In adjudication, the ability of an adjudicator to obtain fees depends on there being a contractual right to payment under the Adjudicator’s Agreement with one or both of the parties. There is nothing in Section 108 of the Housing Grants Construction and Regeneration Act that gives the adjudicator a right to payment. The fact that the appointment of an adjudicator is meant to be rapid means that it is not uncommon for only the referring party to enter into the Adjudicator’s Agreement. This raises questions as to the liability of the responding party for the fees and expenses of the adjudicator, especially in circumstances where the responding party disputes jurisdiction. In Linnett v Halliwells LLP [2009] EWHC 319 (TCC), the TCC helpfully sets out guidance on which party is liable for payment of the adjudicator’s fees in different circumstances.

Linnett v Halliwells: ISG (acting in the name of Mr Linnett) referred a dispute to adjudication. An adjudicator was appointed. The Adjudicator wrote to both parties, enclosing his Terms of Engagement and other documents, including a questionnaire. Halliwells did not sign the questionnaire and did not respond to the adjudicator’s invitation to agree his Terms of Engagement. Halliwells subsequently indicated in correspondence that they were objecting to the adjudicator’s jurisdiction and would not agree to the adjudicator’s Terms and conditions. Halliwells asked the adjudicator to withdraw but, in the alternative, asked him to adjudicate the merits, albeit reserving their position on jurisdiction.

The court held that, in general terms, absent any jurisdictional objections, if an adjudicator is appointed and neither party makes a contract with the adjudicator, nevertheless by participating in the adjudication and thereby requesting the adjudicator to act, both parties enter into a contract with the adjudicator, who acts in that capacity as a result of that request. Such a contract is formed by conduct and contains implied terms that both parties are jointly and severally liable to pay the reasonable fees and expenses of the adjudicator. Joint and several liability only applies to the reasonable fees and expenses of the adjudicator, which could, in principle, be lower or higher than any agreed fee. In practice, however, the agreed fee is likely to be the same as or accepted to be a reasonable fee.

Where one party makes a contract with the adjudicator but the other does not, and the party who does not make a contract then participates in the adjudication, that party effectively requests the adjudicator to act and a contract is made by conduct with the adjudicator, who acts in that capacity as a result of that request.

The fact that one party makes a jurisdictional challenge should not itself change the position where a party participates in the adjudication proceedings. If the adjudicator makes a decision that he did, in fact, have jurisdiction to make, then the mere fact of the erroneous jurisdictional challenge should not change the position. Even where there is a valid jurisdictional challenge, if the party has participated in the adjudication on the merits, that party should still be jointly and severally liable for the fees and expenses of the adjudicator. Only where there is a valid jurisdictional challenge and the party has NOT participated in the adjudication should that party have no liability for the fees and expenses of the adjudicator.

The court held that ‘whether or not the Adjudicator had jurisdiction Halliwells are liable to pay the Adjudicator his reasonable fees and expenses of conducting the adjudication and are jointly and severally liable to the Adjudicator for the payment of such reasonable fees and expenses with ISG, whose liability is limited to the fees and expenses agreed with the Adjudicator…’ The court concluded that the Adjudicator did have jurisdiction in any event. To read the judgment click here.