Would you grant an injunction?
Learnwell University engages Buildkwick Limited to build student accommodation. Liquidated damages are fixed at £3000 per week or part thereof. The contract contains an arbitration clause. The contract provides that if Buildkwick fails to proceed regularly and diligently, Learnwell will be empowered to dismiss Buildkwick from the works. The contract becomes extensively delayed and the parties blame each other. Learnwell dismisses Buildkwick but Buildkwick refuses to leave site. Learnwell seeks an injunction from the court requiring Buildkwick to leave. Should Learnwell be granted an injunction?
Arbitration's what you need
The dispute concerns the responsibility for the extensive delay. That dispute would be subject to the arbitration clause and the adjudication Act 1996 if referred to arbitration. Until that dispute is resolved, Learnwell's right to dismiss Buildkwik from the works cannot be determined. Meanwhile, Learnwell is compensated for the delays by deducting liquidated damages from payments due. These should be a genuine pre-estimate of delay-related damages and Learnwell has only itself to blame if they are set too low.
Either party is free to commence arbitration, but Learnwell applied instead to the court for an injunction. Putting to one side for the moment the question of whether the court would grant a stay to arbitration, it would be unlikely to grant an interim injunction as Learnwell should have been adequately compensated by the liquidated damages and liability is far from clear.
This is contrary to the result of the recent Court of Appeal case of Bath and North-east Somerset District Council vs Mowlem that upheld the application of the council for an interim injunction. In that case the consequences of a protracted delay in allowing another contractor to enter site and carry out remedial works was far more serious. Also, liability was far clearer. As such it should be distinguished from this case.
I believe Learnwell should not be granted an injunction at this stage. The appropriate course to resolve the matter is for Learnwell to commence arbitration and obtain an early award. Thereafter, if Buildkwik is found liable for the delay and still refuses to leave the works Learnwell can seek an interim injunction from the court. Alternatively, the arbitrator could order Buildkwik's dismissal from the works.
William Read, via email Expert answer
The courts' traditional approach is that a contractor is not entitled to retain possession of the site if dismissed. But that has been challenged. Thus, where a contract contained an arbitration clause, the contractor was granted an injunction against possession pending an arbitrator's decision (Foster & Dicksee vs Hastings Corporation).
Further, in the recent case of Bath & North East Somerset District Council vs Mowlem Plc, the council was granted an injunction restraining Mowlem from preventing the council giving site access to a new contractor. The court decided according to the test of the balance of convenience and whether liquidated damages would be an adequate remedy to the council if an injunction were not granted.
So Buildkwick might argue that:
- (i) no injunction should be granted pending an award on the dispute by an arbitrator; and (ii) on the balance of convenience, the injunction should not be granted because liquidated damages would be an adequate remedy for Learnwell.
However, Buildkwick, in resisting the injunction, would be challenging the courts' traditional approach. This is the kind of case that might only be resolved on appeal.
A shedload of troubleWareBuild designed and built a retail warehouse – essentially, a large shed with offices. The developer client, Expand, does not have a tenant. Expand says WareBuild is not finished; WareBuild says it is.
The client says that there are defects in the cladding and the building is not yet complete. There are some unsightly marks on the cladding caused by adhesive residue from a temporary protective coating, which WareBuild removed when it had finished. The cladding subcontractor, Claddit, was specifically selected for its cladding system by Expand, but WareBuild took responsibility for design. Claddit told WareBuild the marks will disappear over time. The client says WareBuild must remove the residue at its own expense.
Expand also says that in order to complete, WareBuild must provide a particular form of collateral warranty from Claddit.
WareBuild provided the standard form of subcontractor warranty but, unknown to the contractor, the main contract had a bespoke form attached that it should have used.
The subcontractor Claddit is not budging and WareBuild is now being hammered for liquidated damages. Should WareBuild pay?