Notices of Dissatisfaction: How Detailed Do They Need To Be?

The decision handed down by the Technology and Construction Court in the case of Metropolitan Borough Council of Sefton ("Sefton") v Allenbuild Limited ("Allenbuild") reaffirms the requirements of notices of dissatisfaction under NEC contracts, particularly where there is a challenge to the validity or enforceability of an adjudicator's decision.

A VALID NOTICE OF DISSATISFACTION

The decision in earlier cases such as Greater Manchester v Keir Construction and Prater Ltd v John Sisk & Son (Holdings) Ltd highlighted the importance of ensuring that a notice of dissatisfaction is served in time, to the right place and person by the correct method and importantly, that it provides clear detail as to what it is that a party is seeking to challenge. Furthermore, it has been established that a notice of dissatisfaction is required both for challenges to the validity or enforceability of an adjudicator's decision as well as challenges to the substantive merits of a decision.

So, what level of detail is required? The answer is that for notice of dissatisfaction to be valid it should be clear and unambiguous so that it puts the other party on notice that the decision is disputed.

THE DISPUTE IN SEFTON VRS ALLENBUILD

Sefton and Allenbuild were in dispute over alleged defects relating to works carried out under an NEC2 Engineering and Construction Contract (ECC) contract for the construction of a leisure centre and water-based theme park in Southport. Sefton, the employer, were awarded £2.2 million plus interest by an adjudicator and sought to enforce the decision.

When court proceedings were commenced to enforce the adjudicator's decision, Allenbuild sought a stay of the court proceedings pending referral of the dispute to arbitration and served a notice of dissatisfaction. The notice sought to challenge the "entirety of the adjudicator's decision" and "all of the adjudicator's conclusions, reasoning and decisions". Allenbuild contended that "this leaves open any challenges on any basis whatsoever (whether as to enforceability or final determination)".

The court ultimately rejected Allenbuild's request for a stay. As part of its reasoning the judge considered that the wording in the notice of dissatisfaction was too broad and simply did not make clear that the challenge related to the validity of the adjudicator's decision on jurisdictional grounds, as well as to the challenge on merits. It therefore was not 'valid'.

In particular the court held that:

"...whilst a notice of dissatisfaction need not descend into the details of any substantive challenge to an adjudicator's decision, the issue of the validity of such a decision is of fundamentally different character from its substantive merits; and a notice of dissatisfaction needs to make it clear whether a challenge is being made to the validity of an adjudicator's decision on jurisdictional grounds, instead of, or in addition to, a challenge to its substantive merits."

KEY TAKEAWAYS

This case highlights the importance of notices of dissatisfaction and ensuring that they set out what is being challenged in order for the notice to be valid. This has significant consequences as under the NEC 2, 3 and 4 forms of contract if a valid notice of dissatisfaction is not given within the time stated in the contract, then the dispute which was referred to adjudication cannot be referred to the tribunal (which would be either to arbitration or court).