Complaints series - Complaint No.19 – reasons for fee allocation

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Complaints series - Complaint No.19 – reasons for fee allocation

June, 2013
JR Hartley

I came across a complaint from a party who, in their eyes at least, had “won” an adjudication, but couldn’t understand why the adjudicator had apportioned liability for some of his fees to them. It transpired that the adjudicator had not given an explanation for his finding which in turn led onto a train of enquiry as to whether the adjudicator had erred.

The starting point must be whether the adjudicator was obliged to give reasons for his decision. If so, then it follows that the adjudicator should have provided reasons for his decision on liability for his fees. Whether such a failure would render his decision is void is questionable, especially if reasons had been given for the substantive parts of his decision. Nevertheless it is considered that a failure to provide reasons for a decision on fees when there was an obligation to provide them is legitimate a ground for complaint.

The next question is how should an adjudicator determine liability for his fees? In the first instance, an adjudicator should ascertain whether the contract and/or applicable adjudication provisions gives guidance. For example, there may be an agreement that one party should pay the fees in any event. Leaving questions aside as to legitimacy of such a provision, then if the parties are taken to have agreed how the adjudicator is to be paid for then this should be followed. Again, although the failure to apply such provisions may not invalidate the decision, after all an adjudicator is entitled to get it “wrong”, it may give grounds for a complaint. One school of thought is that an adjudicator would only have jurisdiction to decide liability for his fees in accordance with the adjudication provisions, but others would say that things are not so clear cut.

Assuming, for present purposes, that there is no express provision as to how an adjudicator should determine liability for his fees, then the conventional view is that, although an adjudicator has a total discretion as to how he reaches his decision on fees, he should adopt a similar approach as an Arbitrator or Court would deal with liability for costs of an action. Therefore, the general rule would be that the loser pays, unless there is good reason to depart from that approach. In some instances it may follow that there is a certain winner. In contrast, a party may have won on some point, but lost on others. In such a situation, then an adjudicator could not be criticised for apportioning liability for his fees taking into account how much time was spent dealing with the points that the parties were successful on. Good reasons to depart from the general rules may also be the conduct of the parties, for example behaviour that led to the adjudication becoming more expensive than it needed to be. Another reason may be the presence of a legitimate offer to settle the matter which would have saved the expense of the adjudication.

In conclusion, as the determination of liability for fees is an operative part of the decision, as a matter of good practise, it is suggested that an adjudicator should provide an explanation of why he has reached his determination. Further, although he may have an unfettered discretion as to how he determines liability, an adjudicator would be wise to follow the principles adopted by arbitrators and the courts in addressing liability for costs.

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