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Doosan Tilbury Douglas legal defeat unpicked

22 Nov 22 Once again, the importance of express contract terms is upheld in court. Solicitor Natalie Cane of Irwin Mitchell LLP explains

The Technology & Construction Court this month ruled that a joint venture of Tilbury Douglas Construction and Doosan Enpure must abide by an adjudication result and pay Northumbrian Water nearly £22.5m.

In March 2016 Northumbrian Water Limited (‘NWL’) engaged a joint venture comprising Doosan Enpure and Tilbury Douglas Construction under a contract based on the NEC3 Engineering and Construction Contract Option C. They agreed that the dispute resolution procedure under clause W2 was to apply.

Various disputes arose between the parties and NWL issued a notice to the JV terminating its services. The JV in turn claimed that NWL was in repudiatory breach. An adjudication was commenced by NWL on 10th March 2022 and both parties participated in the process.

The adjudicator, Michael Turgoose, issued his decision, deciding that NWL’s termination was valid, and that the JV should pay NWL in excess of £22m. The JV did not pay the ordered sum to NWL, instead serving a notice of dissatisfaction in accordance with clause W2.4(2) of the contract and noting its intention to refer the matters in the decision to the tribunal (arbitration).

NWL issued proceedings to enforce the adjudicator’s decision. In turn, the JV served an application to stay the proceedings under section 9 of the Arbitration Act 1996 stating that NWL was not entitled to commence enforcement proceedings in the High Court and that any dispute was to be dealt with via arbitration.

In the case of Northumbrian Water Limited v Doosan Enpure Limited and Tilbury Douglas Construction Limited [2022] EWHC 2881 (TCC), Mrs Justice O’Farrell considered the dispute resolution procedure under the contract. Any dispute arising under or in connection with the contract was capable of being referred to adjudication. During the adjudication the JV did not raise any jurisdictional challenges and fully participated in the adjudication.  The decision was published with the timeframe agreed and addressed the issues raised in the parties’ submissions. Mrs Justice O’Farrell therefore found that a binding and enforceable decision had been reached. [See our previous report here.]

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The JV’s notice of dissatisfaction identified certain matters that were not in dispute, thereby accepting the underlying validity of the decision and, again, they did not raise any challenges in respect of issues such as jurisdiction or rules of natural justice.

Mrs Justice O’Farrell concluded: “Having participated in the adjudication without raising any jurisdictional challenge, specific or general, it is now too late for the JV to raise such challenge and the JV is deemed to have waived any right to do so”.

She declined to grant a stay for arbitration for the following reasons:

  • The notice of dissatisfaction did not address any challenge to validity, resulting in a final and binding adjudication decision
  • The JV lost its right to challenge the validity of the adjudication decision (although it did retain its right to refer the underlying issues in dispute to arbitration) and the adjudicator’s decision was therefore final and binding
  • Because the decision was binding and beyond challenge , it was not a matter that was capable of being referred to arbitration under the contract and accordingly S9 of the Arbitration Act 1996 was not engaged
  • The parties had expressly agreed that the decision would be binding on an interim basis. Paragraph 11 of clause W2.3 confirmed 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.”

If a party wishes to challenge the validity of an adjudicator’s decision, it must do so during the adjudication and in any enforcement proceedings. If its validity is not challenged at those points, the decision will be treated as valid and will be binding on the parties, even if only on an interim basis.

The contract provided for the tribunal to be arbitration, meaning the underlying dispute could then separately be referred to arbitration. The validity of the adjudication decision was not up for determination by arbitration and had to be complied with. The enforcement of an adjudicator’s decision, or any challenge to its enforcement, is instead, a matter for the courts.

It is evident that the court will continue to give the contract its intended meaning and give effect to its express terms. Mrs Justice O’Farrell noted that “the court must always be astute to consider the express terms of the agreement between the parties and the applicability of the statutory provisions”.

  • About the author: Natalie Cane is a solicitor in the Construction & Engineering Department of Irwin Mitchell

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