Millchris Developments Ltd v Waters [2020] 4 WLUK 45: Injunctions, Adjudication and Covid-19

It was only a matter of time when Covid-19 would make its way into the Technology & Construction Court, and Millchris Developments Ltd v Waters [2020] 4 WLUK 45 is the first construction dispute relating to Covid-19. It tackles the issue of whether the delays caused as a result of government ‘lockdown’ restrictions could affect the date of a scheduled adjudication via an interim injunction.

Facts

In September 2017, the applicant carried out work on the respondent’s property. In November 2019, the applicant ceased trading. In March 2020, the respondent alleged that there had been defects in the works on the property and that they had been overcharged by £45,000. As such, the respondent commenced adjudication.

The adjudicator timetabled the submission of evidence to be completed by 3 April 2020 and a site visit for the 14 April 2020, which happens to be within the ‘lockdown’ period stipulated by Government as a result of the Covid-19 health crisis. On 26 March 2020, the applicant wrote to the adjudicator stating that the adjudication should be postponed until the ‘lockdown’ measures were lifted because it was not possible to comply with the scheduled timetable due to relevant ‘lockdown’ restrictions. Subsequently, the applicant applied for an interim injunction prohibiting the respondent from proceeding with the adjudication.

The applicant stipulated that if the adjudication takes place, it would be conducted in breach of the rules of natural justice because the applicant did not have sufficient time to properly prepare for it. As a result of the Covid-19 health crisis, and relevant restrictions in place, the applicant’s solicitor had been forced to self-isolate at home, making it difficult to obtain evidence from those with knowledge of the dispute. Additionally, the applicant submitted that it would be unfair to proceed with the site visit where none of its representatives were able to attend and there was insufficient time to appoint an independent surveyor to be present.

Decision

The application was refused by the court. The well-established principles in American Cyanamid Co v Ethicon Ltd [1975] A.C. 396 require three questions to be asked before an interim injunction may be granted:

· Is there is a serious issue to be tried?

· Would damages be an adequate remedy?

· Where does the balance of convenience lie?

Under the first limb, it was emphasised that the court will only grant an injunction in respect of an ongoing adjudication “very rarely and in very clear cut cases” (see Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd (In Liquidation) [2018] EWHC 2043 (TCC); note that as of 22 April 2020 this case is being heard in the Supreme Court).

In the instant case, the threshold for granting the injunction had not been met. In any adjudication, issues had to be addressed within a short time scale and were usually under time constraints. There had been no explanation as to why the relevant papers could not be digitally transported or scanned over to the solicitor or anyone else instructed with the matter.

Additionally, the parties to an adjudication had no right to be present at a site visit. The adjudicator could therefore conduct the site visit on his own. Despite the property being owned by the respondent who therefore had access to the property, arrangements could have been made for the visit to be recorded and/or for the applicant to list specific matters for the adjudicator’s attention beforehand.

Furthermore, the reason for not being able to obtain evidence had little to do with Covid-19 but rather with the fact that the applicant had been unable to contact its former managing director within the short time available. Thus, the injunction would not be granted, and the adjudication should proceed.

Commentary

Whilst this injunction was rejected, the court stipulated that there might be circumstances where it would be granted, for example where the adjudicator made it clear that they only intended to hear from one party in the adjudication due to the other party not being able to gather evidence as a result of Covid-19. However, generally-speaking, in terms of natural justice disputes for adjudication, delays due to Covid-19 are unlikely the succeed.

For the best chances of establishing a successful claim, there must be clear causation, without any other significant factors breaking the chain of causation, that events unfolding from Covid-19 caused a breach to the rules of natural justice. The parties must be unable to mitigate such events and, as a result, be prejudiced in adjudication should it proceed. Adjudication is used to resolve disputes quickly and thereby secure cashflow within projects; Millchris acts as an indicator to discourage parties attempting to use Covid-19 as an excuse for extra time to gather more evidence.