The Court was asked to determine whether a party can recover adjudication fees from the adjudicator.

Mr Ross was appointed as an adjudicator in 2010 to review a dispute between SGL Carbon Fibres Ltd and RBG Ltd (RBG Ltd is now Stork Technical Services (RBG) Ltd). When Mr Ross was being appointed, he notified the parties to the dispute that he was employed by a solicitor firm called Knights, Solicitors LLP. During the enforcement proceedings in Scottish Court of Session, Lord Glennie found that the adjudicator utilised his own experience and knowledge rather than providing the parties with proper opportunity to comment. Further, it was found that the adjudicator had failed to “exhaust” his jurisdiction.  Therefore, Lord Glennie rendered the adjudicator’s decision unenforceable (see SGL Carbon Fibres Ltd v RBG Ltd [2011] CSOH 62).  Subsequently, RBG initiated proceedings against the adjudicator to recover the fees it had paid. Under the Adjudicator’s Agreement, the parties were jointly and severally liable for the adjudicator’s fees. The total fees paid (including outlays and VAT) were £281,008.62.  Each party had paid its share, half of the fees, as and when the fees were invoiced during the adjudication.  Such payments had been made to Mr Ross’ employer at the time, Knights, who had issued VAT invoices in respect of Mr Ross’ services.

Stork sought to recover the money it had paid on the basis of the law of unjustified enrichment against the adjudicator. Arguing that it had contracted with Mr Ross, the payments were purported to have been made to Knights on Mr Ross’ behalf where Mr Ross had received a benefit rather than his employer.  Further, Stork argued that the fee paid was recoverable as there was no legal justification for Mr Ross retaining the payments once his decision had been set aside as per Court of Appeal’s judgment in PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371.

Lord Tyre, in rejecting RBG’s claim, accepted that within the construction industry it is “standard practice to appoint a natural person to be adjudicator” and the adjudicator’s fees are paid to the adjudicator’s employer if the adjudicator is an employee.  As the adjudicator had informed the parties that he was an employee of Knights, it was clear that the adjudicator was not a party to the supply of services contract.

Further, Lord Tyre distinguished the Court of Appeal’s judgment in PC Harrington and stating that an enforceable decision was not a condition of Mr Ross’ entitlement to payment because the Adjudicator’s Agreement required him to keep the parties appraised of his fees and submit interim invoices for payment.  Interim payments were made for Mr Ross’ services and there had been no “failure of purpose”.