This case relates to a dispute between Northumbrian Water Ltd ('NWL') and Doosan Enpure Ltd ('Doosan') and others regarding the enforcement of an adjudicator's decision for the sum of circa £22.5m. It provides guidance as to the importance of complying with the requirements in respect of termination, adjudication challenges and of adhering to express contract terms by giving effect to the intended meaning of the agreement.
Factual summary
On 23 March 2016, NWL engaged Doosan and others, who together were acting in an unincorporated joint venture ('JV'), under the NEC3 Engineering and Construction Contract Option C in respect of the design and construction of waste water treatment works in the North East of England. A dispute arose between the parties relating to various issues including cost overruns, delay and quality issues in the works. This resulted in NWL terminating the contract on 7 May 2021, citing that the JV had failed to comply with its obligation to perform the works. This was disputed by the JV who claimed that NWL was in repudiatory breach of contract, which the JV accepted on 7 June 2021. NWL sought payment of sums payable to it, however the JV disputed that any sums were payable to NWL. The parties expressly agreed to refer the dispute to adjudication pursuant to Option W2 of the contract, despite the fact that some of the works were excluded from the definition of "construction operations" by Section 105(2) of the Construction Act 1996. Option W2.3 (11) provided that:
"the Adjudicator's decision is binding on the Parties unless and until revised by the tribunal and is enforceable as a matter of contractual obligation between the Parties and not as an arbitral award. The Adjudicator's decision is final and binding if neither Party has notified the other within the times required by this contract that he is dissatisfied with a matter decided by the Adjudicator and intends to refer the matter to the tribunal"
As such, the Adjudicator's decision is binding and enforceable unless revised by the arbitration tribunal.
Adjudication
On 10 March 2022, NWL commenced an adjudication seeking various declarations including a decision that the JV should pay the sum of £26,168,652.47 to NWL plus delay damages and interest.
On 23 May 2022, the Adjudicator, Mr Michael Turgoose, issued his decision in which he found the termination by NWL to be valid and further ordered the JV to pay to NWL the sum of £22,458,540.04 plus interest. The Adjudicator also determined that 90% of his fees were to be paid by the JV with the remaining 10% payable by NWL.
Although both parties paid the Adjudicator's fees, the JV did not comply with the order to pay the sums awarded to NWL and on 16 June 2022 served a Notice of Dissatisfaction confirming its intention to refer the decision to the arbitration tribunal for final determination. Notably, the JV's Notice of Dissatisfaction did not challenge the Adjudicator's jurisdiction or raise any issues regarding validity.
Enforcement
On 1 June 2022, NWL initiated enforcement proceedings to enforce the adjudication decision. At the same time, the JV applied for a stay of proceedings asserting that NWL had breached the contract by commencing enforcement proceedings on the basis that Clause W2 of the contract provides for the resolution of disputes “arising under or in connection with the contract” in arbitration. The key arguments raised by the parties were as follows:
- NWL argued that as the JV had not raised any jurisdictional challenge or breach of natural justice issues the Adjudicator's decision was binding and enforceable unless revised; and
- JV argued that the dispute should be referred to arbitration and that the enforceability of the Adjudicator's decision fell under the jurisdiction of the arbitration tribunal.
Decision
On 14 November 2022, Mrs Justice O' Farrell in the TCC rejected the JV's application for a stay for arbitration and enforced the Adjudicator's decision. Mrs Justice O'Farrell held that:
- the adjudication decision was valid and enforceable;
- there was no justification for a stay of proceedings for arbitration. ; and
- NWL was entitled to summary judgment in the sum of £22,458,540.04, plus interest and costs.
The reasons for the Court's decision can be summarised as follows:
- The Adjudication decision was final and binding unless a notice of dissatisfaction raised jurisdictional issues. In this case it did not. In fact, the Judge commented that the issues raised within the Notice of Dissatisfaction were deemed to be "too vague to be effective" ;
- The JV's argument would require a lengthy arbitration and subsequent Court enforcement which would be contrary to the spirit of the Construction Act 1996 which intends to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly;
- By accepting parts of the Adjudicator's decision, the JV implicitly accepted the validity of the decision. The JV also failed to identify any grounds for challenge of the Adjudicator's decision or the decision in the enforcement proceedings (and as such it was deemed as having waived its right to do so);
- The adjudication decision was final and binding on the parties unless revised and as such NWL was entitled to summary judgment.
- The JV's failure to pay the awarded sum constituted a dispute under s.9 of the Arbitration Act 1996 (stay of legal proceedings). The dispute resolution clause covered the substantive issues in dispute and challenges to the adjudicator's jurisdiction or natural justice.
So, the JV lost the right to challenge the validity of the adjudication decision but retained the right to refer any underlying disputed issues to arbitration. Therefore, the adjudication decision's effectiveness was not subject to arbitration, and s.9 was not applicable as it excluded disputes concerning the enforcement of adjudicator's decisions.
The Court was guided by the contract and was satisfied that the parties had agreed that an adjudication decision would be binding on an interim basis and that the Court could enforce the adjudication decision unless a notice of dissatisfaction was issued. The Notice of Dissatisfaction issued by the JV raised no jurisdictional issues about enforcement.
Practical Considerations
This case highlights the following key points:
- The determination of the Court to uphold adjudication decisions, unless there are jurisdictional or serious breach of natural justice issues. This highlights the importance of expressly identifying the grounds in challenging an Adjudicator's decision.
- An Adjudicator's decision will be treated as valid and binding unless challenges to the validity of the adjudicator's decision are raised during the adjudication and enforcement proceedings;
- If a party argues that an Adjudicator's decision is unenforceable, it implies that the decision is void and therefore not covered by the contract's arbitration clause.
- This case accords with a previous judgment in Metropolitan Borough Council of Sefton v Allenbuild Ltd [2022] EWHC 1443 (TCC) where similar issues were addressed regarding statutory adjudication.
