Dispute – Adjudicator – Arbitration — Contract specifying address for service of notice to refer adjudicator’s decision to arbitration – Claimant faxing notice of dissatisfaction to defendant’s solicitor – Defendant confirming receipt — Claimant serving actual notice at wrong address — Whether notice properly delivered — Whether court exercising discretion to extend time for service — Applications granted in part
By a contract incorporating the terms of the NEC Engineering and Construction Contract (2nd ed 1995), the defendant company agreed to design and construct tanks at the claimant’s sewage treatment works owned. The contract provided that in the event of a dispute, a party dissatisfied with the adjudicator’s decision could refer the dispute to an arbitrator, on notifying the other party in writing, within four weeks of the notification of the adjudicator’s decision, at the last address notified by the recipient for receiving communications.
On 22 March 2010, the claimant’s solicitor faxed to the defendant’s solicitor a notice of dissatisfaction with a decision of the arbitrator issued on 24 February 2010 and a notice to refer a dispute to arbitration. The defendant acknowledged receipt of the notice by e-mail on the same day. However, it subsequently argued that the claimant had failed to serve a valid notice of dissatisfaction within the required time because it had been sent to the wrong address. The claimant applied to the court for a declaration that it had validly notified the defendant of its intention to refer a dispute to arbitration. Alternatively, it sought an extension of time for doing so until 30 March 2010 or such other date as the court might permit pursuant to section 12 of the Arbitration Act 1996 (the 1996 Act).
The parties agreed that the adjudication provision in the contract did not comply with Part II of the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA) so that the adjudication provisions in the scheme for construction contracts replaced the adjudication provisions in the contract, because the contract did not permit a party to refer a dispute to adjudication at any time, as required by section 108 of the HGCRA.
The issues for determination were: (i) whether the arbitration clause in the contract was incompatible with Part II of the HGCRA and of no effect; (ii) if not, whether delivery of the notice of dissatisfaction within the four week period was an effective communication of that notification under the contract; (iii) if not, whether the fact that the notification of dissatisfaction had been received by the relevant individuals within the four week period made it an effective communication; and (iv) if necessary, whether the claimant should be granted an extension of time to serve the notice of dissatisfaction under section 12 of the 1996 Act.
Held: The applications were granted in part.
(1) The clause under which a matter could be referred to arbitration was not incompatible with the scheme for construction contracts and was not one of the adjudication provisions of the contract that fell to be deleted following the incorporation of the adjudication provisions of the scheme into the contract. It was therefore a valid provision.
To include that provision within those that the scheme replaced would remove the operative part of the arbitration clause, which was not contained elsewhere and for which there was no replacement in the scheme. One would therefore be left with a clause that defined the role of the arbitrator but provided no entitlement to refer a dispute to arbitration. Standing back and looking at the matter broadly, the arbitration clause did not form part of the adjudication provisions of the contract. Although it was relevant to the adjudication provisions because non-compliance with it would make the adjudicator’s decision binding, it was concerned with the provision of a right to refer a dispute to arbitration.
(2) Compliance with the mode of delivery specified in the contract was the only means of achieving or securing effective delivery of a communication under the contract because communication took effect only when it was received at the prescribed address.It would be unsatisfactory if, in any case where a dispute arose concerning the time at which a communication took effect, the parties had to investigate the circumstances in which the communication was made and received in order to determine whether the mode of delivery had been as good as or better than the mode of delivery prescribed by the contract. In the instant case, the notice of dissatisfaction had been received by the relevant individuals within the prescribed time and almost certainly sooner than if it had been sent to the last notified address. However, that could provide no basis for reaching any general assumption in the instant context on whether delivery to the individuals concerned with any particular communication was in general going to be more advantageous to the receiving party than delivery to the prescribed address: Manchester Diocesan Council of Education v Commercial & General Investments Ltd [1970] 1 WLR 241, Lantic Sugar Ltd v Baffin Investments Ltd [2009] EWHC 3325 (Comm) considered. Receipt of the notice by the relevant personnel within the time limit could not outweight a failure to give notice under the contract, although it would be a relevant factor when considering an application to extend time under section 12 of the Arbitration Act 1996.
(3) However, on the evidence, the claimant had sent its notice to the correct address. The defendant’s solicitor had agreed in correspondence that it would accept service, on behalf of the defendant, of any documentation relevant to the adjudication. Accordingly, the address of the defendant’s solicitor had been the “last address notified” for the receipt of such communications. There is no reason why an address cannot be notified under clause 13.2 in respect of a particular type of communication but not others. The claimant’s notice of its intention to refer to arbitration a dispute decided by the adjudicator was a dispute relevant to the adjudication since, in the absence of such a notice served within the four-week time limit, the adjudicator’s decision would become finally binding on the parties. A valid notice of intention to refer, served in time, was therefore relevant to the adjudication since it prevented the adjudicator’s decision from becoming final. The claimant was therefore entitled to the declaration it sought.
(4) Had the claimant been found not to have sent the notice to the correct address in time, it would have been a paradigm case for granting an extension of time for service. Given that the conduct of those acting for the defendant had been a material contributing cause of any such failure, and the notice had been received in time by the relevant individuals, it would be unjust to hold the claimant to the strict provisions on service if it was in fact in breach of those provisions.
Andrew Wales and Sarah Martin (instructed by CMS Cameron McKenna LLP) appeared for the claimant; David Streatfield-James QC (instructed by Pinsent Masons LLP, of Bristol) appeared for the defendant.
Eileen O’Grady, barrister