UK: Further Guidance From The TCC On Requirements For A Valid Notice Of Dissatisfaction

In Ravestein B.V. v Trant Engineering Limited [2023], the Technology and Construction Court (TCC) has refused a claimant's permission to appeal an arbitrator's decision under the Arbitration Act 1996 (Arbitration Act). In doing so, the TCC has issued further guidance on an issue that has been considered by the courts in a line of recent case law (which we discuss further below): namely, the requirements for a valid notice of dissatisfaction, under the New Engineering Contract (NEC) suite of contracts, with an adjudicator's decision.

Introduction

Under the Housing Grants, Construction and Regeneration Act 1996 (Construction Act), adjudicator's decisions are 'interim-binding', i.e. binding until finally determined by litigation, arbitration or by agreement.

Most standard forms of contract require the losing party in an adjudication to issue a notification (referred to as a 'notice of dissatisfaction' in the NEC suite of contracts) to the other party that it is dissatisfied with the decision within a set time frame. If it fails to issue a notice on time, and importantly, in compliance with any contractual requirements for such notice, then the adjudicator's decision will become final and binding and any further right to challenge enforcement of that decision will be lost.

Ravestein B.V. v Trant: Background

• In 2010, Ravestein B.V., a shipyard and construction company incorporated in the Netherlands (the Claimant), and Trant Engineering Limited (the Defendant) entered into a subcontract on an amended NEC3 form incorporating Dispute Resolution Option W2.
• Following an adjudication which took place in 2021, in which the adjudicator had found Ravestein liable for defective works and ordered it to pay damages, Ravestein referred the dispute to arbitration.
• The Parties agreed that:

1. the first issue to be determined by the arbitrator was whether Ravestein had served a valid notice of dissatisfaction under clause W2.4(2) of the NEC3 subcontract; and
2. if no valid notice of dissatisfaction had been served, then the adjudicator's decision would be final and binding and could not be the subject of any further dispute resolution process.

• The arbitrator found that Ravestein had not served a valid notice of dissatisfaction; as a result, the adjudicator's decision was final and binding and the arbitrator did not have jurisdiction to hear the dispute.
• Ravestein subsequently sought leave to appeal the arbitrator's decision pursuant to section 69 of the Arbitration Act 1996 – this appeal was the subject of the current proceedings before the TCC.

Ravestein's position

Ravestein sought leave to appeal under section 69(3)(c)(i) of the Arbitration Act, arguing that the arbitrator's decision was "obviously wrong" on two counts since the arbitrator had both:

1. incorrectly held that the notice of dissatisfaction had to both notify the matter in dispute and state the intention to refer it for further dispute resolution; and
2. incorrectly found that Ravestein's notice challenged only the jurisdiction of the adjudicator, rather than contesting the merits of the underlying decision.

Alternatively, Ravestein submitted that the question was one of public importance given the widespread use of the NEC3 standard form (section 69(3)(c)(ii)).

Trant's position

Trant sought to uphold the arbitrator's award, contending that the decision was not "obviously wrong" since the arbitrator had correctly interpreted both the relevant notice provisions; and Ravestein's purported notice of dissatisfaction as solely disputing the jurisdiction of the arbitrator, and not identifying any dispute with the underlying merits of the decision.

Transport for Greater Manchester v Kier Construction Ltd [2021]

In relation to the requirements for a valid notice of dissatisfaction, both Parties relied upon the earlier TCC" decision in Transport for Greater Manchester v Kier Construction Ltd [2021] EWHC 804 (TCC), in which the TCC had also considered the requirements for a valid notice of dissatisfaction under Option W2 of the NEC form. However, the Parties sought a different interpretation of that decision.

Ravestein argued that Transport for Greater Manchester confirmed that:

• no specific form of words or level of detail is prescribed in the relevant clauses;
• all that was required was to inform the Defendant that the adjudicator';s decision is not accepted as final and binding;
• the notice did not need to specify the matter in dispute; and
• the notice did not need to refer to the intention to refer it to the tribunal.

Trant argued that Ravestein's argument was based on an erroneous interpretation of Transport for Greater Manchester. In Trant's submission, the correct test laid down by O'Farrell J in that case was that:

• a notice of dissatisfaction was required to identify both the matter disputed and the intention to refer the matter to the next stage of the dispute resolution process; and
• it was not sufficient simply to notify the other party that you do not accept that the adjudication decision is final and binding.

TCC decision

Requirements for a valid notice of dissatisfaction under Clause W2

The TCC upheld the arbitrator's decision and rejected the Claimant's application to appeal.

Her Honour Judge Kelly agreed with the Defendants that the correct interpretation of the earlier TCC decision in Transport for Greater Manchester was that the notice was required to identify both the matter disputed and the intention to refer the matter to arbitration.

She noted that O'Farrell J had "made it clear in her judgment that she was considering the two separate requirements contained within clause W2.4(2)". Namely:

1. that this provided, together with clause W2.3(11), that the adjudicator's decision would be final and binding "unless one of the parties notified the other within four weeks of notification of the decision that (i) it was dissatisfied with a matter decided by the Adjudicator and (ii) it intended to refer the matter to the Court" (at [42]); and
2. whilst the NEC form "does not stipulate the form of words that had to be used, or the level of detail that was required", a valid notice would have to be "clear and unambiguous so as to put the other party on notice that the decision was disputed but did not have to condescend to detail to explain or set out the grounds on which it was disputed" (at [43]).

Had Ravestein issued a valid notice of dissatisfaction?

The TCC held that it had not - also upholding the arbitrator's decision in this regard.

The email in question was sent by Mr. Ravestein to the adjudicator shortly after he rendered his decision, with Trant in copy, and stated that:

The TCC agreed with the arbitrator that Ravestein's complaint was clearly as to jurisdiction and made no mention of any challenge / complaint as to the underlying merits of the adjudicator's decision.

A further relevant factor which the arbitrator considered would "militate against the email being a notice of dissatisfaction" - and with which the TCC agreed - was that Ravestein had sent its email to the adjudicator rather than to the other party as required by the clause (although it noted that the other party was copied in to the email).

Commentary

Ravestein is the latest in a line of recent case law considering the requirements for validity of notices of dissatisfaction to be given by the losing party in an adjudication.

In Prater Limited v John Sisk & Son (Holdings) Limited [2021], the TCC confirmed that Clause W2.4(2) is concerned with circumstances in which a party is dissatisfied with the decision regardless of the grounds for that dissatisfaction. A notice of dissatisfaction will therefore be required both for challenges on jurisdictional or natural justice grounds, as well as challenges to the merits of the decision.

It is also worth recalling the TCC's further clarification in Prater that, for a party wishing to challenge the enforceability of an adjudicator's decision, it is not enough simply to challenge that decision in a notice of dissatisfaction, it must also "bring and make good that challenge before the Court".

Most recently, in Metropolitan Borough Council of Sefton v Allenbuild Limited [2022], the TCC held that whilst a notice of dissatisfaction "need not descend into the details of any substantive challenge to an adjudicator's decision" (per Transport for Greater Manchester), it did need 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. This decision was not cited by the TCC in Ravestein in which the requirement to identify the "matter disputed" appears to have been considered to require a challenge to the substantive merits only, since Ravestein's complaint about jurisdiction was not found to constitute a valid notice of dissatisfaction. It will be interesting to see if and how the two decisions can be reconciled if this issue comes before the courts again.

Following Ravestein v Trant, the position on notices of dissatisfaction appears - for now at least - to be settled: a notice of dissatisfaction under the NEC suite of contracts must identify both the matter disputed (i.e. the substantive merits and not just the jurisdictional challenge) and the intention to refer the matter to arbitration. If these requirements are not met there is a risk that a party attempting to notify its dissatisfaction with an adjudicator's decision will find itself with no further avenue to resist enforcement.

For Ravestein, failure to issue a valid notice of dissatisfaction resulted in the adjudicator's decision becoming final and binding and all further opportunity to challenge it being lost.

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