Tilbury Douglas Joint Venture ordered to pay ￡22.5 Million

Northumbrian Water Limited v Doosan Enpure Limited and Tilbury Douglas Construction Limited [2022] EWHC 2881 (TCC).

The TCC has ordered the joint venture of Tilbury Douglas Construction and Doosan Enpure (JV) to pay Northumbrian Water Ltd (NW) just under ￡22.5 million. NW had terminated the contract in May 2021 after various disputes arose and claimed that it was owed ￡50 million for contractor default. The JV argued that it was in fact the JV which was owed (approximately) ￡33 million from NW; this was for an adjustment to prices regarding claims events, along with claims of repudiatory breach.

In 2016, NW went into a contract with the JV under a form of NEC 3 Engineering and Construction Contract, option C. The Clause W2 dispute resolution procedure applied. Clause W2 is normally used in the UK. A referral to adjudication may be made by any party at any time. This is the main difference from clause W1, which includes a table setting out who may refer disputes, within certain time periods.

After an adjudication, Mr. Turgoose (adjudicator) ordered the JV to pay NW ￡22.5 million and 90% of the adjudicator’s fees. The JV refused to pay this sum and attempted to refer the dispute to a tribunal. After NW issued proceedings to enforce the adjudicator’s decision, the JV served an application to stay the proceedings under the Arbitration Act 1996 (s.9) and contended that NW was not allowed to commence enforcement proceedings in a court and any dispute was to be dealt with via arbitration.

Justice O’Farrell in the TCC ruled that the JV was not entitled to a stay for arbitration for a few reasons:

a) There was no challenge to the validity of the adjudication decision,

b) the parties expressly agreed any adjudication decision would be binding on an interim basis because of clause W2, and therefore any claim under s.9 Arbitration Act 1996 could not be engaged,

c) the JV lost its right to challenge the validity of the adjudication decision because it did not challenge the validity of it at the time of the s.9 claim.

The JV participated in the adjudication and did not raise any challenges during it.

The courts will always give primacy to the express terms of the contract. If a contract determines an adjudicator’s decision to be temporarily binding, then the parties in dispute must abide by the adjudicator’s decision. They cannot ignore it and raise the existence of an arbitration agreement to resist enforcement.

GEORGE GIBBS LLB (HONS) LPC ACIARB

PARALEGAL HANSCOMB INTERCONTINENTAL