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Is the adjudicator entitled to his fees by virtue of a total failure of consideration?

25th November 2011

Citation: Systech International Limited v PC Harrington Contractors Limited [2011] EWHC 2722 (TCC)

Keywords: Adjudicators fees, breach of natural justice, consideration

Issue: Even though there was a breach of natural justice, is the adjudicator entitled to his fees by virtue of a total failure of consideration?

The Facts

The factual background of this case can be found in the judgment of PC Harrington Contractors Limited v Tyroddy Construction Limited [2011] EWHC 813.  Mr Doherty was appointed by RICS to act as Adjudicator and he was employed by Systech International Limited.  He duly sent out his terms of engagement which set out his charges and terms for payment.  The dispute referred was primarily concerned with the release mechanism for retention monies. PC Harrington (PCH) issued Part 8 proceedings in March 2011 to pre-empt questions of enforceability to seek a declaration that the decisions were not enforceable by reason of breaches of natural justice on the part of the Adjudicator.  The breaches concerned the failure or omission by the Adjudicator to address the defence put forward in the adjudication that no retention could be due because PCH had already overpaid Tyroddy on the subcontract.  The judgment was in favour of PCH and the Adjudicator had “unwittingly [fallen] below the standards which are required to enable the decision or decisions to be enforced”, essentially by ruling wrongly that issues relating to the final account were outside his jurisdiction. In relation to these proceedings, Systech argued unsurprisingly that there had not been a total failure of consideration. The Adjudicator provided a breakdown of his timesheets, where he spent only a fraction of time dealing with jurisdictional objections raised by PCH, reviewing the Referral, the Response, the Reply and the Rejoinder as well as other evidence and documentation.

Held (Akenhead J)

There has not been a total failure and the consideration or bargained-for performance is not “wholly and indivisible” and there had been in effect partial performance by the Adjudicator.  Whilst the Notice of Adjudication defines the outer ambit of the dispute, it is incumbent on the Adjudicator to adjudicate on the defences which are put forward. The Adjudicator made two basic mistakes.  The first one was to assume that he was limited in what he could decide by the four walls and wording of the Notice of Adjudication.  The second was that he clearly got into a muddle about what his jurisdiction was in relation to the final account evidence and arguments put forward by PCH.  The Adjudicator was confused between the final accounting exercise and the abatement to value exercise.  There has not been a total failure of consideration on the part of the Adjudicator under or in connections with his contract.  In those circumstances, the Adjudicator is entitled to his fees.

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