No fee if adjudication unenforceable

In Systech International Limited v PC Harrington Contractors [2012] EWCA Civ 1371, the adjudicator had failed to produce an enforceable decision because a court had decided he had breached the rules of natural justice. Consequently, Harrington refused to pay the fee to Systech for hiring the adjudicator.

The court found there was nothing in the adjudicator’s terms and conditions, nor in the governing regulations, to suggest the adjudicator’s fees should be paid where the decision was unenforceable. Provision for hourly rates and interim payments in the adjudicator’s contract made no difference to this finding.

The court stated that “it can hardly be disputed that the making of a decision which is unenforceable by reason of a breach of the rules of natural justice is a ‘default’ or ‘misconduct’” under the governing regulations. An adjudicator’s appointment can be revoked without payment of fees if there is “default” or “misconduct”.

Michael O’Connor, a solicitor at Speechly Bircham, who acted for Harrington, says: “The Court of Appeal’s decision is likely to lead to an attempt by adjudicators to alter their terms and conditions so that they are entitled to payment regardless of whether their decisions are enforceable.

“However, it is far from certain that the parties in dispute will accept such terms. If both parties reject such terms, the adjudication process may well have to start all over again. If one party accepts but the other rejects such terms, then there is possibly no contract between the adjudicator and that party.”