Author: David Baverstock
Adjudication works. It is an effective way to resolve disputes but it is not necessarily cheap. Adjudicators’ fees are often a bone of contention, especially if it is clear to the paying party that the award, whilst enforceable against him, is wrong in fact or law. But what happens if the award is unenforceable?
The Court of Appeal case of PC Harrington (PCH) v Systech International (Systech) addressed this thorny issue.
A contractor, Tyroddy, commenced adjudication proceedings against PCH under the Scheme claiming release of retention monies held under various contracts. PCH claimed that the adjudicator (an employee of Systech) had no jurisdiction as the parties had agreed to hold monies in escrow until a dispute on overpayment on another project had been resolved.
The adjudicator failed to deal with PCH’s defence and over the course of three adjudications awarded the contractor the funds retained under the various contracts. The adjudicator also ordered PCH to pay his fee of around £25,000.
The court refused to enforce the award on the grounds that by failing to deal with PCH’s defence the adjudicator had breached the rules of natural justice. Systech pursued PCH for its fee which was initially awarded by the court. PCH refused to pay. They claimed that by producing an unenforceable decision the adjudicator had not fulfilled the terms of his appointment which required him to produce an enforceable decision. The Court of Appeal agreed with PCH and the adjudicator was denied his fee.
The Court declared that not only had the adjudicator failed to meet the terms of his appointment, providing instead a service which was of no value to the parties, but the Scheme did not allow payment for part performance of the adjudicator’s duties except in limited cases where the adjudicator resigned.
The court went on to state that this case should not have “very great ramifications” as adjudicators could simply alter the wording of their appointments to ensure they are paid in all circumstances. The desire of parties in dispute to agree to pay for a service even if it is of no value to either of them remains to be seen.
David Baverstock, Trainee Solicitor, Fladgate LLP (email@example.com)