The parties had contracted on the ICE Conditions of Contract (5th Edition) as amended by ICE 5th Edition/HGCRA/March 1998 and ICE/Scot Arb/April 2001. The key issue was whether a letter dated 15 September 2004 from Mowlem to Scrabster was a valid arbitration notice. Scrabster sought a declaration that the notice was invalid and of no effect. If they were successful then the earlier decision of an adjudicator would be final and binding.

Scrabster’s argument was that Mowlem’s notice did not comply with the requirements of Article 1:3 of the Scottish Arbitration Code 1999. Clause 66(9)(a) of the Contract required a party seeking arbitration to serve on the other party a notice to refer the dispute to arbitration. Clause 66(9)(d) required a notice of arbitration to be served within three months of the giving of an adjudicator’s decision, otherwise that adjudicator’s decision would become final and binding. Clause 67(a) stated that the arbitration “shall” be conducted in accordance with the Scottish Arbitration Code 1999. Article 1:3 of that Code sets out at length items that must be included within the notice of arbitration.

The notice given by Mowlem did not include all of the detailed requirements of the Code.

Judge Sir David Edward QC delivered the opinion of the court. The key question was whether the strict provisions of Article 1:3 were essential in order for the notices of arbitration to be valid. The Court’s view was that the parties had incorporated the Code in its entirety, unless expressly provided otherwise within the conditions of Contract. In order to interpret the conditions of Contract the conditions needed to be read as a whole.

He then referred to case law relating to notices, which made it clear that the strict requirements of notice must be followed. In particular he referred to Lord Hoffmann in Mannai Investment co Limited v Eagle Star and Life Assurance Co Limited [1997] AC 749:

“If the clause had said that the notice had to be on blue paper, it would not have been known that serving a notice on pink paper, however correct it might have been that the tenant wanted to terminate the lease.”

However, the strict approach of Lord Hoffmann had perhaps given way to a commonsense approach where absolute clarity or precision may not always be necessary. A commonsense business interpretation should be applied. The word “shall” in the Contract made it clear that the Code had been adopted and must be complied with. However, the form of notice of arbitration that had been included in the appendix to the Contract did not comply with the stringent requirements of Article 1:3 of the Code.

Further, it would be absurd to conclude that a notice of arbitration was automatically invalid quite simply because it did not include all of the telephone numbers, telex numbers and email addresses of the parties as contemplated by Article 1:3(a). This would be especially the case where those contact details would be taken to be known to the parties.

In conclusion, the Court decided that Mowlem’s letter of 15 September 2004 complied with clause 66(9)(a) of the Conditions and was therefore a valid notice.