Adjudicators' Entitlement To Payment Secured

Should adjudicators be entitled to payment when the court refuses to enforce their decision because of mistakes made by the adjudicator?

Previously, there has been little by the way of guidance on this question. However, the recent case of Systech International Ltd v PC Harrington Contractors Ltd, clarifies the position.

Background

Harrington and Tyroddy Construction Ltd were engaged in three adjudications relative to three separate contracts, in which Tyroddy sought payment of outstanding retention. An adjudicator was appointed (employed by Systech). Harrington put forward a defence based on (amongst other things) a re-measurement of Tyroddy's works which, they claimed, meant that they had vastly overpaid Tyroddy so no retention could be payable. The adjudicator rejected this, stating that he did not accept the re-measurement because it was "not agreed but also contractually flawed and outwith [the] dispute."

Harrington obtained a declaration from the court that the three decisions were not enforceable because of breaches of natural justice on the part of the adjudicator. The Judge stated that the adjudicator had "unwittingly [fallen] below the standards which are required to enable the decision or decisions to be enforced...by ruling wrongly that issues relating to the final account were outside his jurisdiction."

Meantime, Systech commenced proceedings against Harrington to recover the outstanding fees.

Arguments and Decision

Harrington argued that the adjudicator had not produced decisions in accordance with the Scheme, given that the decisions were unenforceable, and therefore no payment was due.

Systech argued that the adjudicator's appointment extended to all work concerned with acting as an adjudicator, not just to producing an enforceable decision.

The Judge considered the doctrine of "total failure of consideration." Essentially, if the contract required a number of services to be provided and there was a total failure to provide any of those services, this would amount to a total failure of consideration. However, where some of the services had been provided, there could not be a total failure.

In applying this to the facts, the Judge held that what the parties had bargained for was the provision of the services concerned with the role of the adjudicator. This was not restricted to issuing a decision but included the whole conduct of...