Practice and procedure – CPR Part 8 – Construction of contract – Claimants issuing Part 8 claim seeking declarations concerning construction of building contract – Defendant raising preliminary objection that matter not suitable for resolution under Part 8 procedure – Whether case capable of resolution as matter of pure contractual construction – Claim dismissed
The claimants were two related companies which together acted as employer. The defendant was the contractor on a project involving the construction of three bridges over the Jubilee Line and Docklands Light Railway and a new station entrance at Twelve Trees Park, London.
In July 2017, the claimants invited the defendant to tender for a pre-contract services agreement (PCSA) which was formally executed in August 2018. Thereafter the parties worked on the tender design, although the scope of the defendant’s involvement was contested.
During the PCSA period, the tender design was developed. The PCSA final account was agreed in July 2019. A formal building contract was executed in December 2020. In July 2021, the parties entered into two novation agreements, with project engineers and project architects respectively.
A dispute arose concerning errors and omissions in the tender design. The claimants denied liability and argued that the defendant was liable because it assumed responsibility for the tender design. The claimant sought declarations as to the construction of the contract.
They issued a claim under CPR Part 8 on the basis that the matter could be resolved as a matter of pure contractual construction. The defendant raised a preliminary objection that the matter was not suitable for resolution under the Part 8 procedure since the proper construction of the contract necessitated considering substantial disputes of fact as to the extent of the defendant’s responsibility for the design.
Held: The claim was dismissed.
(1) In essence, the Part 8 procedure was designed for the determination of relevant claims without elaborate pleadings. If the procedure was misused, the defendant could object and equally the court on its own initiative, and as part of its function to manage claims, would order the claim to proceed under Part 7 and give appropriate directions. Thus, the power under CPR 8.1(4) was essentially a case management power to be exercised in accordance with the overriding objective. The court’s power to grant declarations was discretionary.
It was an express requirement of the Part 8 procedure that the question for the court was unlikely to involve a substantial dispute of fact and it was to be implied in the rules that the question should be framed with some degree of precision and/or be capable of a precise answer. There was a real risk of the Part 8 procedure being used too liberally and inappropriately with the risks both of prejudice to one or other of the parties in the presentation of their case and of the court being asked to reach ill-formulated and ill-informed decisions: Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC) followed.
(2) Wherever a party was contemplating commencing proceedings under CPR Part 8 in respect of a claim which could be started under CPR Part 7, the proposed defendant ought to be notified that the use of Part 8 was being contemplated. A brief explanation ought to be provided as to why Part 8 was more appropriate than under Part 7 in the particular circumstances of the case. A draft of the precise issue or question which the claimant was proposing to ask the court to decide ought to be supplied to the defendant for comment and any agreed facts relevant to the issue or question identified: Cathay Pacific Airlines Ltd v Lufthansa Technik [20019] EWHC 484 (Ch) considered.
The adoption of a hybrid procedure under which the determination of limited factual disputes could be accommodated under Part 8 required that the parties should agree the process for determining the facts (for example, on the documents or by way of oral evidence) or, in the absence of agreement, apply to the court for directions: Vitpol Building Services v Michael Samen [2008] EWHC 2283 (TCC) considered.
(3) When interpreting a written contract, the court was concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge available to the parties would have understood them to be using the language in the contract to mean. The salient point was that the meaning of the contract had to be assessed in light of the facts and circumstances known or assumed by the parties at the time it was executed: EE Ltd v Mundio Mobile Ltd [2016] EWHC 531 (TCC) considered.
In the present case, the claimants made a number of factual averments in support of their case on construction. The parties’ positions disclosed substantial disputes of fact which went directly to the circumstances known to the parties at the time the contract was executed and the factual matrix and was hence relevant to the question of construction.
That was not a short or narrow point, or something which could be determined based on inferences drawn from the documents before the court. There was no agreement between the parties as to how that dispute should be determined. The defendant made clear that it would wish to put in additional evidence, and it would be contrary to the overriding objective to shut that out at this stage. Disclosure might be required.
It could not be said that the disputed facts would or might make no difference to the outcome. On the present state of the evidence, the court would have to decide the issues summarily, effectively concluding that the defendant’s construction stood no reasonable prospects of success. The court had not reached that conclusion.
(4) The paradigm Part 8 claim was a discrete issue of contractual construction which could be determined within the four corners of the contract. This was a long way from such a case. The PCSA, contract and novation agreements were lengthy and technical contracts, and the relationship between the three was in issue. The declarations sought were wide-ranging. As things stood, the court was asked to decide the contractual construction issues in a vacuum.
Therefore, the claim was not suitable for determination under Part 8. The court had a discretion to order the claim to continue under Part 7 and the parties were invited to consider how the claim should proceed, and to agree an order and directions if appropriate.
Thomas Lazur (instructed by Howard Kennedy LLP) appeared for the claimants; Sarah Hannaford KC and Ben Graff (instructed by Hawkswell Kilvington Solicitors) appeared for the defendant.
Eileen O’Grady, barrister
