| Date | 7 August 2002 |
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| Judgment | J T Mackley & Co Limited -v- Gosport Marina Limited, TCC 3 July 2002 |
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| The Issue | Reviewing adjudicator's decisions by arbitration. |
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| Implication |
The courts will normally seek to find a contract arising out of parties' dealings and in the Where parties seek to challenge an adjudicator's decision by referring the matter to arbitration under an ICE form, it will first be necessary to obtain an Engineer's Clause 66 decision in respect of the same matters. of express terms, imply into that contract an obligation to pay a reasonable sum. |
printClause 66 of the ICE forms of contract requires that if a dispute arises in connection with the contract works, either party may serve on the Engineer a notice in writing setting out the nature of the dispute. The Engineer is then required to give his written decision on the dispute and that decision becomes final and binding upon the parties unless and until certain other provisions stated in the contract have been met. One of those conditions is a requirement that if either party seeks to overturn the Engineer's decision, it must give a notice to refer the dispute to arbitration not later than three months from receipt of the decision. The more recent ICE forms have introduced a provision whereby until the Engineer's decision has been obtained, no dispute can be said to have arisen. Up to that point, the contract classifies the dispute as a "matter of dissatisfaction". The purpose underlying this wording in the contract is to prevent the appointment of an adjudicator in the absence of an Engineer's decision. Whether this is effective remains to be seen, given that the statute permits a party to refer disputes to an adjudicator "at any time". No clear guidance on this subject has emerged from the courts. However, a related point has arisen in the recent case of J T Mackley & Co -v- Gosport Marina. Gosport engaged Mackley to undertake certain dredging and land reclamation works at Gosport Marina in Hampshire. The form of contract was the ICE 6th edition containing clause 66 dealing with the settlement of disputes. The contract did not incorporate any provisions in relation to adjudication and consequently, by virtue of the provisions of the HGCRA 1996, the Scheme for Construction Contracts was applicable. Following the substantial completion of the works two adjudications took place. Both were concerned with the responsibility under the contract for the build up of silt during the excavation of the works and consequent changes to methods of working and delays. The decision in each adjudication was that the responsibility for these matters under the contract lay with Gosport. Unhappy with both adjudicators' decisions, and some four months after the second decision, Gosport issued a notice to refer the disputed matters to arbitration under Clause 66 of the contract. It is not clear from the judgment whether the two adjudications that had taken place earlier had been commenced following disputed Engineer's decisions. It may be that the existence or absence of Engineer's decisions had already been a battleground for the parties. In the event however, Mackley was not prepared to allow the arbitration to proceed without raising the question of the Engineer's decision. It applied to the court seeking a declaration that Gosport's notice to refer to arbitration was invalid. Mackley claimed that the structure of clause 66 of the ICE conditions required any dispute first to be referred to the Engineer for his decision. In other words, according to Mackley, arbitration could only be invoked in the event of a disputed Engineer's decision. Mackley argued that the notice to refer to arbitration was invalid because it did not identify any decision of the Engineer with which Gosport was aggrieved. The last decision which had been given by the Engineer on any subject was more than three months prior to the notice to refer to arbitration. That being the case, on any footing, the notice to refer was invalid, since it was out of time. Gosport replied that it was not for the court to decide whether the arbitration was properly constituted. That was a matter for the arbitrator to decide by virtue of sections 30 and 32 of the Arbitration Act 1996. Gosport submitted that now that an arbitrator had been appointed and had indicated his willingness to decide on the validity of the arbitration notice, it was appropriate for the court to leave the matter to him. His Honour Judge Richard Seymour QC recognised that these matters were of general importance. Accordingly it was appropriate for him to exercise his discretion to consider the questions raised concerning the validity of the reference to arbitration, rather than to allow the matter to be decided by the arbitrator. In his judgment, a decision of the Engineer was a prior condition that had to be met; otherwise there was no entitlement under an ICE contract to refer a dispute to arbitration. In the present case there was no reference of a dispute to the Engineer prior to the giving of the notice to refer to arbitration and thus the notice to refer to arbitration was invalid. This decision will present some tactical difficulties concerning the adjudication of disputes under ICE contracts. Where either party wishes to contest the decision of an adjudicator by referring the matter to arbitration, it will first have to have obtained an Engineer's decision. The three-month time limit will make it difficult to rely on any Engineer's decision which preceded the adjudication. Perhaps a new Engineer's decision will have to be obtained following the adjudication. It is then this Engineer's decision, and not the adjudicator's decision, that will constitute the matter in dispute for the purposes of a subsequent arbitration. Meanwhile of course, the adjudicator's decision, if properly founded upon jurisdiction, will remain binding. Resolving construction disputes was meant to be simpler than this.
CJ-0230
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