In Northumbrian Water Ltd v Doosan Enpure Ltd and other [2022] EWHC 2881 (TCC) the central issue was whether any dispute about non-payment of the adjudicator’s decision, including enforcement, must be referred to arbitration. The defendants resisted enforcement of the adjudicator’s decision on the ground that the dispute was required to be referred to arbitration. The defendants made an application for stay of the proceedings under the Arbitration Act 1996.

Masood ahmed cut copy

Masood Ahmed

Background

The parties entered into a contract for the design and construction of water treatment works. In the ‘contract data’, reference to the ‘tribunal’ was reference to arbitration. The parties explicitly agreed that the dispute resolution procedure that should apply in the event of a dispute would be adjudication. Disputes arose arising out of cost-overruns, delays to the works and quality issues. The claimant commenced adjudication and the parties jointly appointed an adjudicator. Both parties participated in the adjudication and served documentary evidence and written submissions. The adjudicator gave a decision in favour of the claimant, but the defendants served a notice of dissatisfaction. The claimant then started court proceedings seeking summary judgment to enforce the adjudicator’s decision and the defendants made an application to stay the proceedings pursuant to section 9 of the 1996 act.

Parties’ arguments

The claimant argued that the adjudication decision was valid and should be enforced because: (i) the defendants did not raise any jurisdictional challenge prior to, or during, the adjudication and the notice of dissatisfaction did not raise any breach of natural justice or other challenge to the validity of the decision; (ii) the defendants did not indicate any intention to refer the validity of the decision to the tribunal for determination; and (iii) the notice of dissatisfaction indicated the defendants’ intention to refer only parts of the adjudication decision for final determination, thereby accepting the validity of the decision. The defendants argued, inter alia, that reference to ‘dispute’ in the contract was expressed in very wide language and included the adjudication enforcement claim, and such a dispute was subject to the parties’ dispute resolution regime which included arbitration.

Judgment

The judge, Mrs Justice O’Farrell, noted that the defendants’ notice of dissatisfaction did not identify any grounds on which the validity of the adjudicator’s decision would be challenged, such as any breach of the rules of natural justice or jurisdiction, and the general non-admissions and reservations were far too vague to be effective. In Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) [2019] EWCA Civ 27, Coulson LJ set out the following applicable principles on waiver and general reservations in the adjudication:

  • If the responding party wishes to challenge the jurisdiction of the adjudicator, then it must do so ‘appropriately and clearly’.
  • It will always be better for a party to reserve its position based on a specific objection, otherwise the adjudicator cannot investigate the point.
  • If the specific jurisdictional objections are rejected by the adjudicator, then the objector will be subsequently precluded from raising other jurisdictional grounds which might otherwise have been available to it.
  • A general reservation may not be effective if: (i) at the time it was provided, the objector knew or should have known of specific grounds for a jurisdictional objection but failed to articulate them; (ii) the court concludes that the general reservation was worded in that way simply to try and ensure that all options could be kept open.

O’Farrell J held that, although Bresco was concerned with statutory adjudication, the same principles would apply to contractual adjudication. She found that, having participated in the adjudication without raising any jurisdiction challenge, specific or general, it was now too late for the defendants to raise such challenge and they were deemed to have waived any right to do so. Further, the defendants had identified no grounds of challenge to the effectiveness of the adjudication decision in the section 9 proceedings. O’Farrell J noted that the contract provided that the adjudicator’s decision was binding on the parties unless and until revised by the arbitral tribunal and was enforceable as a matter of contractual obligation. She rejected the defendants’ application because:

  • The notice of dissatisfaction did not include any challenge to jurisdiction or any breach of the rules of natural justice and, as a result, the adjudication decision was final and binding.
  • Regardless of the scope of any reference to arbitration, the parties expressly agreed that the adjudication decision would be binding on an interim basis.
  • In Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR 93 it was argued without success that a defendant in the position of the defendants in the present case was entitled to a stay of enforcement proceedings under section 9 where the defendant wishes to dispute the effect of the decision.
  • The case law was consistent with O’Farrell J’s approach.

The decision demonstrates that the courts will take a robust approach to adjudication enforcement, enforcing the decisions of adjudicators by summary judgment regardless of errors of procedure, fact or law, unless the adjudicator has acted in excess of jurisdiction or in serious breach of the rules of natural justice. Furthermore, a party serving a notice of dissatisfaction should clearly identify any grounds on which the validity of the adjudicator’s decision would be challenged, such as any breach of the rules of natural justice or jurisdiction; otherwise any general non-admissions and reservations will be far too vague to be effective.

 

Masood Ahmed is an associate professor at the University of Leicester and research fellow on the Vici Affordable Access to Justice project, Erasmus University, Netherlands 

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