Practical Law

A few weeks ago I was due to attend an event to mark the launch of the first edition of the CIC’s Low Value Disputes Model Adjudication Procedure (LVD MAP). However, like many other things this year, because of COVID-19, the event was cancelled and moved on-line instead. As a consequence, I think the launch has gone relatively unnoticed, so I thought I might change that with a few words about the new procedure.

What is the CIC’s LVD MAP?

Well, just like it says in the name, it is a procedure for resolving low value disputes by adjudication. In this case, that has been determined at £50,000 or less. Crucially (in my opinion), it is a Construction Act compliant procedure, so can sit alongside the statutory Scheme for Construction Contracts 1998.

It isn’t exactly new either, as a draft procedure was first published for consultation about this time last year, which Jonathan considered at the time (see Blog post, Will new adjudication schemes solve the problem of rising adjudication costs in low value disputes?). A second draft was subsequently published and made available for consultation until October 2019.

Key features of the LVD MAP

We were told at the CIC launch that the procedure has been developed to provide parties involved in low value disputes, especially SMEs, with:

• A procedure that is uncomplicated in its content and overall structure.
• A timetable and programme to manage disputes that avoids unnecessary costs and use of endlessly complicated evidential measures.

It aims to achieve this by dealing with issues that are “clear-cut and not complicated by legal/technical questions”. If there is any doubt about the suitability of the procedure, the nominated adjudicator will make a decision. However, the adjudicator should only proceed if they conclude that the dispute is suitable for determination under the procedure and the responding party has no reasonable objection to the matter being dealt with under the procedure.

That sounds like a jurisdictional challenge in all but name, and also sounds like an area that could give rise to enforcement difficulties down the line. After all, what one party considers to be “reasonable” may not be the same as what someone else thinks is reasonable. We only have to look outside now to see how social distancing rules are being interpreted by the general public to realise interpretation and reasonableness are subjective things.

To avoid some of that subjectivity, we were reminded that where the adjudicator decides the dispute is suitable for determination under the procedure but the responding party objects, the adjudicator can exercise the powers contained in paragraph 13 of the Scheme for Construction Contracts 1998, which includes deciding on the procedure to be followed in the adjudication. We were also reminded that the adjudicator has a duty to avoid incurring unnecessary expense (paragraph 12 of the Scheme). Apparently, by deciding whether to exercise their discretion in applying the procedure, the adjudicator will be complying with that requirement (presumably because of the cost capping that applies). Paragraph 13 also gives an adjudicator the power to take the initiative in ascertaining the facts and the law necessary to determine the dispute, and to request documents, representations and submissions from the parties. Presumably these too can be operated in such a way as to limit costs.

Because the procedure is aimed at issues that are “clear-cut and not complicated by legal/technical questions”, there is a list of the sort of circumstances when it may be unsuitable to use, such as where:

• The total amount claimed is greater than £50,000 (unless the parties agree otherwise).
• A non-financial remedy such as a declaration is sought.
• The documents exceed more than one A4 lever arch file per submission.
• The dispute is unsuitable for the adjudicator to make a decision on a documents-only basis.
• There is an argument as to whether the parties have consented to use the procedure.
• The terms of the contract are not easily discernible.
• There are jurisdictional challenges that the adjudicator decides cannot be dealt with in two hours of the adjudicator’s time.

Choosing to use the LVD MAP

Parties are free to agree to choose the procedure on an ad-hoc basis or can incorporate it by reference into their contracts.

Who are the adjudicators?

As far as I’m aware, any ANB that is supporting the procedure can be asked to select an adjudicator for an appointment in the usual way from a list of individuals who have said they are willing to take on disputes under the procedure. This includes the CIC and RICS (the full list of ANBs appears in Schedule 2 of the procedure).

What does it cost?

This is probably one of the most important features of the procedure. To deal with a low value dispute proportionately, the adjudicators fees are capped as follows:

• Up to £10,000 @ £2,000.
• £10,001 to £25,000 @ £3,500.
• £25,001 to £50,000 @ £6,000.
• If over £50,000, it is negotiable with the parties.

The adjudicator can meet with the parties and can carry out a site visit, and is allowed an extra £1,000 plus reasonable travel expenses for each activity.

However, it is worth highlighting that there is no cap on the fees and expenses of the parties’ representatives.

COVID-19 and dispute resolution

At the procedure’s launch, it was suggested that with the current COVID-19 crisis, the procedure will help to free up cash flow for struggling businesses by quickly and effectively resolving their disputes. Only time will tell if that happens. In the meantime, it has industry support, including getting a mention in the CLC’s guidance on contractual best practice.

Coincidentally, that guidance also refers to RICS’ summary adjudication service, which was recently launched to deal with disputes under £20,000. Described as “summary adjudication”, it is intended to be a “specific response to the needs of the industry” to deal with the economic effect of COVID-19, and will initially be available until the end of July.

If the LVD MAP is a truncated version of the Scheme for Construction Contracts 1998, I’m not sure what you’d call this newer “mini me” procedure. For £1,000, the adjudicator will deliver a decision, with outline reasons only, restricted to one A4 page. The decision will be delivered within 14 days of the referral and there will be no inspection or site visit. Either party can ask for full reasons, but they will be prepared at that party’s expense once the summary adjudication has been completed. FAQs are available for those of you who want to know more.