Linnett to the rescue: Linnett vs Halliwell

Like a saloon owner in a western, looking at the wrecked bar after a shoot-out, an adjudicator who carries on despite a challenge to their jurisdiction has a question to answer. Who’s going to pay for all this?

Traditionally, an adjudicator has been a spectator as parties battled to convince the courts that they have, or have not, had a valid adjudication. Until, that is, fate stepped in and struck a blow for adjudicators everywhere in the case of Christopher Linnett vs Halliwells.

Mr Linnett was the adjudicator appointed by a nominating body to decide a dispute between Halliwells, the employer, and ISG, the contractor. Linnett sent a copy of his terms of engagement to both parties, but only received a response from ISG.

During the course of the adjudication, Halliwells, the responding party, raised two jurisdictional challenges and invited Linnett to resign. He considered the challenges, decided that they were without merit and declined to resign. Halliwells continued to take part in the adjudication, making a number of submissions for Linnett to consider.

Linnett found in favour of ISG and ordered payment of his fees by Halliwells, but Halliwells refused to pay, claiming that he did not have jurisdiction and it was not therefore liable to pay him. As ISG was jointly and severally liable for Linnett’s fees, Halliwells said Linnett should ask ISG to pay.

Linnett had other ideas. He issued a claim against Halliwells, seeking payment of his fees. When Halliwells entered a defence disputing payment, the matter was transferred to the Technology and Construction Court, which was happy to hear it because of the technical nature of adjudications and because the issues raised were of general interest.

Mr Justice Ramsey decided that there was no contract between Halliwells and Linnett based on Linnett’s terms of engagement because Halliwells had never agreed to them. Its silence after it received the terms could not be relied on to establish that the terms were accepted and a contract had been formed. In a Victorian case called Felthouse vs Bindley, a party made an offer to buy a horse, saying: “If I hear no more about him, I consider the horse mine.”

But the silence of the seller was not judged to create an acceptance then and the silence did not work now to create a contract on Mr Linnett’s terms.

Linnett’s fellow adjudicators may now want to take him out to lunch

What Halliwells had done, however, as well as requesting Linnett to make a non-binding decision as to jurisdiction, was to invite him, if he found he had jurisdiction, to proceed with the adjudication. The request from Halliwells to proceed, and the fact that Linnett did proceed with the adjudication, did produce a contract between them.

Even if a party decides to take a jurisdictional challenge in an adjudication, that party will still be liable to pay the adjudicator’s reasonable fees and expenses because they participated in the adjudication after making a challenge. This is irrespective of any reservation they make as to jurisdiction.

Note the reference to “reasonable” fees. In these circumstances an adjudicator is entitled to payment of his reasonable fees. This is what Mr Justice Ramsey said about it: “In my view if one party agreed fees and the other party was liable for a reasonable fee then generally joint and several liability would apply

only to the reasonable fee which could, in principle, be lower or higher than the agreed fee. However, in practice the agreed fee is likely to be the same as, or accepted to be, a reasonable fee.”

So what is the position on liability for adjudicator’s fees if a party wishes to make a jurisdictional challenge? It has a choice: it can raise its jurisdictional challenge and withdraw from the adjudication. It will not then have to bear any liability for the adjudicator’s fees; or it can raise its jurisdictional challenge and, if the adjudicator refuses to resign, continue to participate in that adjudication without prejudice to its right to challenge the decision at any enforcement proceedings. But in this case it will be liable for the reasonable fees of the adjudicator.

Linnett’s fellow adjudicators may now want to take him out to lunch because, unless there’s an appeal, from now on, as the saying might run, there’s no such thing as a free adjudicator.