Construction Muzzy Limited v Davis Construction (South East) Limited

1. As already introduced in my previous decision on the scope of today’s hearing, but worthy of repetition here, by Part 7 proceedings issued on 25th March 2025 and an accompanying application supported by the first witness statement of Paul Scott of 21st March 2025, the Claimant seeks summary judgment against the Defendant in the sum of £261,191.44 plus ongoing interest, through the procedure approved of by the TCC, by way of enforcement of two decisions of Leigh Belasco acting as a construction dispute adjudicator (“the Adjudicator”), those decisions being dated 20th January 2025 and 8th March 2025 respectively, the Defendant having failed to abide by the outcome of those adjudications. By Order of 1st May 2025 Waksman J transferred the proceedings to the TCC at Liverpool and certified that they are suitable for disposal by a District Judge. 2. The Defendant acknowledged service on 13th May 2025 and filed a Defence and Counterclaim dated 21st May 2025. The Defence [22], in addition to averring that the Adjudicator fell into error when determining that documents sent by the Claimant on 26th and 31st July 2024 respectively were interim payment applications and seeking a declaration to that effect by way of the Counterclaim [33 – 36] (“Issue 1”), raises matters of jurisdiction and breach of the rules of natural justice across both adjudications (“Issues 2 – 4”), which the parties agree are amenable to determination summarily by way of this hearing of the above application. 3. This judgment is my decision on enforcement of both adjudications, having heard submissions, for which I am grateful, from both Counsel, supplementing their further skeleton arguments and being referred once more to the 1022 page hearing bundle and the new authorities bundle. The Defendant relies upon a witness statement of Gabriella Shepherd of the Defendant’s solicitors dated 21st May 2025 and the Claimant relies further upon the second statement of Paul Scott dated 30th May 2025, to the extent that they are relevant to the residual issues. Background and the adjudication decisions 4. The Claimant was employed by the Defendant pursuant, materially, to two construction sub-contracts, which allowed for adjudication, to provide what have been described as “groundworks” and “drainage works”, respectively dated 3rd February 2023 and 7th June 2023, at a site known as Conder in Epping, Essex. Those sub-contracts had the same contractual terms. The Defendant became unsatisfied with the quality of the Claimant’s works and the Claimant was asked to leave the site in October 2023, with the works being incomplete. In the first adjudication (“the groundworks adjudication”), the Claimant asked the Adjudicator to decide, inter alia, that it was owed £98,533.44 (plus VAT) or such other sum as may be decided, pursuant to a payment application dated 28th July 2024 [961]. In the second adjudication (“the drainage adjudication”), the Claimant asked the adjudicator to decide, inter alia, that it was owed £102,666.45 (plus VAT), pursuant to a payment application dated 31st July 2024 [962]. The Adjudicator found for the Claimant in the full sums sought on both adjudications. The Defendant’s grounds of opposition 5. The Defendant raises the following issues in resisting summary judgment, in accordance with the limited matters which may be prayed in aid in order to avoid the application of the accepted “pay now, argue later” policy adopted in the TCC for the purpose of supporting the intention of Parliament to assist with cashflow within the construction industry:- (i) Issue 2: There was a breach of the rules of natural justice during the groundworks adjudication, as set out at para. 20 of the Defence [26], “…the Adjudicator placed significant reliance in his Decision upon an unsolicited surrejoinder submitted by the Claimant, for which no permission had been given…”; (ii) Issue 3: The Adjudicator lacked jurisdiction in the drainage adjudication, being under a duty to resign because the dispute in the drainage adjudication was substantially the same as the dispute in the groundworks adjudication, see paras 22 – 24.5 of the Defence [26 – 27]; (iii) Issue 4: (the Defendant agrees that this is only reached if I find against the Defendant on Issue 3) Having failed to resign, the Adjudicator’s approach to the drainage adjudication was one of predetermination rather than one of fresh eyes and an open mind, see paras 36 – 40 of the Defendant’s skeleton argument and paras 24.6 – 25 of the Defence [27 – 28]. The Court’s approach generally 6. Mr Lacey reminds the Court that, as a summary judgment application, the Court has to apply the accepted approach pursuant to CPR r. 24.3, in determining whether the above issues have no real prospect of succeeding in defence of the claim or that there is no other compelling reason why the case should be disposed of at trial and that the burden in this regard lies upon the Claimant as applicant. Mr Lacey’s approach is to emphasise that the Court only has to find that the Defendant’s defences are “arguable” and not “fanciful”, relying not least upon an extract from Coulson on Construction Adjudication (4th edn, 2018) at 7.16:- “It is important to note that, if the defendant identifies and maintains a clear challenge to the adjudicator’s jurisdiction, and can demonstrate an arguable case to this effect in any subsequent CPR Part 24 proceedings, then the decision of the adjudicator will not be summarily enforced, even if the defendant had not suffered prejudice as a result of the process.” 7. Mr Egan says that the above isolated use of “arguable” in a jurisdictional scenario is incompatible with the more general approach as noted in the White Book (2025 Vol. 1) at 24.3.2, namely that a realistic claim (or defence) has to carry some degree of conviction, being “more than merely arguable”, see ED & F Man v Patel [2003] EWCA Civ 472 @ para. 8. 8. To my mind, noting the jurisdictional context of the above extract in any event, it is highly unlikely that the learned author of the above text, had in mind a fanciful but arguable case (which might equate with “merely arguable”) and therefore I am clear that the level of arguability must carry with it a prospect of succeeding beyond fancifulness. Any further semantic discourse here is unlikely to be helpful. The arguments on Issue 2 (the groundworks adjudication) 9. Mr Lacey for the Defendant reminds the Court of the pertinent chronology: 13/12/24C gave notice of adjudication and sought the appointment of an adjudicator 20/12/24C’s Referral Notice D requests longer time to respond (10/1/25), given Christmas 21/12/24Adjudicator’s directions allow until 6/1/25 for D’s Response and until 11/1/25 for C’s Response (Reply) 6/1/25D’s Response 11/1/25C’s Reply 15/1/25D’s Rejoinder 16/1/25C’s Surrejoinder (unsolicited and not subsequently officially permitted by the adjudicator, copy received by me outside the bundle on the day of the hearing) 20/1/25Decision 10. He points out that in addition to the main argument on non-existence of an interim payment application in substance, the Response at para. 51 [253] raised the further issue of an implied term to give business efficacy by way of the mechanism for interim payment applications and the final accounts process operating in sequence, rather than simultaneously. Thereafter, by way of the permitted Rejoinder, the Defendant expanded upon its implied terms arguments, specifically by way of paragraphs 10 – 13 [ 476 – 477]. 11. He then asks the Court to refer to the unsolicited Surrejoinder (see above), which is by way of email from Carl Morris, Director of the Claimant’s representative dated 16/1/25 and timed at 5.42pm, proceeding materially as follows:- “Dear Sir, Muzzy acknowledges receipt of the Rejoinder. Muzzy would respectfully like to make the following short points: 1. There is no need to arbitrarily introduce implied terms into the sub- contract in the contrived way Davis is trying to do. The Sub-Contract terms and conditions stand alone and work fine, there is no need to apply the contrived implied terms to make the Sub-Contract work better in Davis's favour, that does not constitute “business efficacy”. If the Sub-Contract was incapable of operating in its current construction, then Davis would have introduced these new implied terms previously. But it did not…” 12. Mr Lacey’s position is that in dismissing the Defendant’s arguments as to the implication of terms into the contract to achieve business efficacy, the Adjudicator “relied largely” [skel. para. 25] on the above extract, see specifically para. 2.49.6 of the decision [500], where the Adjudicator reproduces point 1 of the email and then says:- “I agree with Muzzy, and I therefore reject the implied term arguments, and so I find.” 13. Instead of so proceeding, it is argued that he should either have ignored the document or should have given an opportunity for the Defendant further to respond. Because of Issue 1 (the alleged errors in relation to analysis of and/or categorisation of the purported interim payment applications and final account payment notices), says Mr Lacey, Issue 2 became of paramount importance in terms of being ultimately determinative and the reliance upon the contents of the Surrejoinder was a serious breach of the rules of natural justice. 14. Applying this to the law, Mr Lacey asks the Court to find a sufficient prospect of showing a serious “more than peripheral” breach in terms of failure to give the Defendant a fair hearing, which was either decisive or of considerable importance to the outcome of the adjudication. 15. Mr Egan, for the Claimant, points out the pleaded case on this issue at para. 20 of the Defence [26] (see para. 5(i) above), emphasising the use of the phrase “significant reliance”. He reminds the Court of the conclusions in this context of Akenhead J on breach of the rules of natural justice in Cantillon v Urvasco [2008] EWHC 282 (TCC) @ para. 57, also referred to by Mr Lacey as noted above, in terms of materiality and decisiveness. 16. He argues that there is no or no sufficient prospect of the Defence succeeding here in the following way:- (i) D set out its main opposition as to validity of the payment application at Section E of its Response [252 – 257] divided into 5 subsections, E(i) importing the issue of a single implied term as to the sequence of the contractual mechanisms at para. 51; (ii) By means of the Rejoinder para. 10 [475 – 476] this expanded to 5 separate implied terms; (iii) The emailed response or Surrejoinder of a day later was therefore a response to this new or expanded position and not an attempt to gain an unfair advantage; (iv) By way of paragraphs 2.45 – 2.48 of the Decision [498 – 499], the Adjudicator makes findings on section E(i) of the Response, which, whether right or wrong in terms of the conclusion (which is or has been decided to be not relevant for summary enforcement purposes), in the Adjudicator’s view disposed of the issue of the validity of the payment application; (v) Then “for completeness”, at para. 2.49 [499 – 500], in what Mr Egan describes as observations equivalent to obiter dicta, he deals with the implied terms arguments in six sub-paragraphs, the last of which quotes and agrees with the Surrejoinder on this issue but all of which rejected the need to imply any such terms; (vi) By way of paras 2.50 – 2.54, the Adjudicator dealt with the other subsections of Section E of the Response and at paras 2.55 and 2.56 [502] he summarised his findings and reached his conclusion; (vii) Thus all of the Defendant’s submissions had been considered and rejected and, by using the phrase “for completeness” the decision on the implied term(s) including reference to the Surrejoinder is either “obiter” or at best only part of the reasoning, at no stage coming close to satisfying the test of decisiveness or considerable importance. Put another way, there is said to be no basis for asserting that, “but for” para. 2.49.6, there would have been a different outcome, when seen in particular in the overall context of the decisions made, taking a step back; (viii) As such, this attempted line of Defence is, says Mr Egan, the epitome of the approach deprecated by Chadwick LJ in Carillion Construction Limited v Devonport Royal Dockyard Limited [2005] EWCA Civ 1358, see paras 86 and 87, namely combing through a decision in an attempt to identify such points of challenge. Discussion – Issue 2 17. Whilst it is apparent that there are strongly held feelings on the Defendant’s part that a level of unfairness has been operative here, from the use of the interim payment application approach through to the perceived lack of time afforded by the adjudicator to produce the Response and perhaps beyond, I am not persuaded that there is any more than a fanciful prospect of success of this argument based upon breach of the rules of natural justice. 18. Firstly, I agree with Mr Egan that, objectively, the undoubted intended and actual function of the Surrejoinder was not to steal an unfair advantage over the Defendant in having the last word on the implied terms issues, but rather to have a succinct opportunity to respond to the significantly expanded matters in this regard in the Rejoinder, i.e. that to allow the Surrejoinder into the mix of matters being considered was not of itself procedurally unfair. That, in essence, disposes of this point. 19. If, however, I am wrong about this, it is patently clear to me that the adjudicator’s approach to the contents of the Surrejoinder does not come close to being more than peripheral to or sufficiently decisive or important in the decision-making process, in the way contended for by the Defendant. 20. The flaw in the Defendant’s analysis, to mind, is neatly exposed by the concession that one option to result in fairness would have been simply to ignore the Surrejoinder completely. In that instance, paragraph 2.49.6 would not have appeared in the decision, but all the other paragraphs would have remained. To argue that the impact of the Surrejoinder was such as to radically alter the views expressed by the Adjudicator as to his conclusions otherwise, to my mind is fanciful indeed. I am satisfied that the observation made at 2.49.6 has no real prospect of being found to have been any more than a minor aspect of the overall decision, the direction of travel of which was all one way, namely against the Defendant’s position. 21. As such, Issue 2 has no real prospect of success, there is no other compelling reason why summary judgment should be refused and the Claimant is entitled to summary judgment on the groundworks adjudication. The arguments on Issue 3 (the drainage works adjudication — jurisdiction) 22. Mr Lacey began by floating the Defendant’s concerns (being without evidence on the issue) that the Defendant had no insight into how the same adjudicator came to be appointed on the drainage adjudication, which might give rise to arguments at trial on apparent bias. For the record, Mr Egan ultimately informed the Court that in his experience it is quite standard practice for the same adjudicator to be appointed in similar circumstances. There is no evidence on this issue and I am satisfied it has no direct relevance to, neither does it carry any weight in relation to Issue 3 for present purposes and therefore I do not take anything flagged here into account. 23. There is no issue between the parties that the Defendant identified and maintained a clear challenge on jurisdiction, beginning with the Defendant’s email of 5th March 2025 at point 2 [706] and repeated by email of 6th March 2025 [702]. In consequence, the Defendant refused to participate in the drainage works adjudication. 24. Mr Lacey confirmed his position that there is an arguable case that the dispute in the drainage works adjudication is “substantially the same” (but not “the same”) as the dispute in the groundworks adjudication, such that the Adjudicator was obliged to resign. 25. The intention of the Scheme, says Mr Lacey, is to prevent serial adjudications and to provide temporary finality for each dispute. He referred the Court to the judgment of Coulson LJ in Sudlows v Global Switch Estates 1 [2023] EWCA Civ 813. This was an appeal from a decision of a second adjudicator, namely that he was bound by an earlier adjudication. S had sought an extension of time based upon G’s delays and the first adjudicator had granted the same. G then omitted work from S’s scope, allowing certification of practical completion. S sought a further extension of time, resulting from a continuation of the first delay and when this was refused, it commenced the second adjudication. The judge on enforcement decided that the disputes were not the same or substantially the same and that the second adjudicator was not bound by the earlier decision, declining to enforce the second adjudication in favour of S. The appeal was allowed on the basis that the contractual responsibility for the delays was the “self-same” issue at the heart of both adjudications. The first adjudicator’s view on this was clear and binding and could only be challenged by trial in Court or by arbitration. 26. Mr Lacey draws the Court’s attention to paragraphs 55 and 58 of the judgment where three overarching principles are identified “when considering arguments of overlap”, the third of which was said to be critical, namely the need for flexibility in the context of a test of fact and degree, requiring common sense and fairness, which he argues is not the approach adopted by the adjudicator here. Specific reference was also made to para. 37(ii) where Coulson LJ noted some principles emerging from the judgment of Jackson J (as he then was) in Quietfield Ltd v Vascroft Construction Ltd [2006] EWHC 174 (TCC):- “If the contractor makes successive applications for extension of time on the same grounds, the architect or contract administrator will, no doubt, reiterate his original decision. The aggrieved party cannot refer this matter to successive adjudications. He is debarred from doing so by paragraphs 9 and 23 of the Scheme and section 108(3) of the 1996 Act …” 27. Mr Lacey identified in detail how the causes of action (failure to serve a payless notice) were the same in the two adjudications, how the contents of the Referral Notices were substantially identical and how the Adjudicator decided the disputes in exactly the same way. 28. It follows, argues Mr Lacey, applying commonsense and fairness, that it is sufficiently arguable that these disputes are substantially the same and that the Claimant should, in effect, stand debarred from pursuing the drainage works adjudication. 29. By way of a counterfactual, in order to enforce or test his point, Mr Lacey referred to paragraph 59 of Sudlows:- “59. Whilst I accept that it is not an invariable guide, one way of at least testing whether the correct approach has been adopted is to consider whether, if the second adjudication is allowed to continue, it would or might lead to a result which is fundamentally incompatible with the result in the first adjudication. If in that second adjudication, one or other of the parties is asking the adjudicator to do something that is diametrically opposed to that which the first adjudicator decided, then that may be an indication that what they are seeking to do is impermissible.” If, says Mr Lacey, a different adjudicator had come to a different decision, that would have given rise to an unacceptable degree of incompatibility. As such, whilst acknowledging that “most” decided cases arose out of the same contract or sub-contract, which is not the case here, he urges that there is no principled reason why that should make any difference when properly looked at in terms of substance, certainly when applying the arguability test upon enforcement. 30. Mr Egan, whilst not necessarily accepting Mr Lacey’s 3 stage approach at paragraph 32 of his skeleton, submits that these disputes are obviously separate. Their substance, he says, is different, as they are claims for notified sums under separate sub-contracts, the statutory right to adjudicate arising independently upon each, giving rise to separate claims and different entitlements. 31. He refers the Court to paragraph 37(i) of Sudlows (another of Jackson J’s identified principles) for further assistance:- “Where the contract permits the contractor to make successive applications for extension of time on different grounds, either party, if dissatisfied with the decisions made, can refer those matters to successive adjudications. In each case the difference between the contentions of the aggrieved party and the decision of the architect or contract administrator will constitute the “dispute” within the meaning of section 108 of the 1996 Act.” 32. Thus, when seen together, paragraphs 37(i) and (ii) illustrate the circumstances where an “aggrieved party” may and may not bring successive adjudications. In context, it is said, para. 37(ii) is clearly making reference to an aggrieved party who has already lost (my emphasis) on the point in question being unable to ask for the dispute to be re-adjudicated. A natural extension of the Defendant’s case must be that any adjudicator would have been required to resign on the drainage works adjudication and thus that the Claimant would effectively be debarred from making such a referral. This, says Mr Egan, is a nonsense. The drainage works dispute relied upon a different factual matrix and the Adjudicator was not even aware of any drainage works issue(s) when dealing with the groundworks dispute. 33. Ultimately, he urges, there is no sufficient level of arguability here and no question of impingement of the second decision upon the first, there being no findings upon the drainage works in the groundworks adjudication. Drawing upon para. 58 of Sudlows:- “58. The third critical principle is the need for flexibility. That is the purpose of a test of fact and degree. It is to prevent a party from re-adjudicating a claim (or a defence) on which they have unequivocally lost (HG Construction, Benfield), but to ensure that what is essentially a new claim or a new defence is not shut out. In this way, the re-adjudication in Carillion v Smith of the same claims, where the only differences were the figures, was impermissible whilst a new, wider, claim or Defence was permissible, even if it included elements of a claim which had been considered before, such as in Quietfield, and Balfour Beatty. Indeed, I consider that the result in each of the reported cases to which I have referred is the product of common sense and fairness.”, the crucial point, he says, beyond those landed on by Mr Lacey, is the first phrase of the second sentence, namely the purpose of this approach being to prevent an unequivocal loser from re-litigating, not to shut out a winner from bringing a new claim pursuant to a separate sub-contract. Discussion – Issue 3 34. Whilst superficially these two adjudications can, as Mr Lacey has done, be demonstrated to be on the same point of dispute in substance, namely the close points of similarly between the referral notices and the identical nature of the disputes raised, I remind myself that I should be applying robust common sense and fairness. In my view the Defendant here seeks to hide behind a shield which has not been provided for the appropriated purpose, in an almost “topsy-turvy world” fashion. 35. A reason why no supportive authority has been referred to me arising out of different contracts or sub-contracts, I am satisfied, is that it is or ought to be patently obvious that the mischief intended to be prevented by the duty to resign can only sensibly be applied to causes of action arising within a discrete contractual factual matrix, as in Sudlows, whether or not aspects of similarity or indistinguishability can be identified across two separate such contracts between the same parties. In that regard, I agree with Mr Egan that an important part of deciding whether disputes are substantially the same must be whether there is a likelihood of impingement upon findings of fact. None is arguable here, in my view, for the reasons he argues. 36. The Defendant here seeks to stop the successful Claimant running the same argument in a different contract, whilst at the same time choosing not to participate in that argument, despite having further issues which might have been argued there in order to change the mind of the Adjudicator (i.e. the concerns expressed as to reliance upon the Surrejoinder in Issue 2). The topsy-turvy irony of this can then plainly be seen, in my judgment, namely of the aggrieved losing party in the groundworks adjudication seeking to prevent the aggrieved winner from pressing home its advantage in a separate adjudication, when, if anything, common sense and fairness suggests that, having lost in the groundworks adjudication, there was little merit in continuing the dispute (however aggrieved with the result the Defendant felt), unless different grounds of opposition could be made out, consistent with the approach noted in Sudlows at para. 37(i). 37. The above hopelessness of the Defendant’s position can, in my view, be shown by what I find to be a proper application of para. 59 of Sudlows. The only party potentially seeking a diametrically opposite decision in the drainage works adjudication would have been the Defendant, had it chosen to participate. Instead, it seeks a decision from the Court as to arguability of an issue which, if successful, would produce a perverse result of a winner wishing to advance the same winning argument in a different contract being prevented from doing so. This, to my mind, is not an approach which is in any way consistent with the “pay now, argue later” policy of the Scheme and I reject the potential for persuading that Court at a later date that the disputes here are substantially similar as having fanciful prospects of success. No other compelling reason is otherwise relied upon. Accordingly, it is necessary to move to Issue 4. The arguments on Issue 4 (the drainage works adjudication – natural justice) 38. Mr Lacey contends that the failure to resign in such circumstances inevitably led to an unacceptable level of predetermination in the Adjudicator’s approach to the (unopposed) drainage works adjudication. In particular he points out the Adjudicator’s “frankness” at para. 2.6 of this adjudication [1017]:- “Whilst Davis did fully participate in Adjudication 1, the facts are very similar in that Adjudication, and I am satisfied that it is reasonable to expect a similar result here. If there were any factual differences that would in some way differentiate this adjudication, then Davis’ refusal to participate means that such facts have not been put to me. That was Davis’ prerogative.” 39. This, he urges, was an acknowledgment that he was not undertaking a fair and balanced assessment of the facts and evidence and not approaching matters with fresh eyes and an open mind, amounting to a sufficiently arguable case of serious and material breaches of natural justice. 40. Mr Egan reminded the Court of the Defendant’s pleading on this issue at para. 25 of the Defence and Counterclaim [28]. In terms of prejudgment, he notes, it is unavoidable that the Adjudicator only had the Claimant’s evidence, given the Defendant’s refusal to take part. He roundly rejects, in such circumstances, any suggestion that there is a proper basis for asserting that the Adjudicator did not approach matters with fresh eyes, pointing to the approach set out at paras 2.1 – 2.5 of the decision [1016 – 1017], reviewing the Claimant’s evidence and then making findings:- “Findings 2.5 I have reviewed Muzzy’s position, and I find (i) the Application was a valid payment application (no point has been taken by Davis to explain otherwise), (ii) Davis failed to provide a payment and/or pay less notice (or if it did, it has failed to disclose the same due to its non-participation) and (iii) that Muzzy’s Application became the sum due in default with reference to clause 7.10, having clearly been served correctly and in accordance with the Sub-Contract.” 41. The reference to reviewing, it is argued, is the equivalent of using “fresh eyes” together with noting that the Defendant could have done something to seek a different decision, but failed to do so. The acknowledgment at para. 2.6, says Mr Egan, is no more than saying that in a non-participation situation which leads to the non-introduction of any material factual differences, a similar result can reasonably be expected. This is not a situation giving rise to any arguable breach of the rules of natural justice. Discussion – Issue 4 42. I am not satisfied that there is any more than a fanciful prospect of a finding at trial of an unfair or material level of pre-determination here, other compelling reason not being relied upon. In many cases in this Court’s experience, parties in the position of the Defendant may raise issues of jurisdiction such as Issue 2, but then choose to continue to participate in the adjudication, without prejudice to their ability to raise jurisdiction on enforcement, should it remain relevant to do so. By refusing to participate, the Defendant left itself open to the potential for an unopposed finding similar to the finding in the groundworks adjudication. Crucially, however, the Adjudicator did not simply approach matters on a “default” basis, but, I am satisfied, properly reviewed the evidence before reaching a decision on that evidence. Para. 2.6 does not indicate that the Adjudicator did not feel it necessary to review matters at all, but rather gives cogent reasons why, having reviewed matters, the result should not be seen as surprising. The Defendant chose to give him no ammunition to proceed differently and the Claimant came up to proof on its evidence. This is not a situation which gets off the ground, it seems to me, in terms of a natural justice argument and I reject it accordingly. 43. As such, Issue 3 and Issue 4 have no real prospects of success and the Claimant is entitled to summary judgment on the drainage works adjudication. —————————————————