I’ve borrowed this week’s title from Star Trek, although (according to the Google search I did), none of the original crew actually said “It’s life Jim, but not as we know it”, that comes from the song, Star Trekkin’. However, that is simply an aside and it doesn’t have a lot to do with the my topic for this week, the adjudication pilot for professional negligence claims (the pilot scheme).
“What’s that?”, I hear you ask. Well, until last week, it wasn’t something I was aware of either.
Extended adjudication pilot for professional negligence claims
According to the introduction by Carr J and Fraser J, the pilot scheme that was launched on 25 May 2016 is a re-launch of an earlier pilot that was launched under the supervision of Ramsey J in February 2015. That initial scheme was limited to professional negligence claims against solicitors and was capped at disputes under £100,000, whereas the re-launched pilot scheme is available to a wide range of professionals and has no limit on the value of a dispute that can adopt it.
I found it interesting to read that the pilot scheme has been introduced because of the success of statutory adjudication “in the construction sphere” and yet, despite that success, those in the working party responsible for the pilot scheme have chosen to write a new set of rules for professional negligence claims. I suspect they have tried to “cherry pick” and include only what they consider to be the better parts of the Scheme for Construction Contracts 1998.
What are the rules?
The rules are included in a “pilot pack”, along with guidance notes, details of the adjudicator panel and standard terms of business for the adjudicator.
Referring a dispute to adjudication under the pilot scheme is voluntary but the parties have to agree in writing to do so. “Dispute” is broadly defined as one where it is alleged the defendant acted in breach of the duties it owed to the claimant, and the claimant seeks a remedy arising from that breach of duty.
As it would be undesirable for an adjudication to proceed when there is a question mark over what the “dispute” is (even if the adjudicator has the power to determine questions relating to his own jurisdiction), the guidance notes caution parties to ensure that they know what the dispute is before starting the process.
It all looks very familiar…
Key aspects of the rules include:
- A notice of intention to refer the dispute to adjudication (called a Notice of Referral), which sets out the dispute the adjudicator is being asked to decide, along with details of the parties. It should also include the parties’ written agreement to use adjudication.
- The Notice of Referral should be provided to the Appointing Body at the same time as it is served on the responding party.
- The parties may agree on the identity of an adjudicator or apply to the Appointing Body. In this case, that is the Chairman of the Professional Negligence Bar Association, who will select from a panel of barristers who specialise in professional negligence disputes. Various time limits apply to the appointment process.
- The adjudicator is appointed on the standard terms of business included in the pilot pack and the date of the appointment is the date the parties return those terms signed.
- Within five days of the appointment, the adjudicator shall give directions for the exchange of witness evidence and submissions. This can be done via telephone conference.
- The adjudicator has wide discretion to decide the dispute, and can take the initiative in ascertaining the facts or law, calling for documents and deciding whether to hold a meeting with the parties.
- The adjudicator has to act impartially and must comply with the principles of procedural fairness.
- The adjudicator’s decision is due within 56 days of the appointment. It must be given in writing, with reasons explaining to the parties why they won or lost. The adjudicator has five days to correct typos and other clerical errors. The adjudicator also has a lien over the decision, and can require payment before the decision is released. Any sum awarded is due and payable within 21 days of the decision.
- The parties can agree that the adjudicator’s decision is binding on them, alternatively, they can opt for the more familiar interim binding nature of an adjudicator’s decision (that is, until the dispute is finally determined by legal proceedings, arbitration or agreement).
The rules then go on to address money and enforcement:
- In terms of payment, the parties can choose from one of two options. With either option, they agree to give the adjudicator the power to direct which party pays the adjudicator’s fees and expenses (and the parties are jointly and severally liable for those fees). Alternatively, they can go further and give the adjudicator the right to determine whether one party should pay the other’s costs, either in full or in part. The guidance notes suggest the parties could go even further than this, and adopt more sophisticated costs awards (such as costs capping or costs awards only if the adjudicator believes a party behaved unreasonably).
- The adjudicator’s decision is enforceable “by proceedings and an application for summary judgment“. Apart from jurisdictional and procedural unfairness challenges, “it is no defence that the Adjudicator erred in fact or law“.
The time limits may be different, but much of the rest seems very familiar (as the links to construction adjudication materials demonstrate). Certainly, I know a lot of construction adjudicators who would love to be able to exercise a lien over their decisions (which we can’t).
Banding of fees payable to adjudicator
One of the aims of the pilot scheme is to provide a cost-effective way for parties to resolve their disputes. The guidance notes recognise the reality of disputes, which means a modest case doesn’t always costs a modest sum to resolve, as they can just as often involve substantial quantities of documents, involve difficult points of law or require a hearing as larger cases. By contrast, large value cases can sometimes involve “relatively short, if knotty, points of law or construction”.
Therefore, one unfamiliar aspect of the pilot scheme is the “banding” in terms of the cap on the fees payable to the adjudicator. This banding divides disputes into categories, where band:
- A is capped at £5,000 (small value claims where one party may have resourcing difficulties and the parties get a less senior individual, or someone who spends less time than is ideal).
- B is capped at £10,000 (greater value claims than A, but where legal costs may still be a significant proportion of the claim’s value).
- C is unlimited. Apparently, this shouldn’t be seen as “an invitation to the adjudicator to charge what they like, but should reflect the dispute’s complexity, the issues involved and the seniority of the adjudicator”.
The guidance notes encourage the parties to “do their best to agree with each other” which band a dispute falls into and suggest it will be helpful to the Nominating Body when deciding who to appoint. What it doesn’t say is how the adjudicator becomes bound by this cap.
Perhaps crucially for construction practitioners, there is no precise definition of professional negligence. The guidance notes suggest a number of professional persons, “lawyers, valuers, accountants and so forth”. I guess that means a lot of us fall into the “so forth” category!
Which disputes are appropriate?
The guidance notes identify some professional negligence disputes that may be suitable (such as where the value of the claim is modest or where mediation has failed) and some that may be unsuitable, including those that:
- Involve complex expert evidence.
- Require witness evidence and extensive cross-examination.
- May have unusual facts.
Construction disputes are not ruled out, but construction professionals are encouraged to “give very careful consideration” to whether they should stick with the statutory adjudication scheme. In part, this may be because parties to a construction contract cannot opt out of or agree to forego the statutory scheme’s right to refer a dispute to adjudication “at any time“. As such, construction professionals (and their insurers) could find themselves confronted with some strange tactical goings on, with referrals to both schemes at the same time.
It isn’t adjudication as we know it
So, this isn’t adjudication as we know it. It is a completely different thing although those familiar with construction adjudication will recognise some features of it.
Carr J and Fraser J both “commend it”. As someone very familiar with construction adjudication, I can see the idea is laudable. However, I feel there may be too many things that the parties have to reach agreement on at the outset for the pilot scheme to achieve the sort of uptake that will test it properly. After all, when parties are in dispute over something, it may be difficult to reach agreement on matters such as costs. That said, only time will tell whether this voluntary pilot (and any future successors) achieves the same level of success as construction adjudication, with parties content to accept the adjudicator’s decision and avoid litigation.
In the meantime, “Beam me up, Scotty”!