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

An adjudicator who identifies a real jurisdictional issue which may prevent determination of the referral may investigate and raise it, even where neither party has articulated the point. Under paragraph 13 of the Scheme for Construction Contracts (England and Wales) Regulations 1998, that issue may be necessary to determine the dispute.

An adjudicator who resigns for that reason is entitled to fees if the terms of appointment provide for payment where no decision is delivered, unless the adjudicator acted in bad faith. Bad faith is more serious than mere default or misconduct and normally involves dishonesty, unconscionability, or deliberately unacceptable conduct. A fee term governing payment after resignation does not alter the adjudicator’s contractual performance for section 3 of the Unfair Contract Terms Act 1977.

SWS referred a construction payment dispute against Bhavishya Investment Ltd (BIL) to adjudication. The proposed unsigned contract identified SWS and Vaishali Patel, rather than BIL, as the parties. The adjudicator queried the contractual basis of the referral and, after receiving no unequivocal acceptance by BIL of an ad hoc jurisdiction, resigned. He claimed £4,290 plus VAT under his terms of appointment.

The Technology and Construction Court held that the adjudicator’s reasoning for resignation was erroneous, but that he had acted honestly and diligently, was entitled to his fees, and was not defeated by UCTA: [2021] EWHC 1337 (TCC). SWS appealed. The adjudicator cross-appealed on the finding that he had acted outside paragraph 13 of the Scheme.

1. SWS’s appeal was dismissed and the adjudicator’s cross-appeal was allowed. The judge’s order awarding the adjudicator his fees was upheld. The Court of Appeal held that the judge had been wrong to find that the adjudicator acted outside paragraph 13 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 or that his reasons for resignation were erroneous.

2. There was a real jurisdictional issue. The best evidence indicated that the construction contract was between SWS and Ms Patel, not BIL. BIL had not made an unequivocal agreement to accept an ad hoc adjudication or to be bound by the decision. The adjudicator was not required to assess possible future arguments about waiver or enforcement.

3. Paragraph 13 empowered the adjudicator to investigate matters necessary to determine the dispute. That included determining whether he had jurisdiction to decide it at all. An adjudicator who identifies a potentially fatal jurisdictional problem should raise it with the parties, rather than proceed in silence and leave the issue to enforcement. The adjudicator had reasonable cause to resign, although a final warning before resignation would have been good practice.

4. The appointment terms entitled the adjudicator to payment for work done where no decision was delivered, unless he had acted in bad faith. The cessation provision confirmed that fees were payable if the adjudication ended before a decision for any reason. On resignation, the low-value procedure ceased to apply and the contractual hourly rate of £325 applied.

5. Bad faith required conduct more serious than inadvertent default or misconduct. The adjudicator had acted diligently and honestly in addressing the jurisdictional problem. His omission of a final warning was not unconscionable or deliberately unacceptable conduct. Section 3 of the Unfair Contract Terms Act 1977 did not apply because the fee clause regulated remuneration after resignation, not his contractual performance; in any event, the term was reasonable.

6. There was no basis to interfere with the judge’s discretionary summary assessment of costs.

• Court of Appeal (Civil Division): By [2022] EWCA Civ 153 , dismissed SWS’s appeal, allowed the adjudicator’s cross-appeal on the paragraph 13 issue, and upheld the order for his fees.
• Technology and Construction Court: By [2021] EWHC 1337 (TCC) , held that the adjudicator was entitled to fees under his appointment terms, had not acted in bad faith, and was not defeated by the Unfair Contract Terms Act 1977.