REUTERS | Toby Melville

Money money money or adjudicator’s fees (again)

When Lord Dyson’s judgment in PC Harrington Contractors Ltd v Systech International was published in 2012, I suspect there was a big intake of breath in the adjudication world, not just from adjudicators, but also from those involved in advising parties and the parties themselves. In deciding that an adjudicator was not entitled to his fees because his decision was unenforceable due to a breach of the rules of natural justice, the Court of Appeal handed down one of the most significant adjudication judgments. I commented on it at the time, twice.

If you are wondering why I’m mentioning this now, I suggest you take a look at Lord Tyre’s judgment in Stork Technical Services (RBG) Ltd v Marion Howitson Ross, a Scottish decision that seems to have slipped under the radar.

Stork Techincal Services v Ross

This dispute involves the widow of Mr George Ross, a well-known adjudicator, and one of the firms (RBG) that was involved in a series of adjudications that ended up before the Scottish courts.

In early 2011, in SGL Carbon Fibres Ltd v RBG Ltd,  Lord Glennie refused to enforce Mr Ross’ decision because he had relied on his own knowledge and experience in arriving at certain conclusions (which I commented on at the time).

Fast forward a couple of years and RBG (now called Stork Technical Services), started proceedings against Mr Ross to recover the £140,500 odd that it paid to him (as it’s half share of the cost of the adjudication). Sadly, Mr Ross died, but the proceedings continued against his widow, as the executor of his estate.

When the matter came before the court, essentially Lord Tyre:

  • Held that the parties’ contract with Mr Ross was a contract for the supply of services entered into with Mr Ross’ employer (a firm of solicitors), not Mr Ross in his personal capacity. In other words, RBG brought proceedings against the wrong party.
  • Rejected, obiter, the submission that this case could be distinguished from PC Harrington v Systech “merely because it required the adjudicator to keep the parties appraised of his fees and submit interim fee bills”.

(In PC Harrington v Systech, Lord Dyson said that on the facts of the case and under the Scheme for Construction Contracts 1998, there was an entire contract between the parties and the adjudicator, with the consideration being an enforceable decision. The steps an adjudicator takes along the way to reaching his decision may be necessary steps to take, but there is no requirement to pay for them if the decision cannot be enforced.)

“…to supply an adjudication of the parties’ dispute”

Obiter, Lord Tyre continued:

“There is nothing in the agreement to suggest that these interim payments were made in consideration of anything other than the service for which Mr Ross was engaged, namely to supply an adjudication of the parties’ dispute.”

Since I read Lord Tyre’s judgment, I’ve been wondering what this phrase really means.

On the one hand, Lord Tyre refused to distinguish Lord Dyson’s judgment, which suggests he may be alluding to the idea that there was something akin to an entire contract here and the interim payments were nothing more than that. After all, if you contract for a builder to build you a house and you pay for the works in monthly installments (it being a construction contract), if the builder fails to finish the works, you don’t have a completed house and the builder is in breach of contract. In those circumstances, you don’t have to pay for those bits that the builder hasn’t built (although you may not get back those sums that you have paid).

On the other hand, the language is vague and there is wriggle room; room to argue that Lord Tyre was suggesting something more along the lines that Akenhead J decided PC Harrington v Systech. (At first instance, Akenhead J held that an adjudicator’s role is not limited to writing the decision, but extends to other matters. If the adjudicator’s decision is unenforceable because of a breach of the rules of natural justice, that does not mean there is a total failure of consideration. I discussed it at the time.)

Whatever Lord Tyre really thought about the point, he didn’t need to consider it in detail as he’d already held that RBG should have brought proceedings against Mr Ross’ employer.

Looking forward, even if there is room for argument about the entire contract point (and I’m sure we will see those arguments before too long), it is good to see that Lord Tyre confirmed the construction industry’s standard practice of appointing a “natural person” as the adjudicator, with the adjudicator’s fees to be paid to the adjudicator’s employer (if the adjudicator is an employee). In this case, that means Mr Ross was not enriched to the tune of £140,500 and his widow is not liable to repay anything. Only time will tell whether RBG bring proceedings against Mr Ross’ employer and whether, if they do, they pursue a breach of contract claim (as Lord Tyre indicated was the proper claim to bring).

In Money Money Money, Abba sang about having to “work all night, I work all day, to pay the bills I have to pay”. As an adjudicator, it can sometimes feel that way and I’m sure this isn’t the last time I’ll be writing about it.

MCMS Ltd Matt Molloy

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