Halliwells LLP, a firm of solicitors, engaged ISG Interior/Exterior Plc under a standard JCT 1998 contract for the fit-out of its offices in Manchester. Disputes arose about payment. ISG applied to the Royal Institute of Chartered Surveyors for the appointment of an adjudicator and Christopher Linnett was duly appointed.
Clause 41A.4 of the JCT contract requires any Referral Notice (i.e the full statement of the claim) to be served within seven days of the notice of adjudication. In this case it was duly served on Halliwells within that timescale, but unfortunately the adjudicator's copy was lost in the post. He did not receive a further copy until five days later. Halliwells eagerly pounced on this point. It argued that the adjudicator now had no jurisdiction to decide the dispute, and invited him to withdraw. For good measure, it said that the construction contract was not wholly "in writing" as required by the Housing Grants Construction and Regeneration Act 1996, so the adjudicator had no jurisdiction on that ground either.
The adjudicator disagreed about jurisdiction. He went on to give a decision in favour of ISG. He also apportioned his fees, in what the judge referred to as the relatively "modest" amount of £2,436, to Halliwells, as the losing party. This must be one of the smallest-value cases ever to come before the Technology & Construction Court. However, it does, as the judge said, contain points of general importance.
What are the options of a party who objects to an adjudication on jurisdictional grounds?
Ramsey J turned to the law of arbitration to assist him. He said that:
a. as soon as he accepts an appointment, an adjudicator (or arbitrator) is entitled to reasonable remuneration, from both parties, for work done
b. the parties are jointly and severally liable for his fees (though of course the adjudicator/arbitrator may order the loser to reimburse the winner)
So what should a party do if it objects altogether to the adjudicator proceeding with the adjudication? Ramsey J said that such a party has two options.
The first option is to assert a lack of jurisdiction and take no further part in the adjudication at all. In these circumstances, there would be no request by that party for the adjudicator to do anything. It would, said the judge, make it very difficult for an adjudicator then to claim any fees from that party.
The second option is for the party to assert a lack of jurisdiction, but to continue to participate in the proceedings (without prejudice to that contention). However, by doing this that party is nevertheless requesting the adjudicator to carry out some work and make a decision – albeit a decision that he has no jurisdiction. That party then comes under an obligation in contract to pay the adjudicator either any fees that it has agreed, or, in the absence of agreement, a reasonable fee.
If the adjudicator's right to be paid does not exist in contract, said the judge, then it exists under the law of "unjust enrichment". This is because it would be unjust if the adjudicator had carried out work at the request of one party without being paid for that work.
In this case of course, Halliwells had participated in the adjudication, and was therefore liable for a reasonable fee.
What is a reasonable fee?
ISG (but not Halliwells) had accepted the adjudicator's terms and conditions. Of course, that acceptance could not bind Halliwells, which, in theory at least, was free to argue for a lesser amount. In practice, with such a relatively small claim, one assumes that Halliwells would not have thought it worthwhile contesting the actual amount. If it did, however, the court would have to either decide that £2,436 was reasonable, or fix its own figure.
The late Referral Notice
In general, the Technology & Construction Court has tried to uphold the process of adjudication against challenges on what might be seen as rather pedantic procedural grounds. This case is no exception. Ramsey J adopted the view of Coulson J in Cubitt Building Interiors Limited v Fleetglade Limited (2007). Although the seven-day time limit in clause 41A was mandatory, that time limit had to be operated in a "sensible and businesslike" way.
Here, it was only the adjudicator, not Halliwells, who had received the Referral Notice late. No prejudice had therefore been caused to it, and indeed ISG had, somewhat generously, offered to extend time for its response document.
The lesson is: as soon as you ask an adjudicator to perform a service - even if what you want him to do is find that he has no jurisdiction - you are potentially liable for his fees. These will be at rates actually agreed, or, in default of agreement, a reasonable amount.
If a party wishes to avoid liability altogether, it must refuse to participate in the adjudication at all. That course of action, while potentially saving fees, gives that party no opportunity to influence the decision. It should therefore be undertaken only when a party is very sure of its jurisdictional arguments.