Steve Ward Services (UK) Ltd v Davies & Davies Associates Ltd

Construction – Adjudicator’s fees – Recovery – Jurisdiction – Adjudicator appointed by appellant to settle dispute concerning construction contract – Adjudicator considering he did not have necessary jurisdiction and resigning – Court holding adjudicator entitled to recover fees – Appellant appealing – Respondent cross-appealing – Whether jurisdictional issue arising – Whether judge erring in law – Appeal dismissed – Cross-appeal allowed. The appellant carried out construction works at a restaurant called “Funky Brownz” in Stanmore, Middlesex, owned and operated by BIL, of which P was a director and the majority shareholder. Although there was no concluded written contract, there was a proposed set of contract documents drawn up in 2019. A dispute arose concerning alleged defects in the proposed contract. In September 2020, an adjudicator was nominated under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended). The dispute referred to the adjudicator was stated as between the appellant and BIL. The adjudicator provided both parties with his terms and conditions. The attached covering letter stated that his fees would be payable to his company (the respondent to the present appeal). Clause 1 of the standard terms (which were not disputed) provided: “[s]ave for any act of bad faith by the adjudicator, the adjudicator shall … be entitled to payment of his fees and expenses in the event that the decision is not delivered and/or proves unenforceable.” The adjudicator subsequently decided that he lacked jurisdiction because the relevant contract was between the appellant and P, not BIL. He then resigned and issued an invoice to the appellant which refused to pay on the basis that the adjudicator was in repudiatory breach of his contract of appointment. On the respondent’s application for summary judgment, the judge concluded that the adjudicator was entitled to recover fees of £4,290 plus VAT and interest because he acted honestly and diligently and not in bad faith under his terms of appointment, which did not fall foul of the Unfair Contract Terms Act 1977: [2021] EWHC 1337 (TCC). Held: The appeal was dismissed. The cross-appeal was allowed. (1) The proposed written contract was in the names of the appellant and P. There was no mention of BIL. There was nothing to indicate any agency on the part of P. Moreover, she ceased to be a director of BIL long before the dispute was referred to adjudication. On the face of it, there was a plain and obvious jurisdictional issue. If a defendant could demonstrate a reasonably arguable case that either he or the claimant were not a party to the construction contract, the adjudicator had no jurisdiction to make any decision, and it would not be enforced against him: Thomas-Frederic’s (Construction) Ltd v Keith Wilson [2003] EWCA Civ 1494; [2004] BLR 23 applied; ROK Build Ltd v Harris Wolf Developments Co Ltd [2006] EWHC 3573 (TCC)); Estor Ltd v Multifit (UK) Ltd [2009] EWHC 2108 (TCC); [2009] 126 Con LR 40 considered. The adjudicator was entitled to decline jurisdiction and resign in consequence pursuant to paragraph 9(1) of the 1998 Regulations and the CIC Low Value Dispute Model Adjudication Procedure (1st Edition) (MAP). Neither paragraph required the resignation to be for good cause. But paragraph 9(1) of the scheme and paragraph 31 of the MAP were both silent about any entitlement to fees, which turned on why the adjudicator resigned and the terms of their contract of appointment. Under paragraph 13 of the scheme, the adjudicator had to investigate the matters “necessary to determine the dispute”. If an adjudicator considered that it was necessary to work out if he or she had the jurisdiction to determine the dispute in the first place, they were duty bound to consider and determine that issue and raise it with the parties before coming to their own conclusion. Paragraph 13 gave the respondent the express power to consider and raise with the parties a point which they had not raised but which he thought was important. Accordingly, the respondent was entitled to decline jurisdiction pursuant to paragraph 13 and had reasonable cause to resign: Primus Build Ltd v Pompey Centre Ltd [2009] EWHC 1487 (TCC); [2009] BLR 437 considered. (2) Whether or not the adjudicator was entitled to fees would depend on the precise terms of their appointment and their conduct. The court’s consideration of conduct might involve asking why the adjudicator resigned and whether the adjudicator was right or wrong to resign. A finding that the resignation involved or was the result of default/misconduct or bad faith, depending on the terms of appointment, would usually be sufficient to disentitle the adjudicator from recovering fees. Conversely, absent such a finding, there would usually be an entitlement to fees incurred prior to resignation: PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371; [2013] 1 EGLR 9 followed. (3) There was a material difference between default/misconduct and bad faith: for the purposes of clause 1, a finding of bad faith had to involve some form of unconscionable or deliberately unacceptable conduct. It was more serious than simple default. In the present case, the adjudicator was not guilty of default/misconduct, much less bad faith. He had raised a real issue as to jurisdiction; he had not received what he reasonably considered proper answers; and he had acted with diligence and honesty in concluding that the proper course was to resign. He did not depart from normative conduct or act contrary to his bargain with the parties. On the true construction of his terms and conditions, the adjudicator was entitled to be paid for the work done by him, subject to the application of the Unfair Contract Terms Act 1977. (4) Clause 1 was not caught by section 3 of the 1977 Act, which was simply concerned with payment of the adjudicator’s fees. In any event, clause 1 satisfied the requirement of reasonableness in the 1977 Act. The provision was drafted in accordance with terms which were capable of being commercially acceptable which was ultimately a matter for the contracting parties; the respondent’s terms were commonly found; there was no inequality of bargaining power; the contract term had to be one which had a substantial effect on the contractual performance reasonably expected of the party who relied on the term. The key word was “performance”: Paragon Finance PLC v Nash [2001] EWCA Civ 1466; [2002] 1 WLR 685 applied. The adjudicator did not go outside the ambit of paragraph 13 of the scheme and his reasons for resigning were not erroneous. James Bowling (instructed by Costigan King) appeared for the appellant; Nigel Davies (of Davies & Davies Associates) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Steve Ward Services (UK) Ltd v Davies & Davies Associates Ltd