Neutral citation: Metropolitan Borough Council of Sefton v Allenbuild Ltd [2022] EWHC 1443 (TCC)

NEC contract topics: Option W2

Form of contract: NEC2 Engineering and Construction Contract, Option C.

Main areas of law: enforcement of adjudication decisions, and the interface between adjudication and arbitration under the Arbitration Act 1996.

 

The Metropolitan Borough Council of Sefton appointed Allenbuild Limited in 2003 to construct a combined leisure centre and water-based theme park at Southport, now known as Dunes Splash World. The project was governed by the second edition (1995) of the NEC Engineering and Construction Contract, Option C. Clause 90 of the contract provided for adjudication as the initial dispute resolution method, with arbitration following under clause 93 if dissatisfaction was notified.

Although practical completion was certified in 2007, the Council issued a notice of adjudication in 2021 relating to alleged defects. An adjudicator appointed under the Scheme for Construction Contracts awarded the Council £2,204,217.13, with additional interest. Allenbuild did not comply with the decision. Sefton Council then sought summary judgment to enforce the award. Allenbuild responded by serving a notice of dissatisfaction and applied for a stay under section 9 of the Arbitration Act 1996, arguing that the dispute was subject to arbitration.

 

The key issues were whether enforcement of an adjudicator’s decision could be stayed pending arbitration and whether the adjudicator’s decision was valid and enforceable. The court had to determine if the arbitration clause extended to enforcement proceedings and whether the defendant had preserved its right to challenge the adjudicator’s jurisdiction or decision-making process.

The defendant contended that a valid notice of dissatisfaction had been served and that the entire matter should be stayed for arbitration. The Council submitted that the arbitration clause did not extend to enforcement and that no jurisdictional objections had been raised during adjudication.

 

The Technology and Construction Court, presided over by His Honour Judge Hodge QC, dismissed Allenbuild’s application for a stay and granted summary judgment for the Council.

The court ruled that the arbitration clause did not extend to enforcement of adjudication decisions. The judgment clarified that the NEC contract required immediate compliance with adjudicators’ decisions, subject to later revision through arbitration or litigation of the substantive dispute. The notice of dissatisfaction served by Allenbuild was found not to have identified any jurisdictional basis for resisting enforcement, nor did it purport to challenge the validity of the adjudicator’s decision.

Judge Hodge held: “A notice of dissatisfaction needs to make it clear whether a challenge is being made to the validity of an adjudicator’s decision on jurisdictional grounds, instead of, or in addition to, a challenge to its substantive merits.” In this case, no such clarity was found.

The court also held that Allenbuild had waived any jurisdictional objections by failing to raise them during the adjudication process and by actively participating without reservation.

The court ordered the defendant to pay the full adjudicated sum of £2,204,217.13, with interest accruing daily until payment. The application for a stay was rejected under section 9(4) of the Arbitration Act 1996.

 

This judgment reinforces the provisional but binding nature of adjudicator decisions and the strict interpretation of the procedural framework established by the Housing Grants, Construction and Regeneration Act 1996. It confirms that a general reference to “the entirety” of an adjudicator’s decision is insufficient to constitute a jurisdictional challenge for the purposes of resisting enforcement.

Users of NEC contracts should take careful note that adjudication and arbitration serve distinct functions. The court affirmed that enforcement of adjudication decisions is a matter for the courts, not for arbitration, unless expressly stated otherwise. This distinction must be preserved to maintain the effectiveness of adjudication as a quick and enforceable interim remedy. Parties seeking to preserve jurisdictional objections must raise and clearly articulate them at the outset of adjudication. Participation without reservation will likely be treated as a waiver of such rights.

The case also highlights the need for precision in drafting notices of dissatisfaction. Any intent to dispute an adjudicator’s jurisdiction must be explicitly stated if enforcement is to be resisted on those grounds.