This case concerns a dispute that was referred to a fixed fee adjudication. The dispute in question was between Steve Ward Services (UK) Ltd and Bhavishya Investment Ltd. The Adjudicator appointed was Nigel Davis of Davies & Davies Associates Ltd. The fixed Adjudicator’s fee in this instance was £6,000.
A short time after the adjudication commenced, the Adjudicator found that he did not have the necessary jurisdiction to determine the dispute referred to him. The Adjudicator, accordingly, resigned. No further documents were considered thereafter, and no decision was issued by the Adjudicator. An invoice for the Adjudicator’s fee was issued to Steve Ward Services (UK) Ltd* for £4,290, exclusive of VAT.
Steve Ward Services (UK) Ltd refused to pay the Adjudicators fee on the basis that in withdrawing from his appointment as Adjudicator, Mr. Davis had breached the terms and conditions of his said appointment and no fee was due to be paid. Steve Ward Services (UK) Ltd sought to rely upon a previous Court of Appeal decision which confirmed that adjudicators are not entitled to payment in the absence of an enforceable decision.
The Court of Appeal previously held in PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371 that an adjudicator would not be entitled to payment where an enforceable decision had not been reached. This judgment saw the emergence of the so called “PC Harrington v Systech clause”. In many adjudicators' terms and conditions, Said clauses stipulate that the adjudicator shall be entitled to payment in the event of an adjudication ceasing prior to a decision being issued.
Mr. Davis referred the Court, in particular, to clause 1 of the terms and conditions of his appointment, which he claimed was drafted specifically in light of the PC Harrington decision in 2012. That clause stated that in the event of the adjudication ceasing for any reason whatsoever, a fee invoice would be immediately raised and due for payment within seven days, unless there was any act of bad faith by the Adjudicator.
The Court concluded that the adjudicator’s decision to resign (as he was entitled to do under Para.9(1) of the Scheme for Construction Contracts (England and Wales) Regulations 1998) did not amount to a breach of the terms and conditions of his appointment. Despite Steve Ward Services (UK) Ltd contending that the resignation was done so in ‘bad faith’, the adjudicator’s claim was successful. The court held that the Adjudicator could rely on the “PC Harrington v Systech clause” contained within the terms and conditions of his appointment as there was no bad faith and the clause satisfied the reasonableness test under the Unfair Contract Terms Act 1977.
The decision in Davies & Davies Associates Ltd v Steve Ward Services (UK) Ltd now brings much needed clarity to the matter of adjudicator’s fees in the absence of an enforceable decision for both parties and adjudicators across the UK Construction industry. Decision or no decision, there will be a fee of some description to pay. Given the frequency of adjudications subject to jurisdictional challenge within construction disputes, this clarity will be welcomed by all.
*Ordinarily, Adjudicators' fees are issued to both parties on a joint and several liability basis; in this particular matter, Bhavishya Investment Ltd were found not to be a party to the Contract, but rather the individual acting as director was. This was the basis of the successful jurisdictional challenge.
