Notices of dissatisfaction under the NEC: a recap

Kathryn Moffett is a senior associate in CMS’s London office

Under the Construction Act, an adjudication decision is temporarily binding until it is finally determined by a court or arbitration (i.e. the tribunal). However, some contracts require a notification to be issued within a certain timescale if a party is to preserve the right to challenge an adjudication decision. Under the NEC suite of contracts this is called a notice of dissatisfaction.

In Transport for Greater Manchester v Kier Construction, the Technology and Construction Court (TCC) considered the level of detail required for a valid notice of dissatisfaction under the NEC form.

The NEC does not address this expressly and the court concluded that a valid notice “would have to be clear and unambiguous, so as to put the other party on notice that the decision was disputed but did not have to condescend to detail to explain or set out the grounds on which it was disputed”.

In Prater Limited v John Sisk & Son (Holdings) Limited, the TCC found a notice of dissatisfaction under the NEC form was required for challenges to the validity or enforceability of an adjudicator’s decision, as well as challenges to the substantive merits of a decision.

Metropolitan BC of Sefton v Allenbuild Limited

Recently, in the case of The Metropolitan Borough Council of Sefton v Allenbuild Limited, the question of validity and enforceability came before the court again.

The TCC reconsidered the detailed requirements of an NEC notice of dissatisfaction where there was a challenge to the validity or enforceability of an adjudicator’s decision.

The dispute concerned alleged defects relating to works carried out under an NEC contract. The council obtained an adjudicator’s decision, awarding it £2.2 million plus interest. The contractor issued a notice of dissatisfaction and did not pay in line with the decision. The council commenced court proceedings to enforce the decision. The contractor then applied for a stay of the court proceedings.

“For the notice of dissatisfaction to be valid, it ought to make clear whether a challenge is being made to the validity of an adjudicator’s decision on jurisdictional grounds”

Allenbuild resisted enforcement and relied on a notice of dissatisfaction issued in relation to the “entirety of the adjudicator’s decision, including all of the adjudicator’s conclusions, reasoning and decisions”.

It claimed this prevented the “decision from being final and binding, and [would] leave open any challenges on any basis whatsoever (whether as to enforceability or final determination)”.

The court did not accept that argument on the basis that “whilst a notice of dissatisfaction need not descend into the details of the substantive challenge, the issue of the validity of an adjudication decision is of a fundamental different character from its merits”.

The court found that in order for the notice of dissatisfaction to be valid, it ought to make clear whether a challenge is being made to the validity of an adjudicator’s decision on jurisdictional grounds, instead of, or in addition to, a challenge to its substantive merits. The wording above was not sufficient as it did not make clear that a challenge was being made to the validity of the adjudicator’s decision on jurisdictional grounds, in addition to the challenge against the merits of the decision.

Allenbuild also ran an argument that the enforcement proceedings ought to be stayed (i.e. paused) in line with the arbitration procedure under the contract.

The court accepted that there were competing interests between the “pay now and argue later” principle, which underpins adjudication, respecting the contractual autonomy of parties who have agreed to resolve disputes through arbitration.

However, the court was critical of the contractor’s argument, noting that the courts “will always have jurisdiction to enforce an adjudicator’s decision”.

This means that in the absence of very clear and specific wording in an arbitration clause, the courts will not be prohibited from considering applications to enforce adjudication decisions.

Conclusion

This case highlights an important qualification to the rule that a generally worded notice of dissatisfaction will be valid under the NEC form. To preserve any challenge to the enforcement of an adjudication decision, parties will now need to make specific reference in a notice of dissatisfaction to enforcement challenges, as well as challenging the substantive merits of the decision.

It is unclear from the court’s judgement whether the nature of the enforcement challenge needs to be to be spelt out in the notice. In keeping with previous decisions, a large amount of detail is unlikely to be required, but it would be prudent for those drafting such notices to identify in general terms whether the enforcement challenge concerns jurisdictional issues on the one hand or natural justice issues on the other.

It is also a clear decision from the court that, without specific wording to the contrary, the decision can be subject to enforcement proceedings enforceable by the courts.

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