J.T.Mackley v Gosport Marina Ltd [2002] EWHC 1315

This summary was provided by CMS Cameron McKenna LLP.

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Section 108 HGCRA 1996 does not of itself create a right to refer a dispute, once decided by an adjudicator, to arbitration. Where reliance is placed on an arbitration clause in a contract, the ability to commence an arbitration and how this should be done falls to be determined by that arbitration clause

Seymour QC

3 July 2002, TCC

G contracted M to carry out certain land reclamation works at a marina. The contract incorporated the ICE conditions of contract with certain amendments. Clause 66 of the conditions concerned the settlement of disputes. It provided that a dispute arose when one party served on the engineer appointed under the contract a notice in writing, stating the nature of the dispute. It also provided that every such dispute should be settled by the engineer and, once a certificate of substantial completion had been issued, a party who was dissatisfied with any decision of the engineer had 3 months to serve notice of arbitration. No reference was made in the conditions to adjudication, therefore the statutory scheme applied.

A certificate of substantial completion was issued, two adjudications took place and a dispute was referred to the engineer. More than three months later, G purported to serve a notice, on M and the engineer, to refer to arbitration the same disputes that were the subject matter of the adjudications. On the same day, M wrote to the engineer referring those same disputes to him as well. M applied for a declaration that the notice to refer to arbitration was invalid.

The court held:

(i) on the question of whether the court ought to exercise its jurisdiction to hear the application: that, generally, any question between parties as to the validity of reference to arbitration should in the first instance be determined by the arbitral tribunal. However due to the general importance of matters raised in this case, it was appropriate for the Court to hear the application; and

(ii) on the question of whether the arbitration notice was invalid the wording of section 108(3) of the HGCRA made it plain that arbitration was only available as a means of challenging the decision of an adjudicator if provided for in the relevant contract. A decision by the engineer was a condition precedent, under Clause 66, to the entitlement of a party under a contract incorporating ICE conditions to refer a dispute to arbitration (even where the subject matter of the arbitration was the validity of an adjudicator's decision under the statutory scheme). There either there had been no reference to the engineer in advance of the arbitration notice, or if there had, the engineer's decision had been given more than 3 months previously so the arbitration notice was out of time. Moreover, the notice of referral to arbitration sought to commence tripartite arbitration proceedings, which was not permitted by the contract. Accordingly, the notice was invalid.

Section 108 HGCRA 1996 does not of itself create a right to refer a dispute, once decided by an adjudicator, to arbitration. Where reliance is placed on an arbitration clause in a contract, the ability to commence an arbitration and how this should be done falls to be determined by that arbitration clause.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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