Essentially, the task of a judicial decision maker is to take a rule of law as a premise, apply this premise to the facts, and arrive at a decision. To arrive at that decision the adjudicator must first establish the appropriate procedure. In the purest sense, this procedure and the decision are fixed variables, which is to say there is no discretionary power. On the contrary, it might be said the adjudicator has extensive discretionary power over her terms, and this article explores the limits of that discretion.

At their core, the contents of adjudicators’ terms are relatively isomorphic. This is due to a combination of the restrictions imposed by legislation and the issues that have emerged from case law on the fees, duties, and rights of the adjudicator. For the most part, the terms exclude procedural matters which are covered elsewhere (by legislation, the contract, and the adjudicator’s directions).

At the eleventh hour, the terms are thrust on the parties and this has contributed to an abundance of litigation over the years. In particular the following issues have been dragged over the coals: Tolent clauses; the disapproval of liens; the enforceable decision obligation etc. Where the law is silent the adjudicator has real discretion to impose the most draconian terms and this seems to be supported by the judiciary. Coulson LJ suggested in Steve Ward v Davies & Davies [2022] EWCA that, in line with the principle the particular overriding the general as a matter of contract construction, the adjudicator’s terms take precedence over the adjudication rules.

The following two sections analyse the content of the adjudicator’s terms. This analysis is ordered hierarchically: starting up high with the fair and reasonable, before descending deeper and deeper into the abyss and the not so righteous.

Boiler Plate Clauses

Adjudication Rules – The terms will often acknowledge the adjudication rules agreed between the parties and the intention to comply with them.

Fee Rate – The terms will disclose the fee rate to the parties and should comply with any overall cap required by the adjudication rules. If the parties refuse to accept the terms, the adjudicator will nevertheless be entitled to a reasonable fee to reflect the adjudicator’s level of expertise (Fenice Investments v Jerram Falkus Construction [2011]).

Expenses – The terms normally state that the adjudicator is entitled to payment of any expenses reasonably incurred. These include the costs of experts, assessors, or legal advisers which she has appointed to assist her (The Scheme p13(e)). The expenses can also include the costs of meetings, site visits, tests, and experiments. Note. Should the adjudicator act on her right to seek assistance, that should only be done with agreement from the parties or otherwise risk invoking a natural justice issue (Babcock Marine v HS Barrier Coatings [2012] CSOH).

Joint and Several Liability – This means that the adjudicator has recourse against either party. Such a term will in any event be implied into the parties’ contract with the adjudicator (Linnett v Halliwells [2009]).

Indemnity – The Act S108(4) states that absent an act of bad faith the adjudicator is “not liable for anything done or omitted in the discharge or purported discharge” of her functions. For completeness, the adjudicator’s terms might include an equivalent provision.

Final Date for Payment – The terms will set out these particulars. A fee invoice will be raised and typically falls due for payment 3-7 days thereafter.

Resignation Fee – The Scheme gives four situations whereby the adjudicator is entitled to fee on an abandoned adjudication: the dispute is to be adjudicated by someone else (p8(4)); the dispute is the same or substantially the same (p9(4)); the dispute varies significantly from the dispute referred (p9(4)); the parties have agreed to revoke the adjudicator’s appointment (p11(1)). This fee entitlement might be extended further to include for resignation due to: failure to agree an extension of time; a settlement between the parties; any other jurisdictional issue. For the later, a variation of the Baldwin Clause might be adopted: “Should I resign as Adjudicator prior to reaching my Decision due to what I consider is a valid challenge to my jurisdiction to decide the dispute referred to me, then the Referring Party will be liable for payment of my fees and expenses” (Baldwin & Anor v Pickstock Ltd [2017]).

Interest on Late Payment – The terms will usually expressly state the terms of interest. From a recent published Judgment came the following clause: ‘In the event of any invoice not being settled as stated an additional charge may be raised for interest charges, which charges will be calculated at the rate of 2.5% per calendar month or pro-rata any part thereof, for the period between the date of invoice and the date of payment in full of that invoice.’ Although that rate might seem excessive and potentially unenforceable, a variation of the clause might suffice and that variation might include reference to the source of entitlement such as the Late Payment of Commercial Debts (Interest) Act 1998.

Cost of Pursuing Debt – In an Adjudication Society Workshop (20/09/22), it was unanimously agreed that every adjudicator should include a term relating to the recovery of any part of their fees. In Vinden Partnership v Orca LGS Solutions [2017], Mr Vinden was entitled to his reasonable costs of pursuing the debt plus interest as per his terms. As a starting point, one might refer to a clause from Steve Ward v Davies & Davies [2022]: “Time related for hours expended working or travelling in connection with the Adjudication including all time up to settlement of any Fee Invoice, which, for the avoidance of doubt, may include any time including Court time, spent securing payment of any fees, expenses and disbursements due“.

Discount – Although not a widely adopted clause, the author would advocate for it. A term to this effect would offer a discount on the adjudicator’s fees where payment is made within a stipulated period. James Pickavance commented that 5% can be an effective method of obtaining prompt payment. Although, its effectiveness in the face of a recalcitrant party might be limited, on occasion the incentive might just bring about closure on the dispute and that is the ultimate objective of the legislation.

Optional Clauses

Advance Payment – Unless expressly prohibited by the rules (TeCSA p20.1) it might seem reasonable to include a term that requires a payment on account in the event that­ the adjudication lasts longer than 56 days. In Mott McDonald v London & Regional [2007], the adjudicator had a term where the referring party must pay an advance payment. Judge Thornton QC suggested this could breach the rule in paragraph 12(a) of the Scheme that the adjudicator shall “act impartially in carrying out his duties”. Equally there might be an apparent bias issue where only one party obliges to pay the advance. In Nicholas James Care Homes Ltd v Liberty Homes [2023] the adjudicator had a term that non-payment allowed him to suspend his services or resign at any time and the Court held the adjudicator had not exercised a lien before issuing his decision.

Cancellation Fee – The adjudicator might include this provision to account for the lost opportunity to earn fees should the parties abandon the adjudication. Similar to loss of profit claims in construction disputes, this term may prove difficult to prove in Court.

Unenforceable Decision Clause – It might be considered that such terms are highly favourable to the adjudicator, given that the Courts give adjudicators substantial leeway in their decisions. In PC Harrington v Systech [2012] EWCA although the Court found that where the adjudicator’s decision was found to be unenforceable there would be no implied right to a fee, it proposed that the adjudicator’s terms could expressly confer such a right. A variant of the Davies Clause might suffice: ‘The Parties agree jointly and severally to pay the Adjudicator’s fees and expenses as set out in this Schedule. Save for any act of bad faith by the Adjudicator, the Adjudicator shall also be entitled to payment of his fees and expenses in the event that the Decision is not delivered and/or proves unenforceable.’ 

Liens – The imposition of a lien on fees is not considered an acceptable practice, and the courts have found that, even where parties have agreed to a lien, such an agreement is invalid (Cubitt v Fleetglade [2006]). That said, in a non-statutory setting where policy considerations do not apply, the finding may well be different.

Late Decision – Any decision reached out of time will be a nullity. In these circumstances, it is unlikely that the adjudicator will be entitled to her fees and expenses (Cubitt Building v Fleetglade). However, applying the rule in PC Harrington in a broad sense, the failure to deliver a decision would include delivering a decision out of time. That said, there would be little sympathy of a Court finding that Cubitt remains binding authority.

Resignation Fee (In Any Event) – Should the adjudicator wish to abandon the adjudication from anything between personal reasons to mere profligacy then a term to this effect would entitle payment to flow. Predicated on this being an enforceable term, the author opines it would be most unjust.

Bad Faith – The Act S108(4) states the adjudicator is not liable for anything done unless that act is done in bad faith and as confirmed in Stubbs Rich v WH Tolley [2001] that includes entitlement to fee. As such this clause would be a nullity in a statutory adjudication and unlikely to meet the threshold imposed by the Unfair Contract Terms Act 1977 in non-statutory adjudication. In any event, this might be categorised as morally reprehensible.

Conclusion

Ramsey J in Linnett v Halliwells LLP [2009] summarised the two principles governing the contract between the adjudicator and the parties. Firstly, should a party accept the terms then they will be binding. Secondly, should a party refuse to accept the terms then there will be implied terms that the party would be jointly and severally liable to pay reasonable fees and expenses. That leaves the other scenario whereby the parties remain silent and take part in the adjudication. In such circumstances, the most likely outcome will be a finding that a contract was formed by conduct under the adjudicator’s terms.

Often the parties will attempt to negotiate acceptable terms with the adjudicator. Due to the likely gulf between the adjudicator’s terms and an implied contract, it would be better for the adjudicator to make concessions. For example, where there is a stalemate, an adjudicator might forego her fee following a valid resignation due to a jurisdictional issue. Note. The adjudicator should be mindful of the RICS guidance note which states that the fact a party refuses to accept terms is not a valid reason to resign.

Ultimately, there is a delicate balancing act to ensure the terms are acceptable. In some sense, adjudicators are tasked with the delivery of justice and the terms should follow in that vein. Imposing draconian terms is not in that vein and threatens the legitimacy of adjudication. In reality, it is not unknown for adjudicators to tax their fee in respect of ‘time properly spent’.­­­