An Adjudicator’s misdemeanour and how it could have been avoided
I was recently talking over lunch with a solicitor who regularly represents small and medium sized contractors in adjudications. The direction of our conversation turned to the subject of adjudicators nominated by ANBs.
It is my experience that most adjudicators appointed by ANBs do a decent job, and quite a few are immensely capable and held in high regard. However, parties and their professional representatives are rarely moved to talk to me about their good experiences of adjudication and adjudicators. Most conversations centre on problems and faults caused, so they say, by adjudicators. And this was the case with my lunch companion. The story he told me demonstrates that even experienced adjudicators can make choices, which lead to unnecessary criticism from parties and avoidable complaints to the ANBs that appoint them. It also highlights the fact that reading and applying guidance published by leading ANBs will help adjudicators to dodge pitfalls.
A few months ago, my lunch companion received confirmation from an ANB that an adjudicator had been nominated to decide a dispute between his client, an electrical sub-contractor, and a large (tier 1) contractor. His client was the referring party.
This was a relatively small dispute in terms of value and complexity. The adjudicator sent his terms of engagement to the parties. The terms were received by my lunch companion on the same day that the adjudicator had been nominated. The adjudicator was considerably experienced. He had been on the ANB’s panel for over twelve years and had undertaken over one hundred adjudications. He was, by all accounts, a safe pair of hands.
The adjudicator had been involved in three previous adjudications, several years before, which involved the claimant sub-contractor. In two cases the sub-contractor had lost, and in the third case they had recovered most of what they had claimed. In all three adjudications the sub-contractor had been ordered to pay some or most of the adjudicator’s fees. They paid up promptly, though not always cheerfully.
In two recent adjudications, not involving the claimant sub-contractor, the adjudicator had struggled to recover his fees. So, he had made a small, but significant, addition to his terms of engagement. His fresh terms required the parties to pay a deposit up front, which amounted to 50% of his estimated final fee for undertaking the adjudication. The deposit was non-refundable, even if the dispute settled without the adjudicator making a decision. It was not expressly stated in the terms of engagement, but one could infer that the adjudicator would not proceed if the parties did not accept this term.
My lunch companion sent the terms of engagement back to the adjudicator. He had signed them, but only after striking through the paragraph which required an upfront deposit. The adjudicator resigned. His reasoning was that his decision to include an upfront payment term was based on a commercial imperative that he would be paid. He was concerned that he would not and thus he would not proceed. My lunch companion complained to the ANB.
First thing the ANB did was to firefight a problem. There was still a dispute that needed resolving and currently, no adjudicator in place. My lunch companion’s client agreed to begin the process again with a fresh notice, and the ANB sourced a second adjudicator. One was nominated quickly and without the client incurring an additional nomination fee. The new adjudicator did not require an upfront payment and the case proceeded without further commotion.
Interestingly, the ANB advised my lunch companion of the way it dealt with his complaint, and the action it had taken as a result.
It seems that, when presented with details of the complaint, and asked for his comments, the adjudicator reasoned that a nomination by an ANB is made on the basis that the adjudicator will be able to reach agreement on his terms. If no agreement can be reached, and he has concerns about being paid, the adjudicator argued that he is entitled to resign. The ANB disagreed with the adjudicator.
The ANB’s subsequent approach with the adjudicator that resigned was also interesting. Its tactic was, not to castigate him but, to inform him about its guidance and help him avoid being the subject of similar complaints in the future.
The ANB first set out its position clearly and unambiguously. It said it did not nominate adjudicators conditionally. The ANB cited its own formal guidance, which says that a nominated adjudicator should not resign because a party fails to accept his terms. The guidance explained that to do so places the ANB in an invidious position.
The ANB walked through the relevant parts of the guidance with the adjudicator and together they had an open and frank discussion. The adjudicator expressed his genuine concerns about getting paid. In the end the adjudicator and the ANB came to an agreement. He accepted the rationale behind the ANB’s policy. In the future, he would set out the basis of his fees as he had done in the years previously and would not try to impose upfront payments.
If he did not get agreement on the amount and/or basisof his fees, he would simply advise the parties that his terms and conditions will apply. If the parties then take further steps in the proceedings without challenging his terms, those terms will likely be deemed to have been accepted by the parties’ conduct.
If one or both parties expressly objects to all or part of his terms and conditions, the adjudicator agreed he would not simply resign, or get embroiled in an argument. Whether or not his terms are accepted, the adjudicator will ultimately be entitled to a reasonable fee. He would state the total amount of the fee in his decision. This aspect is as enforceable as the rest of his decision, save where the fee is unreasonable. In which case the court will decide what is reasonable.
What is remarkable and encouraging about this story is the ANB’s overall approach to dealing with complaints. Its immediate concern was to ensure that a complaining party, which appeared to have a viable complaint, was dealt with promptly and inconvenienced as little as possible.
Also encouraging is the fact that the ANB’s adjudicators, including experienced ones, who are the subjects of niggly complaints, will not necessarily be penalised, e.g. removed from the ANB panel, but will first be guided and informed so that they can avoid being complained about in the future.