The Court of Appeal has confirmed that an Adjudicator is not entitled to any of his fees in circumstances where his decision is unenforceable.
In doing so, the Court of Appeal reversed Mr Justice Akenhead's decision in Systech International Limited v. P C Harrington Contractors Limited that an adjudicator was entitled to be paid his fees (calculated on an hourly basis), despite the fact that his decision was unenforceable.
The decision in question was found unenforceable due to the adjudicator's breach of natural justice. The Court of Appeal therefore concluded that the decision was of no value to the parties and the adjudicator was not entitled to payment of his fees.
It remains to be seen whether this decision will be applied in circumstances where the unenforceability of the adjudicator's decision is unrelated to the adjudicator's performance and conduct of the adjudication. For instance, a different conclusion may have been reached if the adjudicator's decision was unenforceable on jurisdictional grounds, where the parties had asked the adjudicator to proceed with the adjudication despite the respondent’s jurisdictional objection.
The Court of Appeal judgment is likely to lead to attempts by adjudicators to alter their terms and conditions so that they are entitled to be paid regardless of whether their decisions are enforceable. However, such term may fall foul of Section 3(2) of the Unfair Contract Terms Act 1977 which renders unenforceable a contractual provision in standard terms that purport to allow a party to claim “to render a contractual performance substantially different from that which was reasonably expected of him” or “in respect of the whole or any part of his contractual obligation, to render no performance at all”, unless the provision satisfies “the requirement of reasonableness” (as defined by UCTA).
As to whether parties to an adjudication would be prepared to accept terms allowing an Adjudicator his fees, even if the decision reached was unenforceable, Lord Davis suggested that the “solution would be in the market place”.