Mr Linnett was appointed to act as an adjudicator in a dispute between ISG Interior Exterior PLC ("ISG") and Halliwells in relation to a contract to carry out the fit out works at Halliwells' new offices in Manchester. Mr Linnett claimed his fees and expenses against Halliwells, who contended that they were not liable for the fees and expenses due to having taken an objection to his jurisdiction. Halliwells argued that Mr Linnett should claim his fees from ISG, who could then seek to claim them from Halliwells in enforcement proceedings, which would be challenged by Halliwells on jurisdictional grounds.

Mr Linnett was nominated by the RICS on 28 May 2008, whereby he sent the parties a letter enclosing his Terms of Engagement. Halliwells did not respond to Mr Linnett's invitation to agree to his terms and conditions, nor did they return his "Adjudicator's Questionnaire". Instead, Halliwells challenged the adjudicator's jurisdiction on the basis that the referral had been served out of time and asked him to withdraw from the adjudication and, alternatively, invited him to revise directions for the date of service of the response if the adjudicator was not prepared to withdraw.

Mr Linnett did not accept Halliwells' assertion that the referral was served out of time, and proceeded to consider the case upon its merits. The referral was served by fax (without the accompanying documents which were sent by post) on 29 May 2008 and served on Halliwells the following day. Mr Linnett did not receive the original referral and accompanying documents which seemingly were lost in the post, but received a duplicate copy five days later.

The Judge held that although the accompanying documents were not served within the seven day period and this breached clause 41A.4 of the JCT Standard Form 1998, it was not sufficient to invalidate the adjudication or nullify the decision itself. He considered the decision of Cubitt Building Interiors Ltd -v- Fleetglade Ltd where it was held that this clause must be operated in a sensible and commercial way. Further, the Judge considered the discussion regarding clause 41A 5.6, which provides that, "Any failure by either Party to enter into the JCT Adjudication Agreement or to comply with any requirement of the Adjudicator under clause 41A 5.5 or with any other provision in or requirement under clause 41A shall not invalidate the decision of the Adjudicator." It was held that in the present circumstances, this clause would be apt to cover the failure to serve the accompanying documents on the adjudicator within the seven day period, and thus the adjudicator retained his jurisdiction.

With regard to the question of Mr Linnett's fees, it was held that no contract was formed between Halliwells and Mr Linnett upon the terms of Mr Linnett's engagement. As Halliwells did not reply to the letter enclosing the Terms of Engagement, acceptance by silence could not be inferred. Where one party agrees the adjudicator's terms but the other does not, then the adjudicator can enforce those terms against the party with whom he has contracted. There is nothing objectionable in an adjudicator being appointed unilaterally.

In general terms, if an adjudicator is appointed and neither party makes a contract with him or her, then the parties by participating in the adjudication and thereby requesting the adjudicator to act, enter into a contract with the adjudicator, who then acts in that capacity as a result of that request. A contract such as this one would be formed by conduct, and would also contain implied terms regarding fees and expenses of the adjudicator. The Judge considered the position in relation to the appointment of an arbitrator was similar:

"(a) Where a person acts as an arbitrator then by accepting the appointment, that person is entitled to reasonable remuneration from the parties for work done;
(b) Where a person acts as an arbitrator then the parties are jointly and severally liable for that person's fees and expenses;
(c) Where a person acts as arbitrator but does not have jurisdiction then that person may have a claim based on the fact that the useless work was carried out at the request of the parties or one of them.
I see no reason why those general principles should not apply to a person who is appointed as an adjudicator under express or implied contractual provisions for adjudication."

However, when there is a jurisdictional challenge the situation differs and a party has two options. First, it can make an assertion of lack of jurisdiction and withdraw, taking no further part in the adjudication proceedings and leaving the adjudicator and other party to proceed at their risk. In such circumstances, in the absence of any agreement with the adjudicator, it would be difficult to make that party liable for the adjudicator's fees and expenses.

Secondly, a party can make an assertion of lack of jurisdiction but continue to participate in the proceedings without prejudice to that contention. By participating in this way, whilst the party is not giving the adjudicator jurisdiction to make a binding decision, it is requesting that the adjudicator carry out the work and make a decision. Should the adjudicator make a decision, and in fact, have jurisdiction to make it, then there is no reason why the mere fact of the erroneous jurisdictional challenge should change the position. If there is a valid jurisdictional challenge and if a party has not participated in the adjudication then the party can have no liability for the adjudicator's fees. If, however, the party participated in the adjudication process, despite raising jurisdictional issues and continuing on a without prejudice basis, that party would generally be liable for the reasonable fees and expenses of the adjudicator. The Judge also stressed that this was a matter of contract between the adjudicator and the relevant party, and that should the adjudicator not have jurisdiction this would nullify any decision made by him. This would preclude one party from recovering from the other any sums based on the adjudicator's allocation of fees and expenses contained in the invalid decision.

Halliwells had invited Mr Linnett to adjudicate on the merits, albeit reserving their position on jurisdiction. Thus, Mr Linnett was proceeding with the adjudication at the request of both parties, and was therefore entitled to his reasonable fees and expenses. Further, there was no basis upon which Halliwells could resist enforcement of the adjudicator's decision by relying on an oral variation. The Judge held the following:

"In my judgment therefore, whether or not the Adjudicator had jurisdiction Halliwells are liable to pay the Adjudicator his reasonable fees and expenses of conducting the adjudication and are jointly and severally liable to the adjudicator for the payment of such reasonable fees and expenses with ISG, whose liability is limited to the fees and expenses agreed with the Adjudicator, as set out above."

It was also considered whether Mr Linnett may be able to enforce the provisions of the JCT contract under s.1(1)(b) of the Contracts (Rights of Third Parties) Act 1999, on the basis that a provision of the JCT contract purported to confer a benefit on him. The Judge considered the case of David Cartwright -v- Lydia Fay and concluded that the 1999 Act was not available to Mr Linnett in this case.

Counsel for Mr Linnett argued that the conduct in subsequent adjudication was also of relevance. In the second adjudicator's decision, Halliwells relied on the decision made in the first adjudication. The Judge held that:

"…Halliwells would have been prevented from approbating and reprobating the Decision of the Adjudicator. Having relied on it for the purpose of the Second Adjudication, and having obtained the benefit of that decision in the Second Decision, I do not consider that Halliwells could now assert that the Adjudicator did not have jurisdiction to make the Decision."