Adjudication in Construction Law

Darryl Royce

Document

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CHAPTER 5 The decision

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5.1 Time limit for decision

5.1 The Housing Grants, Construction and Regeneration Act 1996 provides that a construction contract governed by Part II should require an adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred.1 Referral under section 108(2)(c) takes place upon receipt of the notice by the adjudicator.2 The unamended Scheme requires the adjudicator to reach a decision not later than 28 days after the date of the referral notice or 42 days after the notice if the referring party consents or such a period exceeding 28 days after the notice as the parties may, after the giving of that notice, agree.3 ‘Date of the referral notice’ means the date of receipt of that notice by the adjudicator.4 5.2 Adjudicators operating under statutory and contractual procedures are aware, and ought to be well aware, of the importance of complying with the time limits. The time limits were set by Parliament and are crucial to the effectiveness of the form of adjudication required by the Act. A party is entitled to know whether or not a decision has been given and to be free to act in its own best interests if it has not got a decision within the time allowed. The requirements of the Act can be an intrusion into contractual arrangements and, as such, may have to be read and construed narrowly if they or their operation were to cut down or impede a party's rights or commercial freedom.5

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5.2 Communication of decision

5.2.1 The principle

5.3 There is a long line of decisions in the Technology and Construction Court that have held that a decision that is not delivered promptly by the most rapid available means of delivery is invalid. These decisions include Bloor Construction (UK) Ltd v Bowmer & Kirland (London) Ltd,6 St Andrew's Bay Developments Ltd v HBG Management Ltd,7 Barnes & Elliott Ltd v Taylor Woodrow Holdings Ltd,8 Ritchie Brothers (PWC) Ltd v David Philp (Commercials),9 Hart Investments Ltd v Fidler 10 and Cubitt Building & Interiors Ltd v Fleetglade Ltd.11 The rationale for this principle is as follows:

• Adjudication is intended to be a rapid and informal means of resolving disputes on a temporary basis.
• To that end, the Scheme rules, and all other adjudication rules, provide that the adjudicator must deliver his or her decision promptly.
• Given the rationale for adjudication in its present rapid form, the rules are to be construed as being mandatory. They are rules which the adjudicator is obliged to comply with.
• So as to comply with this rationale, the adjudicator should use the most rapid means of delivery that are reasonably available. This will ordinarily involve the use of e-mail or facsimile facilities.
• Any delay after the end of the relevant adjudication period in delivering the decision must be minimal and, if the decision has been reached before the end of that period, it should be delivered within that period.
• Any failure to comply with the requirement of prompt and rapid delivery will render the decision unenforceable and, probably, a nullity.12

5.2.2 Means of communication

5.4 Nowadays virtually all adjudicators have available instantaneous methods of transmission. It is right to say that first class post is archaic. If an adjudicator cannot send the decision by e-mail or fax, one or other of the parties will usually be keen to send some one to collect it. The contemporaneous duty to communicate the decision is one which can therefore easily and freely be achieved by an adjudicator. He or she can send it by e-mail, fax it, or ring up the parties and agree with them (but not just tell them) that it could be collected: ‘The decision is ready for collection'. It is to be hoped that a practice of simply

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putting the decision in the DX will not be followed, whether or not the adjudicator is at or close to the time limit.13 5.5 As a matter of common sense, three decisions should be treated as having been issued at the same time if they have been issued at a particular time on the same day although contained in two e-mails and one e-mail having been received first. What the adjudicator has done is the equivalent of delivering the awards in two envelopes and no sensible interpretation should take account of which envelope was on top of another or which one was opened first.14 5.6 Where an adjudicator has indicated that it is his or her usual practice to correspond by facsimile without the use of post other than for publication of decisions and he or she will on occasion copy documents by e-mail that does not amount to a contractually agreed procedure whereby the adjudication decision has to be given in any particular way. All that the adjudicator is doing is to give advance notice of his or her usual method of communication to ensure that the parties did not object to facsimile communication in the normal way with copy documents by e-mail. The adjudicator is not however committing himself or herself to sending the decision by post in circumstances where the parties were content to communicate by email. There is no agreed procedure for communicating the decision and the adjudicator is not fettered by that letter from sending the decision out in any way he or she chooses. If the adjudicator transmits an e-mail communication attaching a letter and a document entitled ‘Adjudicator's Decision', both of which are dated but unsigned, followed by the letter and decision, both signed and dated in hard copy to the parties on the same day but not received until four days later, it is clear that the decision is sent and received on the earlier date and it would make no sense to say that the decision is given on the later date when it has already been fully communicated four days earlier and the adjudicator considered himself functus officio at that point. All that happens on the later date is that the parties receive a hard copy of a decision which has already been both given and received on the earlier date, albeit that on this latter occasion the decision is both signed and dated.15

5.3 Decision outside the time limit

5.3.1 Decision binding if adjudication agreement not terminated?

5.7 There is some difference of approach in the authorities concerning the effect of a late decision. The first is that the decision of an adjudicator is binding upon the parties to the relevant dispute whenever given, provided only that the adjudication agreement, if any, has not been terminated for failure to produce a decision within the relevant timescale before the decision is made and that a fresh notice of adjudication has not been given by one of the parties before the decision is made. This is because the Act does not actually prescribe any definite finishing point so that, subject to the agreement of the parties made

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after the dispute has been referred, an adjudicator can take as long as he or she wishes to reach his or her decision and it is still binding upon the parties. Also, the effect of the provisions of the Act prescribing the terms as to adjudication to be included in a construction contract, and providing for the implication of terms into a relevant contract if it does not itself include the prescribed terms, is that the adjudication provisions for which the Act makes provision are only directly applicable to the immediate parties to the relevant construction contract. They do not, without more, apply at all to the person appointed as adjudicator. Those terms do, of course, bind the person appointed as adjudicator if he or she agrees by contract to comply with them.16 5.8 Paragraph 19 of the Statutory Scheme envisages that, if an adjudicator fails to reach his or her decision within whatever is the relevant time period in the particular case, any of the parties to the dispute may serve a fresh referral notice and a new adjudicator could be appointed. It must be implicit in that provision that the first adjudicator ceases to have jurisdiction in the relation to the dispute upon the giving of a fresh referral notice, but also that until the giving of a fresh referral notice, the original adjudicator retains jurisdiction to determine the dispute. The latter conclusion is reinforced by the facts that, under the Act and the Statutory Scheme, the adjudicator is not liable, in the absence of bad faith, for any defaults in performing his or her obligations as adjudicator, including failing to produce a decision by the time he or she should, and the obligation of the parties to the construction contract to give effect to the decision of an adjudicator concerning a dispute referred to him or her is unqualified. Certainly, there is no express indication that the obligation to comply with a decision depends upon it having been given by some particular date.17

5.3.2 Or is the time limit mandatory?

5.9 The other view is that the provisions of the Act and the Statutory Scheme suggest that the time limit is mandatory. Such an interpretation reflects the natural meaning of paragraph 19(1)(a) of the Statutory Scheme. It is simple and straightforward. It provides a clear time limit and leaves all parties knowing where they stand. It has the sensible result that paragraph 19(2) of the Statutory Scheme comes into operation only after the original adjudicator's jurisdiction has expired. The other interpretation necessitates the reading into paragraph 19(1)(a) of a qualification to the effect that, while the adjudicator ‘shall reach his decision’ within 28 days, he or she is nonetheless entitled to reach it at any time during an indefinite time thereafter, so long as one of the parties has served a fresh notice of adjudication. If the intention underlying paragraph 19 had been to create a jurisdiction of that duration, it could readily have been expressed in plain terms. Furthermore, there is no reason why, on the other interpretation, the continuing jurisdiction of the adjudicator should be terminated by the mere fact that one of the parties serves a fresh notice of adjudication under paragraph 19(2). That need not result in the appointment of a new

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adjudicator, since the party serving it may fail to follow it up by procedure under paragraphs 2 to 7.18 This view that the time limit is mandatory has been followed in other cases.19

5.4 Communication outside the time limit

5.4.1 Primary objective of a decision within the time limit

5.10 There are two aspects to the objectives of the Act. It is necessary to put them in order of priority. The first is the need to get a decision. When standing back and looking at the legislation, and the contracts that are made to give effect to it, a pragmatic and sensible approach has to be adopted, not just to the interpretation of the legislation, so far as can be done, but in particular to the interpretation of the relevant contract. The fundamental purpose of the legislation is to establish a mechanism for the resolution of disputes, ostensibly during the course of the execution of the works (rather than after completion), which in certain circumstances would enable the parties to have some idea of what the tribunal competent to resolve the dispute might be. That should enable them to be better informed about their dispute, but, above all, to put them in a position in which they would have a decision, which they have to accept, even if the dissatisfied party has, at least for the immediate future, to put it behind it. Part of that regime is the timing. It is not just secondary but integral to the objective. Timing is important since, for a system of this kind to work properly, the time limits are observed (subject always to the parties’ agreement as set out in the Act). But this tail should not wag the dog. Compliance with a time limit is not the dominant and be-all factor. That is the production of the decision. As a matter of competing priorities, the completion of the decision, as such, comes first. Its notification to the parties should follow as night follows day, but the first and primary objective is that the decision should be there within the time limit.20

5.4.2 Tolerance for a delay of a day or two

5.11 It would not be a sensible interpretation of section 108 of the Act that a decision becomes unenforceable because, as a result of an adjudicator's mistake about its delivery which results in a delay of a day or, possibly, of two days, it becomes unauthorized. Such a delay is within the tolerance and commercial practice that must be afforded to the Act and the construction contract. Whilst an adjudicator is not authorized to make mistakes, a decision arrived at in time is in principle authorized and valid and does not become unauthorized and invalid because of an error by the adjudicator in dispatching the decision, it does not reach the parties within the time limit. It should be emphasized that this tolerance

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does not extend to any longer period (unless perhaps the parties have agreed to a very long duration) nor does it entitle the adjudicator not to complete the decision within the time allowed. The Act only confers authority to make a decision within the 28-day period or such other period as it provides.21

5.5 Form of decision

5.5.1 Formalities

5.12 The Act does not expressly require an adjudicator's decision to be in writing, but this may be inferred from section 115(6), which provides that references in Part II to a notice or other document include any form of communication in writing and references to service should be construed accordingly. The Statutory Scheme requires the adjudicator to deliver a copy of his or her decision to each of the parties to the construction contract.22 5.13 Where there are no express words in the contract which made it clear that the adjudicator must sign the decision and the wording used makes it clear that the adjudicator within the requisite time should reach his or her decision and forthwith send that decision in writing to the parties, it is clear as a matter simply of contractual interpretation that the decision of the adjudicator does not as such have to be signed by him or her. All that the contract calls for is that the adjudicator reaches a decision and sends that decision to the parties.23 5.14 The need for a signature of the decision can only arise as a matter of contractual implication. However, applying the normal principles relating to the implication of terms, it is neither reasonable nor necessary for there to be a term that the decision is actually signed. Whilst it is the case that a decision signed by the adjudicator would clearly demonstrate as a matter of evidence that it was his or her decision, the contract provisions in this regard are still operable if it could be demonstrated as a matter of evidence that a decision was the decision of the particular adjudication.24 5.15 It is simply not necessary on any commercial or practicable basis to infer that a decision which clearly is that of the particular adjudicator must be signed. It is generally desirable for the avoidance of any doubt that decisions are signed. Indeed, the vast majority of decisions which have been the subject of court proceedings have been signed. That does not however detract from there being no need to infer that the parties must have intended that decisions must be signed before it can be considered to be a valid adjudication decision.25

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5.5.2 Reasons not required

5.16 A construction contract is not required by the Act to contain a provision obliging an adjudicator to give any reasons for his or her decision. Under the Statutory Scheme, the adjudicator, if requested by one of the parties to the dispute, should provide reasons for his or her decision.26 An adjudicator is not required to give reasons for rejecting submissions which, on the basis of the approach he or she adopts, are irrelevant.27

5.5.3 Reasons to make it clear that all essential issues decided

5.17 Where the parties have agreed that the adjudicator should give reasons, the adjudicator is obliged to give reasons so as to make it clear that he or she has decided all of the essential issues which must be decided as being issues properly put before him or her by the parties, and so that the parties can understand, in the context of the adjudication procedure, what it is that the adjudicator has decided and why. So, for example, it would be important for any reader of the decision to know whether or not first the adjudicator had purported to decide a set-off and counterclaim, and second, if so, on what grounds By way of practical illustration, there is clearly a significant difference between a decision to the effect that the adjudicator did not have jurisdiction to decide the set-off and counterclaim, which in principle would be subject to consideration by the Courts in the event of an adjudication enforcement application such as the present, and a decision within his or her jurisdiction that having considered the defence, he or she rejected it on the merits. In the latter case, in accordance with established principles, a party seeking to resist enforcement would not be entitled to challenge the correctness of that decision if made within jurisdiction. It is right that a recipient of a decision such as this should be entitled to know what it is the adjudicator has decided and why.28

5.5.4 Reasons absent or unintelligible

5.18 If an adjudicator is requested to give reasons pursuant to paragraph 22 of the Statutory Scheme, a brief statement of those reasons will suffice. The reasons should be sufficient to show that the adjudicator has dealt with the issues remitted and what his or her conclusions are on those issues. It will only be in extreme circumstances that the court will decline to enforce an otherwise valid adjudicator's decision because of the inadequacy of the reasons given. The complainant would need to show that the reasons were absent or unintelligible and that, as a result, it had suffered substantial prejudice.7 Nevertheless, just as an arbitrator's award which is uncertain on its face is unenforceable

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at common law – River Plate Products NL BV v Etablissement Coargrain 29 – and under the Arbitration Act 1996 section 68 (2)(f), so must an adjudication decision be also.30 5.19 However, the fact that a decision does not reach the standard of an average court judgment (as judged by judicial peers) does not mean that that it is not reasoned. A decision is not unreasoned just because the reasoning is wrong in fact or in law or because judges would give more reasons. A decision may be no work of art. The grammar may be poor, the sentence structure may be unconventional, to say the least, and it may in places be confusing and repetitive. However, it is necessary to see through all that and determine if on the key issues there was some intelligible reasoning.31

5.5.5 A summary

5.20 Judicial observations on adjudication decisions may be summarized as follows:11

(a) The decision needs to be intelligible so that the parties, objectively, can know what the adjudicator has decided and why.
(b) A decision which is wholly unreasoned but which is required to be reasoned is not a decision for the purposes of the Scheme or under contractual machinery which requires a reasoned decision. It would therefore not be enforceable as such.
(c) Because the Courts have said time and again that the decision cannot be challenged on the grounds that the adjudicator answered the questions, which he or she was required to address wrongly, the fact that the reasons given are, demonstrably or otherwise, wrong in fact or in law or even in terms of emphasis will not give rise to any effective challenge.
(d) The fact that the adjudicator does not deal with every single argument of fact or law will not mean that the decision is necessarily unreasoned. He or she should deal with those arguments which are sufficient to establish the route by which the decision is reached.
(e) The failure to give reasons is not a breach of natural justice.
(f) The reasons can be expressed simply. If the reasons are so incoherent that it is impossible for the reasonable reader to make sense of them, it will not be a reasoned decision.
(g) Adjudicators are not to be judged too strictly, for instance by the standards of judges or arbitrators, in terms of the reasoning. This reflects the fact that decisions often have to be reached in a short period of time and adjudicators are often not legally qualified. It certainly reflects the fact that there has not been a full judicial or arbitral type process
(h) The fact that reasoning in a decision is repetitive, diffuse or even ambiguous does not mean that the decision is unreasoned.32

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5.5.6 Planning context of limited relevance

5.21 Decisions on the duty to give reasons in a planning context are only of limited relevance to adjudicators’ decisions for three reasons:

• Adjudicators’ decisions do not finally determine the rights of the parties (unless all parties so wish).
• If reasons are given and they prove to be erroneous, that does not generally enable the adjudicator's decision to be challenged.
• Adjudicators are often not required to give reasons at all.33

5.5.7 Time for payment need not be specified

5.22 Whilst it is undoubtedly the case that many adjudicators do call for payment within a specified period of time, it is not essential if it is clear from the wording of the decision and in context that payment is required to be made. If there is the clearest contractual requirement that an adjudicator's decision is binding and is to be ‘implemented', the absence of a specific period for payment in the decision does not undermine the requirement that the sum is to be paid.34 Where the Statutory Scheme applies, in the absence of any directions by the adjudicator relating to the time for performance of his or her decision, the parties are required to comply with any decision of the adjudicator immediately on delivery of the decision to the parties.35

5.6 Remuneration of adjudicator

5.6.1 Contractual entitlement between appointee and the parties

5.23 The remuneration of an adjudicator appointed under prescribed contractual terms relating to adjudication will become a matter of contractual entitlement between the appointee and the parties.36 Where the Statutory Scheme applies, the adjudicator is entitled to the payment of such reasonable amount as he or she may determine by way of fees and expenses reasonably incurred by him or her.37 In addition, the parties are jointly and severally liable for any sum which remains outstanding following the making of any determination on how the payment shall be apportioned.38 In practice, the contractual terms upon which adjudicators are prepared to accept appointments contain similar provisions. The adjudicator will therefore normally have a discretion as to the apportionment between the parties of payment of his or her remuneration.

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5.6.2 Reasonableness of fees and expenses

5.24 Under the Statutory Scheme, the adjudicator is obliged to avoid incurring unnecessary expense.39 Although an adjudicator is entitled to the payment of such amount as he or she may determine by way of fees and expenses incurred by him or her, the amount must be reasonable and the fees and expenses must have been reasonably incurred.40 Whatever may be the appropriate way of assessing them, it cannot be the case that the adjudicator (or any party who has paid him or her and now seeks to recover them from the other) is entitled to whatever the adjudicator decides; otherwise the reference to reasonableness in paragraph 25 of the Statutory Scheme is entirely otiose and the fact that there may have to be some kind of assessment of the reasonableness of the fees (either in a direct claim by the adjudicator or in a claim by the other party) is not so repugnant or absurd that the framers of the Statutory Scheme could not have intended it.41 Since the adjudicator has no power of lien (see below) the forum in which the fees is likely to arise is one where, simply, they have not been paid and the adjudicator claims them, or they have been paid by the ‘wrong’ party, which claims to be indemnified. Or the paying party takes the initiative and seeks a declaration as to their reasonableness. In any of those cases, the Court will in some way have to address the question of reasonableness.42 5.25 The overall burden of proving reasonableness must rest upon the adjudicator – there is no basis in paragraph 25 for reversing it. But assuming that when the fees dispute first arose, the adjudicator explained how the fees were made up by reference to rate, hours worked and (at least in summary) on what, there will be an evidential burden on the defendant to make out at least a prima facie case to say that they are unreasonable. Simply putting the adjudicator to proof is not enough. If the defendant does properly raise the issue of reasonableness, the Court's approach on any assessment should be a robust one, with a considerable ‘margin of appreciation’ given to the adjudicator, for the following reasons:

• The work has to be undertaken at considerable speed, and sometimes with moving targets in the sense of what the core issues underlying the adjudication are, or become; by analogy, where work is done by solicitors on an urgent basis, this is frequently advanced as a reason why the Court should award more than the guideline rate of costs;
• Routine satellite litigation about an adjudicator's costs could not have been intended by the framers of section 108 of the Housing Grants, Construction and Regeneration Act 1996 or the Scheme and would be a discouragement to potential adjudicators to act in this important process.43

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5.6.3 Hourly rates, time spent and unnecessary work

5.26 Accordingly, in relation to hourly rates, provided that the rate claimed is not clearly outside an overall band of reasonableness, there will be no basis to interfere, even if it could be shown that a different adjudicator, especially an adjudicator with different qualifications, may have charged less or even significantly less. In this area, as with solicitors’ costs, it is a fact that rates can vary considerably. The seniority and experience of the adjudicator concerned is also a factor. The reasonableness of an hourly rate is not to be determined in a vacuum, in absolute terms, by reference to some notional adjudicator. It is to be considered in the context of the adjudicator agreed in advance by the parties (if such be the case) or the adjudicator in fact appointed. In this context, it makes sense for the adjudicator, when appointed, to indicate his or her hourly rate and invite express agreement. If a party simply fails to acknowledge the invitation at all, any later complaint that the rate was excessive is unlikely to provoke much sympathy.44 5.27 As for time spent, challenges in other areas of professional fees are usually not on the basis that the hours claimed were not worked but that the particular task took too long or that unnecessary work was done. But again, leeway needs to be afforded here because on a tight schedule different adjudicators may approach their task in different ways or order their work differently. And as for allegedly unnecessary work, it is important to bear in mind paragraph 20 of the Scheme. The adjudicator is entitled to take into account matters under the contract which he or she considers are necessarily connected with the dispute.45

5.6.4 Disputes as to fees

5.28 Given the principles set out above, the party to an adjudication which is considering a fees challenge will need to give careful consideration as to whether there is any realistic basis for disputing the fees claimed. It is to be expected that that in the usual run of cases there will not. But if a party, and in particular the paying party, intends to challenge them, it should take the initiative where necessary. If the adjudicator brings proceedings first, the party sued will then defend in the usual way. But if the adjudicator does not or threatens proceedings against the other party (who may take a different view on fees), the paying party should progress the resolution of the dispute by seeking a declaration from the Court as to the reasonableness of the fees. In any such proceedings, the adjudicator will no doubt counterclaim for the fees. If the adjudicator has by then claimed against the non-paying party or now seeks to bring it in, that party would be able, properly, not to admit liability on the basis of the dispute raised by the paying party. It is hard to see how the adjudicator would be able to obtain an immediate judgment against the non-paying party in such circumstances. The latter will be bound by the eventual result. In this way, the non-paying party's exposure to costs will be kept to a minimum. Any disputes which arise thereafter should not involve any significant points of principle. A party will be

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entitled to make an application for summary judgment if it takes the view that they clearly are (or are not) reasonable, and in any event, they can seek an immediate assessment – it is hard to see how any disclosure is involved other than the papers sent to the adjudicator and his or her own timesheets. Nor is oral evidence likely to be necessary. So the hearing is likely to be short and the Court might in an appropriate case direct that the issue be dealt with on paper.46

5.6.5 No lien on decision

5.29 In complying with the Statutory Scheme rules, the adjudicator must act impartially under paragraph 12(a). The adjudicator must reach a decision which must be accompanied by reasons if these are requested (paragraphs 19 and 22). This decision, with the reasons if these are requested, must be delivered to the parties as soon as possible after he or she has reached his or her decision (paragraph 19(3)).47 It follows from these provisions that the adjudicator may not impose a lien on his or her decision or reasons and not deliver it pending the payment of his or her fees. This is because the adjudicator is restricting himself or herself from complying with the obligation to deliver these documents as soon as possible after he or she has reached the decision which must be reached within 28 days or, if the referring party agrees, within 42 days.48 A clause that purports to impose a lien as envisaging a potential delay, which could be lengthy, between the completion of the decision and its communication to the parties whilst arrangements are made in respect of the adjudicator's fees and is thus contrary to section 108 of the Act, which envisages both completion and communication within the 28-day period. An open-ended extension is contrary to the whole principle of adjudication as described in the Act.49 5.30 Moreover, an adjudicator will appear to lack impartiality in making it a condition of appointment that his or her fees would first have to be paid by the referring party before he or she delivered the decision to the parties and by then appearing to enforce that pre-condition. Where an adjudicator is appointed under a construction contract to which Part II of the Act is applicable, particularly where the agreement does not contain an overriding contractual adjudication clause, the appointment is not consensual in the same way as an arbitrator's appointment is consensual and he or she has a quasi-judicial function since he or she is imposed unilaterally by the state onto one of the parties to reach a binding, albeit temporary, decision about their dispute. The adjudicator may not, therefore, be or appear to be financially beholden to one party, particularly the referring party, or place himself or herself in the position in which he or she might appear to be more partial to one side than the other. The imposition of a lien on his or her decision which has to be lifted by the referring party in order to obtain the decision gives an appearance of partiality and

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amounts to a breach of paragraph 12(a) of the scheme. Thus, the adjudicator is in breach of his or her contractual obligations imposed by paragraphs 12(a) and 19(3) of the Scheme in imposing this condition and, subsequently, in implementing it.50

5.6.6 Fees to be paid for a previous adjudication

5.31 An adjudicator's apparent inclusion in the award of his or her fees to be paid by the unsuccessful party some of his or her fee for an earlier abortive adjudication does not give rise to an issue of jurisdiction. The adjudicator has a discretion under the jurisdiction which he or she has (subject to the issue of who the contract was with). If he or she exercises it and allows within the ambit of fairness a reasonable amount to be borne by the losing party, that party loses no more than it would have done if the abortive adjudication had not taken place. Even if that were wrong, the adjudicator's decision would still be enforceable save in respect of the identifiable part of the decision upon which on that premise he or she did not have jurisdiction; he or she would simply have included a clearly identifiable element on which he or she did not have jurisdiction. It is no different from a decision in which two sums are awarded to a claimant and on one of them the adjudicator had no jurisdiction. The Court will usually enforce the part of the decision in respect of which he or she had jurisdiction.51

5.6.7 Decision unenforceable

5.32 The question that arises where an adjudicator is claiming fees for work in an adjudication and the decision is unenforceable is whether the contract between the parties and the adjudicator is (a) an entire contract such that the bargained-for consideration was an enforceable decision or (b) a divisible contract for the performance of a series of ‘ancillary and anterior functions’ culminating in the making of a decision. Another way of putting the question is to ask whether the adjudicator has performed any of the contractual functions in respect of which payment is due. That is a question of the construction of the contract.52

5.6.8 Adjudication under the Statutory Scheme

5.33 Where the adjudication is under the Statutory Scheme, the terms of engagement must be read together with the terms of the Scheme. The significance of the Scheme is that it contains important provisions which deal with the question of remuneration in the event that the adjudicator does not reach a decision in various circumstances. Paragraph 8(4) provides that, where an adjudicator ceases to act because a dispute is to be adjudicated by another person, he or she is entitled to payment of fees and expenses in accordance with paragraph 25. Paragraph 9(1) provides that an adjudicator may resign at any time on notice. Paragraph 9(2) provides that an adjudicator must resign where the dispute is the

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same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication. Paragraph 9(4) provides that where an adjudicator resigns in the circumstances referred to in paragraph 9(2), or where a dispute varies significantly from the dispute referred in the referral notice and for that reason he or she is not competent to decide it, he or she is entitled to payment of reasonable fees and expenses. It is significant that, if the adjudicator resigns by giving notice under paragraph 9(1), he or she is not entitled to any remuneration. This shows that the adjudicator is entitled to fees and expenses where he or she does not complete the engagement by making a decision, but only in carefully defined circumstances. The contrast between the treatment of a resignation under paragraphs 9(1) and 9(2) is striking. A similar contrast is made at paragraph 11 in relation to the adjudicator's remuneration in the event of a revocation of his or her appointment. Paragraph 11(1) provides that the parties may at any time agree to revoke the appointment for any reason. In that event, the adjudicator is entitled to payment of reasonable fees and expenses. But if the revocation is due to ‘the default or misconduct of the adjudicator', paragraph 11(2) provides that there is no entitlement to fees or expenses. It can, therefore, be seen that the Scheme carefully defines the circumstances in which the adjudicator is entitled to remuneration where his or her appointment comes to an end before he or she has made a decision.53

5.6.9 The bargained-for performance

5.34 What is the bargained-for performance? It is an enforceable decision. The purpose of the appointment is to produce an enforceable decision which, for the time being, would resolve the dispute. A decision which is unenforceable is of no value to the parties. They would have to start again on a fresh adjudication in order to achieve the enforceable decision which the original adjudicator had contracted to produce.54 Paragraph 11(2) of the Statutory Scheme provides powerful support for this view. If the adjudicator's appointment is revoked due to default or misconduct, he or she is not entitled to any fees. 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’ on the part of the adjudicator. It is a serious failure to conduct the adjudication in a lawful manner. If during the course of an adjudication, the adjudicator indicates that he or she intends to act in breach of natural justice (for example, by making it clear that he or she intends to make a decision without considering an important defence), the parties can agree to revoke his or her appointment. In that event, the adjudicator is not entitled to any remuneration. It makes no sense for the parties to agree that the adjudicator is not entitled to be paid if his or her appointment is revoked for default or misconduct before he or she makes a purported decision, but to agree that he or she is entitled to full remuneration if the same default or misconduct first becomes manifest in the decision itself.55

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5.35 The fact that the adjudicator was not liable for anything done or omitted to be done unless it was in bad faith (paragraph 26 of the Statutory Scheme) lends further support to the view that the parties did not intend that the adjudicator should be paid for producing an unenforceable decision. If the opposing view is right, the adjudicator is entitled to be paid the same fee for producing an unenforceable decision as for producing one that was enforceable and yet, absent bad faith, the parties are not able to claim damages for the adjudicator's failure to produce an enforceable decision, regardless of the seriousness of the failure and the loss it has caused. That is a most surprising bargain for the parties to have made.56 5.36 If the fact that an adjudicator has not produced an (enforceable) decision that determines the matters in dispute, which is what the contract of engagement required of him or her before the entitlement to fees arose, does give rise to concerns on the part of adjudicators then the solution is in the marketplace: to incorporate into their terms of engagement (if the parties to the adjudication are prepared to agree) a provision covering payment of their fees and expenses in the event of a decision not being delivered or proving to be unenforceable. It is for the adjudicator to stipulate for such a term: not for the parties to the adjudication to stipulate to the contrary.57 Where the adjudicator's terms and conditions provide ‘Save for any act of bad faith by the Adjudicator, the Adjudicator shall also be entitled to payment of his fees and expenses in the event that the Decision is not delivered and/or proves unenforceable', the adjudicator is entitled to be paid fees for work done unless there has been an act of bad faith on the adjudicator's part. If such a term applies, and an adjudicator acting with diligence and honesty comes to the conclusion that the proper course is for him or her to exercise the right under Paragraph 9(1) of the Statutory Scheme to resign is not a situation within the expression ‘bad faith'.58 5.37 There is considerable doubt whether such a clause is caught by section 3 of the Unfair Contract Terms Act.59 It is simply concerned with payment of the adjudicator's fees. It says nothing about what contractual performance the adjudicator is expected to perform. In any event, paragraph 9(1) of the Statutory Scheme gives the adjudicator an unfettered right to resign which is relevant to the contractual performance that the

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adjudicator is expected to perform. If that is wrong, the clause satisfies the requirement of reasonableness where:

• The provision is in accordance with terms which in PC Harrington v Systech the Court of Appeal regarded as being capable of being commercially acceptable to the contracting parties;60
• It is a term commonly found;
• There is no inequality of bargaining power; and
• The referring party could have rejected the terms (and sought a different adjudicator), but has instead accepted them not once but twice. On each occasion that party being represented by solicitors with enormous experience and expertise in respect of adjudications.61

5.6.10 Referring party's liability for fees in absence of jurisdiction

5.38 There is a view that the Statutory Scheme implicitly confers on the adjudicator a power to apportion his or her fees and to decide who should pay the apportionment and that where it is clear some of that work was unauthorized as it was beyond his or her jurisdiction the unsuccessful party cannot be liable for it. Only the party that sought adjudication is liable for the fees, expenses and costs incurred by asking for a decision which the adjudicator has no authority to make and to which it was not entitled under the contract and which in breach of contract is sought. The Statutory Scheme takes effect as implied terms of the construction contract and the referring party is only entitled to exercise its right to call for adjudication if it first complied with paragraph 1(3) of the Statutory Scheme. If it does not do so in part, it is thus in breach of contract.62 5.39 The opposing view is that the referring party would only be in breach of contract so to refer a dispute if there were to be implied in the construction contract a provision that there should be no reference to adjudication other than as contemplated under the relevant term dealing with adjudication. The implication is certainly not necessary to give business efficacy to such a contract, which works perfectly well absent such implication, nor is it an obvious inference from the agreement, i.e. ‘so obviously a stipulation in the agreement that the parties must have intended it to form part of their contract’ (Chitty on Contracts, 31st ed Volume 1, paragraph 13-008). Indeed, the question of whether such a term is to be implied would most likely give rise to serious disagreement since the question of whether a dispute is within the ambit or outwith the relevant provision will often give rise to difficult questions, and the party who claims an absence of jurisdiction always has the option of protecting itself by simply taking the jurisdictional point and then playing no part in the adjudication. It follows that the referring party will not be liable for the adjudicator's fees as damages for a breach of contract committed by referring to adjudication disputes which are said to have been outwith the ambit of the adjudication provisions of the construction contract.63

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5.6.11 Adjudicator's discretion as to party to pay fees and expenses

5.40 An adjudicator is not bound by the Civil Procedure Rules or the Arbitration Act 1996, but the same principles are applicable. The first question is who has been the successful party. An adjudicator will correctly, on any count, decide that the referring party was overall the successful party where it has made a substantial recovery of just short of 60% of what it claimed. If the adjudicator has also formed the view that part of the claim did not represent sums due but cannot conclude that that part was intentionally exaggerated and reduces the referring party's entitlement to costs by 10%, the court cannot begin to say either that that was wrong or that it was so wrong that it gave rise to some inference that the adjudicator must have been biased. Some judges or adjudicators might have made a greater reduction but on any count, this would simply be the exercise of a discretion. Even if the adjudicator was wrong on the law, facts or the exercise of a discretion, the court will not interfere.64 This could be seen as reflecting the approach of an appellate court to appeals on costs as described by Stuart-Smith LJ in Roache v News Group Newspapers Ltd,65 and cited with approval by Lord Woolf MR in AEI Rediffusion Ltd v Phonographic Performance Ltd:66

Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should, or should not, have considered, or that his decision was wholly wrong because the Court is forced to the conclusion that he has not balanced the various factors fairly in the scale.

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