Neutral citation: (1)Walter Llewellyn & Sons Ltd (2)Rok Building Ltd v Excel Brickwork Ltd [2010] EWHC 3415 (TCC)

NEC contract topics: Interpretation of NEC contracts, Contract Data, 17.1 (ambiguities), 93.1 (referral to the tribunal)

Form of contract: NEC Engineering and Construction Subcontract (Second Edition, November 1995), Option A

Main areas of law: Arbitration law, specifically under the Arbitration Act 1996, The Housing Grants, Construction and Regeneration Act 1996 (HGCRA)

 

Walter Llewellyn & Sons Ltd (“WLAS”) was appointed as the main contractor by Tower Hexagon ASRA Housing Associations to deliver a 121-unit timber frame housing project in Thamesmead, London. WLAS subsequently subcontracted the brickwork and blockwork to Excel Brickwork Ltd (“Excel”) in May 2002 under a contract incorporating the NEC Engineering and Construction Subcontract (Second Edition, November 1995), with Option A and various additional clauses and amendments.

The NEC contract was not fully completed, notably leaving the Subcontract Data – Part One blank, including the section that was intended to identify the dispute resolution tribunal.

The subcontract incorporated a separate document titled "Additions and Rules" dated 1 June 2001, drafted by WLAS. This document was designed to ensure compliance with the HGCRA and was explicitly stated to override the NEC conditions in case of inconsistency.

In December 2003, WLAS sold its business and assets to Rok Building Ltd (“Rok”), including the benefit of this subcontract. In August 2004, damage was discovered in several completed properties, and WLAS and Rok claimed that Excel was contractually and/or tortiously liable.

WLAS issued proceedings in on 31 October 2008. After several stays for non-compliance with the Pre-Action Protocol, the matter progressed to a hearing. Excel applied for a stay under Section 9 of the Arbitration Act 1996, arguing that the dispute should be referred to arbitration.

 

The primary legal issue was whether the subcontract included a binding agreement to arbitrate disputes. Excel relied on a clause within WLAS’s Additions document which stated that “if the standard Sub-Contract form makes provision for settlement of disputes by arbitration then... the dispute shall be referred to arbitration”. Excel argued that Clause 93.1 of the NEC contract, which refers to a “tribunal” as the ultimate forum following adjudication, implied arbitration and thus activated the arbitration clause in the Additions.

WLAS and Rok countered that the NEC2 contract only provided for arbitration if the parties had expressly filled in the tribunal section in the Subcontract Data, which they had not. Therefore, there was no agreement to arbitrate.

Additional arguments raised included the interpretation of Clause 93.1 and whether it survived the override provisions in the Additions, which incorporated the statutory adjudication scheme.

 

Mr Justice Akenhead held that there was no arbitration agreement between the parties and dismissed Excel’s application for a stay. The judge reasoned that Clause 93.1, which refers to a tribunal, did not in itself establish arbitration. The NEC2 form required the parties to specify the tribunal in the Subcontract Data, which they had failed to do. Therefore, the tribunal was undefined and arbitration was not expressly agreed upon. Furthermore, the arbitration clause in the Additions was predicated on a condition: only if the NEC form “makes provision for” arbitration. The court found that the NEC form only makes such provision if the tribunal is filled in as “arbitration”, which was not the case here.

Justice Akenhead rejected the suggestion that ambiguity under Clause 17.1 or the contra proferentem principle should be applied. He also found it commercially unrealistic to suggest that an ambiguity could be resolved years later by instruction under Clause 17.1.

Regarding Clause 93.1, the judge accepted that it was not a clause dealing with the “appointment and actions” of an adjudicator and therefore survived the substitution of the statutory adjudication scheme. However, this did not create a binding arbitration agreement.

The application for a stay under Section 9 of the Arbitration Act was denied, and Excel was ordered to pay the Claimants’ costs of the application.

 

This judgment serves as a crucial reminder for those drafting NEC subcontracts. Despite the NEC suite’s aim to promote clarity and collaboration, failure to complete critical contract data, such as identifying the dispute resolution tribunal, can result in costly litigation.

Unless the NEC subcontract data is filled in to nominate arbitration specifically, clause 93.1 does not establish arbitration by default. Clause 93.1 doesn't imply arbitration as the tribunal must be defined by the parties in the subcontract data. This is particularly relevant when additional terms, like WLAS’s Additions, contain conditional arbitration clauses.

The decision highlights the importance of integrating amendments with full awareness of their interplay with standard NEC clauses. Drafters must not assume that references to tribunals or the inclusion of arbitration provisions in a standard template will be enforceable without explicit and consistent completion of all contractual elements. The ruling also illustrates judicial resistance to retrospective clarification or post-completion instructions as a means to resolve contractual uncertainty under clause 17.