Davies & Davies Associates Ltd v Steve Ward Services (UK) Ltd

An adjudicator may investigate facts and law necessary to determine the dispute, but that power is not a roving commission to identify and decide a fundamental issue which neither party has referred or adopted. An adjudicator who honestly and diligently resigns under paragraph 9(1) of the Scheme is not thereby acting in bad faith.

Where the adjudicator’s agreed terms provide for payment if no decision is delivered, that provision may entitle the adjudicator to fees for work done, subject to any exclusion for bad faith. A clause dealing with the timing of an invoice does not independently enlarge the substantive entitlement. Such terms may satisfy the reasonableness requirement in section 3 of the Unfair Contract Terms Act 1977.

The Claimant sought summary judgment for £4,290 plus VAT in respect of fees charged by Mr Nigel Davies for acting as adjudicator in a dispute referred by the Defendant against Bhavishya Investment Ltd. The proposed construction contract identified Ms Vaishali Patel, rather than Bhavishya Investment Ltd, as the client, although invoices had been issued to and paid by Bhavishya.

During the second adjudication, the adjudicator investigated the identity of the contracting party and resigned after concluding that he lacked jurisdiction. The Defendant disputed liability for the fees, alleging abandonment, repudiatory breach and reliance on standard terms contrary to section 3(2)(b) of the Unfair Contract Terms Act 1977. The issues concerned jurisdiction, construction of the adjudicator’s terms, statutory reasonableness and the amount of time charged.

1. Judgment for the Claimant. The adjudicator was not entitled to resign on the basis that he had discovered a jurisdictional issue which the parties had not referred to him. The proposed contract at least entitled him to conclude that Ms Patel, rather than Bhavishya, was the contracting party, but the parties had not raised a dispute about that issue or his jurisdiction.

2. Paragraph 13 of the Scheme permits an adjudicator to take the initiative in ascertaining facts and law necessary to determine the dispute. It does not authorise the adjudicator to formulate and determine a new fundamental issue which neither party raises or adopts. The adjudicator’s route was therefore outside paragraph 13, although his resignation was not an abandonment of his appointment or a deliberate refusal to provide a decision.

3. The effect of the agreed terms depended on their true construction. The clause providing for an invoice whenever the adjudication ceased concerned the timing of charging and payment. It did not create an entitlement where fees were excluded under the principal fee clause.

4. The principal fee clause entitled the adjudicator to payment for work done where no decision was delivered, unless the adjudicator had acted in bad faith. A diligent and honest decision to exercise the right to resign under paragraph 9(1) of the Scheme was not bad faith. The parties’ appointment ended by resignation, so there was no later revocation of the appointment.

5. The court expressed doubt that the fee clause was within section 3 of UCTA because it concerned payment rather than the contractual performance expected of the adjudicator. If section 3 applied, the clause satisfied reasonableness: it was drafted in light of PC Harrington Contractors Ltd v Systech International Ltd, there was no inequality of bargaining power, and the Defendant accepted the terms twice while represented by experienced adjudication solicitors.

6. The amount claimed was not excessive. Judgment was entered for the Claimant as sought.