Prentice Island Ltd v Castle Contracting Ltd [2003] A550/01

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An adjudicator's entitlement to his fee under the Scheme for Construction Contracts is not dependant on the validity or otherwise of his decision.  So long as an adjudicator is validly appointed and remains in post in good faith, he will be entitled to his fee even if it subsequently turns out, on examination by the Court, that he should have resigned.

Sheriff Court, Scotland – Sheriff Principal Dunlop QC

15 December 2003

A dispute regarding the final account between Prentice and Castle was taken to adjudication under the (Scottish) Scheme for Construction Contracts.  Castle maintained, both during the adjudication and in the subsequent Court proceedings, that the dispute was the same or substantially the same as a dispute which had previously been taken to an earlier adjudication and that the adjudicator should therefore have resigned (as required under paragraph 9(2) of the Scheme) and therefore that the adjudicator had no jurisdiction.  The adjudicator decided the dispute was not the same or substantially the same as in the earlier adjudication and proceeded to determine the dispute referred to him.

Among other things, the adjudicator found Castle liable to pay Prentice one half of his fee in respect of the adjudication.  In fact, Prentice paid the adjudicator's fee in full and sought recovery from Castle of its one half share.  Castle failed to comply with the adjudicator's decision or to reimburse Prentice for the half share of the adjudicator's fee.  Prentice raised an action to enforce the decision and to obtain relief from Castle for a half share of the fee.

Castle's position was that the adjudicator lacked jurisdiction to make a decision in the adjudication because he should have resigned under paragraph 9(2) of the Scheme.  Castle argued, under reference to Ballast plc v Burrell Adjudication Watch 17 December 2002, Baldwins Industrial Services plc v Barr Limited Adjudication Watch 6 December 2002, Carillion Construction Limited v Davenport Royal Dockyard Limited Adjudication Watch 27 November 2002) and Deko Scotland Limited v Edinburgh Royal Joint Adventure Adjudication Watch 11 April 2003 that such lack of jurisdiction meant the adjudicator's decision was a fundamental nullity.  Where there was no valid decision, the adjudicator was not entitled to a fee under the Scheme.  Consequently, Prentice was not entitled to be reimbursed by Castle as the parties had no liability to the adjudicator for payment of his fee in the first place.

Prentice argued that under the terms of the Scheme, regardless of whether or not the adjudicator's decision was valid, he was entitled to his fee.

The Sheriff Principal (upholding the decision of the Sheriff at first instance) found in favour of Prentice.  If an adjudicator, in good faith, makes an error as to whether or not he should resign in such circumstances he nevertheless remains in post as a validly appointed adjudicator.  There is a distinction between the process upon which the adjudicator is engaged and the product of that process, namely the decision.  So long as the adjudicator has in good faith remained in post, the Scheme gives him a right to be remunerated for his work.  In these circumstances the adjudicator is entitled to his fee even if his decision ultimately turns out to be invalid: it would be intolerable if an adjudicator were to be deprived of his fee because his decision on whether to continue with the adjudication or to resign turned out, on examination by the Court, to be mistaken.  If the party objecting to the adjudication continuing had a fundamental objection to it they could always apply to the Court for judicial review of the adjudicator's decision not to resign.  Nothing in the Scheme suggests that the adjudicator's entitlement to his fee is conditional on the validity of his decision in the adjudication.

This summary was provided by CMS Cameron McKenna LLP.

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