Case No. HT-2025-000039 , HT-2-25-000040 - [2025] EWHC 2005 (TCC)

I have therefore decided that the Jameses have a real prospect of success on the residential occupation point and so the adjudicator’s decision will not be enforced. I have further decided that on the central point of substance, the payless notice, the adjudicator was wrong. The question arises as to what order I should make in relation to the adjudicator’s fees. The adjudicator ordered that Mr and Mrs James were to pay his fees of £9,638 plus VAT and that the parties were jointly and severally liable for them. Mr Hanna submits that in this scenario, I should reverse the adjudicator’s decision in relation to fees and order RBH to pay them. Mr Frampton says that, even assuming the adjudicator’s award is reversed, I have no power or jurisdiction to change his decision on fees.

I was referred to five cases on this point. They are Castle Inns (Stirling) Ltd v Clark Contracts [2005] Scot CS CSOH 178, TSG Building Services PLC v South Anglia Housing [2013] EWHC 1151(TCC), Halsbury Homes Ltd v Adam Architecture Ltd [2016] EWHC 1422, D McGlaughlin & Sons Ltd v East Ayrshire Council [2021] CSOH 122 and A&V Building Solution Ltd v J&B Hopkins Ltd [2024] EWHC 2295.

The starting point is the decision of the Outer House of the Court of Session (Lord Drummond Young) in Castle Inns In that case, the judge was asked, in effect, to strike out the pursuer’s claim to recover the adjudicator’s fees that the pursuer had been ordered to pay as the losing party in an adjudication. It had not been decided at that stage whether the adjudicator’s decision was right or wrong.

The judge went on to consider at paragraphs 16 to 17 the position in relation to the adjudicator’s fees. His conclusion was that he had no power to interfere with the adjudicator’s decision in relation to fees, and he gave four reasons for this.

“16.

The critical question that arises in the present case is whether that part of the adjudicator’s decision can be reconsidered by the Court or, presumably, by an arbiter. In my opinion, it cannot, on the basis that such reconsideration would be contrary to the contractual scheme found in clause 41A. I reach this conclusion for four reasons. First, there is no contractual mechanism in clause 41A that would allow such reconsideration to take place. The power in clause 41A.7.1 is conferred specifically upon the adjudicator. No appeal is possible against an adjudicator’s decision, and an adjudicator’s decision cannot be challenged on the ground that it is wrong on the facts or in law: see Diamond v PJW Enterprises Ltd., 2004 SC 430. It follows that the adjudicator’s decision as to liability for his fee and expenses cannot be challenged directly. Secondly, although the contractual scheme does permit an indirect challenge to the adjudicator’s decision on any dispute submitted to him by means of court proceedings or arbitration, that mechanism only relates to a dispute or difference; that appears from the wording of clause 41A.8.1, and indeed section 108(3). It accordingly does not apply to the adjudicator’s decision on his fee and expenses, as that part of his decision does not involve a ‘dispute’ in the contractual sense. Thus, the contract has deliberately excluded any direct challenge to the adjudicator’s decision, and does not, at least according to its terms, contemplate that anything other than a ‘dispute’ can be the subject of indirect challenge. The possibility of challenging an adjudicator’s decision has accordingly been taken into account in the contract, and the contractual scheme is that an indirect challenge, through court or arbitral proceedings, is possible but only in respect of the underlying dispute. That seems to exclude any challenge to ancillary findings, such as a finding on liability for the adjudicator’s fee and expenses. Thirdly, because the adjudicator’s decision on liability for his fee and expenses is essentially ancillary in nature, there is no commercial necessity that it should be capable of reconsideration. In any system of dispute resolution, the parties are likely to incur irrecoverable outlays and expenses; indeed, in some jurisdictions, such as those in the United States, a successful party does not recover anything in respect of expenses, outlays and other costs. Thus, the normal criterion for the implication of a contractual term does not apply to the part of the adjudicator’s decision dealing with his fee and expenses.

17

The foregoing reasons for the conclusion that an adjudicator’s decision on his fee and expenses cannot be reconsidered by the Court all relate to the contractual structure of clause 41A. The fourth reason indicates an obvious rationale underlying that conclusion; it is the practical difficulty of reconsidering the adjudicator's decision on such a matter. Adjudication is a distinct process, with its own peculiar features. In particular, it is subject to very demanding time limits, which apply both to the parties and to the adjudicator. The result is that the parties’ cases may not be as fully prepared as is desirable, and the adjudicator may be compelled to come to a relatively hasty decision. In court proceedings, by contrast, a full and detailed presentation is expected, and the judge has a significantly better opportunity to come to a carefully reasoned decision. Moreover, additional facts may emerge, or additional arguments may be developed. It is accordingly impossible to conclude merely from the fact that the Court reached a different decision that the adjudicator’s decision was wrong. The decisive factor in the Court’s decision might not have been presented to the adjudicator, or might have been presented in such a way that its significance was obscured. If, therefore, the Court is to reconsider the adjudicator’s decision on liability for his fee and expenses, the facts and arguments presented to the adjudicator will frequently require to be investigated and taken into account. That is inevitably a difficult task; it involves weighing the significance of arguments that are not the same as those presented to the Court. In addition, in some cases matters may be argued before the adjudicator that are not argued before the Court. The present case provides such an example; in the first adjudication, the question of the adjudicator’s jurisdiction was argued, I was informed, at some length. That issue was determined in favour of the present defender. It is not, however, an issue that can arise in the present proceedings. If it is the case that a large part of the argument before the adjudicator was taken up with the question of jurisdiction, it is obviously likely that his decision on liability for his fee proceeded at least in part on the basis that the present defender had succeeded on that part of the argument. Consequently, even if the pursuer were wholly successful in the present litigation, it would not be appropriate to allow it to recover the whole of the adjudicator’s fee and expenses. How any apportionment should be carried out, however, is an extremely difficult task for a tribunal that has not heard the same arguments as the adjudicator. For all these reasons, I am of the opinion that there are sound practical reasons for holding that an adjudicator’s decision on liability for his fee and expenses cannot be reopened in any proceedings before the Court”.

At paragraph 32 of A&V Building Solutions Ltd, Mr Roger Ter Haar KC, sitting as a Deputy High Court Judge in this Court, noted that there were four strands to the reasoning of Lord Drummond Young in Castle Inns:

“(1)

There was no contractual mechanism that would allow a reconsideration of the adjudicator's decision in respect of his fees.

(2)

Whilst the contractual scheme permits an indirect challenge to the adjudicator’s decision on any dispute submitted to him by means of court proceedings or arbitration, that mechanism only relates to a dispute or difference. It does not apply to the adjudicator’s decision on his fee and expenses, as that part of his decision does not involve a ‘dispute’ in the contractual sense.

(3)

Because the adjudicator’s decision on liability for his fee and expenses is essentially ancillary in nature, there is no commercial necessity that it should be capable of reconsideration.

(4)

There is a practical difficulty of reconsidering the adjudicator’s decision in such a matter”.

I agree with the learned Deputy Judge’s analysis of Castle Inns. Castle Inns is also cited in Sir Peter Coulson’s book on adjudication at paragraph 10.25 as authority for the proposition that, “An adjudicator’s decision as to liability to pay fees is final and is not subject to challenge in subsequent arbitration/litigation”.

In TSG, Akenhead J reversed an adjudicator’s decision, but he did not reverse the decision on fees, and he held at paragraph 53:

“However, the adjudicator had jurisdiction to decide what he did, although I have held that he reached the wrong conclusion. It follows that South Anglia must pay the adjudicator’s fee of £12,564 plus VAT”.

It is, perhaps, fair to point out that it is not clear from the report to what extent that point was argued.

In Halsbury Homes, Edwards-Stuart J considered the same point, commenting on an earlier edition of Sir Peter Coulson’s book and the reference to Castle Inns. He said this at paragraph 64:

“I agreed with that observation. There is nothing in Lord Drummond Young’s opinion which suggests that his decision might be confined to Scotland. It seems to me that his reasoning is equally applicable to the relevant provisions of the RIBA conditions that apply in this case. However, Ms Stevens submitted that it would be an extremely unjust outcome if an erroneous exercise by an adjudicator should be at the expense of the correct responding party. If this were to be the ultimate position, then there would be some force in her point, but, of course, an adjudicator’s decision as to how his or her fees should be allocated between the parties may represent more than just the outcome of the decision. An adjudicator is not required to make a binary decision based simply on the result. He or she can, like the Court, take into account the conduct of the parties, other issues that were raised and the overall course of the referral”.

On the facts of that case, the judge held that he was not bound by the decision of the adjudicator as to fees because of the provisions of the contract which applied between the parties, and this enabled him to order that the ultimately successful party should recover its liability to pay the adjudicator’s fees from the unsuccessful party before the Court.

In D McGlaughlin & Sons Ltd v East Ayrshire Council, an adjudicator had found in favour of the pursuer and ordered the defender to make payment of the principal sum plus interest. The defender had paid these sums. In court proceedings, the pursuer sought enforcement of the adjudicator’s decision. The defender resisted enforcement unsuccessfully, but also lodged a counterclaim, seeking orders which included a repayment of the sums the defender had paid. The pursuer argued, relying upon Castle Inns, that the Court could not order repayment of interest. The case was decided against the defender, but Lord Clark dealt with the interest point at paragraph 42, where he noted:

“In my view, the adjudicator’s fees and expenses discussed in Castle Inns v Clark Contracts Limited are quite different from interest which has to be paid from the date of the award. The latter is not ancillary to the dispute. Rather, it is part and parcel of the adjudicator’s award”.

Thus, the judge drew a clear distinction between repayment of interest and repayment of fees and expenses, as to which he made no criticism of Castle Inns.

More recently, in A&V Building Solutions v JB Hopkins, the decisions to which I have just referred were considered by Mr Roger ter Haar KC. He reviewed this case law, noting that all the authority in this Court and in Scotland supports the position that the adjudicator’s decision on fees could not be challenged: see paragraph 47. He commented that there were arguments to suggest that Castle Inns should be reconsidered, but he decided that the case before him was not the case in which to do it. He noted that the relevant point had not been pleaded, and it may also have been relevant that one of the parties was unrepresented.

Mr Hanna submitted that I have the power to reverse the adjudicator’s decision on fees. He accepted that the authority was all one way and was against him, but he submitted that the authority was thin. He then advanced three submissions: first, that Castle Inns could be distinguished on the facts; secondly, that the decision of the Supreme Court in Aspect Contracts v Higgins [2015] UKSC 38 enabled the Court to interfere with the adjudicator’s decision on fees; and thirdly, that the Court should imply a term (by reference to the officious bystander test) that, if an adjudicator’s decision was reversed by a final determination of a Court, then the ultimately successful party would be entitled to recover any adjudicator’s fees paid if the matters wrongly decided by the adjudicator could be shown to have led to the requirement to pay the adjudicator’s fees.

As to the first of these submissions, Mr Hanna argued that Castle Inns could be distinguished on the facts because the present case revolves around a single substantive issue, namely whether a payless notice was valid, whereas in Castle Inns, there was a multiplicity of issues at stake. That is true, but I am not persuaded that Castle Inns can be distinguished because the decision is plainly put on a broad footing. Furthermore, whilst that decision and the subsequent decisions I have referred to might be said, fairly, to amount to a thin line of authority, the plain reality is that it is all one way, and the comment in Sir Peter Coulson’s book to which I have referred is by an author who has unrivalled expertise in this field. I should not depart from the settled position unless I am persuaded that it is wrong.

More broadly, whilst it is correct to say that the position in this case differs from Castle Inns and that the picture here is a binary one, that is to say I consider that the adjudicator’s decision was wrong, there will be many cases where the adjudicator will be found to have been partly right or the picture may be a more nuanced one. Indeed, in this case, the Jameses took a point in the adjudication on which they lost., that is whether the notice of adjudication was defective. In my judgment, there is some merit in having a clear rule that the adjudicator’s decision as to fees is not susceptible to review. That was Lord Drummond Young’s fourth reason, and it weighed with Edwards-Stuart J at paragraph 65 in Halsbury. If the position were otherwise then, when deciding whether to alter the adjudicator’s decision as to fees, the Court would have to review the reasons for the decision on fees in light of the arguments presented to the adjudicator, the way in which they were presented and compare them with the position of the Court hearing.

Turning to the decision of the Supreme Court in Aspect v Higgins and Mr Hanna’s second submission, that case addressed the jurisprudential basis for the entitlement to recovery of sums paid pursuant to the decision of an adjudicator. Lord Mance said this at paragraph 23, (with which the other Justices agreed):

“In my view, it is a necessary legal consequence of the scheme implied by the 1996 Act into the parties’ contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicator’s decision can be shown to have led once there has been a final determination of the dispute”.

Mr Hanna argued that this implied term would cover orders as to the adjudicator’s fees. Attractively though the argument was put, I cannot accept it for the following reasons. First, I accept Mr Frampton’s submission that the Scheme treats the adjudicator’s entitlement to payment of fees as ancillary and separate to the dispute: see paragraph 25 of the Scheme. This is further supported by reference to paragraph 9(4), which deals with the payment of fees on the resignation of an adjudicator and paragraph 11(1) on the payment of fees on the revocation of an appointment.

Secondly, in my judgment there is nothing in the decision in Aspect v Higgins to suggest that it was intended to cover an adjudicator’s fees. Castle Inns was not cited. Aspect Contracts imported a causation test. If applicable to fees, it would be necessary to show that the adjudicator’s decision could be shown to have led to an overpayment. However, an adjudicator has a wide discretion as to fees. As I have already indicated, his or her decision on fees may depend upon a number of considerations, which would not be limited to a consideration as to which was the winning party overall. It would also include the manner in which the adjudication was conducted by the parties. If the implied term covered any decision in relation to fees, it would be necessary to review the exercise of the adjudicator’s discretion, and this may be difficult to do, particularly where short reasons had been given. I can see nothing in Aspect which suggests that Lord Mance intended this.

As to Mr Hanna’s third submission based upon an alternative implied term, I consider that this should be rejected for essentially the same reasons. It is inconsistent with the authorities and the statutory scheme, and it imports a causation test which I consider would be difficult to apply in many cases. I therefore do not accept that an implied term should be implied by reference to the officious bystander test.

Accordingly, I am not persuaded that I have the power to alter the adjudicator’s decision in relation to his fees.