Fenice Investments Inc v Erram Falkus Construction Ltd

An adjudicator’s determination that one party should pay his fees does not itself establish the amount recoverable. Under paragraph 25 of the Scheme for Construction Contracts (England and Wales) Regulations 1998, the fees must be reasonable and may be assessed by the court. The adjudicator bears the overall burden of proving reasonableness, although the paying party must raise a proper prima facie challenge once sufficient information has been provided. Assessment should be robust, allowing a considerable margin of appreciation because adjudication is conducted urgently and satellite litigation is undesirable. Hourly rates should be assessed in the context of the adjudicator appointed and may be left undisturbed if within an overall band of reasonableness. The bad-faith immunity provision does not restrict challenges based on unreasonableness.

Fenice employed Jerram Falkus Construction Ltd to construct five residential properties. Following an adjudication concerning extensions of time, the adjudicator decided that Jerram Falkus was liable for his fees of £19,775 plus VAT. Jerram Falkus paid only £5,000 plus VAT, disputing the balance.

Fenice paid the balance and related legal costs and sought recovery from Jerram Falkus. It applied for summary judgment, arguing that the adjudicator’s fee determination was enforceable without further assessment, or that fees could be challenged only for bad faith. The central issues were the contractual effect of the adjudicator’s determination, the correct approach to assessing reasonableness, and the sums recoverable by Fenice.

1. Summary judgment. Fenice obtained judgment for £20,360 inclusive of VAT. The remaining claims for £6,480.50 were left for final determination after further written evidence and argument. Interest and costs were subsequently awarded, producing a total judgment figure of £20,600.
2. The adjudicator’s decision as to which party should bear his fees determines the parties’ allocation of liability, but does not convert the fees into a provisional substantive award governed by paragraph 23(2) of the Scheme for Construction Contracts (England and Wales) Regulations 1998. Paragraph 25 requires the fees to be reasonable. The adjudicator’s entitlement is contractual, and Linnett v Halliwells LLP [2009] EWHC 319 correctly explained the separate contractual relationships between the parties and the adjudicator.
3. The argument that fees could be challenged only for bad faith failed. Paragraph 26 of the Scheme protects the adjudicator from liability for acts or omissions absent bad faith; it does not immunise an unreasonable fee claim. The statutory arbitration provisions concerning reasonable fees and immunity supported that distinction.
4. The adjudicator bears the overall burden of proving reasonableness. Once the fee structure and work undertaken are sufficiently explained, the paying party must raise at least a prima facie case of unreasonableness. The court should adopt a robust approach and allow a considerable margin of appreciation. Relevant considerations include the urgency and changing scope of adjudication, the adjudicator’s seniority and experience, the rate proposed or agreed, the adjudicator actually appointed, the work reasonably required, and matters necessarily connected with the dispute.
5. Jerram Falkus had no real prospect of showing that the £350 hourly rate or 56.5 hours were unreasonable. Fenice therefore recovered the adjudicator’s fees. Its recovery of the solicitors’ fees incurred in dealing with the adjudicator’s claim was limited to £1,500, and its own legal costs were also limited to £1,500 because it should have paid and dealt with the claim more promptly.