site and complete its works, is entirely contrary to the practical position evinced by the exclusion from the IAuditor system.

It is necessary for me to consider whether the exclusion from that system was contractually justified. In my view it was not: it was in my view a clear drawing of a line in the sand: thereafter the works would not be carried out by A & V. That position could be justified if J&BH already had a right to refuse A & V carrying out its works: but it did not have such a right. Thus there is some similarity between this case and the case of Sweatfield Ltd v Hathaway Roofing Ltd distinguished by H.H. Judge Coulson in Tombs.

Firstly, J&BH had no right to terminate the sub-contract under Clause 15.1 as it did not purport to operate the machinery of that Clause.

Secondly, at common law for a party to bring a contract to an end because of the other party’s alleged repudiatory breach, there must be an acceptance of that repudiation: J&BH’s pleaded case was that the repudiation was accepted on 16 April. This could not justify refusal of access to the IAuditor system on 22 March 2021. J&BH pleads in the alternative that it accepted the repudiation by engaging others to complete the works, but there is no pleading of any election communicated to A & V before 16 April 2021.

For the above reasons, I accept A & V’s case that the removal of A & V from the IAuditor system, taken with the background facts to which I have referred, amounted to repudiatory breach of the sub-contract which A & V was entitled to accept and did accept by refusing to return to Site and resume work.

It follows from this that I reject J&BH’s case that as at 22 April 2021 A & V was guilty of a repudiatory breach of contract which J&BH was entitled to accept.

For the above reasons, I substantially accept A & V’s case pleaded at paragraph 5.0 (d) of the Particulars of Claim.

Paragraph 5.0 (e) alleges:

The simple fact is that A & V did not achieve Practical Completion and therefore is not entitled to a Certificate of Practical Completion.

Paragraph 5.0(f) alleges:

I have accepted A & V’s case that removal from the IAuditor system amounted to a repudiatory breach of contract. Paragraph 5.0 (f) adds nothing to paragraph 5.0 (d).

Paragraph 5.0 (g) alleges:

In order to consider this allegation, it is necessary to set out the history of the adjudications which took place in respect of this sub-contract.

I have set out above that on 15 March 2021 A&V submitted Application No. 13. On 22 March 2021, A & V submitted Application No. 14. That application was dated the previous day, 21 March 2021, which was a Sunday. That application claimed £211,773.60 net of VAT. J&BH responded with a certificate showing £68,946.25 due from A & V to J&BH.

On 17 November 2021 A & V commenced adjudication proceedings seeking a net payment of £211,773.60 plus VAT, interest and fees, based on Application 14.

J&BH argued that Application 14 was invalid because it as issued a day late.

The adjudicator appointed was Mr Blizzard.

In due course the Court of Appeal commented (Footnote: ⁵⁹):

Mr Blizzard’s decision dated 19 January 2022 found that interim application 14 was valid. He identified a net sum due to A & V of £138,010.86 to which he added interests, costs and his fees.

Notwithstanding Clause 20.3 of the sub-contract, J&BH failed to pay any part of this sum to A & V.

On 2 December 2021, at a time when the Blizzard adjudication was ongoing, J&BH issued Part 8 proceedings against A & V in which, amongst other things, J&BH sought declarations as to the invalidity of Application 14.

The Part 8 proceedings came before Eyre J on 12 April 2022. He held that Application 14 was a day late and therefore invalid (Footnote: ⁶⁰).

On 26 May 2022 Coulson LJ granted A & V permission to appeal against Eyre J’s decision.

In June 2022 A & V commenced a second adjudication before Mr Smith. This did not go well for A & V: on 6 July 2022 Mr Smith issued a decision holding that the true value of the sub-contract works was less than A & V had already been paid. He ordered A & V to pay J&BH a net sum of £82,956.88.

The Court of Appeal heard the appeal against Eyre J’s decision on 17 January 2023.

Two days later, on 19 January 2023 I heard argument on J&BH’s claim for enforcement of Mr Smith’s adjudication.

On 27 January 2023 the Court of Appeal handed down its judgment. In the course of that judgment Coulson LJ made the following comment in paragraph [23], which is what is referred to in paragraph 5.0 (g) of the Particulars of Claim:

Coulson LJ also said at paragraph [43]:

The Court of Appeal rejected A & V’s submission that the Part 8 proceedings were an abuse of process. However, the Court of Appeal decided that, contrary to Eyre J’s decision, Application 14 was valid.

To that extent A &V was successful, but in the final paragraph of his judgment Coulson LJ said:

On 15 February 2023 I handed down my judgment enforcing Mr Smith’s decision (Footnote: ⁶¹).

Thereafter, on 1 June 2023 I heard a number of cross-applications, but importantly for present purposes, I heard an application by A&V for a stay of my 15 February 2023 judgment. On 16 June 2023 I handed down judgment in which I granted the stay (Footnote: ⁶²).

Against that recital of the complicated procedural history, I return to paragraph 5.0 (g) of the Particulars of Claim.

The importance of this allegation appears to be twofold: firstly, it was suggested by Mr Judd in cross-examination of Mr Geale that the decision of Mr Blizzard showed that £138,000 should have been paid to A & V in May 2021. Whilst that is correct insofar as it goes, the failure to pay at that time was not a breach of Clause 20.3. That breach only occurred upon failure by J&BH to comply with Mr Blizzard’s January 2022 Decision: however in the events which happened, that was only effective until Mr Smith issued his decision 6 months later. Secondly, it is said that the Smith adjudication was only necessary because of J&BH’s failure to honour the Blizzard decision. That is right up to a point, but as the Court of Appeal pointed out, the usual procedure is to seek enforcement in this Court of the adjudicator’s decision, which procedure A & V did not invoke.

In the circumstances, whilst A & V are correct to say that J&BH was in breach of Clause 20.3, that breach does not sound in damages save to the extent that A & V may be entitled to interest, a matter considered below.

For the reasons set out above, I conclude that A & V has established:

I now turn to consider the separate heads of claim in the Scott Schedule.