A UK decision that held adjudicators will not be able to
recover their fees if their decision is unenforceable has
ramifications for dispute resolution mechanisms in Australian
The England and Wales Court of Appeal decision of PC Harrington
Contractors Ltd v Systech International Ltd  EWCA Civ 1371
held that an adjudicator was not entitled to payment of their fees
when the rendered decision is unenforceable by reason of a failure
to afford natural justice to the parties.
The arbitration and the arbitrator's
A contractor, PC Harrington Contractors (PCH),
engaged Tyroddy Construction as a subcontractor to conduct work at
Wembley Stadium. A dispute arose between the parties concerning the
return of retention moneys held by PCH under the subcontract. The
parties referred the dispute to an adjudication by Mr Doherty.
During the adjudication, PCH argued that Mr Doherty did not have
jurisdiction to determine the matter until the question of whether
PCH had overpaid Tyroddy on another project was resolved. However,
Mr Doherty determined that he did have jurisdiction and expressly
declined to deal with PCH's overpayment defence.
Ultimately, Mr Doherty held that PCH was to return the retention
moneys to Tyroddy and ordered PCH to pay his fees of Ł18,144.
Mr Doherty's decision was subsequently held to be unenforceable
because he had failed to afford natural justice to the parties by
reason of his refusal to consider PCH's overpayment defence.
Notwithstanding the unenforceability of his decision, Mr Doherty
sued PCH for his fees.
Is an adjudicator entitled to be paid when their
decision is unenforceable?
At first instance, Justice Akenhead rejected the argument that
there had been a "total failure of consideration" and
held that Mr Doherty was able to recover his fees as "there
has been in effect at the very least partial performance by the
Adjudicator". Even though the decision was unenforceable, Mr
Doherty had conducted a substantial amount of work, including
reviewing documents and corresponding with the parties.
On appeal, the Court focused on the governing legislation and
The relevant legislation provided:
"The adjudicator shall be entitled to the payment of such
reasonable amount as he may determine by way of fees and expenses
reasonably incurred by him. The parties shall be jointly and
severally liable for any sum which remains outstanding following
the making of any determination on how the payment shall be
apportioned." (Scheme for Construction Contracts, clause
The Court found that this entitled the adjudicator to be paid
when the appointment came to an end before the decision was made,
but not when an unenforceable decision was rendered. Further, the
Court drew a distinction between:
an entire contract – where payment is made for the final
product, that is, an enforceable decision; and
a divisible contract – where payment is made for the
performance of the preliminary functions in the making of a
The Court held that the present contract was of the former type.
There was nothing in the contract or in the governing legislation
to indicate that the parties intended to pay for an unenforceable
decision or for the preliminary functions performed by the
adjudicator. Essentially, the unenforceable decision was of
"no value to the parties".
Therefore, it was determined that Mr Doherty was not entitled to
recover his fees.
Implications for contracts with arbitrators
This decision highlights the primacy of the contract in
determining whether parties will be liable to pay for the fees of
the adjudicator or arbitrator in the event that any rendered
decision is determined to be unenforceable.
The Security of Payment legislation provides that an adjudicator
will not be entitled to be paid his or her fees where the decision
is not made within the time limits allowed by the legislation. It
remains to be seen, however, whether the approach taken by the
English Court of Appeal will be adopted in Australia to limit
recovery of fees when the rendered decision is unenforceable due to
issues in relation to jurisdiction and/or denial of natural
Parties should give thought to whether their contract with the
adjudicator or arbitrator entitles the adjudicator or arbitrator to
recover payment for an unenforceable decision and, at the very
least, whether the contract is an entire contract or a divisible
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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