Pay now, argue later: Construction Muzzy Ltd v Davis Construction (South East) Ltd

Background

Construction Muzzy Ltd (“Muzzy”) was engaged by main contractor, Davis Construction (South East) Ltd (“Davis”), under two separate subcontracts for i) groundworks and ii) drainage works in respect of a residential development in Epping, , which involved the construction of 45 new homes.

Following issues on site, Davis asked Muzzy to leave site on the basis they had produced poor quality work despite having completed substantial works. Davis failed to pay two payment applications submitted by Muzzy in July 2024, resulting in Muzzy issuing the following adjudications:

• The "Groundworks Adjudication" under which Muzzy claimed recovery of £98,533.44 in respect of the payment application dated 28 July 2024 relating to the groundworks completed.

• The "Drainage Adjudication" under which Muzzy claimed a further £102,666.45 in respect of a second payment application dated 31 July 2024 relating to the drainage works completed.

Both the above adjudications were decided in Muzzy’s favour, awarding a combined sum of £261,191.44 plus interest. While Davis participated in the Groundworks Adjudication, they refused to participate in the Drainage Adjudication, ultimately refusing to pay both sums. Muzzy later sought summary judgment to enforce the decisions and recover the sums.

Enforcement

Davis defended the application for the summary judgement on the following grounds:

• Davis argued that the adjudicator improperly relied on an “surrejoinder” submitted by Muzzy during the groundworks adjudication, which had been served by Muzzy without Davis's persimmon. Davis argued that they were deprived of an opportunity to respond to the surrejoinder.

• Davis contended that the adjudicator should have resigned on the basis that the drainage adjudication concerned substantially the same dispute as the groundworks adjudication. As a result, Davis argued the second decision was void for lack of jurisdiction.

• Additionally or alternatively, Davis alleged that the adjudicator could not have approached the second adjudication independently, having already formed views during the first adjudication.

The Court’s findings

• While, the Technology and Construction Court ("TCC") acknowledged that the surrejoinder was procedurally unusual it decided its inclusion in the adjudication proceedings were necessary: it responded to new points raised in Davis’s rejoinder and was not pivotal to the adjudicator’s reasoning. Accordingly, the court held that there was no material breach of natural justice.

• Applying the principles in Sudlows Ltd v Global Switch Estates 1 Ltd, the TCC rejected Davis’s contention that the two adjudications were substantially the same. Although both related to works on the same site, they concerned separate and distinct subcontracts. The adjudicator was therefore entitled to proceed with the second adjudication.

• There was no evidence that the adjudicator had approached the drainage adjudication with prejudice: the adjudicator undertook an independent review of the evidence in both adjudications which formed the basis of the decisions.

Judgment

The TCC granted summary judgment enforcing both adjudication decisions. In doing so, the court reaffirmed three key points:

• Adjudicators’ decisions will be enforced unless there is a clear and material breach of natural justice or jurisdiction.

• Minor procedural issues, such as accepting a surrejoinder, will not affect enforcement unless they genuinely disadvantage one side.

• The “pay now, argue later” principle remains the primary role of the adjudication process.

Other takeaways

There remains a high threshold for any challenge of an adjudicator's decision – arguments based on jurisdiction require more than a “fanciful prospect of success.” Courts will not entertain speculative challenges which are viewed to be aimed at delaying payment.

Separate contracts indicate separate disputes - even where works are related, disputes under different subcontracts will generally be treated as distinct unless factual findings overlap significantly.

Commercial reality – adjudication was primarily introduced to ensure cash flow in the construction industry. Contractors and subcontractors should expect courts to uphold adjudicators’ decisions swiftly, preserving the integrity of the regime.