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Enforcement of the adjudicator’s decision under the NEC3

4 November 2019

Adjudication under the NEC3

Clause W1 of the NEC3 governs adjudication of disputes in jurisdictions where the UK Housing Grants, Construction and Regeneration Act 1996 does not apply, such as South Africa.  

In terms of Clause W1.1 of the NEC3 “[a] dispute arising under or in connection with this contract is referred to and decided by the Adjudicator”.  In terms of Clause W1.4(1) “[a] Party does not refer any dispute under or in connection with this contract to the tribunal unless it has first been referred to the Adjudicator in accordance with this contract”.  When these two clauses are read in conjunction, it is clear that adjudication is a mandatory step before proceeding to arbitration or court proceedings (whichever is selected by the Parties in the Contract Data).

Appointment of the Adjudicator

‘Adjudicator’ is a defined term, and the Adjudicator is generally identified in the Contract Data.  Clause W1.2(3), however, provides that “[i]f the Adjudicator is not identified in the Contract Data or if the Adjudicator resigns or is unable to act, the Parties choose a new adjudicator jointly.  If the Parties have not chosen an adjudicator, either Party may ask the Adjudicator nominating body to choose one. The Adjudicator nominating body chooses an adjudicator within four days of the request.  The chosen adjudicator becomes the Adjudicator.” 

Although Clause W1.1 refers to the Adjudicator in the singular, Clause 12.1 of the Core Clauses expressly contemplates the plural as well.  It states, “In this contract, except where the context shows otherwise, words in the singular also mean in the plural and the other way round…”.  Further, as pointed out in Keating on NEC, “the adjudication contract is sufficiently flexible to allow the terms to be agreed as and when a dispute arises and a party wishes to refer it to adjudication”.  The provisions of the NEC3 cannot, therefore, be said to be a bar to the appointment of an ad hoc adjudicator.

A standing adjudicator is generally appointed at the start of the contract and would generally be expected to keep herself abreast of developments on the site.  For this she would usually charge a monthly retainer. An ad hoc adjudicator is appointed as and when a dispute arises for the purposes of determining only that dispute and would usually only charge an hourly fee for their services.

Adjudicator’s Authority to Determine Jurisdiction

Some adjudication contracts do grant an adjudicator the power to determine whether or not she has jurisdiction to hear the dispute.  This would be a way of eliminating later jurisdictional challenges from a losing party.  

This is not explicitly dealt with under the NEC3, however, it is generally accepted that if a party challenges an adjudicator’s jurisdiction, the adjudicator may investigate this challenge and come to a non-binding “decision” as to jurisdiction, so as to determine whether to continue the adjudication or, if she believes she has no jurisdiction, to resign [Fastrack Contractors Ltd v Morrison Contractors Ltd [2000] BLR 168; AMEC Projects Ltd v Whitefriars City Estates Ltd [2004] EWCA Civ 1418; Nicholas Gould, King’s College London, Centre of Construction Law, MSc in Construction Law & Dispute Resolution]  

Enforcement of the Adjudicator’s Decision

If the Adjudicator decides that she does have jurisdiction to act, and makes an award, Clause W1.3(10) of the NEC3 states that “[t]he Adjudicator’s decision is binding on the Parties unless and until revised by the Tribunal and is enforceable as a matter of contractual obligation” [emphasis added].

If the losing party refuses to make payment of an Adjudicator’s award, enforcement may be pursued by way of both:

  • Action proceedings, followed by a summary judgment application; or
  • Application proceedings.

There is a myriad of case law supporting the enforcement of an adjudicator’s award, as a matter of contractual obligation, where the contract states that such award is binding upon the parties, pending determination by a court or arbitrator [Freeman NO v Eskom Holdings Limited (2010); Basil Read (Proprietary) Limited v Regent Devco (Proprietary) Limited (2010); Emfuleni Local Municipality v Tau Ya Mariri Transport and General Services (2012); Esor Africa Pty (Ltd) v Bombela Civils Joint Venture (Pty) Ltd (2012); Tubular Holdings (Pty) Ltd v DBT Technologies (2013); Stefanutti Stocks (Pty) Ltd v S8 Property (Pty) Ltd (2013)].

Enforcement of the Adjudicator’s award may not be resisted based on an error of fact or law.  

The issue of a notice disputing the adjudicator’s award and/or the referral of the dispute to a court or arbitrator also does not suspend the obligation to make payment of the adjudicator’s award, pending determination by such court or arbitrator, and the courts have even gone so far as to enforce payment of a temporarily binding adjudicator’s award, as a matter of contractual obligation (in line with the principles of sanctity of contracts and freedom of contract) in circumstances where the contractor had gone into business rescue [Frese NO. v Steve Biko Foundation 2017 JDR 0360 (GJ)].  

The only remaining grounds available to resist the enforcement of the Adjudicator’s award, is to challenge her jurisdiction.  There are two legs to this test:

  1. Did she have jurisdiction in the first place?  To establish this one would look at:
    • Whether she was properly appointed i.e. by the correct nominating body, with the appropriate agreements in place; and
    • Whether there is a dispute to be adjudicated i.e. have the necessary preconditions been met (e.g. notices issued) and has the dispute crystallised.
  2. Did she lose jurisdiction during the course of the proceedings?  To establish this one would look at:
    • Whether she complied with the rules of natural justice i.e. did she give both parties an opportunity to be heard and/or avoid any appearance of bias;
    • Whether she complied with the procedures for the adjudication process; and
    • Whether she answered the right question.

Establishing compliance with this test is not an easy feat. 

Author: Michelle Kerr, Director