In the world of construction, adjudication decisions are generally binding on an interim basis. That is, they must be followed unless and until they are finally determined by court or arbitration proceedings.
But it is not always that simple. For example, sometimes decisions become binding by default. A recent case before the Technology & Construction Court (TCC) – Transport for Greater Manchester v. Kier – has shone a light on this.
The adjudication
Kier had been contracted to build a bus interchange in Bolton. Those works had fallen into delay, and the employer (TfGM) had deducted liquidated damages of just under £600,000. As is often the case in such a situation, Kier commenced an adjudication seeking an adjustment to the Completion Date and repayment of delay damages.
The contract was based on the NEC3 Engineering & Construction Contract, which among its standard terms in clause W2.3(11) states “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”. W2.4(2) goes on to confirm that the relevant period is four weeks from the decision. So in effect, the contract has the parties parties agree a decision will be binding if notice of dissatisfaction is not given in time.
In late 2019, Kier successfully persuaded the adjudicator that it was entitled to a full extension of time and repayment of the delay damages that had been deducted, with interest. Four days later, TfGM’s solicitors wrote to Kier stating that “it is clear that [the adjudicator] has erred in law and in his interpretation and application of the express terms of contract between the parties in a number of fundamental respects”, but noting that “without prejudice to TfGM's right and intention to seek formal resolution to reverse the outcome of the Decision, TfGM is prepared to comply with the Decision on a provisional basis”.
Payment was then made a few days later. Alongside that, TfGM sent an email direct to Kier stating that it was “issued on a provisional basis only and without prejudice to TfGM's right and intent to seek formal resolution to reverse the Decision”.
Challenge to the decision
In August 2020, as it had warned (and presumably after a period of discussion and negotiation had failed to resolve the dispute amicably), TfGM issued court proceedings for the final determination of the dispute that the adjudicator had considered.
Kier responded by saying it couldn’t. It argued that the requirement to notify dissatisfaction within four weeks of the decision hadn’t been met. It accepted that payment of the award had been made alongside the letter from TfGM’s solicitors, but said it wasn’t enough, because:
- It wasn’t sent to the address for notices set out in the Contract;
- It didn’t set out with any particularity which matters TfGM was dissatisfied; and
- The reference to dissatisfaction was part of another communication, not in a separate notice.
However, the court found otherwise: the solicitors’ letter was sufficient.
It noted that Kier’s solicitors had been stated in the Adjudication Notice and all other adjudication documentation as capable of accepting documents, and as the notice of dissatisfaction flowed from the adjudication process, it followed that it could be given in the same way. TfGM made the interesting point that if Kier had been right, as the Adjudication Notice itself was served in the same way (on solicitors rather than at the address in the contract), it would mean that the whole adjudication would have been a nullity.
The court also found that “The Contract did not stipulate the form of words that had to be used, or the level of detail that was required in any notice of dissatisfaction”. It said 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”. So TfGM’s solicitors’ general notice of dissatisfaction was sufficient to meet the requirement of clauses W2.3(11) and W2.4. It was also in essence only one communication: it was a short letter with a focus on noting dissatisfaction with the decision.
Although it found in TfGM’s favour, the court went on to note that had the solicitors’ letter not have been issued and it had relied on the email direct from TfGM to Kier alone, that would not have been enough. Although the substance was sufficient, it was only sent by email, which was not a valid means of service of such a notice under the contract.
Lessons
Kier presumably felt that this challenge was worth a go – if it had been successful, it would have won the case on a technicality. In fact, the court found that one of the ‘notices’ wasn’t sufficient. But now, unless there is an agreement, it will have to defend the claim against it on its merits.
TfGM will be relieved that this technical defence was not accepted. Given the fact that letters were clearly sent within the period required, it must have felt relatively confident of that outcome. And it is probably the right outcome here, as it ensures that parties aren’t held to overly pedantic or technical points and risk losing out on valid rights if they fail to meet that.
But it is a useful reminder that contractual provisions should be carefully considered. Contracts increasingly have these kind of ‘conclusivity’ provisions around adjudication decisions (and other matters) – including the NEC ECC by default. Making sure they are complied with is crucial for parties, as is considering the effect of related provisions such as notice requirements.
About the author
Oli Worth is a partner at Archor, a new boutique construction law practice that specialises in construction disputes and adjudication
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