P C Harrington Contractors Ltd v Systech International Limited [2012] EWCA Civ 1371

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes


Where, in an adjudication governed by the Scheme for Construction Contracts (England and Wales) Regulations 1998, an adjudicator’s decision is held to be unenforceable because he has failed to follow the rules of natural justice, the adjudicator will not, subject to any provisions in his contract of engagement which expressly provide to the contrary, be entitled to payment of his fees.

Court of Appeal, the Master of the Rolls, Lord Justice Davis and Lord Justice Treacy


PC Harrington Contractors Limited (“PCH”) was a contractor employed to carry out works at three projects, namely Wembley Stadium, King’s Waterfront, Liverpool and Kingsfield Hospital, Mansfield. It engaged Tyroddy Construction Limited (“Tyroddy”) as subcontractor in relation to each of the projects.  Disputes arose between PCH and Tyroddy as to whether Tyroddy was entitled to the release of retention monies held by PCH under each subcontract.  These disputes were referred to adjudication and the same adjudicator (who was employed by Systech International Limited (“Systech”)) was appointed in each adjudication. The subcontracts between PCH and Tyroddy, and the adjudications were all governed by the relevant parts of the Housing Grants, Construction and Regeneration Act 1996 (the “Act”), and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme”) in their original form, i.e. prior to the recent amendments made by the Local democracy, Economic Development and Construction Act 2009.

In the Wembley adjudication, on 21 January 2011, PCH’s claims consultants wrote to the Adjudicator saying that he had no jurisdiction.  Their argument was that the parties had agreed that payment of retention monies should be put on hold until the question of the alleged overpayment of £300,000 on another project was resolved.  On 27 January, the Adjudicator notified the parties that, having reviewed this jurisdiction issue, he had decided that he had been properly appointed and would continue with the adjudication. 

PCH reserved its position on the jurisdiction issue and addressed the merits of Tyroddy’s claim in the adjudication.  Its principal defence was that no sum was due to Tyroddy because it had been overpaid by about £225,000 on the Wembley project.  On 21 February 2011, the Adjudicator issued his decision in the Wembley adjudication in which he held that the retention monies were due to Tyroddy.  Together with his decision, the Adjudicator issued an invoice for his fees in the total sum of £18,144, which comprised £15,120 (72 hours at £210 per hour) plus VAT.  The invoice was addressed to PCH because in his decision he ordered PCH to pay his fees.  A materially identical series of events occurred in the King’s Waterfront and Kingsfield Hospital adjudications.  The Adjudicator claimed further fees of £7,686 and £10,216 inclusive of VAT for these two adjudications.  In all three adjudications, the Adjudicator decided to deal with the defence that no retention monies were due because PCH had already overpaid.   

In view of this failure to deal with its principal defence, PCH issued Part 8 court proceedings in March 2011 seeking a declaration that the three decisions were not enforceable by reason of a breach of the rules of natural justice.  This claim was heard by Akenhead J who gave judgment in favour of PCH on 25 March 2011: (http://www.law-now.com/law-now/2011/PCHarringtonDec11.htm). He held that the Adjudicator had “unwittingly [fallen] below the standards which are required to enable the decision or decisions to be enforced” on the grounds that by ruling wrongly that issues relating to the final account were outside his jurisdiction, he had put himself in the position that he could not and would not deal with a defence.  Moreover, he had reached this decision without giving the parties the opportunity to be heard on the point.  He concluded, therefore, that the Adjudicator’s decisions were not enforceable.

PCH declined to pay the Adjudicator’s fees and Systech brought proceedings to recover them.

Akenhead J found that, notwithstanding the finding of unenforceability, the Adjudicator was entitled to his fees. He was so entitled because the bargained-for performance of the Adjudicator was not just the making of a decision, but also all of the steps that had to be taken beforehand.

PCH appealed this finding to the Court of Appeal.


The Court was asked to address:

  • Whether the Adjudicator could recover his fees where his decision has been held to be unenforceable for failure to comply with the rules of natural justice.


The Court held that:

  • The question in this case was whether the contract between the parties to the adjudication and the Adjudicator was (a) an entire contract, such that the bargained-for performance was an enforceable decision and the Adjudicator was not entitled to payment of his fees if he did not produce such a decision, or (b) a divisible contract for the performance of a series of ancillary functions culminating in the making of a decision, such that the Adjudicator would be entitled to payment for the performance of those functions whether the decision was enforceable or not. This was a question of construction of the contract.
  • The terms of the Adjudicator’s engagement had to be read together with the terms of the Scheme. The Scheme contained important provisions which dealt with the question of remuneration in the event that the adjudicator did not reach a decision in various circumstances. The Scheme provided that, in such a case, an adjudicator was only entitled to fees and expenses in limited circumstances. This showed that the adjudicator’s entitlement to be paid did not accrue as and when services were provided but only when his engagement had been completely performed. The terms of the Adjudicator’s terms of engagement in this case were not inconsistent with this.
  • The bargained-for performance in this case was an enforceable decision. The purpose of the appointment was to produce an enforceable decision which, for the time being, would resolve the dispute. A decision which was unenforceable was of no value to the parties. They would have to start again on a fresh adjudication in order to achieve the enforceable decision which the Adjudicator had contracted to produce.
  • If this decision gave rise to concerns on the part of adjudicators then the solution was in the market-place: to incorporate into their terms of engagement (if the parties to the adjudication are prepared to agree) a provision covering payment of their fees and expenses in the event of a decision not being delivered or proving to be unenforceable.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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