So who stands to benefit from adjudicator's nice little earner?
When the adjudication process was in its infancy, a senior figure from a well-known firm of construction consultants regaled me with the tale of his first appointment as an adjudicator.
As you can imagine, most of the details were pretty dull, but an interesting point arose at the end when, after it was all over, he received a sizeable cheque for his fees for acting as adjudicator, made out to him personally. His wife, who had become very excited at the prospect of a trip to the sales, was disappointed when he returned the cheque and asked for it to be made out to the firm that employed him.
Although some adjudicators practice on their own, many more work with larger consultancies, in partnerships or limited companies. For most of them, adjudication is another service they provide alongside the mainstream of construction advice and what used to be known as expert witness work - now called 'litigation support'. These services are provided by the individual but billed for by their company. When the appointment of an adjudicator is made, who is appointed - the individual or their company?
Such niceties were overlooked by the Housing Grants Construction and Regeneration Act 1996, ('the Act'), as were so many other details necessary to make the adjudication process work.The Scheme for Construction Contracts ('the Scheme') sought to plug the gap by requiring that an adjudicator should be 'a natural person acting in their personal capacity'. You might think that this put an end to what was a rather sterile debate in any event.
Well, here is the rub. Unlike arbitrators, unless the terms of their engagement expressly state otherwise, adjudicators are not able to withhold their decisions until their fees have been paid.
And although disputing parties are happy enough to bring their money claims to adjudicators, there are those who are disappointed with the result and, faced with the prevailing attitude of the courts against overturning the adjudicator's decisions, vote with their wallet, as it were, and refuse to pay the adjudicator. In such circumstances, the adjudicator has no choice but to sue.
But do they do so in their name or in the name of the company they work for?
The point arose in the unreported case of Faithful and Gould Ltd v Arcal Ltd and Others (judgment 25.5.01), when the claimant sued for the fees of its employee, Mr Gray, who had acted as an adjudicator in a dispute between the defendants. Mr Gray was, in fact, the third adjudicator to have been approached by the parties;
the previous two attempts had failed after disputes over fees. It seemed that Arcal did not have the funds to pay for an adjudication but hoped to do so from the proceeds. Understandably, Mr Gray proceeded with great caution and obtained the parties' written agreement as to payment. In the event, his decision went against Arcal and it recovered nothing. He also ordered it to pay his fees as part of his decision. When it did not pay, the claimant sued.
The main plank of the defendant's defence was that the adjudicator's engagement was agreed between Arcal and Mr Gray and not the claimant, Faithful and Gould. On this basis, it applied to strike out the claim for disclosing no cause of action.
The judge made short work of the argument. He acknowledged that the Scheme requires an adjudicator to be a natural person for the simple reason that the role of an adjudicator must be carried out by an individual and cannot be done by a team. It is not unusual for such an individual to practise in a partnership or a limited company, which administers and recovers their fees.There is nothing in the Act or the Scheme which requires adjudicators to claim their fees in their personal capacity. The judge dismissed the argument as 'both unattractive and untenable'.
To avoid unwarranted objections to payment of fees, adjudicators should ensure that they submit their own terms and conditions to the parties for agreement before agreeing to the appointment. If their fees are to be invoiced by their company or partnership, they should say so.