PC Harrington vs Systech: Wrong call

This new Court of Appeal case is exciting. In my opinion it ought to be debated. In my opinion the debate should say: “This house believes that in PC Harrington vs Systech International the judges have got it wrong”. I ought to be invited to support the motion. In my opinion the principles enunciated about the adjudicator’s contract and the analysis of the Scheme for Construction Contracts is adrift. In my opinion I am a “tart” because I can argue the other way. That’s my opinion.

What’s up? This high-level court says of the adjudicator’s promise in his contract: “The bargained-for performance is to provide an enforceable decision.” And he didn’t, so he can’t have his fee. In my opinion that’s wrong. Instead the bargained-for performance from the adjudicator is to provide his/her opinion. And that’s my opinion.

What else is up? The adjudicator is said to have breached the rules of natural justice. In my opinion, he didn’t - he got the law wrong. And if he did get the law wrong, tough. If he did breach the rules of natural justice it was a procedural error, which in my opinion makes no odds. In any event, what do you expect when belting along at a million miles an hour? In my opinion, you expect mistakes and that’s what is bargained for.

What do you expect when belting along at a million miles an hour? In my opinion, you expect mistakes and that’s what is bargained for

So what’s the story? A labour-only ground-worker called Tyroddy did a load of work for PC Harrington Contractors. Five years later, Tyroddy whinged for his retention fund, and was ignored of course. So Tyroddy called for an adjudicator. Philip Doherty of Systech was appointed. Harrington’s defence was to say that the final account had to be sorted out before retention could be released.

The adjudicator said no to that. He decided the retention should have been released years before and that any dispute as to the final account was yet to crystallise, since all had been quiet for five years. And therefore the final account was out with this retention issue and inadmissible. He ordered the retention be paid.

Harrington didn’t pay. The High Court would not enforce, saying Doherty had acted unfairly, by not getting down to the final account. By now Tyroddy had gone out of business. And the adjudicator’s fee note from Systech had not been paid. So Systech sued Harrington. Mr Justice Akenhead ordered Harrington to pay up. The adjudicator’s contract with the parties, he said, was more than to produce an award, it was to carry out all the steps prior to making the decision. That was his opinion.

Harrington took that opinion to the Court of Appeal. Those three judges had the opposite opinion. They say an adjudicator’s ordinary promise is to “produce an enforceable decision”. So no fee is payable. I told you it was exciting, didn’t I?

Nothing in the act or the ‘Scheme’ says anything about ‘resolving’ the dispute. That word was removed by Parliament

Bear in mind that we are talking here about the adjudicator’s contract with the parties. In short, what does he get paid for? It’s simply a question of the true nature of the adjudicator’s contract. His promise, in this case, was to reach his opinions by using the well-known “Scheme” for adjudicating construction contracts, plus whatever of his own terms were accepted at the point of appointment. All he said in his terms was his rate per hour.

Now then, the “Scheme” tells us what fee is payable in the event that the adjudicator does not reach a decision or his appointment is revoked. There is nothing anywhere that says no fee is payable when he does reach a decision but the decision is unenforceable. So the head judge in the Technology and Construction Court said the fee is payable for all the build-up work to the decision. The Court of Appeal said that’s wrong. Its reason is that the idea of adjudication is to produce a decision “which for the time being would resolve the dispute”.

Nothing in the act or the “Scheme” says anything about “resolving” the dispute. That word was removed by parliament. This is not a dispute resolution system. The system is, say the courts time and again, rough and ready and likely to result in injustice. You can’t have the grinding detail of litigation or arbitration. The system is highly likely to witness mistakes by the adjudicator. He/she has made no promise that the courts can enforce his/her mere opinions. And that’s my opinion.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple