Almost a year ago to the day, we reported on the case of Systech v PC Harrington, a TCC judgment where Mr Justice Akenhead (the judge in charge of the TCC) held that an adjudicator was entitled to be paid his fees (calculated on an hourly basis), despite the fact that his decision was unenforceable.

In a judgment handed down today the Court of Appeal reversed Akenhead J’s decision, and held that the adjudicator was not entitled to his fees, essentially because his decision was of no value to any party.  The reason the adjudicator’s decision was unenforceable was because the adjudicator failed to afford natural justice to the parties, i.e. the adjudicator had (in a technical sense) misconducted the adjudication. 

Implications

The Court of Appeal’s decision provides confirmation that if an adjudicator’s decision is unenforceable because the adjudicator has failed to do what he was engaged to do, then generally the adjudicator:

  • Will not be entitled to payment for any work performed; and
  • If a party has paid the adjudicator for any work performed, the adjudicator will be required to repay that money.

The position may well be different, however, where:

  • An adjudicator’s terms of appointment provide that the adjudicator is to be paid in any event, i.e. whether or not his decision is enforceable; or
  • The unenforceability (and worthlessness) of the adjudicator’s decision is unrelated to the adjudicator’s performance and conduct of the adjudication.  This could be the case where the adjudicator’s decision is unenforceable due to a jurisdictional matter, and the referring party requested the adjudicator to proceed with the adjudication despite the respondent’s jurisdictional objection.

But even if the Court of Appeal’s decision now leads to adjudicators amending their standard terms of engagement, to include words to the effect that they are entitled to payment whether or not their “decision” is enforceable, there may still be difficulties.  Section 3(2) of the Unfair Contract Terms Act 1977 renders unenforceable a contractual provision in standard terms which purports to allow a party to claim “to render a contractual performance substantially different from that which was reasonably expected of him” or “in respect of the whole or any part of his contractual obligation, to render no performance at all”, unless the provision satisfies “the requirement of reasonableness” (as defined by UCTA).  On one view, a contractual provision which requires that an adjudicator be paid, despite the adjudicator (due to his own default) not providing the very thing he was required to give the parties – an enforceable decision – may fall foul of UCTA.

Reference: PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371