Nicholas Towers considers adjudication, extensions of time and judgment in default during lockdown
- Some lessons on the interference with dispute resolution caused by Covid-19 can be learned from a recent decision of the TCC in MillChris Developments Ltd v Waters  4 WLUK 45. This note considers that decision, as well as some issues relating to extensions of time in litigation, and the merits of requests for judgment in default during the lockdown.
Restraining contractual dispute resolution mechanism through injunctive relief
- Adjudication is a “quick and dirty” method of dispute resolution that produces temporary decisions, enforceable via summary judgment, within 21-28 days of a referral. A statutory adjudication scheme is heavily used within the construction industry, and it is a massive aid to cash flow. Parties retain the ability to litigate / arbitrate the underlying dispute, though most do not. The speed of the process makes it difficult at the best of times, but during the lockdown it will be even more of a logistical challenge.
- In MillChris, the respondent to an adjudication commenced on 23rd March 2020 (the day the lockdown was announced) sought an injunction to restrain any adjudication proceedings until the lockdown was lifted. The company was no longer trading and was having difficulty contacting the relevant ex-employees, its solicitor was in self-isolation, and it did not consider that a site visit to analyse alleged defects and overcharging would be possible. It argued that continuing with the adjudication would be a breach of natural justice because it would be denied the opportunity to present its case, citing Dyson LJ in Amec Capital Projects Ltd v Whitefriars City Estates Ltd  EWCA Civ 1481:
“14. The common law rules of natural justice or procedural fairness are two-fold. First, the person affected has the right to prior notice and an effective opportunity to make representations before a decision is made.”
- Ultimately, the application was rejected on the facts. Jefford J considered each of the impediments upon which MillChris relied, such as the difficulties with contacting ex-employees, and concluded that they were a product of the circumstances of the company, not Covid-19. Where solicitors were concerned, her view was that the technology was available to allow the preparation of the adjudication remotely. This could include the scanning or couriering of documents, taking proofs of evidence via Skype or Zoom, and even attending a site visit via videolink.
Extensions of time
- Clients involved in court proceedings during the lockdown may experience similar practical difficulties, albeit usually with less onerous timescales. Will they be able to obtain relief? Until 30th October 2020, the new PD 51ZA means that parties can agree 56-day extensions of time. However, this does not apply to a defence, which under CPR 15.5(1) can only be extended by 28 days.
- How likely is a party to obtain a longer extension of time where there is no agreement? Paragraph 4 of PD 51ZA is not much help and merely states the obvious:
“4. In so far as compatible with the proper administration of justice, the court will take into account the impact of the Covid-19 pandemic when considering applications for the extension of time for compliance with directions, the adjournment of hearings, and applications for relief from sanctions.”
- A court will not be as hostile to an application for an extension of time as an application to restrain an adjudication, but defendants must be alive to the need to demonstrate genuine impediment. Assertions of Covid-19 lockdown difficulties will undermined if detailed instructions have been taken from the client remotely, a bundle prepared, and counsel briefed to attend a Skype hearing. It is suggested that genuine practical obstacles will have to be shown, such as material documents being in an office under lockdown, with no realistic prospect of retrieval. Remember, given the ubiquity of VPNs, shared drives and cloud storage, any application must drill down into the detail of the client’s document storage system.
- In the recent decision in Muncipio de Mariana v BHP Group PLC  EWHC 928 (TCC) is helpful. There, HHJ Eyre QC set out the following principles, in the context of an application to extend the time to reply to an expert report:
(a) The underlying objective must be to keep to existing deadlines. The prompt administration of justice and compliance with court orders remain of great importance.
(b) Legal professionals are expected to make appropriate use of modern technology.
(c) Lawyers are expected to rise to the challenge of the pandemic, to be ready to put up with inconvenience and acquire new skills to use remote technology, and “go the extra mile”.
(d) The same considerations are unlikely to apply to litigants in person.
(e) Courts should be willing to accept evidence and material with less polish and focus than might normally be expected.
(f) Courts must take into account the reality of the pandemic and avoid being overly exacting and requiring compliance with deadlines that cannot be achieved.
(g) Courts must be conscious that remote technology is likely to cause work to take longer; meetings conducted remotely will take longer than those carried out face to face.
(h) The court will take into account the availability of IT equipment, fast internet connections and support staff. It will also note that some parties may be caring for children or sick family members.
(i) All these factors should be set against the general reluctance to lose a trial date, and the court should be confident that there is no alternative available which is compatible with dealing fairly with the case.
Judgment in default
- In circumstances where businesses may not be open, pre-action letters and, importantly, claim forms and particulars of claim are likely to go unnoticed. For some clients, this presents a temptation to quietly serve proceedings on a defendant’s business premises, wait, then apply for judgment in default. This is probably self-defeating. There will be many, many applications to set aside default judgments on the basis that the business premises were shut down, the staff could not visit to check the mail, and the failure to file a defence was innocent. Especially where individuals or small businesses are concerned, the argument that “the defendant should have arranged mail forwarding or the periodic collection of post” will probably not win the day, with judges likely to be more sympathetic to a defendant’s pleas that the decimation of their business and trying to make ends meet was a greater priority than timely collection of post.
- It seems likely that an application to set aside judgment in default, where all correspondence has been sent to a business address that has been forced to close, will probably succeed. All the default judgment will have achieved is additional costs and delay. Quietly “stealing a march” on defendants by hoping they will not notice proceedings served during lockdown is therefore inadvisable.
- It is suggested that claimants take greater steps than usual to bring a claim to a defendant’s attention during this period, by posting documents to the director(s)’ addresses (if known) and emailing scanned copies to company email addresses. This makes it much harder for recalcitrant defendants to plead ignorance, and if they do bury their heads in the sand, makes a set aside application much less likely to succeed.
If you have any questions in relation to the article, please contact Nicholas.firstname.lastname@example.org