Adjudicator fees

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Parties responding to adjudications commenced under the Housing Grants and Regeneration Act 1996 often take objections relating to jurisdiction, and proceed with their response to those adjudications “without prejudice” to those fundamental objections.

That often poses the following real difficulty for adjudicators: if those jurisdictional objections are found to be valid, and the party commencing the adjudication is unable to meet any liability for costs, how will the adjudicator be paid?

From the perspective of the party taking a valid jurisdictional objection, being forced to pay such fees is obviously somewhat unpalatable. Similarly, however, from the perspective of the adjudicator, uncertainty as to whether any claim for fees against a responding party would be enforceable introduces a highly unwelcome degree of uncertainty, particularly in time-heavy and intensive adjudications, where the fees “at stake” might be very large.

Jurisdictional objection

Prior to February, the position appeared to turn upon whether the jurisdictional objection taken was a valid one: in Griffin v Midas Homes (2000) 78 ConLR 152, HHJ Humphrey Lloyd QC held that, where it is found that an adjudicator does not have jurisdiction, “only the party that sought adjudication is liable for the fees, expenses and costs incurred by asking for a decision which the adjudicator had no authority to make”.

This seemed to suggest that the line was to be drawn between cases where the adjudicator did in fact have jurisdiction, in which case the responding party could be liable for his fees, and cases where the adjudicator did not in fact have jurisdiction, in which case, it seemed, the responding party could not be liable.

That, however, did little to assist in resolving the uncertainty in many cases.

New approach

Mr Justice Ramsey has now taken a different and welcome approach. In Linnett v Halliwells [2009] EWHC 319, [2009] All ER (D) 36 (Mar), he held that the responding party will be liable to pay the adjudicator's reasonable fees and expenses if it continues to participate in the adjudication proceedings beyond making an assertion of lack of jurisdiction, and regardless of the validity or otherwise of the jurisdictional objection. This is the case even if the responding party rejects the adjudicator's terms of appointment and only participates without prejudice to its jurisdictional challenge or if the responding party merely asks the adjudicator to make an early non-binding decision on jurisdiction.

Similarly Ramsey J made it clear that where the responding party makes a valid jurisdictional challenge and does not participate in the proceedings, that party “can have no liability for the fees and expenses of the adjudicator”.

Many involved in the process will welcome this decision as a sensible and commercially appropriate way of resolving the different (and equally valid) interests of adjudicators and responding parties by, in effect, giving such responding parties the option of proceeding “without prejudice” to their jurisdictional objections while making clear that that option has its own cost consequences: the two bites of the cherry which responding parties have previously enjoyed now comes with a potential price tag attached.

The result of the decision in Linnett is that, rather than not knowing whether he is entitled to recover his fees from the responding party until after the jurisdictional issue has been resolved (often by the court at a time when the adjudicator has already spent considerable time working on the case), the adjudicator can now know that the responding party will be jointly and severally liable for his fees as soon as that party starts to participate in the proceedings. Adjudicators should be comforted by this, particular in circumstances where there might a question mark as to the solvency of the referring party.

Participation

In ensuring that parties who wish to take such objections recognise that continuing to participate in the Reference leaves them open to pay adjudicator's fees, Ramsey J's decision may also have the benefit of ensuring that those parties consider at an early stage the option of applying to the court during the adjudication to resolve that objection rather than leaving all such arguments to enforcement proceedings after the costs of the adjudication have been expended. That, it is suggested, can only be a good thing given the complexity and cost intensive nature of some modern adjudications.

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