Adjudicators cannot charge for unenforceable decisions, appeal judges rule

Adjudicators cannot charge for unenforceable decisions, appeal judges have ruled.

The case concerned a dispute between a builder and subcontractor over work carried out at Wembley Stadium and two other sites in Liverpool and Mansfield.

Delivering judgment in PC Harrington v Systech International [2012] EWCA Civ 1371, Lord Dyson, Master of the Rolls, said parliament's intention in passing the Housing Grants, Construction and Regeneration Act 1996 was to provide a scheme for a 'rough and ready temporary resolution' of construction disputes.

He said that was why the courts enforced decisions, even where they could be shown to be wrong on the facts or in law.

'But a decision which is unenforceable because the adjudicator had no jurisdiction to make it or because it was made in breach of the rules of natural justice is quite another matter,' Lord Dyson said.

'Such a decision does not further the statutory policy of encouraging the parties to a construction contract to refer their disputes for temporary resolution by an adjudicator. It has quite the opposite effect.

'It causes the parties to incur cost and suffer delay on a futile exercise. I can see no basis for holding that parliament must have intended that an adjudicator who produces an unenforceable decision should be entitled to payment.'

The court heard that a dispute between PC Harrington Contractors (PCH) and subcontractor Tyroddy Construction over whether retention monies should be released in three projects, including Wembley Stadium, led to the appointment of an adjudicator from Systech International.

Early last year claims consultants for PCH wrote to the adjudicator saying he had no jurisdiction to hear the claim because the parties had agreed that payment of the retention should be put on hold until the question of an alleged overpayment on another project was resolved.

The adjudicator, Mr Doherty, decided that retention monies were due to the subcontractor for each of the three contracts. He charged PCH £18,100 for the Wembley adjudication and a further £10,216 and £7,686 for the other two.

However, Lord Dyson said the adjudicator failed to deal with the defence that no retention money was due because PCH made an overpayment.

Mr Justice Akenhead ruled at the High Court that this failure meant the adjudicator had fallen below the required standards for his decision to be enforced.

Lord Dyson allowed PCH's appeal. Lord Justice Davis agreed, for his own reasons, and Lord Justice Treacy also agreed.

Michael O'Connor, solicitor at Speechly Bircham, represented PCH.

He said the Court of Appeal ruling was likely to lead to attempts by adjudicators to alter their terms and conditions so they were entitled to payment regardless of whether their decisions were enforceable.

'However, it is far from certain that the parties in dispute will accept such terms,' he said. 'If both parties reject them, the adjudication process may well have to start all over again.

'If one party accepts but the other rejects the terms, then there is possibly no contract between the adjudicator and that party.

'One solution may be for the parties to agree in the underlying contract that any adjudication must be referred to an adjudicator who is prepared to accept entitlement to payment only on the basis they produce an enforceable decision.'