A recent decision in the Court of Appeal of Northern Ireland has clarified that the timeframe for serving a Notice of Dissatisfaction under an NEC contract is not postponed by jurisdictional challenges to an adjudicator’s decision. Notices of Dissatisfaction are a standard feature of the NEC form and are a pre-condition to challenging an adjudicator’s decision through court or arbitration proceedings.
The parties entered into an NEC contract for the construction of a waste management facility. The matter was referred to adjudication in 2011 following a disputed application for payment. By a decision dated 23 October 2012, Fermanagh, the local authority, was ordered to pay Gibson, its contractor, over two million pounds. Fermanagh refused to pay and sought unsuccessfully to challenge the adjudicator’s jurisdiction in response to subsequent enforcement proceedings brought by Gibson.
Under Clause 93.1 of the NEC contract, a party dissatisfied by an adjudicator’s decision may refer the disputed matter to arbitration, provided that such intention is notified within four weeks of the decision. Fermanagh assumed that the four week period would not run while the adjudicator’s jurisdiction was in dispute and they feared that serving a Notice of Dissatisfaction could constitute a waiver of their challenge as to adjudicator’s jurisdiction. Consequently, they waited until the outcome of the enforcement proceedings, nearly four months later, to serve their notice. Gibson claimed that Fermanagh’s notice was out of time and that the adjudicator’s decision had become finally binding. In response, Fermanagh argued that it was entitled to an extension of time for serving a Notice of Dissatisfaction under the Arbitration Act 1996 on the basis that jurisdictional challenges were “outside the reasonable contemplation of the parties” when the NEC contract was agreed.
On appeal by Gibson, the first instance decision to grant an extension to Fermanagh was overturned. The Court of Appeal held that a jurisdictional challenge to an adjudicator’s decision was within the reasonable contemplation of the parties when agreeing the terms of an NEC contract. Lord Justice Girvan emphasised that a reasonable party, properly advised, should have realised that it was prudent to notify the other party of an intention to refer the dispute to arbitration in order to protect their future position, despite any ongoing jurisdictional challenges raised in defence to enforcement proceedings. Such a notice would not have been inconsistent with Fermanagh’s jurisdictional objections and would have provided Fermanagh with an alternative basis on which to challenge the adjudicator’s decision (i.e. via arbitration proceedings).
The ruling is likely to be welcomed by Employers and Contractors alike and provides helpful clarity as to an important part of the NEC form. Parties should be aware that the requirement to serve a Notice of Dissatisfaction will be strictly applied by the courts and, where arbitration is concerned, extensions of time under the Arbitration Act are likely to rare.