The claimant was a contractor under a contract to build 157 apartments in the Jewellery Quarter of Birmingham, and the defendant was a developer, acting as its employer. This case concerned a Part 8 claim for declarations that an adjudicator had erred in their calculations of the amount due from the claimant to the defendant, in finding that £9,369,927 was due to the claimant, as opposed to the £20,277,563.57 that the claimant considered was actually due to it. As the defendant was in liquidation at the time of the claim, the claimant sought, and was granted, permission to bring a claim under section 130 of the Insolvency Act 1986.

The parties entered into a construction contract for the claimant to construct the aforementioned flats on 16 November 2017, and works commenced shortly after. The original contract sum was £18,796,450, exclusive of VAT, which was later increased to £19,458,279.45 by way of variations worth £645,329.45 and £16,500 for loss and expense incurred by the claimant, neither sum ever having been disputed by the defendant. The dispute between the parties initially arose in June 2019, when the defendant, having previously issued its payment notice no. 19 for £9,369,927 in respect of the claimant’s works, claimed that it had overpaid it by £844,867, and demanded repayment of this sum within 14 days. The claimant did not pay this sum to the defendant, and raised its interim payment application no.19 by which it considered that the defendant in fact owed it a further £752,628.80.

On 17 June 2019, the claimant went into administration, which entitled the defendant to terminate the contract on the grounds that it was insolvent for the purposes of the contract, which it proceeded to do. The defendant then progressed the claimant’s works until 27 April 2020, when it assigned its rights and obligations under the contract to Grainger plc, which was the intended beneficiary of the project. The defendant has not suggested that the claimant was notified of this assignment or that the claimant’s consent was sought.

The works appear to have been completed by 3 May 2022. On 12 June 2022 a dispute was referred to adjudication, in which the claimant claimed £11,264,544.57 against the defendant, on the basis that the defendant had failed to provide a statement of account as it had been required to do so under clause 8.7.4 of the contract and that the figure claimed would and should have been the figure due under this statement of account. As evidence of practical completion, it relied on a website which showed some of the flats being marketed for rental. The adjudicator accepted that practical completion and remedying defects had been completed three months prior to the flats being marketed and that the defendant was in breach of its obligation to draw up a statement of account. However, he was not willing to assume that the full £11,264,544.57 was due, but rather considered that the amount due would actually be considerably lower. Further, he found that he did not have enough information to determine the amount actually due. Accordingly, though the claimant had been partially successful, it was still ordered to pay the adjudicator’s fee.  

Subsequently, on 16 August 2022 the claimant’s agent requested that the defendant agree that it is liable for at least £752,628.80 exclusive of VAT, failing which the claimant would assume that a further dispute had arisen under the contract. On 29 August 2022, the claimant initiated a second adjudication, seeking a declaration that it was owed £11,264,544.57 or such other sum as the adjudicator may award, or alternatively that it was entitled to at least £752,628.80 or such other sum as the adjudicator may decide. The claimant later advanced in its reply a further alternative sum of £356,908, the amount of certified works in the defendant’s payment notice of 4 June 2019. In response, the defendant argued that the works had actually only been completed on 16 August 2022, that the adjudicator lacked jurisdiction as the real employer was Grainger plc, and that Grainger had itself incurred costs that would be due to it from the claimant. The second adjudicator dismissed the contention that he did not have jurisdiction. In respect of the amount due to the claimant, the adjudicator took the approach that the legal burden of proof falls on the claimant to prove the value of any work which it had carried out but for which it had yet to be paid. The adjudicator found that the best evidence available was the payment notice of 4 June 2019, and that the claimant was due the difference between the amount in this notice and the amount it had already been paid, amounting to £356,008.

Following further correspondence between the parties, on 4 November 2022 the claimant petitioned for the winding up of the defendant. The defendant entered liquidation on 21 December 2022. The claimant then brought a claim for declaratory relief on 7 August 2023, having obtained the permission of the court. In its claim, the claimant submitted that the adjudicator had misinterpreted clause 8.7.4 of the contract, and accordingly the claimant was really entitled to a total of £20,277,563.57 rather than £9,369,927, meaning that the defendant owed £11,264,544.57 rather than £356,008. The claimant’s main argument in support of this assertion is that the wording of clause 8.7.4.3 was "the total amount which would have been payable for the Works in accordance with this Contract" - this, it argued, was plainly different to the value of the work actually done. It also argued that interpretation of this wording in line with leading cases including Wood v Capita Insurance Services Ltd [2017] AC 1173 does not lead to a different conclusion.   

The defendant, being in liquidation, was not present at court and did not make oral submissions. The judge therefore took into account its submissions in the second adjudication. The judge did accept the claimant’s submissions on the meaning of clause 8.7.4.3, both in terms of its ordinary meaning and its meaning in accordance with ordinary principles of interpretation. The judge also commented on the approached of the defendant and the second adjudicator in response to the claimant’s claim that it was entitled to a substantial windfall. The defendant sought to measure the claimant’s entitlements by measuring Grainger’s losses, while the second adjudicator treated the claimant’s claim in the adjudication as a quantum meruit claim. The judge considered that neither of these approaches were correct, but neither was the claimant’s. It did however accept the defendant’s approach of treating Grainger as the employer, as in some sense Grainger did become the employer for the purpose of the project (though not the employer of the defendant), and this approach preserved the integrity and commercial logic of the accounting exercise, while avoiding an unjust windfall for the claimant. The judge did acknowledge that there was a risk of this interpretation conferring legitimacy on an unauthorised assignment, but considered that this was not actually the case, as the assignment remained invalid, and Grainger was only treated as the employer for limited accounting purposes. However, the judge also found that this was not an appropriate case for the court to exercise its jurisdiction to grant declaratory relief. As grounds for this finding, he cited the caution the court must take in exercising this discretion, particularly when a party is absent. Further, he considered that a challenge by the defendant would have had a reasonable chance of success. The judge therefore dismissed the claim. 

As the judge himself went to some length to emphasise, this case illustrates the discretionary nature of declaratory relief. A court will naturally approach this kind of remedy with a degree of caution. Further, this case illustrates that if a party defending an action for declaratory relief that is not present at the proceedings, this will also weigh on the mind of the court, in order to avoid a potentially unjust outcome. Additionally, this case also provides valuable guidance as to the approach of the court where a party is unable to appear at a hearing and make oral submissions. In these cases, the court will use what information is available to determine what the party’s position would have been, in the interest of safeguarding natural justice.