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Adjudication enforcement proceedings not stayed to arbitration

Back in July, I wrote about the judgment in Metropolitan Borough Council of Sefton v Allenbuild Ltd, where HHJ Hodge QC in the TCC in Manchester enforced an adjudicator’s decision and, in so doing, rejected an application under section 9 of the Arbitration Act 1996 for a stay pending referral of the dispute to arbitration. At the time, I suggested that this topic was:

“… quite rare in adjudication enforcement proceedings, but possibly not as rare as hens’ teeth!”

Well, not six months have gone by and we have another case. This time, its the judgment in Northumbrian Water Ltd v Doosan Enpure Ltd and another, and it was O’Farrell J in the TCC in London who enforced the adjudicator’s decision and rejected the defendant’s section 9 application. 

Northumbrian Water Ltd v Doosan Enpure Ltd and another 

This was a dispute over cost overruns and delay arising out of a new water treatment plant, which a joint venture between Doosan Enpure Ltd and Tilbury Douglas Construction Ltd (the JV) had agreed to design and construct for Northumbrian Water Ltd (NWL). The parties contract was based on the NEC3 Engineering and Construction Contract (ECC), Option C.

As we all know, parties to NEC contracts can select Option W1 or Option W2, depending on whether their contract is a “construction contract” or not. Here, the parties expressly agreed to adjudicate all disputes under Option W2, even though some of the works were excluded works under section 105(2) of the Construction Act 1996. They selected arbitration for the tribunal. It is certainly a pragmatic approach and will have avoided all those issues about which bits of the works were caught by the Act, and which weren’t. Those are never easy issues for anyone to deal with (but that’s another story).

In May 2021, NWL gave notice terminating the JV obligation to perform the works. It relied on the JV’s failure to comply with its contractual obligations, alternatively it relied on termination for convenience. In response, the JV alleged NWL was in repudiatory breach of contract, which it purported to accept in June 2021.

The adjudication

In March 2022, NWL referred the parties’ dispute to adjudication. Both parties sought declarations and claimed sums due: NWL claimed £51 million and the JV sought just under £33 million for its claims and compensation events.

The adjudicator’s decision was issued in May 2022. He found NWL’s termination was valid and awarded it some £22.5 million.

In June 2022, the JV gave a notice of dissatisfaction, as required under Option W2, identifying those elements of the adjudicator’s decision it agreed with and those parts it was dissatisfied with.

Enforcement proceedings

The adjudicator’s decision went unpaid and, in June 2022, NWL issued enforcement proceedings. In response, the JV issued an application under section 9 of the Arbitration Act 1996 to stay the enforcement proceedings for arbitration.

For any party thinking of relying on section 9 to resist enforcement, O’Farrell J’s judgment is worth a read, even though the JV’s application failed and the adjudicator’s decision was enforced. That is because it is in her customary detailed style, and takes us through a number of issues. For example:

  • The judge had to consider whether there was a binding and enforceable adjudicator’s decision under the contract. In turn, part of this question involved considering whether the JV had raised a jurisdictional challenge, or had participated in the adjudication without doing so.
  • Although a notice of dissatisfaction had been served after the adjudication, the JV did not challenge jurisdiction or raise a breach of natural justice. Instead, it accepted some parts of the adjudicator’s decision and challenged other parts. This meant it had partly accepted the validity of the adjudicator’s decision and lost any right to challenge it. (Any non-admissions and reservations that were made were “too vague to be effective”).
  • As there was no jurisdictional challenge, on the face of it, the decision was binding and enforceable.

Turning to the section 9 application, the judge made the point that the parties had agreed that, as a matter of contract, the court had the power to enforce an adjudicator’s decision (clause W2.3(11)). This meant it was not a matter that could be referred to arbitration for the purpose of section 9. She also noted that the JV did not make submissions in the enforcement proceedings regarding the validity of the adjudicator’s decision.

My takeaways

As I said when I wrote about Sefton v Allenbuild, I’m not surprised that the section 9 application did not succeed although I was quite surprised to see the argument being raised. Perhaps it was because of the sums in issue and the need for the JV to try and resist enforcement as best it could. However, one of the judge’s concluding remarks sums it up rather well:

“… the JV has not identified any grounds of challenge to the decision for want of jurisdiction or procedural unfairness, any right to challenge the validity of the decision has been lost and the decision is binding unless and until revised in arbitration.”

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