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Dissenting party still liable for adjudicator's fees

12 Jul 11 A party who disagreed with the amount of fees charged by an adjudicator was still liable to pay them.By taking part in the adjudication, it was taken that they had agreed to the fees. As long as the hourly rate claimed by an adjudicator is not clearly outside an overall band of reasonableness, there would be no basis to interfere.

Fenice Investments and Jerram Falkus were involved in an adjudication which was conducted by Dr. Franco Mastandrea. Dr. Mastandrea had sent both parties’ solicitors a note of his hourly rate and had asked both parties to confirm his proposal. Fenice had done so, but Jerram Falkus had not. Dr. Mastandrea was employed by Hill International, and, whilst his appointment was a personal one, he told the parties that the invoices would be issued by Hill and it was them who should be paid. Dr. Mastandrea made an award in Fenice’s favour, and ordered that his fees of £19,775 plus VAT be paid by Jerram Falkus.

Jerram Falkus took the view that his fees were excessive, and initially refused to pay anything. Later it made a payment of £5,000, considering that Dr. Mastandrea was not entitled to any more. Fenice had accepted that the fees were reasonable, but said that since both parties were jointly and severally liable for them, Dr. Mastandrea should pursue Jerram Falkus for payment. However, later Fenice paid the balance of the fees plus Dr. Mastandrea’s own legal costs. In dealing with the matter, Fenice incurred its own legal costs of over £3,000 because Hill threatened legal action to recover payment. Fenice also claimed these from Jerram Falkus.

The parties’ adjudication agreement either expressly or impliedly incorporated the provisions of the Scheme for Construction Contracts; one of the terms of their agreement, therefore, was that if the adjudicator states which of the parties should be liable to pay the fees, that party (“the paying party”) agrees with the other that he will do so. This was independent of the fact that as against the adjudicator, they are both jointly and severally liable. It must follow that if the paying party refuses to pay the adjudicator, he is in breach of his agreement with the other party. There was also a separate agreement between the parties and the adjudicator. As far as fees were concerned, a party may make an express agreement, as Fenice had done here, in which case the adjudicator may claim under that express right. However, in the absence of an express agreement, a party will nonetheless be taken to have made an agreement by conduct if he participates in the adjudication, having requested the adjudicator to act. It would be an implied term of that agreement that the party concerned would pay the adjudicator’s reasonable fees.

As long as the hourly rate claimed by an adjudicator was not clearly outside an overall band of reasonableness, there would be no basis to interfere, even if it could be shown that a different adjudicator, especially an adjudicator with different qualifications, might have charged less or even significantly less. The seniority and experience of the adjudicator concerned was also a factor. The reasonableness of an hourly rate should not be determined in a vacuum by reference to some notional adjudicator. It was sensible for the adjudicator, when appointed, to indicate his hourly rate and invite express agreement, as had happened here. If a party simply fails to acknowledge the invitation at all, as Jerram Falkus had, any subsequent complaint that the rate was excessive would be unlikely to provoke much sympathy. Other factors to be taken into account were the short timescale involved in which the adjudicator had to produce his decision.

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The court held that Jerram Falkus was liable both for the fees and the legal costs Fenice had incurred in taking legal advice when Hill threatened legal action.

Fenice Investments Inc. v Jerram Falkus Construction Ltd. [2011] EWHC 1678 (TCC)

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