In this article, Michael Woolley considers the recent decision of the TCC in Northumbrian Water Ltd -v- Doosan Enpure & Anor [2022] EWHC 2881 (TCC) (14 November 2022) and the interrelationship of arbitration with the enforcement of an adjudicator’s decision.
It is well understood that adjudication offers no immediate powers to enforce an adjudicator’s decision. There may be a contractual promise to abide by the decision, but somebody’s failure to comply with a contractual obligation is usually what led to the adjudication in the first place.
The court stepped in and the Technology and Construction Court developed an accelerated procedure in which it would give summary judgment in respect of an enforceable decision.
The court generally does this regardless of the underlying dispute and regardless of whether the adjudicator has made an error in deciding a fact or in the law. The arguments that might give rise to the court not being ready to give summary judgment include an adjudicator acting outside his jurisdiction or where there was a serious breach of the rules of natural justice in the conduct of the adjudication.
How then does this fit in with the contractually agreed arrangement for dispute resolution?
First, we can consider the easy position. JCT contracts include an optional arbitration clause and the parties must specifically opt for this if they want to have arbitration. Historically, arbitration had been the default mechanism under the contract but that changed with the advent of adjudication. The JCT appear to have recognised that it would be nonsensical to have an adjudication decision, which remained disputed (say on grounds of jurisdiction), for that dispute to be determined in arbitration and then for the arbitration decision to have to be taken to court and registered as a judgment in order for it to be enforceable through the use of the court’s coercive powers. The standard article by which the parties can opt for arbitration under the JCT contract was modified so as to exclude, “any disputes or differences in connection with the enforcement of any decision of an adjudicator”.
The NEC contract does not however provide for this. Clause W2 provides that if the party is dissatisfied with the decision of the adjudicator, then it should give notice, within four weeks of the adjudicator’s decision, that it intends to refer the dispute to the ‘tribunal’ and the giving of that notice is a condition of such a referral. What then if the ‘tribunal’ is arbitration? Without the exclusion in the JCT wording, would a disputed adjudication decision have to go to arbitration for a decision before enforcement?
The Arbitration Act 1996 has been considered by the courts as requiring arbitration where there is an arbitration agreement and a dispute. Considerable latitude has been given to what constitutes a dispute and it became clear that almost any argument would do, whether or not the court considered it had no reasonable prospect of success. This led to a judge indicating that it was possible to dispute the winner of the previous year’s Boat Race. Where court proceedings have been pursued contrary to such an arbitration agreement, the act required a mandatory stay of those court proceedings
This was the background when the court came to consider the enforcement of an adjudication decision in a dispute between Northumbrian Water and a joint venture comprised of Doosan Enpure and Tibury Douglas. The contract was based on NEC wording. The adjudicator had decided that Northumbrian Water was entitled to be paid £22,458,540.04 plus interest, but inclusive of VAT.
Unsurprisingly the JV said that the adjudicator’s decision was disputed and gave notice, as to the underlying merits of the dispute within the requisite four-week period. That notice did not however raise the sort of argument that would otherwise justify a court in refusing to enforce and adjudicator’s decision where there was no arbitration agreement – such as acting outside jurisdiction or breach of the rules of natural justice.
Thus, the question for the court to resolve in one sense was (i) did it look for a solution upholding the speedy procedure it had evolved for enforcing adjudication decisions? or (ii) did it have to give primacy to the Arbitration Act and grant the mandatory stay?
On this occasion the court was helped by the fact that the notice expressing dissatisfaction with the decision only disputed parts of the decision and did not raise issues as to whether the adjudicator had exceeded his jurisdiction or acted in breach of the rules of natural justice. That, combined with the four-week time limit, meant that by the time the matter was before the court the JV could not dispute that the adjudication decision was validly made.
Mrs Justice O’Farrell DBE, head of the Technology and Construction Court, decided that the JV, having lost its right to impugn the validity of the adjudication decision could take the underlying dispute to arbitration but because there could be no challenge to the validity of the adjudication decision, there was not a dispute that could engage the arbitration agreement. Accordingly, Northumbrian Water obtained summary judgement for £22,458,540.04 plus interest and costs.
What is also interesting in the decision is that the judge said that ‘dispute’ within clause W2.1 was wide enough to encompass, “a dispute as to whether the adjudication decision was outwith the jurisdiction of the adjudicator or in breach of the rules of natural justice”. So, one might think that a dispute on those aspects would have to go to arbitration. The judge also said however, “If there is a challenge to the validity of the adjudication decision, any requirement for a party to await the outcome of such challenge through the arbitral process likewise deprives it of any efficacy in the interim.” Which suggests that the court might not make the mandatory stay in respect of a matter that should, contractually, go to arbitration.
Two points to close with. The first is that the amount of money at stake means that the case may well be pursued further – so watch this space. The second to consider is if you want to amend clause W2 to avoid this sort of argument.
For further information, please contact:
Michael Woolley, Hill Dickinson
michael.woolley@hilldickinson.com
