Appeal refusal highlights importance of valid notices in UK construction disputes

The decision arose out of a dispute over defective work between two construction companies that had entered into a NEC3 engineering and construction subcontract. At the centre of the dispute was whether one of the companies, Ravestein BV (Ravestein), had served a valid notice of dissatisfaction following the original adjudicator's decision, allowing Ravestein to challenge the adjudicator’s decision by way of arbitration or litigation.

The parties had opted to NEC Dispute Resolution Option W2. Under clause W2.4(2) of Option W2, a party to a dispute cannot proceed to arbitration or court unless it has formally notified the other party of its dissatisfaction with the adjudicator's decision.

Construction  disputes expert Sian Hughes of Pinsent Masons said the case will have “a significant impact” on how parties under the NEC suite of contracts file a notice of dissatisfaction in future construction-related disputes.

”On receiving an adjudicator’s decision it is imperative to be aware of any contractual requirements for challenging it, particularly under the NEC suite of contracts. If you are minded to challenge it, make sure that the requisite notice is given at the right time, on the right person, by the right method and includes the right content,” she said.

Ravestein had contracted to provide construction and engineering works to Trant Engineering Limited (Trant). Trant claimed Ravestein’s works were defective, and referred the dispute to adjudication. The adjudicator decided that the works were defective and that Ravestein should pay Trant £458,000 in damages.

Following the adjudicator’s decision, Ravestein emailed the adjudicator and copied Trant, communicating that it did not accept the adjudicator’s decision as being “final and binding” and its intention to challenge the adjudicator’s jurisdiction. In the email, it wrote: “Mister Cousins, after seven days you weren’t entitled to make any rulings. You must also follow the rules of the UK in 1996 by the Housing Grants, Construction and Regeneration Act (Construction Act). If you do not withdraw your ruling before tomorrow, our solicitor mister Hugh Smit will file request at ICE to reverse the ruling. All rights reserved. Kind regards.”

Ravestein later relied on the email as a notice of dissatisfaction, and referred the dispute to arbitration. Trant contended that the arbitrator had no jurisdiction because no valid notice of dissatisfaction had been served. The arbitrator sided with Trant and ruled that the email was clearly referring to the adjudicator’s jurisdiction and that nothing was said about the correctness of the adjudicator’s decision. 

NEC Option W2 provides that an adjudicator’s decision is binding on the parties unless and until revised by the court or arbitration, and is enforceable as a matter of contractual obligation between the parties. If neither party notifies the other that it is dissatisfied with the decision, and that it intends to refer the matter to the court or arbitration, within four weeks, the adjudicator’s decision becomes final and binding.

Rejecting Ravestein’s appeal under the Arbitration Act, the court agreed with Trant that the arbitrator did not have jurisdiction because the email was not a valid notice of dissatisfaction. The court said that a valid notice requires both the identification of the matter which the party disputes and a statement that the party intends to refer the matter to the tribunal; and it was not sufficient simply to notify the other party that you do not accept that the adjudication decision is final and binding.

Ravestein’s email did not refer to an intention to refer to arbitration a substantive dispute on the merits and did not satisfy the requirements of a contractual clause in order for valid notice to be given. As a result, the adjudicator’s decision was final, binding and enforceable.

The court noted that any notice had to be construed objectively, by reference to how it would have been understood by a reasonable recipient, and the threshold for establishing an error of law is very high.