Systech International Ltd v PC Harrington Contractors Ltd

An adjudicator’s decision may be unenforceable for a serious breach of natural justice without there being a total failure of consideration under the adjudicator’s contract. The relevant performance is ordinarily the provision of the adjudicator’s role as a whole, including procedural work, consideration of the parties’ cases and evidence, and the decision-making function. Partial performance prevents a total failure of consideration. An adjudicator acting honestly may therefore remain entitled to fees despite an unenforceable decision. The notice of adjudication defines the outer ambit of the dispute, but the adjudicator must address relevant defences raised within that dispute.

Systech claimed payment from Harrington for fees incurred by an adjudicator in three adjudications concerning retention monies under construction subcontracts. The adjudicator accepted the appointment terms and undertook substantial work, but his decisions were later held unenforceable because he failed to address Harrington’s case that it had overpaid and because he wrongly treated final-account issues as outside his jurisdiction.

Harrington argued that the unenforceable decisions constituted a total failure of consideration, that the adjudicator had failed to issue decisions under the statutory scheme, and that the earlier enforcement judgment was binding in rem against Systech. The central issue was whether the adjudicator’s honest but procedurally defective performance entitled him to fees.

1. The claim succeeded. Judgment was entered for the adjudicator in the agreed sum of £22,000 plus VAT for the three adjudications.
2. The doctrine of total failure of consideration is concerned with the performance bargained for. The court must construe the contract to identify that performance. Where the contract requires several services, failure must be total; partial performance prevents recovery on the basis of total failure.
3. The adjudicator was engaged to perform the role of adjudicator, not merely to produce an enforceable decision. That role included dealing with jurisdictional objections, reviewing the referral and responses, considering evidence and submissions, managing procedure, and deciding the dispute. The appointment terms, including payment for all time incurred and provision for interim fees, supported that construction.
4. The adjudicator had acted in significant breach of natural justice by declining to address the overpayment and final-account defences. The notice defined the outer ambit of the dispute, but it did not prevent the adjudicator from considering relevant defences raised in response. The adjudicator was required to rule on those defences, even if they were advanced for the first time in the adjudication.
5. Those breaches did not amount to a total failure of consideration. The adjudicator had honestly and substantially performed the contractual role by undertaking extensive procedural and evidential work. The fact that the resulting decisions were unenforceable did not make the performance a nullity for the purposes of the fee contract.
6. No implied contractual term requiring compliance with natural justice was necessary. The legal consequences of a sufficiently serious breach were already established, and implying such a term would conflict with the adjudicator’s statutory protection under section 107(4) of the Housing Grants, Construction and Regeneration Act 1996. The court also doubted that the earlier enforcement judgment was a judgment in rem binding on Systech, which had not been a party.

The judgment records an earlier TCC enforcement decision concerning the same adjudications, in which the decisions were held unenforceable for breaches of natural justice. The present proceedings were separate consolidated fee claims by Systech against Harrington.