Can an adjudicator seek security for fees?

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Authored by: Justin Yuen

Nicholas James Care Homes Ltd v Liberty Homes (Kent) Ltd [2023] EWHC 360 (TCC) concerned an application for summary enforcement of an adjudicator’s decision.  Liberty resisted enforcement, asserting that the adjudicator’s requests for payment of his fees in advance were an implied threat to exercise a lien on his decision, which amounted to bias and impartially. The court rejected these assertions and granted the application to enforce the adjudicator’s decision.

The adjudicator had made a decision in favour of Nicholas James Care Homes (NJCH), who then applied to enforce that decision against Liberty Homes (Kent) Ltd (Liberty).  The adjudicator’s terms of appointment provided that he was “entitled to a sum as and whenever determined by him as Security for payment of fees and expenses and may request this sum in advance of any invoices …”.

The adjudicator’s clerk sent a  number of email requests to Liberty for payment in advance of the adjudicator’s fees, which Liberty argued  amounted to making demands in breach of   paragraph 19 of the Schedule  to the  Scheme for Construction Contracts (Part I – Adjudication) (Scheme), which requires an adjudicator to reach his decision within a specified time. Although the adjudicator did not exercise a lien, Liberty argued that the (implicit) threat to do so was unlawful and /or contrary to paragraph 12(a) of the Scheme (which provides that an adjudicator must act impartially when carrying out is duties)  and that there was manifest bias, meaning that his decision should not be enforced.

It was not in dispute that the effect of the Scheme and legal authorities is that an attempt to exercise a lien over the delivery of a decision within the statutory /agreed time periods is unlawful and that such attempt may well render the decision once delivered unenforceable.  

However, in this case, the court concluded that, whilst emails from the adjudicator’s clerk were certainly tenacious and persistent, they did not at any stage cross the line into being properly construable by the reasonable observer as   improper threats to impose a lien and none of them could be described as “extraordinary”. The reality, the court said, was that neither the adjudicator nor his clerk had used the word “lien”, let alone threaten to exercise it. The court pointed out that there was no submission before it supported by any authority that it was impermissible for an adjudicator to ask for and indeed obtain security for fees from both parties during the course of the adjudication reference, irrespective of whether those are agreed as part of an adjudicator’s terms and conditions.  As matter of principle, the court said, that of itself without more, in particular any attempt to exercise a lien, cannot be objectionable.

Comments

This case is a good reminder to adjudicators that they should be careful about securing their fees, in order not to render their decisions unenforceable, assuming that the Hong Kong Court will follow the same approach as in the UK when the security of payment legislation is implemented in Hong Kong.

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Justin Yuen

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9734