Construction Adjudication Cases: Part 1 of 2020

2) Jurisdiction and Natural Justice [9] - Flexidig Ltd v M&M Contractors (Europe) Ltd M&M, a company incorporated in Northern Ireland but with a substantial business presence in England, engaged Flexidig under a subcontract to carry out works in connection with infrastructure for fibre optic broadband in Lincolnshire. There had already been two adjudications between the parties, in the second of which M&M claimed £1.5m damages for defects. The adjudicator, Mr Baldwin, awarded M&M £462,000, “on account of” the costs of remedy. Upon enforcement in Northern Ireland, Horner J granted judgment for £12,000 only having found there was no jurisdiction to award a payment on account. In the third adjudication, Flexidig claimed £673,374 + VAT said to be the balance owing on its application for payment number 70 (AFP), or such other sum as the adjudicator should find due. The claimwas put as one for ‘damages’, though it was in truth a debt. Flexidig contended that there was no pay less notice and that its later application was a payee payment/default notice entitling them to payment of the sum claimed. M&M disputed the validity of the payment notice, and in any event claimed that it had served a pay less notice, in time, which by virtue of its claim for £1.5m for defects reduced the sum due to zero. M&M argued that once it was accepted that there was a valid pay less notice, the technical (‘smash and grab’) claim failed and that was the end of the matter. Flexidig in reply said the pay less notice relied on was out of time, did not specify how the sum of £1.5m was calculated and bearing in mind the second adjudication and failed at enforcement, there was no merit in such a claim anyway.

They went on to suggest that the adjudicator had power to decide what sum if any was due for defects and contended it could not exceed £247,000 which was the sum that M&M claimed to have spent to date on putting right defects. M&M’s rejoinder was that the dispute referred was no more than the technical question whether there was a valid pay less notice and if the notice was valid, there was no jurisdiction to consider or award any other sum.

The Adjudicator's Findings

The adjudicator:

1) Found Flexidig’s application for payment was a valid payment notice

2) Found M&M’s pay less notice was in time and valid to prevent the sum claimed being the notified sum

(3) Decided that Flexidig was not entitled to recover ‘damages’ of £673,000

4) Found that, without deciding the true value of the AFP, there was still jurisdiction to decide whether the amount to be paid should be greater than the sum specified in the pay less notice which here was zero 5) Went on to consider what sum if any M&M was entitled to withhold for defects and decided that M&M was entitled to withhold money for the estimated costs of making good defects and that the maximum sum was to be found by taking the figure of £462,000-odd (previously decided by Mr Baldwin in the second adjudication) and deducting that from the sum of £673,000 claimed by Flexidig leaving £223,000 which he awarded.

[9] [2020] EWHC 847 (TCC)

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