1) Contractual requirement to adjudicate not a fetter on the statutory right: The Fraserburgh Harbour Commissioners v McLaughlin & Harvey Ltd [2021] CSOH 8 (26 January 2021) Lady Wolffe Background The Pursuer engaged the Defender to extend the Fraserburgh harbour on an NEC3 contract 2005 with 2006 amendments. They alleged defects in the works and commenced proceedings in court claiming over £7m in damages. The parties’ contract used Option W2.1(1) containing what was described as a “cascade of dispute resolution”. Clause W2.4(1) read: “W2.4 (1) A Party does not refer any dispute under or in connection with this contract to the tribunal unless it has first been decided by the Adjudicator in accordance with this contract.” The ‘tribunal’ in the contract was arbitration. Nothing turned on this, as in Scotland a provision for arbitration does not entirely exclude the jurisdiction of the court. Rather the issue was whether clause W2.4 was a procedural bar to the bringing of proceedings in court to determine a dispute that had not previously been referred to adjudication and in respect of which the party challenging the adjudication decision had served a notice of dissatisfaction under clause W2.4(2). The court decided that the meaning and effect of clause W2.4 was clear. The parties had agreed to resolve disputes in a specified way, with the merits to be finally determined by arbitration.
The court considered whether the clause was in any way a fetter on the basic statutory right to refer a dispute to adjudication “at any time” in section 108 of the Act, noting that Dyson LJ had held this provision “means exactly what it says"[6]. The court accepted the provision operated as a procedural bar on the right to litigate or arbitrate before there had been an adjudication and a notice of dissatisfaction given. Although it did not seem to have been argued by either party, Lady Wolffe considered and adopted the finding of Edward-Stuart J in Anglian {7} that that a provision in identical terms was not a fetter on the right to adjudicate “at any time”. The right to adjudicate was valuable and to deprive the Defender of that right was to deny them the advantages and speed of the contractually agreed “first mode of dispute resolution”.
Comment
Although not argued in this case, it was argued in Anglian that a similar provision to W2.4 denied a claiming party the right to adjudicate at any time (in effect of his choosing) since it obliged him to adjudicate before he could exercise the right to seek a final determination elsewhere. That argument failed in Anglian and Lady Wolffe agreed. Whilst the parties are free to choose their dispute resolution processes, NEC3 and NEC4 are industry standard forms whose provisions are usually dictated by the employer and not individually negotiated. Whilst adjudication has its merits it is not without its drawbacks. To name but two: not every dispute is suitable for adjudication; disputes can add tens of thousands of pounds of irrecoverable costs unless the decision is accepted as final. It is also fair to say that because of the prescriptive time limits for challenging a certificate or decision of the contract certifier, there is in reality little choice but to adjudicate with dispatch which rather negates the option to do so “at any time”.
[6] Connex South Eastern Ltd v MJ Building Services Group [2005] EWCA Civ 193 [7] Anglian Water Services Ltd v Laing O’Rourke Utilities Ltd [2010] EWHC 1529 (TCC)
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