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The vexed question of adjudicators’ fees (part 2)

In my post, The vexed question of adjudicators fees, I discussed ways that the adjudicator and the parties could manage the adjudication process to keep costs down.

That post sets out the background to this issue and refers to the Adjudication Society panel debate, Adjudicator’s fees and the costs of adjudication – over the top?, which was held at the offices of Charles Russell LLP last month.

This post looks at other issues related to adjudicators’ fees, such as the level of fees, the perceived lack of regulation and accountability of adjudicators, and challenging the reasonableness of the adjudicator’s overall fee.

You get what you pay for

I think it is fair to say that, on the whole, a higher hourly rate should reflect an individual’s greater experience. With that, you anticipate that the individual will spend less time on a matter than a less experienced individual with a lower hourly rate. This point was noted at the panel debate, with some attendees recommending that parties nominate the more experienced adjudicator who will be better value overall and present you with a decent decision.

The idea that you get what you pay for should apply equally to legal representatives as well as adjudicators. However, comments at the panel debate suggested that some individuals increase their hourly rates when appointed to act as an adjudicator or arbitrator, rather than as an expert. The point was made that this practice was more prevalent when adjudication was still in its infancy than nowadays. However, it hasn’t gone away. I’m happy to say it’s not a practice I adopt!

Low-value disputes (generally under £10-20,000) are of special concern, since it is these disputes that seem to have been priced out of the process. There didn’t seem to be a clear consensus on whether hourly rates were reduced to accommodate the relatively low value of the dispute, although it was suggested that in such disputes the adjudicator may have an idea of how large his overall fee ought to be. One example given was in the region of 20% of the value of the dispute for something valued in the region of £10-12,000. Someone else mentioned an adjudication where the adjudicator’s fee was the same as the sum in dispute (about £10,000).

I was recently in the Republic of Ireland discussing adjudication in advance of the introduction of a statutory scheme over there. They are considering excluding claims under a certain value. Someone also referred to the Federation of Master Builder’s adjudication scheme, which allows the adjudicator up to 10 hours at no more than £110 (plus VAT) per hour. However, the point was made that introducing a cap for disputes under a certain size may disenfranchise many parties in the construction industry. No-one mentioned the fact that it would also breach the “at any time” statutory right that those parties have to refer a dispute to adjudication.

Regulation and accountability

Some attendees felt that adjudicators are unregulated and are not accountable to the parties or the ANBs. I’m not sure this is fair. In the last few years we have seen a number of high-profile examples of adjudicators breaching the rules of natural justice and the courts refusing to enforce their decisions. I’ve probably blogged about most of them. Such cases leave the parties in an invidious position. They have spent money on their own legal team and one of them is, most likely, looking at a rather large adjudicator’s fee note with disdain. The other party is most likely still owed the money it claimed (and has it’s own legal fees to worry about).

I think the high-profile cases do have a beneficial effect on the rest of us. On occasion you may think “but for the grace of God go I”, but more often you will look at what happened and make a mental note to remind yourself not to behave that way yourself.

The parties do have some recourse to the ANBs and professional bodies and can lodge a complaint. I know this happens. Equally, the parties can raise the matter of the reasonableness of the fee note with the adjudicator. It may sometimes feel like there is no place to turn, but I’m sure some adjudicators may be amenable to a discussion over the fees they have charged (especially if the court has refused to enforce their decision as a result of a breach of natural justice). One also has to balance this with the courts guidance in Fenice v Jerram Falkus that an adjudicator is entitled to a reasonable fee and that a reasonable fee is usually based on the adjudicator’s hourly rate, provided it is in an overall band of reasonableness.

If you are unhappy about the adjudicator’s hourly rate, challenge it. As was observed by several attendees at the panel debate, in practice this is often less easy to do with ANB appointments, where time is already running. One attendee suggested capped fees or scale charges, which could be imposed by the ANBs. Another wondered if adjudicators should provide estimates, either at the outset, or updated as the adjudication progresses.

Although not discussed at the panel debate, I note that the RICS draft guidance for surveyors acting as adjudicators devotes just over six lines to the subject of the adjudicator’s fees and expenses (paragraph 14.8), which can be summarised as:

  • Adjudicators are entitled to be paid a reasonable fee.
  • They should keep a log to justify time spent.
  • It is poor practice to split fees between the parties 50/50, unless there is a good reason.

Change is unlikely

Given how many years it took to amend the Construction Act 1996 and the Scheme for Construction Contracts 1998 (and the issues that we may now be faced with as a consequence), any statutory change is unlikely. If change does take place, it will only happen as a result of the various ANBs introducing some form of fee structure for adjudicators who are members of their panels, with uniformity across them all. I’d refer you to the RICS’ draft guidance mentioned above and put money on my ability to herd cats first!

That said, adjudicators must take responsibility for their actions and behave accordingly. It is one thing to suggest better case management, but we need to see it put into practice by the parties as well. All adjudication users would benefit. Similarly, we need to see less wayward behaviour by adjudicators with attention paid to the rules of natural justice and those things that we can and can’t do. In hand with this goes a radical suggestion: how about the parties restricting jurisdictional challenges to those that have a realistic chance of success, both during the process and at enforcement stage?

5 thoughts on “The vexed question of adjudicators’ fees (part 2)

  1. Hello Ian – I mean the chances of ANBs introducing a fee structure are unlikely to happen (a) at all or (b) quickly.

  2. Gentlemen…

    I would like to ask the following:
    Firstly, does anyone have a comment about proof of the hours for the Adjudicator’s time, and secondly, whether the fee should be for the Adjudicator’s firm or only his own hours?

  3. Graham – I would expect most practioners to keep a contemporaneous record of time spent and to be able to provide an explanation of how much time was spent and when it was spent.

    Re: firm v own hours, I think this would depend on the charge out structure – I know some firms will charge for administrative staff time separately, but in the majority of cases I see that time incorporated into the adjudicator’s rate as an overhead. However, I would expect the basis of charging to be notified at the outset/upon nomination/appointment.

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