What are reasonable fees for an Adjudicator?

A query that parties often ask is, what are reasonable fees for an Adjudicator? This matter was addressed (again) in a recent case in the Technology and Construction Court in London (Fenice v Jerram Falkus).

In that case, which related to an earlier adjudication, it was noted that the Adjudicator had charged an hourly rate of £350.00 (+VAT) per hour. In the court proceedings, the Defendant took the view that the Adjudicator’s fees were excessive.

However, the court found that, provided that the hourly rate claimed by an adjudicator was not clearly outside an overall band of reasonableness, there would be no basis to interfere with the fee rate charged, even if it could be shown that a different adjudicator, might have charged less or even significantly less. The judge examined the fees charged by the Adjudicator in question and found them to be reasonable, and also found that there was no serious basis for challenging the hours that the Adjudicator had spent on his decision.

As far as fees were concerned, a party may make an express agreement regarding an Adjudicator’s fees, however, in the absence of such an express agreement, a party will nevertheless be taken to have made an agreement by conduct with the Adjudicator if he participates in the adjudication that he will pay the Adjudicator's reasonable fees. In an earlier court case, Linnett v Halliwells, Judge Ramsey had observed that in practice the agreed fee of an Adjudicator was likely to be the same as, or accepted to be, a reasonable fee.

Therefore, we must all now face the prospect that Adjudicator’s fees in the band up to £350.00 per hour + VAT (and above) are likely to be considered by the courts as being reasonable.

Therefore, you need to ensure that you prepare properly for an adjudication, whether you are pursuing or defending the action, so that it is the other party that is required by the Adjudicator to pay his fees.

If you wish to discuss how this matter may affect you, please contact our office.

Does the prevention principle solve all problems?.

The prevention principle is a good card for a Contractor to play, but it is not a ‘get out of jail’ card.

In a recent (non-Construction) case (Adyard Abu Dhabi v SDS Marine Services) SDS rescinded its contract with Adyard and Adyard then commenced proceedings, arguing that SDS could not rescind, as SDS had caused delays to the project. In its action, Adyard cited the prevention principle. The prevention principle in this case was stated as being that SDS could not rely on the consequences of its own default (i.e. causing delays to the project), when rescinding the contract.

As part of the process of deciding the matter, the court looked at whether Adyard had proved that SDS had caused a delay to the project.

Adyard’s case was that causation was established by showing that the duration of the act of prevention extended over the original contract completion date regardless of:
• what other events may have been delaying the works; and
• whether the variation would have any impact on the actual progress of the works.

In other words, Adyard argued that the court should only look at the event or act in question to see how it related to the contractual completion date. A theoretical delay would suffice, rather than only an actual delay.

The court rejected Adyard’s submissions as a matter of principle, authority and common sense. In the court’s view, Adyard had to show that the act relied on must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some actual delay.

The court’s analysis indicated that, if there were two concurrent causes of delay, one which was the contractor's responsibility, and one which was said to trigger the prevention principle, the principle would not in fact be triggered if the contractor could not show that the employer's conduct made it impossible for him to complete within the stipulated time. The existence of a delay for which the contractor is responsible, covering the same period of delay which was caused by an act of prevention, would mean that the employer had not prevented actual completion. Throughout its analysis, the court stressed the importance of the contractor proving delay to the actual progress of the work as a result of the alleged act of prevention.

The Adyard case referred to above illustrates the importance of a party proving that an act of prevention caused or will cause actual delay to the progress of the works; and the courts have made it clear that they will focus on fact, not theory. This therefore must be clearly kept in mind when preparing an extension of time claim.

If you have an issue that you wish to discuss regarding the prevention principle and/or concurrent delay, please contact our office.

Conclusivity can be bad for your wealth.

Conclusivity is a major issue in many standard form contracts, and it can cost you dear if you overlook the significance of conclusivity.

We all know (or should know) that a standard term of many of the JCT contracts is that the Final Certificate or Final Statement issued under the contract, becomes conclusive evidence, as to (amongst other things) the balance due between the parties, and the extension of time and the loss and expense entitlement of the Contractor; except in respect of those matters that are referred to adjudication, arbitration or litigation, within 28 days of the issue of the Final Certificate or Final Statement.

However, what is often overlooked, and which was considered in a recent case in the Technology and Construction Court in London (Fenice v Jerram Falkus), is that in the situation where an Adjudicator gives his Decision on a date which is after the date of issue of the Final Certificate or Final Statement, the parties only have 28 days from the date of that Decision to commence arbitration or legal proceedings regarding the dispute referred to adjudication. If they do not do this, the Decision of the Adjudicator also becomes conclusive between the parties in much the same way as the Final Certificate or Final Statement would normally be.

For clarity, conclusivity in this context means that the matter cannot be further considered in the future, and therefore, and unless a party is happy with the information contained in the document that creates conclusivity (whether that be the Final Certificate, or the Final Statement, or, in certain circumstances, an Adjudicator’s Decision) then it needs to act without delay upon receipt of the document in question, otherwise it could find itself badly out of pocket.

Therefore the moral of this story is, if (particularly, but not necessarily solely under a JCT contract) you receive a Final Certificate or a Final Statement, or you receive an Adjudicator’s Decision issued after the date of the Final Certificate or Final Statement, you immediately need to consider the implications of the document in question and, if it is necessary based on your considerations, you need to act very quickly.

If you have any queries about the significance of any such documents that you have received or do receive in the future, you should immediately contact our office.

The new ‘Construction Act’ comes into force on 1 October 2011

The new ‘Construction Act’ (The Local Democracy, Economic Development and Construction Act 2009) comes into force in England on 1 October 2011. No one working for a client, a main contractor or a subcontractor can ignore the new Construction Act or the new Scheme. Their effects will ripple through standard form contracts, payment notices and procedures, and adjudication. Ad-hoc / in-house subcontract forms will need to be amended otherwise they will be non-compliant and will be ineffective.

In respect of adjudication, the main issues relate to the removal of the requirement for a contract to be in writing before adjudication provisions can apply, the introduction of a statutory slip rule for adjudicators, and attempts to restrict the imposition of an agreement as to which party pays for the cost of adjudication.

In respect of payments the amendments will prohibit ‘pay when certified’ provisions, includes entirely new concepts of Payer Notices, Payee Notices, and Pay Less Notices; and permits a contractor or subcontractor from part suspension of its services, rather than suspending its services entirely.

The new Construction Act will have a major impact upon the UK construction industry, and you need to ensure that your contracts and subcontracts are amended to suit the commencement date of the new ‘Construction Act’. If you do not attend to this, you could face the situation where a Payee could issue a Payment Notice, and the amount on that Payment Notice would be the amount due. That could be a good thing or a bad thing depending if you are the Payee or the Payer. In either case you will face consequences that you may not be prepared for.

Many of our clients are asking us to upgrade and/or amend their contracts and subcontracts now in anticipation of the application of the new ‘Construction Act’; and you really need to consider doing the same so that you are not ‘left behind’ and left unprepared for the major changes coming our way.

If, as a result of the above, you feel that your contracts or subcontracts need to be upgraded or amended, you need to contact us (i.e. Melbury Construction Consultants Ltd) as we offer a Contract and Subcontract drafting service for many of our clients.

Given the importance of the new Construction Act we will be holding two breakfast seminars on this subject on 28 September 2011 and 29 September 2011. Further details of these seminars will be sent out nearer the time in the normal way, if, however, you wish to provisionally book a place at these seminars now, please contact our course administrator, Debs Idris, on courseadmin@melburyconsulting.com or on debs.idris@melburyconsulting.com