Yes, folks, it’s the fab follies

“This is one of those rare cases where the judge erred in enforcing the adjudicator’s decision.” Ears pricked up at that. That’s what the Court of Appeal said recently in Lead Technical Services vs CMS Medical.

The adjudicator awarded £83,541 in fees to be paid by the client for the consulting engineer’s services. The client refused. So the engineer asked a court in Leeds to enforce. And the judge did.

Unusually, the client still would not pay. It said the judge ought not to have enforced. Mind you, it had earlier said that the adjudicator ought not to have adjudicated. Before that it had said to Lead Technical Services there was no right to adjudication.

Credit: Simone Lia

“There is no agreement in writing” … “There is nothing there” … “Because the contract is bare”

The Court of Appeal also had a problem with its own procedures. Both the adjudicator and the judge moved quickly to give their decisions, but the Court of Appeal took more than a year from the award to decide to boot it out. Too long.

So how come the judge was wrong to enforce? Here is the story. Lead Technical Services is the consulting engineer for a warehouse, offices and separate block of starter units. As is becoming not so unusual, the contractor and the client had a difference of opinion about professional fees. Instead of falling out, they went to adjudication. Also not unusual was an early dogfight called the judicial challenge. I confess that I enjoy these exciting intervals. The idea is that the respondent gets in a mild strop about there being no right to adjudicate. Over the years I have seen some right daft attempts to derail the wagon. Snag with that is the tendency to groan, “Here we go again”, and treat a good challenge with a wrinkled nose. So I have to de-wrinkle these days. Some of the challengers have got good. By the way, I will tell you what test I use for the challenge later.

The client told the adjudicator that the professional services agreement with the consulting engineer was signed in November 2002. But the agreement was replaced nine months later by a deed of appointment. The adjudication rules in the deed were not the same as in the original agreement. That meant, said the client, that the adjudicator had been appointed by the wrong body. If that was correct, the adjudicator had to resign. It is one of those loony rules that ought to be buried.

The client’s next objection to adjudicating is an old favourite. It arrives with trumpets blowing and showgirls dancing: “There is no agreement in writing.” What? Yes; we have a “deed of appointment” heaving with rules but, oh dear, oh dear, there was an oral agreement in which, it is alleged, the fees would be capped at £20,000.

Well, says the Court of Appeal, if that is so, we haven’t got the right to adjudicate because the Construction Act requires contracts to be in writing. Yes, I know there is one but the torpedo is the disputed oral agreement on fees. When, oh when, is the DTI or parliament, going to stop this money-wasting nonsense? We adjudicators are quite capable of deciding a dispute about the existence of an oral term.

The adjudicator and later the judge could not see how the “deed of appointment” nine months after the first consultant services appointment overtook the first “deal”. The deed was fatally flawed, they said. The Court of Appeal saw it the other way. Not flawed at all. It trumped the earlier contract. That being so, the “new” rules in the deed pointed to which body should appoint the adjudicator. The wrong appointing body appointed the adjudicator, so the adjudication was a nullity.

But even if the right nominating body had been used, there was still the dispute regarding the oral term. The judge and adjudicator ruled that the oral term did not exist. But the Court of Appeal said it did. That decision had a disastrous impact on the adjudication. The existence of a disputed oral term stops the adjudication taking place. The client said it was a fee cap of £20,000. The consultant sent a bill for £90,000. So, for two reasons the Court of Appeal set aside the adjudication. Lawyers will say, yes of course; contractors will wrinkle their noses.

I promised to give you the test I use for jurisdiction challenge: “The adjudicator cannot act where there is a real prospect based on cogent grounds of establishing the adjudicator has acted without jurisdiction.” Wrinkled nose?