Issue 3: Subject to bad faith was Mr Davies entitled to be paid for the work done before resignation? The judge construed clause 1 of the Terms as entitling the adjudicator to be paid unless he acted in bad faith. That was challenged on appeal.
The judge’s finding that Mr Davies reason for resigning was “erroneous” linked back to his view that it was not for Mr Davies to consider the jurisdiction issue because it was not raised by the parties. But as the court of appeal had found Mr Davies was entitled to raise the issue in any event, irrespective of the parties, then that criticism of him fell away entirely. The judge was therefore wrong to say that the adjudicator's reasoning was erroneous. It was not. This was also material to the subsequent issue of bad faith. It was suggested for SWS that Mr Davies had not raised the point with parties as one of jurisdiction. That was not correct. It was clearly understood by SWS’ solicitors that it was a jurisdictional issue and they treated it as such. There was more force in the next point: that the adjudicator should have given the parties a final warning that unless the parties accepted his jurisdiction and the binding nature of any decision he was to produce, he would resign. The court said that the giving of such a warning would always be good practice when an adjudicator was preparing to do something draconian, such as resigning. Whether such an omission amounted to bad faith, was dealt with under Issue 4 below. The court also noted that at [66], the judge had rejected the suggestion that the adjudicator "abandoned his appointment and impermissibly refused to provide a decision" , and later found at [79] that Mr Davies had acted with "diligence and honesty". For the reasons given, the court agreed with both of those conclusions. Mr Davies' diligence and honesty were palpable. Those conclusions were also relevant to any consideration of bad faith. The court concluded that the adjudicator had been entitled to decline jurisdiction pursuant to paragraph 13 of the Scheme. He had reasonable cause to resign in all the circumstances of this case.
The Law: the court summarised the applicable principles as follows.
a) Under the provisions of the Scheme, an adjudicator was entitled to resign. No reason was required. b) Whether or not the adjudicator was entitled to fees following any such resignation would depend on i) the precise terms of their appointment, and ii) the conduct of the adjudicator. c) The court's consideration of conduct might involve asking why the adjudicator resigned, so it might matter whether the adjudicator was right or wrong to resign. To that extent, the court disagreed with the learned district judge in Paul Jensen[10] , (although he was quite right in the result because of the absence in that case of any allegation of default or misconduct). d) A finding that the resignation involved was the result of default/misconduct or bad faith, depending on the terms of appointment, would - in accordance with the general approach in PC Harrington[11] usually be sufficient to disentitle the adjudicator from recovering fees. Conversely, absent such a finding, there would usually be an entitlement to the fees incurred prior to resignation. There was no binding authority on an entitlement to fees when an adjudicator resigned. The judge had concluded that absent bad faith the adjudicator was entitled to his fees. SWS complained about this conclusion. Their alternative interpretation was based on the premise that Clause 1 applied where:
[10] Paul Jensen Ltd v Staveley Industries PLC, 27 September 2001 (unreported) [11] PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371; [2013] BUSLR 970; [2013] BLR 1.
Made with FlippingBook - Online catalogs