Adjudicator – Jurisdiction – Dispute arising between parties to building contract – One party referring dispute to adjudicator – Defendant responding party challenging jurisdiction – Adjudicator asserting jurisdiction and apportioning fees and expenses to defendant – Whether defendant liable when raising jurisdictional challenge – Claim allowed
In 2007, a company (ISG) entered into an agreement with the defendant under the 1998 JCT standard form of building contract to carry out works at the defendant’s new offices. By article 5 and clause 41A it was agreed that either party could refer any dispute or difference arising under the building contract to adjudication in accordance with clause 41A.2, with the dispute being finally determined by legal proceedings.
Disputes arose under the contract. ISG, as the referring party, served a notice of adjudication on the defendant, the responding party, and the RICS nominated the claimant adjudicator. The defendant did not respond to the claimant’s invitation to agree his terms and conditions of engagement and did not return his completed questionnaire. It took the view that the claimant did not have jurisdiction to deal with the matter since the referral had been served out of time and requested that he withdraw. If he was not prepared to do so, the defendant requested him to revise the directions for the date of service of its response, so that it could defend the claim on its merits.
The claimant informed the parties that unless he received a completed questionnaire from the defendant he would assume that his terms were agreed. The defendant replied but still questioned the claimant’s jurisdiction. However, the claimant dismissed the jurisdictional challenge and proceeded to consider the matter on its merits.
The claimant subsequently apportioned his fees and expenses entirely to the defendant, but the latter refused to pay on the basis that, since it had challenged his jurisdiction and had not accepted his terms, there was no contract between them. Accordingly, the claimant had to seek his fees and expenses from ISG.
The claimant then issued proceedings against the defendant to recover the moneys claimed on the ground that, by its actions, the defendant had engaged the claimant’s services and had been involved in the adjudication process. An issue arose as to whether an adjudicator was entitled to recover his fees and expenses from a responding party that had challenged his jurisdiction.
Held: The claim was allowed.
Whether or not the claimant had jurisdiction, the defendant was liable to pay his reasonable fees and expenses of conducting the adjudication and was jointly and severally liable with ISG, whose liability was limited to the fees and expenses agreed with the adjudicator.
By accepting an appointment to act as an arbitrator, a person was entitled to reasonable remuneration for the work done and the parties were jointly and severally liable for that person’s fees and expenses. Where a person acted as an arbitrator but did not have jurisdiction, then that person might have a claim based upon the fact that the useless work was carried out at the request of the parties or one of them. There was no reason why those general principles should not apply to a person who was appointed as an adjudicator under express or implied contractual provisions for adjudication.
The general principle was that acceptance of an offer could not be inferred from silence except in exceptional circumstances. The present case was not exceptional and had not given rise to any express or implied obligation on the part of the defendant to speak: Felthouse v Brindley (1862) 11 CB(NS) 869, Allied Marine Transport Ltd v Vale do Rio Doce Navegacao SA (The Leonidas D) [1985] 1 WLR 925 and Vitol SA v Norelf Ltd (The Santa Clara) [1996] AC 800 considered.
However, by asking the adjudicator to withdraw but, in the alternative, asking him to adjudicate on the merits, albeit reserving the position on jurisdiction, the defendant had asked him to proceed and carry out work. Whatever the correct position on jurisdiction, the defendant had accepted that if the claimant rejected the jurisdictional argument, he would carry out work in dealing with the merits, which would involve considering the arguments of both sides.
In such circumstances, the claimant had proceeded both in compliance with the request of the defendant and pursuant to the agreement with ISG. He had proceeded at the defendant’s request but without express agreement as to fees. The request from the defendant and the fact that the claimant had carried out the adjudication gave rise to a contract formed by conduct with an obligation on the part of the defendant to pay the claimant’s reasonable fees and expenses.
Even if the matter could not be characterised in terms of a contract, a responding party such as the defendant had benefited from or been enriched by having a decision on the merits upon which it could seek to rely. That enrichment was at the expense of the claimant, who had spent time and incurred cost in dealing with the defendant’s submissions and the arguments raised. That enrichment was unjust where a party accepted the benefit of the adjudicator’s services without payment. There were no specific defences to the payment of the fees in this case: Banque Financière de la Cité SA v Parc (Battersea) Ltd [1999] 1 AC 221 considered.
Emily Monastiriotis of Mayer Brown International LLP appeared for the claimant; David Fearon of Halliwells LLP, of Sheffield, appeared for the defendant.
Eileen O’Grady, barrister
