Systech International Limited v PC Harrington Contractors Limited

Case reference: 
[2011] EWHC 2722 (TCC)
Thursday, 27 October 2011

Key terms: 
Natural Justice – Adjudicator’s fees – Total failure of consideration – implied term

PCH had engaged Tyroddy for 3 subcontracts. The issues addressed were agreed to apply to all 3 subcontracts. A dispute arose which was referred to adjudication. The Adjudicator was appointed and wrote to the parties enclosing “Terms of Engagement of the Appointment as Adjudicator” which included a provision that both parties were jointly and severally liable for payment of his charges. Both parties accepted these terms. The Court had previously considered that the Adjudicator’s decision was not enforceable by reason of breaches of natural justice as the Adjudicator had failed or omitted to address Harrington’s defence in the adjudication. These proceedings related to the Adjudicator seeking payment of his fees from PCH. PCH resisted on the basis there had been a total failure of consideration: the Adjudicator had failure to issue “Decisions” in accordance with the Scheme as he had produced decisions that were unenforceable. Part of the argument was based on there being an implied term that the Adjudicator was obliged to conduct the adjudications in accordance with the principles of natural justice. The Judge considered that he was required to determine what the Adjudicator had contractually or otherwise undertaken to provide and, unless there has been a total failure of consideration or bad faith on the part of the Adjudicator, the Adjudicator would be entitled to payment. The Judge considered that the bargained-for performance required from the Adjudicator covered not only the production of the decision but also the discharge of the remaining aspects of the role which involved the conduct of the adjudication in the period leading up to the decision. There was also a policy consideration: where the Adjudicator had done his honest best in performing his role as an Adjudicator, even if ultimately the decision is unenforceable, the Court should be slow to infer that payment was excluded. This position may be different if there was any suggestion of dishonesty, fraud or bad faith on the Adjudicator’s part. On the facts there had not been a total failure of consideration as the Adjudicator had spent significant time in dealing with jurisdictional objections, reviewing the pleadings and documentation as well as communicating the parties. This was a partial discharge of his role as Adjudicator. Therefore there had not been a total failure of consideration. The Judge doubted that there was an implied term to the effect that the Adjudicator would act in accordance with the principles of natural justice.

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