Employer-nominated adjudicator clauses challenged

Sprunt Limited –v- Camden LBC [2011] EWHC3199, TCC Akenhead J also (2011) CILL

Facts

Sprunt was an architect’s firm, which entered into a Framework Agreement with Camden for the supply of building consultancy services.  Camden’s standard terms, incorporated in the Framework Agreement, provided that Camden was to be “the specified nominating body” to appoint an Adjudicator for any dispute between them.  The parties subsequently fell out over fees for a particular job, and Sprunt started an adjudication, applying to the RICS to appoint an adjudicator.  Camden objected that the RICS was not the contractual nominating body.  The RICS appointed an adjudicator who rejected this challenge, and went ahead with a Decision ordering Camden to pay Sprunt £150,000.

Camden refused to pay on the basis that the RICS appointment was invalid because only Camden had the right to appoint the Adjudicator.

HELD:

This Adjudicator appointment clause was contrary to the principles of Section 108 of the HGCRA and therefore the Statutory Scheme applied, under which a person commencing an adjudication is entitled to approach any appropriate “adjudicator nominating body”, such as the RICS.

Comment:

1. There were other things wrong with adjudication clause in the Framework Agreement, including an attempt by Camden to provide that an adjudication decision should be suspended from taking effect in certain circumstances.  Both this and the attempt to give one party the right to nominate the Adjudicator were sufficient grounds to invalidate this adjudication clause. Where an adjudication provision is in some sense defective, then the whole clause gets replaced by the Statutory Scheme.
2. At paragraphs 44-51 of his judgement, Akenhead J robustly condemned the practice of appointing one’s own adjudicator because it was “inherently unsound and contrary to the policy of the HGCRA for the contract to specify that one side should nominate the adjudicator.”  Section 108(2)(e) of the Act requires the Contract to impose a duty of impartiality upon the Adjudicator, which cannot be safely done where one of the parties is responsible for giving the Adjudicator a potentially lucrative fee paying appointment.
3. The Judge saw further serious objection in the possibility that a nominator might “choose a horse for the course”, or might even deliberately appoint someone who was so expensive (say a top QC) that the Referring Party would be deterred from proceeding.
4. Contrast the situation which the parties agree an adjudicator in advance (for example dispute adjudication boards under FIDIC).  We suggest that this is not caught by Akenhead’s reasoning.  The parties have the freedom to contract, and if they choose a particular adjudicator in advance for their potential disputes, this is not in principle a breach of Section 108.