MillChris Developments Limited v Waters: Application for Injunction to restrain injunction due to Covid-19 rejected virtually by TCC

There is no doubt that Covid-19 has caused significant disruption for both Employers and Contractors in the construction industry.  However, the Technology and Construction Court (“TCC”) has made clear in its first Covid-19 decision that, when it comes to adjudication, the usual rules apply.   

In particular, the Court refused to grant an application by a respondent to adjudication proceedings for an injunction to restrain the proceedings on the basis of the Covid-19 outbreak.

The proceedings were conducted remotely.  The facts were as follows:

• The contractor had carried out works at the property of Mrs Waters, which had commenced in September 2017;
• In November 2019, the contractor apparently ceased trading, but were still shown as an active company on Companies House;
• As the homeowner was unhappy with the works, she commenced an adjudication on 23 March 2020,, alleging that she had been overcharged and that there had been defects in the works. This was the day on which the Government imposed the current lockdown;
• An adjudicator was appointed and issued directions for the conduct of the adjudication, including a direction for a site visit. The contractor objected to the adjudicator’s directions and timetable, asserting that it was not possible to comply with the timetable because of the COVID-19 health crisis and that the adjudication should be postponed until the lockdown measures were lifted;
• The adjudicator decided that the adjudication should proceed but proposed a two-week extension to the timetable. The contractor refused to agree and duly sought an injunction on the basis that if the adjudication proceeded it would be conducted in breach of the rules of natural justice, for the following reasons:
  • It did not have sufficient time to prepare for proceedings as a result of the COVID-19 health crisis;
  • It was no longer trading for the same reason;
  • Its solicitor had been forced to self-isolate at home which had made it difficult to obtain evidence;
  • Government measures such as social distancing would make it difficult/impossible to carry out a site visit with representatives in attendance; and
  • There was insufficient time to appoint an independent surveyor to attend the site visit.

AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [4] established that an adjudicator is under a duty to comply with the rules of natural justice and these include the fact that every party has the right to a fair hearing and the right to be heard by an impartial tribunal.   This includes giving each party an equal and reasonable opportunity to present its own case and to deal with its opponent's case.

Whilst the general rule is that the Court does have the power to grant injunctive relief to restrain a party from pursuing an adjudication where it appears to be just and convenient to do so, Fraser J in Michael J Lonsdale v Bresco [1] Fraser J highlighted that the court will only exercise this jurisdiction "very rarely and in very clear cut cases".  This is consistent with the underlying policy of the Construction Act 1996, which allows the parties to refer a dispute to adjudication "at any time" (section 108).

Decision

The Court refused to grant an injunction and the Applicant’s arguments were rejected.

The Court was not convinced that the difficulties the contractor faced were due to Covid-19; as set out above, it had ceased trading some months before.  The real difficulty for the contractor was that it had not been able to contact its former managing director.  However, the court also noted that no attempt had been made to contact a former project manager and it therefore rejected the argument that the self-isolation of its solicitor had caused these difficulties. 

The case demonstrates that, when it comes to adjudication, the Court will require very precise evidence as to why a party will be prejudiced by the statutory  timescale of 28 days (which, as set out above, the adjudicator had agreed to increase to 42 days) and why that prejudice is attributable to COVID-19 (and not to other reasons).

The decision highlights that the Court will only very rarely interfere with an adjudication that is already on foot.  In the absence of clear evidence, the safer course of action for a responding party may be to simply reserve its position on any perceived procedural unfairness (or other arguments relating to natural justice) and to seek to challenge on enforcement.

1. Michael J Lonsdale (Electrical) Ltd V Bresco Electrical Services Ltd (In liquidation) [2018] EWHC 2043 (TCC), [2018] B.L.R. 593, [2018] 7 WLUK 752
2. Billingford Holdings Ltd v SMC Buildings Solutions Ltd and another [2019] EWHC 711 (TCC)
3. Twintec Ltd v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC)
4. AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [2004] EWHC 393 (TCC)
5. Carillion Construction Ltd v Devonport Royal Dockyard [2005] EWCA Civ 1358

This article was co-written by Judith Hopper, Partner, Matthew Phipps, Senior Associate, and Annie Richardson, Legal Apprentice.

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