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You Must Adjudicate First NEC3 imposes obligation to adjudicate first before commencing court proceedings.

Icons CourtMichael Comba discusses NEC3 imposing an obligation to adjudicate first before commencing court proceedings.

 

Greater Glasgow Health Board v Multiplex Construction Europe Ltd and others [2021] CSOH 115

The facts

The Greater Glasgow Health Board (the Employer) entered into a NEC3 ECC Option C contract (the Contract) with Multiplex (the Contractor) for the construction of a hospital. The Contract included the standard NEC optional dispute resolution clause, W2, which provides that a dispute will be referred to adjudication prior to being referred to the tribunal (in this case, the Scottish Courts). Referral to the tribunal can also only occur once a ‘notice of dissatisfaction’ has been served by a party dissatisfied by an adjudication’s outcome.

After the works had concluded several defects in the construction were discovered, and the Employer sought approximately £73m in damages from the Contractor. The Employer referred the matter immediately to the courts, arguing that the dispute was too complex for an adjudication. It claimed that the dispute, really concerning several individual disputes, would have required up to 22 individual adjudications. It argued that W2 impliedly excluded such complex disputes. The Contractor argued that adjudication had to occur first and that, in the absence of an adjudication, W2 served as a contractual bar on commencing court proceedings.

The judgment

The court held that complex disputes were not impliedly excluded from W2. It considered that it was foreseeable at the time of entering the Contract that such disputes may arise and so determined that, had the parties intended to exclude complex disputes, they would have done so explicitly. In any event, the court also held that the dispute was not intrinsically complex or unsuitable for adjudication, nor were 22 individual adjudications obviously required; that was a matter for the adjudicator to consider when the dispute was referred to adjudication.

The court, however, did not agree with the Contractor’s interpretation that W2 was a contractual bar. The obligation to first refer a dispute to adjudication could be waived by the parties and, while the court could not consider the merits of the claim in the absence of that waiver, the court’s jurisdiction was not fully ousted. This followed the reasoning of a recent similar case[1].

Analysis

Although a Scottish case, this judgment is nonetheless important for parties in England and Wales using the NEC form of contract and option W2. Disputing parties under contracts with this option must first refer the dispute to adjudication, regardless of size or value.

This case further underlines that, even for large and high-value claims, the courts continue to strongly support the use of adjudication as a means of dispute resolution ahead of using court proceedings. It is, therefore, crucial that employers and contractors fully acquaint themselves with their dispute resolution process as there is fair chance that they will have to refer to it sooner or later.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it..

[1] Fraserburgh Harbour Commissioners v McLaughlin & Harvey Ltd [2021] CSOH 8, 2021 S.L.T. 1009, [2021] 1 WLUK 281

Michael Comba is a Solicitor at Sharpe Pritchard LLP.


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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email  This email address is being protected from spambots. You need JavaScript enabled to view it.

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