Background
The proceedings related to the construction of an anaerobic digestion plant in Kent. Grays Thurrock Properties Ltd (“GTP”) subcontracted BioConstruct Ltd (“BioConstruct”) for the construction of the plant. The subcontract provided for 14 payment milestones.
BioConstruct raised a claim against GTP due to GTP’s failure to pay Milestones 14, RR1 and RR2. GTP subsequently raised an application for strike out under CPR 3.4(2)(a) or summary judgment under CPR 24.3 on the basis that (1) the milestones within the subcontract were not achieved, therefore meaning that no payment was due, and (2) BioConstruct’s case lacked merit and failed to demonstrate a fulfilment of Milestone 14.
Issues
GTP argued that BioConstruct’s claim had no reasonable prospect of success. Its application hinged on four grounds.
- The meaning of ‘immediately preceding in the subcontract’.
- The Design Feedstock not being issued.
- A Steady State Operation not being demonstrated.
- A failure of BioConstruct to provide the necessary Take Over documentation.
The Court focused primarily on the first issue: whether the Plant achieved Steady State Operation for 18 days “immediately preceding” Take Over Testing as required under the subcontract. The Steady State Tests were completed between 29th January 2020 and 15th February 2020. The Take Over Tests were completed on 7th and 8th March 2020. GTP’s application sets out that 7th March 2020 could not be considered ‘immediately preceding’ from the Steady State Operation of 15th February 2020 and therefore the requirement under the subcontract was not satisfied.
Following BioConstruct’s Reply, GTP argued that the defence raised a number of issues for the first time. Relying on Martlet Homes Ltd v Mulalley & Co Ltd, GTP put forward that it was not permitted to rely on matters to the extent that they amounted to causes of action. The Martlet case restricts the introduction of new claims late in proceedings.
However, the Court determined that the plea was not a new cause of action, rather that it already existed in BioConstruct’s Particulars of Claim. For example, the ‘immediately preceding’ issue was dealt with by BioConstruct at paragraph 51 of the Particulars of claim. The Court found against GTP in its reliance on Martlet and noted that BioConstruct’s Reply was appropriate in the case of a “Yes, but” argument. It found that BioConstruct’s response was a “Yes, but” response, rather than a fresh claim.
Further, BioConstruct relied on both R v Inspector of Taxes ex parte Clarke [1974] and In Re Coleman's Depositories Ltd, and Life and Health Insurance Association [1907] 2 KB 798 in its Response. BioConstruct argued that ‘immediately preceding’ should be interpreted as ‘with all reasonable speed in the circumstances’.
Court’s decision
Under CPR3.4(2)(a) and CPR 24.3, the bar for striking out or granting a summary judgment is high. It must be demonstrated by an applicant that is claim has no real prospect of success.
Given that the plea in Reply was not to be regarded as a new cause of action, and owing to the fact that BioConstruct relied on authorities, the Court dismissed the application as it related to the meaning of ‘immediately preceding’. The Court found that it would be ‘impossible to say that it [BioConstruct] had no real prospect of success within the meaning of CPR 24.3’.
The remaining issues – concerning Design Feedstock, Take Over, and Steady State Operation – were not considered in detail. However, it was noted that as such issues gave rise to issues of fact, it could not be said that there was no real prospect of success. The application was subsequently dismissed by the Court, under either CPR 3.4(2)(a) and CPR 24.3.
Practical implications
This case underscores the importance of ensuring clarity and precision when establishing payment milestones. Contractual milestone definitions should be precise and objectively measurable to avoid disputes over interpretation. Where operational conditions are a factor in the setting of milestones, the specific protocols and documents required should be made clear. Clients should ensure that objective testing protocols and documentation requirements are agreed upfront.
It also provides a reminder regarding the high bar that is set by the court when assessing summary judgment or strike out. It reiterates that where there is a real dispute of fact or disparity regarding contractual terms, courts will generally allow the matter to proceed to trial. Therefore, when opting to pursue strike out or summary judgment the client needs to appreciate the potential cost implications of doing so and whether pursuing another form of alternative dispute resolution would provide a more cost effective and efficient resolution.
If you would like to discuss this article further please contact the authors, Alice Sleep and Heather Roberts.
