Peterborough City Council v Enterprise Managed Services Ltd

A contractual dispute resolution clause must be construed so that its adjudication machinery has practical effect. Under the FIDIC provisions considered, a dispute must be referred to a Dispute Adjudication Board before litigation unless a standing Board was no longer in place when the dispute arose. A Board is in place once its member or members have been duly appointed. Difficulties concerning fees or signatures do not necessarily make the machinery unenforceable where the court can imply reasonable remuneration or compel execution. The court has a discretion to stay proceedings, with a presumption in favour of requiring the parties to use the dispute resolution process they selected. Practical concerns about cost, complexity or the likely issue of a notice of dissatisfaction did not displace that presumption.

The Council contracted with EMS for the design and installation of a solar energy plant. A dispute arose concerning whether the plant achieved the contractual output by the specified date and whether the Council was entitled to a contractual price reduction.

EMS contended that the FIDIC contract required the dispute first to proceed through adjudication by a Dispute Adjudication Board, followed by amicable settlement efforts and, if necessary, litigation. The Council issued court proceedings and argued that the contract permitted direct access to the courts under sub-clause 20.8, and that the adjudication provisions were unenforceable. EMS applied for a stay.

The issues were whether the contract required prior adjudication and, if so, whether the proceedings should be stayed.

1. Construction of the FIDIC machinery. The contract required the current dispute to proceed by adjudication and amicable settlement under sub-clauses 20.4 and 20.5, with litigation only as the final stage. Sub-clause 20.8 did not confer a unilateral right to bypass adjudication. Its reference to there being no DAB in place concerned a case where no DAB existed when the dispute arose, principally where the contract provided for a standing DAB which had ceased to be in place.
2. A DAB was in place once its member or members had been duly appointed under sub-clauses 20.2 or 20.3. The appointing body’s appointment was final and conclusive, and the DAB could thereafter receive a reference. The appointment did not depend upon the parties having completed every term of the Dispute Adjudication Agreement.
3. The adjudication provisions were enforceable. Any missing agreement about the adjudicator’s remuneration could be resolved by implying an entitlement to reasonable fees and expenses. A refusal to sign the Dispute Adjudication Agreement could, if necessary, be addressed by specific performance. The alleged difficulty concerning enforcement of a DAB decision did not create fatal uncertainty where the final forum was litigation rather than arbitration.
4. Stay. The court had an inherent discretionary jurisdiction to stay the proceedings. There was a presumption in favour of leaving parties to resolve their dispute in the manner chosen in their contract. Although the dispute was complex and adjudication might be expensive or ultimately followed by litigation, those considerations did not amount to a sufficiently compelling case to displace the presumption.
5. The action was stayed and the parties were left to pursue the contractual dispute resolution machinery.

First-instance decision. No appellate history is stated in the judgment.