Getting paid adjudicator fees - some common pitfalls and how to avoid them

Getting paid adjudicator fees - some common pitfalls and how to avoid them

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"When I was young I thought that money was the most important thing in life. Now that I am old, I know that it is" – Oscar Wilde

The starting point – The Construction Act

The Construction Act allows the parties to agree who should pay the adjudicator’s costs. The Scheme for Construction Contracts makes provision for the adjudicator to be paid a reasonable amount and also sets out what should happen in certain specific circumstances, for example if the parties revoke the adjudicator’s appointment.

Most adjudicators will issue their own terms and conditions which may make explicit provision for some of the situations covered in this article, in which case the terms and conditions will prevail.

How do I enforce a claim for unpaid fees?

Depending on the size of the claim and the issues involved, you should issue your claim for unpaid fees in your local court with a TCC judge, or in the Central London County Court. Very straightforward claims can be issued in the local county court.

The TCC has issued guidance that, “Generally, claims which are for less than £250,000 should be commenced in County Courts of other High Court centres outside London which have TCC designated judges.” There are exceptions to this, which include cases involving adjudications, and cases which cannot readily be dealt with in a county court by a designated TCC judge.

These principles were considered by the TCC in Chern v Apiloa Corporation and another [2018] EWHC 3025 (TCC) (12 October 2018). Here, the dispute concerned fees of £168,000 which had been charged for an otherwise unremarkable adjudication by Dr Chern, the adjudicator. He had been paid money on account, and sued the two defendants, both parties to the adjudication, for the balance. He issued proceedings in the Central London County Court. The second defendant applied for the matter to be transferred from the TCC list in the Central London County Court to the TCC, arguing that this was not a straightforward dispute and there were issues over the fees including the reasonableness of the fees charged. The TCC refused the application to transfer, holding that it was a straightforward dispute which the Central London County Court was perfectly capable of handling.

How much can I charge?

You are entitled to payment of “a reasonable amount”, and anything that is not outrageously high or disproportionate is likely to be reasonable.

What is reasonable was considered by the TCC in Fenice Investments Inc v Jerram Falkus Construction Ltd [2011] EWHC 1678 (TCC). While the factual background to this claim was convoluted, the court discussed what is reasonable in the context of the particular challenges of adjudication including the short timescales and the sometimes fluid nature of what the adjudicator is being asked to consider.

The court was keen to discourage satellite litigation about adjudicators’ costs and indicated that a robust approach to reasonableness should be taken. As long as the fees are within an overall band of reasonableness they will not be susceptible to challenge and the courts will be reluctant to interfere. In the usual run of cases there will not be any realistic basis to challenge fees.

Who can I clam the fees from?

The Scheme for Construction Contracts provides that the parties are jointly and severally liable for your fees.

So even if you apportion liability for the fees, and one party does not pay their share, you can claim the full sum from the non-defaulting party.

What if the parties withdraw or revoke my appointment?

You can probably recover your costs.

Although there is no case directly dealing with this issue, there are cases which deal with the costs of the parties in these circumstances.

The Court of Appeal looked at this in John Roberts Architects v Parkcare Homes (No2) Ltd [2006] EWCA Civ 64. Here, the adjudicator had been given the express power to award the legal costs of the parties, but no substantive decision was reached following the withdrawal of one of the parties. The Court of Appeal held that, on the correct interpretation of the adjudication agreement, the adjudicator did have the power to order the payment of legal costs.

What if I reach a decision but the TCC decides that it is unenforceable because of a breach of natural justice?

Then your fees are not recoverable.

This was considered by the Court of Appeal in Systech International Ltd v PC Harrington Contractors Ltd [2012] EWCA Civ 1371. Here, the adjudicator had produced decisions that were unenforceable (he had failed to deal with the responding party’s principal defence) The Court of Appeal opined that the parties had bargained for an enforceable decision, which had not been provided. An unenforceable decision “was of no value to the parties”.

Systech depended on a close textual analysis of the adjudicator’s terms and conditions and the Scheme. Lord Justice Davis, who is not a construction expert, commented that he thought that the case would not have “any very great ramificationsbecause it would be open to adjudicators to draft their terms of engagement to include a provision providing for an entitlement to payment in the event of an unenforceable decision.

Whether such a provision would be valid is uncertain but many adjudicators do now have it in their terms of engagement. The fact that there are no reported cases dealing with this point since 2012 would suggest that parties are accepting this wording and that it is valid. Alternatively we might just be waiting until there is a case where there is a commercial justification, or the parties are angry enough, to litigate the point.

What if the responding party does not accept my jurisdiction?

If the responding party participates in the adjudication, this amounts to a request to carry out work and reach a decision. The responding party is therefore liable for your fees. Linnett v Halliwells LLP [2009] EWHC 319 (TCC). Here, Halliwells had participated in the adjudication following a reservation of their rights to raise a jurisdictional challenge. 

What if I am asked to decide on my jurisdiction?

You are entitled to be paid for your work in deciding. This was discussed in Linnett v Halliwells LLP [2009] EWHC 319 (TCC)

Can I exercise a lien over my decision?

No. You run the risk of your decision being unenforceable on the grounds of “lack of jurisdiction, procedural irregularity and lack of impartiality”, plus non-compliance with the Scheme, as happened to the adjudicator in 2007 in Mott Macdonald Ltd v London & Regional Properties Ltd [2007] EWHC 1055 (TCC).

The adjudicator refused to publish his decision until his fees were paid by the referring party, which was required by a clause in his terms and conditions. By the time the referring party paid the fees, the decision was issued one day late.

The TCC decided that the failure to deliver the decision pending payment of fees was a restriction on the obligation to deliver it as soon as possible after it is reached. And by requiring payment by one party, the adjudicator ran the risk of being, or appearing to be, financially beholden to that party. The imposition of the lien gave rise to a risk of partiality.

In addition, although the adjudicator had reached his decision, he had not signed it until after he had received payment, several days later. This was in contravention of the Scheme, which requires the decision to be reached and sent as soon as possible thereafter.

Avoiding problems

Careful drafting of terms and conditions should prevent many of these problems arising, but it is impossible to cater for every eventuality.

First published by the Adjudication Society. Reproduced with permission.

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