Notices of dissatisfaction under NEC – separate challenges needed

Iain Drummond and Lindsay Robinson consider The Metropolitan Borough Council of Sefton and Allenbuild Limited and the requirement in an NEC notice of dissatisfaction to separate challenges to the adjudicator’s jurisdiction or the substantive merits of the adjudicator’s decision.

19th August 2022

The Technology and Construction Court has provided a recent qualification to the requirements for notices of dissatisfaction under New Engineering Contract (NEC) conditions following an adjudicator’s decision. The court found that ‘the validity of an adjudicator’s decision is of a fundamental[ly] different character from its merits’, meaning that jurisdictional issues and substantive merit issues should be covered separately in any notice of dissatisfaction under NEC. 

The law

Under NEC, the decision of an adjudicator applies unless and until it is revised by a tribunal, which can be the decision of a court, or a decision at arbitration. If the dispute relates to an NEC contract, a notice of dissatisfaction must be served within a stated period of time, if one of the parties wishes to challenge the decision. 

In the recent case of The Metropolitan Borough Council of Sefton and Allenbuild Limited, the court provided further qualification as to the content required in a Notice of Dissatisfaction.

The case

The dispute related to a claim for alleged defects under an NEC contract. The Metropolitan Borough Council of Sefton (the “Council”) obtained an award at adjudication for £2.2 million. Allenbuild, the contractor, sought to challenge enforcement of the adjudicator’s decision, having preserved its position by issuing a notice of dissatisfaction (“NOD”). The NOD was drafted widely, and included dissatisfaction with ‘the entirety of the Adjudicator's decision including all of the Adjudicator's conclusions, reasoning and decisions’.

The Council sought enforcement of the adjudicator’s award, while Allenbuild sought a stay of the enforcement proceedings under the Arbitration Act 1996. 

The judgment 

In respect of the NOD, the court considered that when drafting a NOD under NEC, ‘the issue of the validity of [an adjudicator’s] decision is of a fundamentally different character from its substantive merits; and 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’.

The words used by Allenbuild in its NOD (on its true construction) did not make clear that a challenge was being made to the validity of the adjudicator's decision on jurisdictional grounds as well as its substantive merits.

Conclusion

The case clarifies the content required of an NOD issued under NEC depending on the basis of objection to an adjudicator’s decision. It is clear from this judgment that the courts will require to see a distinction in a NOD issued under NEC conditions between a challenge to the validity of an adjudicator’s decision on jurisdictional grounds on the one hand, and a challenge to the substantive merits of the decision on the other. This should be stated clearly in any NOD, although the court held there is no need for the NOD to “descend into the details” of the substantive challenge.

Key points

  • Notices of dissatisfaction under NEC should be drafted carefully and with consideration of all the issues.
  • Challenges to the adjudicator’s jurisdiction, or the substantive merits of the decision, should be separated out in any notice of dissatisfaction. 
  • The grounds of challenge to the substantive merits do not need to be set out in detail, although it is worth taking a cautious approach.