The Facts

On 18 December 2012, Merit Merrell Technology Ltd (‘MMT’) entered into an amended NEC3 Engineering and Construction Contract with Imperial Chemical Industries Ltd (‘IMI’) to conduct works at the IMI’s paint processing plant in Ashington, Northumberland. Although the initial contract sum was just under £2 million, additional works instructed by IMI (the ‘Employer’) valued the contract to be in excess of £23 million. During the performance of the contracted works, a dispute arose over the quality of the MMT's (the ‘Contractor’) welding and the value of its works. Subsequently, the Contractor's employment under the contract was terminated.

The Contract Data in the contract identified the Adjudicator nominating body to be the Chartered Institute of Arbitrators (‘CIArb’). The amended contract included "instructions to tenderers", which had "secondary option clauses" containing Option W2 serving as the Dispute Resolution provision in the contract. On 11 February 2013, the parties signed a Memorandum of Agreement which outlined a Schedule of Amendments to the contract and included amendments to Option W2. Schedule 1 of the contract amended Option W2 with the wording:

"Delete and replace with ‘The Contractor and the Employer acknowledge and agree that all Disputes shall be resolved in accordance with Appendix 2’."

Appendix 2 outlines the dispute resolution procedure. Consultation (paragraph 2) part of the Appendix states that the parties shall "consult in good faith in an attempt to come to an agreement in relation to the Dispute”. Paragraph 4, Adudication, sets out that adjudication shall be carried out in accordance with the Technology and Construction Solicitors Association (‘TeCSA’) Adjudication Rules, 2011 Version 3.2. Further, the Appendix 2 identified Adjudicator nominating body to be the Royal Institution of Chartered Surveyors (RICS).

Schedule of Amendments to the contract stipulated that it was to supersede all other contract provisions. Further, it stated that

"Option W2 - Add new sentence 'Notwithstanding any provisions to the contrary, this contract is deemed to be a "construction contract" within the meaning of Part II of the Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009'."

In January 2015, the CIArb nominated adjudicator provided first adjudication decision where the Contractor was held to be entitled to some £7.5 million as a valid payment notice had not been served. The adjudication was conducted utilising the Option W2 procedure and was not contested by either party to the contract. Employer merely stated that the TeCSA was the right Adjudicator nominating body and failed to challenge the adjudicator's appointment by CIArb. Hence, further two adjudications were conducted under Option W2 procedure where CIArb nominated the same adjudicator. Although the Adjudicator’s Second decision stated that the Employer was entitled to the documents it had listed in the schedule to the notice of adjudication, no orders were made enforcing the Contractor to deliver them up to the Employer. Third decision by the Adjudicator addressed issues arising on the termination and provided decision in favour of the Contractor. However, third decision was not placed before TCC.

The Decision

Mr Edwards-Stuart J granted summary judgment enforcing the second adjudicator's decision but declined to grant an order for delivery of the documents requested by IMI.

Mr Justice Edwards-Stuart concluded that the addition of new wording to Option W2 by the memorandum of agreement had the effect of restoring the original Option W2 clause.  Court’s reasoning was that to hold otherwise would not allow the new wording to be incorporated. Hence, the Adjudicator nominating body named in the contract data (CIArb) applied as there were no adjudicators named in the contract data. The court ruled that the use of Option W2 was valid and the adjudicator had been nominated by the correct body which applied the correct rules.

With relation to the reference of RICS, the court held that it was common practice to place words in brackets when drafting a contract to indicate that it is provisional position or something that was to be negotiated further. Although the reference to RICS in square brackets would be valid in absence of Adjudicator nominating body specified in the contract, clear choice of CIArb meant that choice of CIArb is valid.

The court also assessed whether the adjudicator lacked jurisdiction by proceeding on the basis of Option W2 rather than the TeCSA rules, provided that applicable dispute resolution procedure was in Appendix 2. Mr Justice Edwards-Stuart held that MMT had waived right to rely on the TeCSA rules where the adjudicator had rejected the Scheme for Construction Contracts 1998 which is the other alternative. The adjudicator did not breach rules of natural justice and did not lack jurisdiction as the Adjudicator was right to apply Option W2 in the absence of request to utilise TeCSA.

The second part of the second Adjudicator’s decision, entitling ICI to certain documents, was also assessed by the court. As the adjudicator entitled ICI to the documents but refused to order the delivery of those documents by MMT, Mr Justice Edwards-Stuart concluded that the court cannot provide further orders than what the adjudicator had decided. Although ICI argued that further guidance was not provided by the Adjudicator as the period of five days for MMT to find and assemble the documents was too short, the court would not ordinarily order delivery of documents that were unlikely to be of any use to the other party. Having assessed the requests, the court held that it was unclear which could be useful where several instances give rise to triable issues. As the Court assessed summary judgment application, it had to refuse relief sought unless it’s very clear (observations of Dyson J (as he then was) in Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR 93, at 100.

Commentary

This case is a prime example where detailed care and consideration should be placed when drafting amendments to the contract to avoid complications when conducting dispute resolution. If the parties had disputed the rules and procedures to adjudication from the start, it may have prolonged the dispute process and incur unnecessary costs.

Interestingly, with regard to ICI’s request for specific documents awarded by the Adjudicator, the court stated that it may be more appropriate for the situation to have requested an interim injunction requiring MMT to preserve the documents until further clarification. As ICI did not apply for such interim injunction, it gives rise to questions as to the situation of the documents. Although the court held that the Adjudicator’s decision entitled legal rights for ICI to the documents held by MMT, it seems like MMT can withhold the documents until ICI can prove with sufficient information that the documents are required. The notable difficulty to such argument is that how can one clarify the need for documents that one does not have access? Even if the documents sought by ICI can be clarified for identification, who shall determine the degree of correctness of the potential disclosure from MMT documents? Further, in such scenario, are there any measures compelling MMT to disclose further documents if ICI continue to request more documents on the basis that the disclosed documents are not satisfactory?