Jurisdictionally challenged

Published 30 April 2020

Executive Summary

1. In Flexidig Limited v M&M Contractors (Europe) Limited [2020] EWHC 847 (TCC), the Sub-Contractor (Flexidig) applied to the court for summary judgement to enforce an adjudicator’s decision against the Employer (M&M).

2. M&M defended the application on the basis that (i) the Adjudicator lacked jurisdiction; and (ii) the application should be dismissed in any event because it had not been served correctly; and the English Court did not have jurisdiction.

3. The Court held that it had jurisdiction to consider Flexidig’s claim and recognised against the context of a “rough and ready” Adjudication process that the Adjudicator had not exceeded his jurisdiction. Accordingly, the Decision was enforceable.

Background

4. M&M is a company incorporated in Northern Ireland. The parties’ sub-contract contained a Northern Irish governing law and non-exclusive jurisdiction clause. The sub-contract also provided for Adjudication, with final determination by litigation or arbitration in Northern Ireland. The works, however, were carried out in Lincolnshire, England.

5. The Adjudication concerned Flexidig’s interim application for payment (the “AFP”) in the sum of £2,507,481. Of that sum, M&M had previously paid £1.742m leaving a balance of £673,374.

6. M&M failed to serve a payment notice within the requisite period under the sub-contract, or at all. Instead, it sent a purported ‘pay less notice’ referring to a counterclaim of circa £1.5m, stating that the amount due was “zero”

7. The Adjudicator found that the pay less notice was valid.

8. He then went on to consider, without deciding the ‘true value’ of the AFP or the counterclaim, whether or not M&M should pay more than the sum specified in its pay less notice. This was on the basis of s118(9) of the Construction Act and the relief sought by Flexidig which included “such other sum as the Adjudicator finds is due”.

9. The Adjudicator decided that the sum due was £223,597.21 and made provision for payment by M&M, plus interest and costs and fees.

The challenge to the Courts jurisdiction.
10. In this case, M&M made a pre-emptive strike issuing a claim form for a declaration that the Adjudicator’s decision was invalid in Northern Ireland before the date that Flexidig were able to issue enforcement proceedings in the TCC.

11. M&M argued that, as a result of the extant proceedings, Northern Ireland was the proper forum and Flexidig should not be allowed permission to serve its claim form out of the jurisdiction.

12. The judge held that that this was only one factor to be taken into account if the Court was exercising its discretion under CPR 6.37 to decide whether England was the “proper place in which to bring the claim”. The other factors included the fact that the works took place in England; M&M had a “significant presence” in England; M&M was already involved in litigation arising out of the Adjudication (and unpaid fees) in England and crucially the claim had been argued and simply awaited judgment, if appropriate. It was therefore “absurd” to suggest that the parties should be put to the cost and expense of litigating in Northern Ireland.

13. In the circumstances, the Court held that it had jurisdiction to consider Flexidig’s application and that Flexidig was entitled to retrospective permission to provide service under CPR 6.37.

The challenge to the Adjudicator’s jurisdiction
14. M&M then sought to challenge the Adjudicator’s jurisdiction on a number of basis: (i) the referral was served late (ii) the decision to award a positive sum exceeded his jurisdiction; (ii) there was a breach of natural justice.

15. The Court unsurprisingly rejected these arguments finding that:

15.1 The date of “giving the notice of adjudication” was the date of actual or deemed service; not the date it was sent. The Referral was therefore in time.

15.2 The ambit of the dispute referred should not be overly legalistic. There was a power conferred by s 118(9) of the Act and both parties had opportunity to and did make submissions in relation to the sum to be withheld against the AFP.

15.3 There was no breach of natural justice. The Adjudicator decided the dispute on the material before him as to which both parties had the opportunity to address.

16. Accordingly, and in appreciation of the fact that Adjudication is a relatively rough and ready procedure, the Judge found that the Adjudicator was not “straying off course” and had jurisdiction to make the Decision he did.

Lessons for the construction industry

17. The Court’s decision should come as no surprise. It confirms the TCC’s desire to deal with cases swiftly and efficiently and to enforce Adjudication decisions wherever possible.