UK: Cold Comfort For Adjudicators With Unpaid Fees

Last Updated: 13 March 2009
Article by Philip Eyre

Speak to any Construction Adjudicator and it is likely they will tell you that these days things are getting more tricky getting fees paid. There are also horror stories about Adjudicators never getting paid. The adjudication process requires certainty for Adjudicators to be promptly paid for work undertaken. There is no established procedure for Adjudicators to seek security for their fees "up-front" and no Adjudicator will now seek to use the publication of the decision as a bargaining tool for getting paid, for fear of rendering a "late" delivered decision a nullity.

The law in relation to payment of Adjudicator's fees has recently been considered by the Hon Mr Justice Ramsey QC in the Technology and Construction Court ("TCC"). The proceedings involved a well-known Construction Industry Adjudicator against Manchester-based solicitors. The solicitors were party to a contract to carry out fit-out works at their new offices and a dispute under the contract was referred to adjudication. The Contractor was the referring party in an adjudication and the solicitors were the Responding Party. The solicitors said they did not have to pay the Adjudicator his fees and expenses having objected to the Adjudicator's jurisdiction in the adjudication. That remained the solicitor's position during and after the adjudication and in the proceedings in the TCC.

Principles and points of interest arising for those involved in adjudication from the Judgment are as follows:-

  1. An Adjudicator can be a Claimant to proceedings for recovery of fees in the TCC if its determination raises a question of general importance.
  2. If the value of unpaid fees is low, the case management TCC Judge might suggest a Costs Capping Order, which could make the recovery of fees uneconomic to pursue.
  3. In this case, the Adjudicator agreed with the Defendant that there should be no Order for Costs – the proceedings are unlikely to have been viable for this adjudicator based upon fees of £2,436.95 (including VAT) with no recovery of costs.
  4. If both parties have participated in the adjudication then, in default of entering into a fee agreement with the adjudicator, the parties shall be jointly and severally liable for the reasonable fees and expenses of the Adjudicator, whether or not any jurisdictional objection is raised or sustained. Should either party enter into a fee agreement with the adjudicator then that party will be liable for the fees based on that agreement.
  5. A reservation of jurisdiction at the outset by the Responding Party is not, of itself, sufficient to insulate that party for liability for the Adjudicator's fees.
  6. Only a total abstention from participation in the entirety of the adjudication (having reserved the position on jurisdiction) will insulate a Responding Party from liability for fees. In practice, this will happen only rarely.
  7. Ideally, the Adjudicator should have both parties execute an adjudication agreement. Silence will generally not be taken as acceptance by a party to the terms of an agreement proposed by the Adjudicator.
  8. If the Adjudicator proposes fees in an agreement, but one or both parties do not accept the agreement, then the Court may consider the fee proposed by the adjudicator as equating to a reasonable fee.
  9. If an Adjudicator does not have jurisdiction then any "decision" made by the Adjudicator will be a nullity, which precludes one party from recovering from the other based on any allocation of fees made by the Adjudicator in the "decision".
  10. A party's liability for the reasonable fees and expenses of the Adjudicator may be limited to the level of remuneration agreed with the Adjudicator in any adjudication agreement.
  11. An Adjudicator may assert that there is a provision in the applicable adjudication rules purporting to confer a benefit on the Adjudicator for payment of fees through Section 1(1)(b) of the Contract (Rights of Third Parties) Act 1999. This argument will not be available if the Contract expressly excludes the conferring of such rights.
  12. Failing the existence of any Contract with the Adjudicator under which the Adjudicator can recover fees, the Adjudicator may have a restitutionary right to payment of fees for unjust enrichment for services provided to the parties.
  13. Unless a party remains consistent in its assertions about the validity of an Adjudicator's decision, that party runs the risk of falling foul of the principle of approbation or reprobation. An election of validity of an Adjudicator's decision, howsoever made, may prevent that party from asserting invalidity in any context from the time of that election.
  14. The TCC Judge case managing a claim for fees by an adjudicator may suggest that the matter be dealt with by papers only without a hearing in order to minimise costs. A paper only determination without a hearing will invariably be the preferred route for an adjudicator to obtain judgment as economically as possible. Amber Construction Services v London Interspace HG Ltd [2008] BLR p 74 is a good example of a low value dispute determined by Mr Justice Akenhead without a hearing.

In summary, the Judgment of Mr Justice Ramsey QC shuts off an avenue previously thought to be available to Responding Parties to escape liability for the Adjudicator's fees. The solicitors had participated in the adjudication and were liable for the Adjudicator's fees. If a Responding Party participates in the adjudication in any way, say, by requesting the adjudicator's conclusion on a jurisdictional objection or by making written submissions to the adjudicator, then the Responding Party will become jointly and severally liable for the adjudicator's fee. In spite of the helpful clarification provided by the Judgment, the concern must remain for adjudicators that there is no speedy and cost-effective procedure that has been especially crafted by the Courts for recovery of adjudicator's fees, Further, the propensity for jurisdictional points to be raised in defence of claims for fees effectively places a burden on adjudicators to prove that any decision was made within jurisdiction. At the end of the day Adjudicators should be adjudicating and not litigating fee claims.

Case: Christopher Michael Linnett –v- Halliwells LLP [2009] EWHC 319 (TCC)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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