Should adjudicators be entitled to payment when the court refuses to enforce their decision because of mistakes made by the adjudicator?
Previously, there has been little by the way of guidance on this question. However, the recent case of Systech International Ltd v PC Harrington Contractors Ltd, clarifies the position.
Harrington and Tyroddy Construction Ltd were engaged in three adjudications relative to three separate contracts, in which Tyroddy sought payment of outstanding retention. An adjudicator was appointed (employed by Systech). Harrington put forward a defence based on (amongst other things) a re-measurement of Tyroddy's works which, they claimed, meant that they had vastly overpaid Tyroddy so no retention could be payable. The adjudicator rejected this, stating that he did not accept the re-measurement because it was "not agreed but also contractually flawed and outwith [the] dispute."
Harrington obtained a declaration from the court that the three decisions were not enforceable because of breaches of natural justice on the part of the adjudicator. The Judge stated that the adjudicator had "unwittingly [fallen] below the standards which are required to enable the decision or decisions to be enforced…by ruling wrongly that issues relating to the final account were outside his jurisdiction."
Meantime, Systech commenced proceedings against Harrington to recover the outstanding fees.
Arguments and Decision
Harrington argued that the adjudicator had not produced decisions in accordance with the Scheme, given that the decisions were unenforceable, and therefore no payment was due.
Systech argued that the adjudicator's appointment extended to all work concerned with acting as an adjudicator, not just to producing an enforceable decision.
The Judge considered the doctrine of "total failure of consideration." Essentially, if the contract required a number of services to be provided and there was a total failure to provide any of those services, this would amount to a total failure of consideration. However, where some of the services had been provided, there could not be a total failure.
In applying this to the facts, the Judge held that what the parties had bargained for was the provision of the services concerned with the role of the adjudicator. This was not restricted to issuing a decision but included the whole conduct of the adjudication. Notwithstanding that the decision was deemed unenforceable, the Judge was satisfied that the adjudicator had done his best in carrying out his role, albeit that he had got something wrong. There was no bad faith or dishonesty. As such, the Judge concluded that it could not be said that there had been a total failure of consideration by the adjudicator, and held that he was entitled to his fees on all three adjudications.
The case provides significant comfort for adjudicators, assuring them of payment even on the issue of unenforceable decisions. Parties to adjudications may be less impressed when they are presented with a bill for an adjudication which at the end of the day gets them nowhere.
There are a number of situations, though, where this case will have very little impact. For example, the argument already exists that payment of interim fees to an adjudicator could personally bar a party from later taking issue with payment following the decision of the adjudicator. Also, the service to be provided in most adjudicator's appointments is all work connected with the adjudication (as in Systech), as opposed to simply the provision of a decision.
Would the decision have been different if the appointment was just for provision of a decision? The Judge's comments with regards the absence of bad faith or dishonesty may indicate that to justify non-payment there is the requirement for a shortcoming above and beyond just an unenforceable decision.
The full text of the judgement can be found here.