Just the other day, I was reading Tony Bingham’s piece in Building about the return of Lord Dyson to the Court of Appeal as the Master of the Rolls. Tony ended his piece as follows:
“I am excited by the ‘re-appearance’ of this judge. What does he say now about this 14-year old dispute management scheme? Have we strayed off-piste?”
A couple of days later, Lord Dyson’s judgment in PC Harrington v Systech was published. In light of the conclusions he reached about adjudicators’ fees, I wonder what Tony (and a lot of other people) are thinking now.
No fee if no enforceable judgment
In case you missed the judgment, Lord Dyson concluded that an adjudicator is not entitled to be paid if a court finds he is in breach of the rules of natural justice and doesn’t enforce his decision. Essentially, Lord Dyson said that on the facts of the case and under the Scheme for Construction Contracts 1998, there is 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.
That’s quite a dramatic turnaround from Akenhead J’s judgment, which was overturned.
At the time of Akenhead J’s judgment, I said that I didn’t think it was unfair to the parties. I was pleased to see the door firmly shut on yet another attack on adjudicators and ways to wriggle out of paying for the work we do. Too often the focus is on the adjudicator and not on the parties’ dispute.
And a year on?
What do I think now that we have Lord Dyson’s considered view on the matter?
My initial reaction was that it is an unfair result for an adjudicator who had (to quote Akenhead J) “honestly and unwittingly misunderstood his jurisdiction”. That could happen to any adjudicator and the implications for those that do could be far reaching and costly. Some commentators have already suggested that it may raise standards among adjudicators, but at what cost?
I also wondered whether the bar for adjudicators was being set far higher than the test would be for other professionals. Had we moved away from a reasonable skill and care obligation to something more onerous, akin to a fitness for purpose or best endeavours obligation?
Looking on the bright side
However, upon reflection, I’m not sure things are so bad.
We have to remember that successful jurisdictional challenges remain relatively rare, so the judgment’s impact may be less dramatic than we first thought, although I may not go as far as to agree with Davis LJ that the judgment should not have “any very great ramifications”.
I think the door has been opened for adjudicators to reconsider the terms of their engagement. Davis LJ suggested that adjudicators could include a term that they should get paid, regardless of whether they deliver a decision or it proves to be unenforceable. While I’ve seen it suggested this type of provision may fall foul of the Unfair Contracts Terms Act 1977 (UCTA 1977), I’m not sure it is going to be acceptable to many parties. I also wonder what would happen in a situation where neither party agrees expressly to the adjudicator’s terms of engagement, or the responding party expressly rejects those terms, along with the whole adjudication on jurisdictional grounds.
I was rather more taken with what Lord Dyson appeared to be alluding to with his references to stage payments. He looked at the various situations where the Scheme for Construction Contracts 1998 provides for an adjudicator being paid, or not, depending on the circumstances. In addition, he drew a distinction between section 109 of the Construction Act 1996 as it applies to parties to a construction contract (an entitlement to be paid in stages or instalments), and adjudication, where there is no reference to such a right. One of the cases he refers to also mentions stage payments.
I am still pondering whether it would be appropriate for an adjudicator to include a term regarding stage payments, but I can certainly see the attraction, particularly in those large disputes that inevitably last far longer than the 28 or 42 days envisaged by the Construction Act 1996. You’d just have to draft in such a way that made it clear that the payments were not to be returned, in the event of a non-enforceable decision. Equally, an adjudicator has the option of asking the referring party for an undertaking in the event that the responding party challenges jurisdiction and the referring party wants the adjudication to continue. This could even be part of the adjudicator’s terms of engagement. Similarly, it is arguable that an analogy could be drawn with what happened in Linnett v Halliwells: that on questions of jurisdiction (that turn out to be wrong), there is an implied obligation on the referring party to pay.
I would also welcome guidance from the adjudicator-nominating bodies (ANBs) on the judgment, particularly in terms of whether and how adjudicators’ engagement terms ought to be amended. Jonathan has confirmed that RICS is currently considering what guidance it should give to its adjudicators, and whether the recently published third edition of the RICS Guidance Note: Surveyors Acting as Adjudicators, requires an addendum. If the market place is to determine the solution going forwards, then the sooner we have that guidance, the better it will be.
Final thought
If adjudicators are to learn any lessons from this sorry tale, then one of the lessons must surely be to take care when dealing with jurisdictional issues, especially when deciding to exclude a party’s submissions.
Bearing in mind my comments last time this was blogged about, you’ll not be surprised to hear that I welcome Lord Dyson’s judgment. I don’t think it is setting the bar higher for adjudicators than other professionals.
If I make an honest mistake in my work I would not expect to be able to charge my client for it. My mistake; my loss, not my client’s.
I would resist payments on account particularly when acting for a respondent. If payment was made and the decision was subsequently found to be unenforceable I would suggest that payments made ought to be repaid, again on the basis of a total failure of consideration.
From my perspective when acting as Adjudicator, I never – when nominated by an ANB – try to impose “standard terms of business” on parties. It begs the question – what will I do when one of them says ‘no’ ? Better in my view to inform the parties of my (reasonable) hourly rate, and then just get on with it. I doubt that will change.
As Adjudicators, we have immunity from suit, save in the case of bad faith (and we surely couldn’t validly exclude that via contract terms). If there is a threshold jurisdiction challenge, and the Referring Party wants us to continue (and we form the view that we have jurisdiction) and we do so then nothing in this decision will alter our continued entitlement to payment.
Its only where we unilaterally go outside jurisdiction (and are not saved by severability) or make a sufficiently material error of natural justice that we lose the right to payment. In such a case, the parties normally lose much more than we now will – in terms of wasted fees, both of adjudication and enforcement, plus they do not get the decision that they were entitled to. Query why they should agree additionally to bear our fees ?
There would no doubt be cases, perhaps in a large dispute where the parties agree on the identity of the Adjudicator for his/her particular qualities, that they would be willing to assume for themselves the risk of such a mistake in the tight timescales – such that the Adjudicator gets paid regardless. But I doubt that there will be any ‘typical’ ANB appointment case where the parties, and in particular responding party, would agree to such a term – why would they ? (Especially where there is a perception I am aware of in some quarters that some Adjudicators may have become a little care free about such matters)
As for what comes next – I wonder whether adjudicators might now properly be joined as parties to enforcement proceedings, where the enforcement is resisted based on the Adjudicator’s conduct (as opposed to threshold jurisdiction) …..
If not, then the ‘in rem’ / ‘in personam’ debate at first instance in Systech v PC Harrington – about whether a decision in enforcement proceedings to which the Adjudicator was not a party will bind the Adjudicator in his fees claim – becomes material again. In that case, having already decided the Adjudicator’s failings in the enforcement hearing (PC Harrington v Tyroddy) Mr Justice Akenhead re-decided the same points in the fees hearing (Systech v PC Harrington). The ‘in rem’ point was not strictly determined as a result, but the Judge said that if it had been then it would have been decided against PC Harrington – i.e. Systech (the Adjudicator’s employer) and any Adjudicator could reargue the natural justice points in a fees claim. Does that mean that both parties should consider joining the Adjudicator into the enforcement ?
Interesting times …..
LORD DYSON is my new hero and has restored my faith in the British justice system completely with his recent ruling on the CRB regulations.
I felt the law was a breach of HR legislation myself and indeed wrote myself to the Home Secretary, Theresa May many months ago (twice) to point out this and give her my views but never got a response. I am glad the Master of the Rolls has shown some of the common sense that often eludes many a politician. This could have a massive impact on many thousands of people who are disadvantaged, embarrassed, sometimes even unfairly treated by employers over relatively minor crimes often committed in a rebellious youth. I feel the government should concede the point immediately and look to change course and adopt the American system where minor convictions are removed from a persons record completely after periods of non offending.
Their statistics prove that this policy significantly reduces crime levels and helps to stop re-offending by offering an incentive and this helps break the cycle of crime that our politicians have no idea about solving. People deserve a second chance, especially young people who currently have no incentive to go straight, as every time they apply for a job their past comes back to haunt them; even after a decade or two.
This ruling could eventually save the justice system millions of pounds and could reduce re-offending in the country considerably if the Government backed it and showed a bit of sense – it is long overdue and personally I would give Lord Dyson a knighthood immediately.
Sorry… I know the above article is about something else but Lord Dyson deserves credit. He really is ‘cleaning up’ the image of a fair and just society with this ruling.
Good on him – Good on him.
For those not familiar with the judgment Angela refers to, see T, R (on the application of) v Chief Constable of Greater Manchester & Ors [2013] EWCA Civ 25, which was handed down on 29 January 2013. For a detailed discussion, see Legal update, Unfiltered disclosure of all convictions and cautions breached Article 8 of the ECHR.