A contractor that referred disputes over three projects, including Wembley Stadium, to an adjudicator, but later had the adjudicator’s decisions set aside as unenforceable, has succeeded in an appeal against a ruling that it must nevertheless pay his fees.
Lord Dyson MR ruled that the adjudicator was not entitled to recover his fees of £22,000 plus VAT, where his decision was “unenforceable by reason of a failure to comply with the rules of natural justice”.
He said there was nothing in the adjudication scheme introduced by the Housing Grants, Construction and Regeneration Act 1996 to entitle an adjudicator to his fees where his decision is unenforceable.
Overturning a ruling by Akenhead J that the fees in respect of the three adjudicator’s decisions were payable by PC Harrington Contractors, Lord Dyson said that the judge fell into error in concluding that there had not been a total failure of consideration by the adjudicator, because he had done a considerable amount of work on the dispute.
Lord Dyson said that the scheme under the 1996 Act carefully defines the circumstances in which an adjudicator is entitled to renumeration, and that he had no discrete entitlement to fees and expenses for the functions he performed ancillary and anterior to the decision.
He continued: “I return to the question: what was the bargained-for performance? In my view, it was an enforceable decision. There is nothing in the contract to indicate that the parties agreed that they would pay for an unenforceable decision or that they would pay for the services performed by the adjudicator which were preparatory to the making of an unenforceable decision. The purpose of the appointment was to produce an enforceable decision which, for the time being, would resolve the dispute. A decision which was unenforceable was of no value to the parties.”
Davis LJ added that, if this decision caused concern for adjudicators, then the solution was “in the marketplace”, as they could incorporate into their terms of engagement a provision covering payment of their fees and expenses in the event of a decision proving to be unenforceable.”
PC Harrington engaged sub-contractor Tyroddy Construction Ltd in relation to three projects: Wembley Stadium; King’s Waterfront, Liverpool; and Kingsfield Hospital, Mansfield. Disputes arose as to whether Tyroddy was entitled to the release of retention monies held by PCH under each subcontract, and were referred to adjudication.
The adjudicator, employed by Systech International Ltd, decided that the retention monies were due under each subcontract, but PCH won a ruling that he had failed to deal with its defence that no sum was due because Tyroddy had been overpaid by about £225,000 on the Wembley project.
Akenhead J ruled that the decisions were unenforceable for a breach of the rules of natural justice, but found that PCH must nevertheless pay the adjudicator’s fees.
PC Harrington Contractors v Systech International Ltd Court of Appeal (Lord Dyson MR, Davis and Treacy LJJ) 23 October 2012
James Bowling (instructed by Speechly Bircham LLP) for the appellant
Dominique Rawley QC (instructed by Systech Solicitors) for the respondent
