Adjudicator fees: paying the piper ahead of the tune

Before the ink dried on my email invoice, the invoice was paid in full, no quibbles: bang, paid by return. That’s what invariably happens when the adjudicator asks for their fee. In goes the email invoice and back come the pennies. Invariably. Now then, adjudicators, arbitrators, dispute deciders are in a special category: judicial or judicial-ish. It’s not the same as the cut and thrust of everyday commerce.

There the English disease gets in the way. And what’s that? Well, we are not good at paying up. We want pipes and bricks and plumbers and chippies so we happily place orders and take delivery, but then something interferes with our grip on the chequebook. Paying up is plagued by paralysis. We don’t actually like paying. English commerce is a bad payer..

So, how come adjudicators’ and arbitrators’ fee notes get paid smack, bang, wallop?

It’s because we get our fee invoice issued while still on honeymoon. Disputing parties are nowadays asked to pay the fees of dispute deciders while the dispute affair is still raging and the award is yet to be decided. The sensible and canny human being sees little merit in delaying payment, little merit in causing the adjudicator to become niggled over late payment.

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As for the adjudicator, he or she is as daft as a brush if the fee note is issued after the award is sent. The losing party then, in a split second, suffers payment paralysis, as the idea of forking out adjudication fees skedaddles off into the undergrowth whinging and snarling. So, my dear adjudicator referee: get your money before the final whistle.

This is something that the very experienced adjudicator Cyril Chern is presumably well aware of and operates by when appointed by the RIBA. A recent case about his fees is Nicholas James Care Homes Ltd vs Liberty Homes (Kent) Ltd [2023]. On day one of his appointment, Dr Chern sent his fee terms to the parties. These included: “Dr Chern shall also be entitled to a sum as and whenever determined by him as security for the payment of fees and expenses and may request this sum in advance of any invoices and may further request that such sum be replenished on a regular basis as and when deemed necessary.” It further said: “The referring party shall pay Dr Chern’s invoice in full within seven days and may apply to the responding party for reimbursement of one half of the amount of these invoices.”

An adjudicator is as daft as a brush if the fee note is issued after the award is sent. The losing party then, in a split second, suffers payment paralysis, as the idea of forking out fees skedaddles into the undergrowth whingeing

Fair? Yes, lots of us very experienced dispute deciders do the same, more or less, as Dr Chern. He, like me, has suffered from burnt fingers by pressing on with dispute services such as adjudication without asking for payment in advance.

I will give you more of the story shortly, but first here’s some history. When these adjudication provisions were ambling their way through parliament in 1996, some of us (including me) nibbled at the MPs’ ears about the adjudicator having a lien on the award. We adjudicators wanted the same protection as given for over 100 years to all arbitrators.

The Arbitration Acts all said that an arbitrator was entitled to hang onto their award, to keep the result secret, until the arbitrator’s fee was paid.

I recall an MP getting traction with his comment that arbitrators had this protection because their fees were often large in amount but these new adjudicator people were not doing an in-depth investigation and their fees thus were expected to be very modest, say in the region of £1,500. So none of the adjudication machinery need provide for a lien on an adjudicator’s award.

Ah, well now, it hasn’t turned out as that MP expected. Adjudication has reached giddy heights in complexity, and huge expense is now (wrongly, in my view) commonplace.

Dr Chern’s immediate call for fees on day one was in the grand sum of £30,000.  I can see why, and I believe he was justified.

The dispute he was appointed to fathom was what is called a “true value” analysis. The builder, Liberty Homes (Kent) Ltd, said the final account was £5.1m. The employer disagreed and said the final account was under £3m.  Any experienced adjudicator can see that fathoming a “true value” of that final account to a depth and accuracy – to the ha’penny (if, if that’s what has to be done in adjudication) – that is one hell of an exercise for the adjudicator. Hence the whopping fees. The award eventually ordered the builder to repay the not insignificant overpayment back to the employer of £2.589m.

So, Liberty Homes (Kent) Ltd tried to argue that Dr Chern had applied a lien on his award. If so, it was unlawful and would torpedo the award. The High Court said no to all that argument. Dr Chern’s terms were not a lien, nor were they unfair, nor one-sided, nor created any form of bias. The court ordered the award to be complied with and the overpayment to be repaid. Very big, complex disputes come to adjudication these days; it’s high time that a lien on the fee be introduced into the machinery by parliament. But to that idea, I reckon: fat chance.

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