Citation: EWHC 2881 (TCC)
Summary of the facts
The claimant applied for summary judgment to enforce an adjudicator’s decision and the defendant joint venture companies (JV) applied for the proceedings to be stayed pursuant to the Arbitration Act 1996 s.9.
The claimant had engaged the JV on the NEC3 Engineering and Construction Contract Option C to design and construct an upgrade to water treatment works. The parties agreed that Option W should apply, which provided that disputes would be referred to an adjudicator whose decision was binding on the parties unless and until revised by the arbitration tribunal and enforceable as a contractual obligation under cl.W2.3(11); a party who was dissatisfied with the adjudicator’s decision could refer the matter to arbitration. Disputes arose between the parties arising out of cost-overruns, delays to the works and quality issues. The claimant terminated the contract. The JV disputed the termination and said that the claimant was in repudiatory breach, which it accepted. Disputes were referred to adjudication and the adjudicator gave a decision in favour of the claimant. The JV gave notice that it was dissatisfied with parts of the adjudicator’s decision and intended to refer those matters to arbitration for final determination.
The claimant submitted that the adjudicator’s decision was binding on the parties unless and until it was revised by the arbitration tribunal and was enforceable as a matter of contractual obligation; as there was no challenge to the adjudicator’s jurisdiction or breach of natural justice, there was no defence to an application for summary judgment. The JV argued that it was entitled to a s.9 stay because the adjudication enforcement claim was “a dispute arising under or in connection with this contract” within the dispute resolution clause which had to be referred to arbitration, and that enforceability of the adjudicator’s decision was a matter for the arbitration tribunal.
Held — O’Farrell J
Application refused.
Adjudicator’s decision – Having participated in the adjudication without raising any jurisdiction challenge, specific or general, it was too late for the JV to raise such a challenge and it was deemed to have waived any right to do so, Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27 applied. The JV accepted parts of the adjudication decision on the merits and did not identify any breach of the rules of natural justice or want of jurisdiction. It would have been open to the JV to explain the basis of any challenge to the validity of the adjudication decision without any risk to its application for a stay under s.9(3), Capital Trust Investments Ltd v Radio Design TJ AB [2002] EWCA Civ 135 considered. As a matter of construction of the dispute resolution procedure the adjudication decision was binding on the parties unless and until revised in arbitration and was enforceable as a matter of contractual obligation, Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] C.L.C. 739, Bouygues UK Ltd v Dahl-Jensen UK Ltd [2001] 1 All E.R. (Comm) 1041 and Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358 followed. Subject to its application for a s.9 stay, the JV had no defence to the application for enforcement of the adjudication decision and the claimant was entitled to summary judgment (see paras 37-52 of judgment).
Stay of proceedings – The JV’s failure to pay the sum awarded by the adjudicator, however indisputable the claimant’s claim to the same, amounted to a dispute within the meaning of s.9, Halki Shipping Corp v Sopex Oils Ltd [1998] 1 W.L.R. 726 considered. The words “a dispute arising under or in connection with this contract” were apt to cover the underlying substantive issues in dispute regarding termination, claims for payment and extensions of time, and to cover a dispute as to whether the adjudication decision was outside the adjudicator’s jurisdiction or in breach of the rules of natural justice, regardless of whether that was considered to be part of, or separate from, the substantive underlying dispute. However, the notice of dissatisfaction did not include any challenge on grounds of jurisdiction or breach of natural justice and, as a result, the adjudication decision was final and binding in respect of those matters. The JV had lost the right to challenge the validity of the adjudication decision, in court or in arbitration, although it retained the right to refer the underlying disputed issues to arbitration in accordance with its notification. On that basis, the effectiveness of the adjudication decision was not a matter which under the contract was to be referred to arbitration and s.9 was not engaged. Furthermore, regardless of the scope of any reference to arbitration, the parties had expressly agreed that the adjudication decision would be binding on an interim basis. Any requirement for a party to enforce it by obtaining declaratory relief through an arbitration award deprived the decision of any efficacy in the meantime. The parties agreed by cl.W2.3(11) that the court had power to enforce the adjudication decision pending any revision in arbitration. The grant of summary judgment did not pre-empt any later decision made by the arbitrator, Macob and Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd [2004] EWCA Civ 1757 applied (paras 57-73).
