Practically speaking, many adjudicators are employed by or are partners in or directors of firms. While they act in a personal capacity in arriving at their decisions, what happens if they have to sue to recover their fees? Should they sue in their personal capacity or can they seek recovery through their firm or company?
A recent decision of the Technology and Construction Court considered this point in the context of a dispute between an adjudicator and two administrative receivers. This decision also contains a timely reminder for receivers to ensure that the basis on which they enter into contracts is very clearly defined.
In Faithful & Gould Ltd vs Arcal Ltd (in Administrative Receivership) and Others (25 May 2001) the adjudicator, Nicholas Gray, was a chartered surveyor and a director of Faithful & Gould. He had been careful to ensure that Arcal's receivers agreed to reimburse his fees for carrying out the adjudication. His enquiries received neither a confirmation nor a denial, but the judge construed this as an agreement by the receivers. In the event, the adjudicator found against Arcal and sought recovery of his fees. The receivers refused to pay. Faithful & Gould started proceedings to recover the adjudicator's fees. The receivers maintained that given the wording of rule 4 of the scheme, the company had no standing to seek to recover the adjudicator's fees: that could only be attempted by the adjudicator acting in his personal capacity.
Faithful & Gould argued that, while rule 4 clearly envisaged the adjudicator acting in his personal capacity when arriving at his decision, this did not extend to any action that had to be taken to recover unpaid fees. In the first place, this amounted to an argument that there was no liability to pay simply because the invoice was not issued by the adjudicator personally. Second, while the wording of rule 4 is clear that the adjudicator is to carry out his duties personally, there is no indication that this extends to the adjudicator's billing practices. Adjudicators will often bill in their company or firm name.
Perhaps not surprisingly, the judge agreed with these contentions. Common sense, yes, but it is useful that the court has finally had the chance to review the position and make a positive ruling, clarifying not only this point but also the extent of the adjudicator's personal obligations in this area.
The second point of interest raised by this case concerns the capacity in which the administrative receivers entered into the contract with the adjudicator. In pursuing fee payment, the claimant sued not only the company in administrative receivership but also the two administrative receivers personally. The point at issue was whether they were personally liable for the adjudicator's fees.
An administrative receiver is personally liable on contracts he makes on the company's behalf unless the contrary is expressly provided. This is confirmed by section 44(1)(b) of the Insolvency Act 1986. Consequently, receivers are careful to state expressly in all correspondence and documentation that they are not contracting in their personal capacity but on behalf of the company in receivership; hence, anyone seeking to recover their costs would rank as an unsecured creditor.
Unfortunately, in this particular case, the receivers had not expressly clarified their position. As a result, they fell foul of section 44(1)(b) and the judge decided that they were personally liable, although there was no suggestion that the fees could not be included as an expense in the receivership.
I am grateful to Nick Henderson of the Construction and Engineering Group at Dickinson Dees for supplying this decision and its supporting papers.
Simon Lewis is a partner at solicitor Dickinson Dees in Newcastle upon Tyne.