Rok v Celtic Composting (2009)

Background and the Dispute

The dispute arose from a sub-contract between Rok Building Ltd ("Rok") and Celtic Composting Systems Ltd ("Celtic"). Celtic, the main contractor for a civil engineering project at Deep Moor, Devon, employed by Devon County Council, engaged Rok to deliver an in-vessel composting facility. The sub-contract adopted the NEC3 Engineering and Construction Contract, Option B (June 2005 with June 2006 amendments, further modified by the parties).

Significant delays occurred during the works, one of which involved site flooding in July and August 2008. Rok submitted a compensation event claim in December 2008, seeking a 19-week extension of time and £877,339.52 in additional costs. This claim was restated in Application for Payment No. 13, submitted on 27 April 2009, which claimed £782,875.92.

Celtic issued Certificate No. 13 on 8 May 2009, rejecting the claim in full and certifying no extension of time. Rok subsequently initiated adjudication proceedings under Clause W2 of the NEC3 contract, supported by the CIC Model Adjudication Procedure. The adjudicator found the flooding to be a Compensation Event and awarded Rok an extension of 29 working days and a payment of £204,465.14 plus interest and partial adjudication costs.

Celtic refused to pay the adjudicated amount, arguing the decision was declaratory rather than directive and that payment should occur only through standard certification processes.

Legal Issues

The key issues before the court were whether the adjudicator’s decision mandated immediate payment or merely adjusted the contractual accounts for future certification, and whether such a decision could be enforced without a specified timeframe for payment. Celtic contended that absent an express direction to pay within a defined period, the decision lacked enforceability in that regard. They also raised concerns about fairness, suggesting they might be unable to recover similar sums from Devon County Council.

The court also had to consider whether adjudication under the NEC3 framework permitted enforceable monetary awards outside of the standard certification and payment cycles.

Judgement

Mr Justice Akenhead ruled in favour of Rok, holding that the adjudicator's decision was not merely declaratory but constituted a binding directive requiring payment. The judge interpreted the adjudicator's language that “Rok shall be paid...” as enforceable.

The judge dismissed Celtic’s argument that the absence of a payment deadline negated enforceability. He held that the absence of such a deadline did not change the clear intention that payment should be made, especially given the adjudicator’s reference to interest accruing from the final date for payment of the earlier certificate.

The court reaffirmed established principles from  William Verry v London Borough of Camden (2006) and David McLean v Swansea Housing (2001), emphasising that adjudicators’ decisions must be interpreted contextually, considering both their wording and the nature of the dispute referred.

As to the fairness argument, the judge noted that the contract was not a "pay when paid" arrangement and that the HGCRA’s section 113 prohibits such clauses. Celtic’s inability to recover upstream from Devon County Council did not excuse its obligation to comply with the adjudicator’s decision.

The court awarded judgment in the sum of £173,191.73 (after deducting partial payment already made), plus continuing interest.

NEC contract learning points and implications for the construction industry

This decision is of significant importance for those working under NEC3 contracts. It reinforces that adjudicators' decisions, even where not explicitly time-bound, can require immediate payment. The judgment provides a strong affirmation that disputes regarding interim applications, particularly where redress is sought in the form of payment, can lead to enforceable orders, notwithstanding the payment certification regimes of the contract. Project managers and consultants should therefore be aware that NEC’s certification clauses do not override the enforceability of adjudicators’ decisions. For contractors and subcontractors, the ruling illustrates the importance of clearly framing adjudication notices and the redress sought.

Clients and main contractors must take care when managing risk up the supply chain. Reliance on the assumption of equivalent recovery from employers may not align with legal obligations to pay downstream, particularly in the absence of effective and lawful back-to-back payment terms.

The judgment confirms that the NEC contract’s adjudication and payment mechanisms must be read alongside the HGCRA, with the latter prevailing where conflicts arise. The clarity brought by this ruling helps construction professionals better understand the balance between interim dispute resolution and final account reconciliation under NEC contracts.

In his summary of the NEC contract payment provisions, Mr Justice Akenhead noted that “The language of the NEC3 form is mostly framed in the present tense so that superficially at least there is little patently mandatory language.” While this remark may seem anecdotal, it illustrates the court’s recognition of the NEC’s unique drafting style. The judgment affirms that, despite the use of the present tense throughout most of the contract, this language carries mandatory effect due to the singular use of the future tense in the “actions” clause 10.1.