In Steve Ward Services (UK) Ltd v Davies & Davies Associates Ltd, the Court of Appeal considered the leading case on an adjudicator’s entitlement to fees when the adjudication does not go as expected, PC Harrington Contractors Ltd v Systech International Ltd, and summarised the applicable principles on the issue:

  • Under the Scheme for Construction Contracts, an adjudicator is entitled to resign. No reason is required.
  • Whether or not the adjudicator is entitled to fees following any such resignation depends on the precise terms of their appointment, and the conduct of the adjudicator.
  • The court’s consideration of conduct may involve asking why the adjudicator resigned, so it may matter 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, will usually be sufficient to disentitle the adjudicator from recovering fees. Conversely, in the absence of such a finding, there will usually be an entitlement to the fees incurred prior to resignation.

Clause 1 of the adjudicator’s terms of appointment said that, save for any act of bad faith by the adjudicator, he would be entitled to payment of his fees and expenses if the decision was not delivered and/or proved unenforceable. The Court of Appeal agreed with the first instance judge that Clause 1 meant that, in the absence of bad faith, the adjudicator was entitled to be paid his fees. Was there bad faith?

In concluding that the adjudicator was not guilty of default or misconduct, much less bad faith, the Court of Appeal noted that an act of bad faith will usually require some measure of dishonesty or unconscionability. There is a material difference between default or misconduct (an expression used in the Scheme), and bad faith. For the purposes of Clause 1, a finding of bad faith must involve some form of unconscionable or deliberately unacceptable conduct on the adjudicator’s part.

The Court also ruled that section 3 of the Unfair Contract Terms Act (dealing with the rendering of a contractual performance substantially different from what was reasonably expected) did not apply to clause 1, and even if it did, it was reasonable. Such terms are commonly found, and in the Court’s experience, ubiquitous. There was no inequality of bargaining power, both sides were represented when the contract was made and most importantly of all, clause 1 made complete commercial sense and fitted easily with other terms of the contract.

Steve Ward Services (UK) Ltd v Davies & Davies Associates Ltd [2022] EWCA Civ 153