The correct approach: where parallel Part 7 enforcement proceedings and Part 8 proceedings are afoot

Published 29 junio 2023

Background

Sleaford commenced an adjudication to recover sums, it said, had been overpaid to Isoplus. Sleaford also requested that the Adjudicator provide advice as to whether Isoplus had complied with a particular payment term in the contract which it said amounted to a strict precondition to payment ('the Payment Term').

The Adjudicator found in Isoplus' favour and declared that it was due £323,502.32 as an interim payment. Additionally, whilst noting that the advice was non-binding and was expressly distinguished from the binding elements of the Decision, the Adjudicator found that the Payment Term was a precondition to payment, however it would be not possible to determine whether the Payment Term had been complied with on the available evidence.

Part 8 proceedings

On 14 February 2023, Isoplus made a demand for payment but this was resisted by Sleaford. In anticipation of enforcement proceedings, Sleaford issued its own Part 8 proceedings on 27 February 2023, seeking a declaration that Isoplus had not complied with the precondition to payment under the Payment Term and that, consequently, Isoplus was not entitled to further payment.

Part 7 proceedings

On 15 March 2023, Isoplus commenced Part 7 proceedings seeking to enforce the Adjudicator's Decision.

The two proceedings were then consolidated by consent order and came before Mr Alexander Nissen KC, sitting as Deputy Judge.

In considering the authorities, the Judge confirmed that the correct approach was to deal with the Adjudicator's decision first then, so far as possible, sort out Part 8 proceedings. On that basis, the Judge considered that:

1. As Sleaford accepted that the Adjudicator's decision was enforceable, there was no defence to its enforcement.

2. In respect of the Part 8 proceedings, there were serious questions to be asked, including: (i) how the Payment Term should be construed; (ii) whether Isoplus had in fact complied with the Payment Term; and (iii) whether Sleaford had waived the need to strictly comply with the Payment Term. Given the likelihood of a dispute of fact in connection with these issues, the matter was considered unsuitable for determination by Part 8.

As such, the Judge dismissed the Part 8 proceedings and gave Judgment in favour of Isoplus for the Part 7 proceedings. The Judge also confirmed that: (i) fresh proceedings could be commenced for a final decision on the issue; and (ii) Sleaford would not be prevented from re-running the same arguments as to the compliance with the Payment Term in those proceedings.

Comment

This case is a cautionary reminder that the Part 8 procedure should not be mis-used as a tactic to resist enforcement where there would be a fundamental dispute of fact.

Indeed, the Courts will take a dim view of any attempts to do so and the consequences will most likely be a dismissal of the proceedings coupled with an order to pay the other party's costs on an indemnity basis.