Legal: Beware the adjudication time bar

A recent decision of the Technology and Construction Court appears to be the first case to apply an NEC time bar that requires disputes to be notified within one month for non-Construction Act contracts. The practical effect of the decision is that, in most cases where the time bar applies, claims will become barred one month after a dispute arises unless notice is given and an adjudication commenced within a further four weeks. This is an onerous requirement, which parties should take special care to avoid breaching. The TCC’s decision, in the case of Sitol Ltd vs Finegold [2018] EWHC 3969 (TCC)’, was handed down in December 2018, but has only recently been made available.

Sitol Ltd vs Finegold

Sitol was engaged by Mr and Mrs Finegold to undertake highly specialised tiling work as part of a large building and refurbishment project at the Finegolds’ home in Hampstead. An NEC3 Engineering and Construction Short Contract was in place between the parties. As it was a residential project, the Construction Act was not applicable.

Sitol sought to enforce an adjudication decision against the Finegolds for the outstanding sums for work done of £44,838.38. The Finegolds resisted enforcement on two grounds, including that the dispute was referred to adjudication too late. The Finegolds relied on clause 93.3, which was in standard form, and stated: “A party may refer a dispute to the adjudicator if:

• The party notified the other party of the dispute within four weeks of becoming aware of it and
• Between two and four further weeks have passed since the notification.”

Time bar upheld

The TCC concluded that a dispute arose between the parties on 19 February 2018, when the Finegolds’ lawyer wrote to Sitol, stating that there was no contract between the parties and thereby rejecting Sitol’s claim. As Sitol did not issue a notice of adjudication, or otherwise notify the Finegolds of the dispute, until 25 April 2018, the adjudication was out of time.

In determining whether a dispute existed for the purpose of the time bar, the court adopted the well-established test for determining whether a dispute exists that is capable of being referred to adjudication. In this respect, the court relied on the seven propositions articulated in Amec Civil Engineering Ltd vs Secretary of State for Transport [2004] EWHC 2339, and emphasised that “a dispute does not arise unless and until it emerges that the claim is not admitted”. Against this background, the court had no difficulty in concluding that a dispute had crystallised on 19 February 2018 with the Finegolds’ rejection of Sitol’s claim (notwithstanding that further information had also been requested).

Clause 93.3 also requires a party to have “become aware” of a dispute. The court considered that awareness had to be determined objectively, because if the test were wholly subjective a party could avoid time starting to run by not opening a letter addressed to them.

Conclusions and implications

Similar time-bar provisions to clause 93.3 of the NEC Short Contract are included in the NEC3 and NEC4 Engineering and Construction Contract (as Option W1) as well as in other contracts in the suite. Although not applicable where the Construction Act applies, these provisions will take effect in relation to supply-only contracts, excluded operations (such as tunnelling, power generation and water treatment), domestic works (as in this case) and international projects. This decision will therefore be of relevance to parties contracting on the NEC form in a variety of circumstances.

Those parties who find themselves subject to these provisions will need to be particularly vigilant

This appears to be the first court decision to apply the NEC time bar and adopts a straightforward and robust approach. Few adjudications would ordinarily be commenced within the period stipulated. Those parties who find themselves subject to these provisions will need to be particularly vigilant.

In reaching his conclusion, the judge noted that he had “no great enthusiasm” for the point, but that he was bound to apply the law. A similar lack of enthusiasm may be read into obiter comments made by Mr Justice Coulson (as he then was) when considering the same time bar in Costain Ltd vS Tarmac Holdings Ltd [2017] EWHC 319 (TCC)’: “The adjudicator decided that a particular claim could not be brought because of the time bar … I can see that there may be all sorts of potential arguments arising in respect of clause 93. Is it a condition precedent? What effect does it have on an ongoing dispute or ongoing defects? What is the link between the time bar and the precise formulation of a claim? These may all provide fertile ground for debate between the parties. But none of them is a matter for the court on this application.”

These comments were not referred to in the present case, nor whether the clause might not be a condition precedent. It remains to be seen whether attempts will be made in the future to dilute the impact of the provision, despite the findings made in the present case.

Rachel Todd is an associate in the infrastructure, construction and energy disputes team at CMS