NEC3 dispute? 4 weeks, or go mute

A recent decision made by the TCC in respect of the application of a standard NEC “time-bar” clause has raised many questions as to the practical and commercial effects of parties relying on such clauses. Here, we focus on the facts of the case and the commercial impact that this decision may have within the construction sector.

In this case, Sitol Ltd ("Sitol”) and Finegold & Anr (“Finegold”) had entered into a standard form NEC3 contract (“the Contract”). Following a dispute between the parties, Sitol raised adjudication proceedings. The adjudicator found in Sitol’s favour and ordered Finegold to pay the sum of £45,000, plus adjudicator’s fees of £42,000.

Matters became even more contentious when Sitol raised an action with the TCC seeking enforcement of the adjudicator’s decision. One of the main arguments raised by Finegold for not paying the outstanding sum was that the dispute was referred to the adjudicator too late as a result of a clause in the Contract, namely Clause 93.3.

Clause 93.3 states:

“a party may refer a dispute to the adjudicator if the party notified the other party of the dispute within four weeks of becoming aware of it.”

As the Finegolds were residential occupiers, Part II of the Housing Grants, Construction and Regeneration Act 1996, as amended, was not applicable. The question before the court was therefore whether Sitol had referred the dispute to adjudication in accordance with the notice provisions of the Contract, as well as whether notice had been provided to Finegold within four weeks of Sitol becoming aware of the dispute.

According to Finegolds, they received notification that the dispute was being referred to adjudication around 25 April 2018. However, the dispute had arisen some time before this. As a background, Sitol had sent an invoice in respect of unpaid fees on 23 January 2018. In addition to the fees remaining unpaid, Finegold’s solicitors issued an express rejection of the claim in a letter dated 19 February 2018. According to this timeline, this meant that the latest date that Sitol should have served notification of the dispute to Finegold was 19 March 2018.

In considering these facts, the court applied the test set out in the case of Amec v Secretary of State for Transport [2004] EWHC 2339. This case stated that the key indicator as to whether a dispute has arisen is dependent on a claim having been denied. Considering this reasoning, and the actions of both parties, it was clear to the court that a dispute had arisen and had crystalised on 19 February 2018. Therefore, it was found that the adjudication raised by Sitol was out of time. 

Lord Waksman J had stated that he had come to this conclusion “with no great enthusiasm,” but he was bound to apply the law. This is likely due to the commercial consequences of such a decision to construction disputes falling outwith the scope of the Construction Act.

It remains to be seen how this decision will affect how parties interact when contracting under NEC3, where Clause 93.3 remains unamended. We may therefore see dilution of this Clause 93.3, via drafting amendments between parties. For now, parties will have to be far more vigilant of relevant timescales for notification during any initial dispute discussions, especially where Clause 93.3 applies to NEC3 contracts. 

Construction

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