UK: Is it Win-Win for Adjudicators, Whatever the Service?

Last Updated: 5 July 2005
Article by David Arnott

There are few occupations where a person has the right to be paid whether the work they deliver is right or wrong, or where the work duplicates what has been carried out already. Being appointed adjudicator to resolve disputes in the construction industry does, however, seem to be one of them.

Since the introduction of adjudication there have been a number of occasions when the courts have expressed concern at adjudicators’ late decisions, breaches of natural justice, excesses of jurisdiction or other ultra vires acts. However, unless the adjudicator declines an appointment or resigns part-way through the process, there is little a party to a dispute can do to stop him carrying on and, usually before delivering a decision, being paid a fee for the service.

Resignation may result for a number of reasons: perhaps it is determined that no construction contract exists or that the dispute has yet to crystallise, or that the adjudicator has a conflict of interest meaning he cannot act impartially. Under the statutory scheme governing many adjudications, an adjudicator must also resign if the dispute is the same or substantially the same as one which has previously been referred to adjudication where a decision has been given. In each case however, at least in the first instance, it is for the adjudicator to decide whether or not he should resign. But if he wrongly fails to resign should he still be entitled to demand payment of his fee from either party?

This issue was brought into sharp focus in a case before the Sheriff Principal of Tayside Central and Fife some 18 months ago. That case centred on the fees for an adjudication. One of the parties, Castle Contracting, had challenged the adjudicator’s jurisdiction at the outset of the adjudication on the ground that the dispute was substantially the same as the dispute already determined in a previous adjudication. The adjudicator, however, decided that the dispute was not substantially the same and proceeded to deliver his decision. In doing so he required Castle to pay over to the Pursuer, Prentice Island, £1,923, being one half of the total fee paid to him.

Prentice Island raised proceedings in the Sheriff Court to enforce the adjudicator’s decision including the decision on fees. In relation to the claim for fees, Castle argued that an adjudicator’s entitlement to be paid is conditional on issuing a valid decision. If however the adjudicator should have resigned, due to the fact that the matter in the dispute was substantially similar to what had already been adjudicated on, then it was argued that the decision was a nullity. Accordingly, no decision, no fee.

The Sheriff Principal decided that whether or not the decision was invalid did not impact on the issue of fees. The essential point was that, having decided in good faith to proceed and deliver a decision, the adjudicator had a stand-alone right to be paid, even if the decision was later found to be ultra vires or void. Castle therefore had to pay up.

If this decision is correct then it does have some remarkable consequences. Firstly, if an adjudicator’s decision is determined to be invalid it seems harsh for the Responding Party to have to meet the adjudicator’s fees particularly if he has correctly requested that the adjudicator resign from the outset. Surely in such circumstances the Referring Party, who has insisted on the adjudication proceeding, should meet the fees. Similarly if the adjudicator himself does something which renders his decision invalid – for example, issuing it late – why should he be paid. Why is he entitled to be paid for producing a worthless decision which cannot be enforced?

If Castle is correct does it mean that an adjudicator, no matter the validity of his or her decision, is bulletproof? The 1996 Act already gives adjudicators immunity from being sued for anything done or omitted unless it is in bad faith. Of course, there remains the option of complaining to the adjudicator’s professional body if the service has been lacking and word of mouth may also restrict a person’s chances of future appointments. These options are little comfort to an unsuccessful party however.

One possibility which may be considered is trying to stop the adjudicator before he or she gets far into the process. The Sheriff Principal indicated that Castle could have sought interim interdict seeking to halt the adjudication.

In practice, however, the party seeking interdict would have to show that there was clear case to prevent the adjudicator continuing, and that the balance of convenience or fairness favoured stopping the adjudicator. This is a difficult test to meet against the background that adjudication should be a quick and efficient way to resolve disputes and that adjudicators need to be free, once appointed, to press on unhindered to a decision.

Against this why should an adjudication proceed if there is no valid basis for doing so and even worse why should the Responding Party be expected to pay for it? I doubt Castle and Prentice will be the last case to consider adjudicator’s fees.

David Arnott is a partner with MacRoberts, specialising in construction law.

This article featured in the June 2005 issue of Project Scotland.

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© MacRoberts 2005

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