Shhh! Adjudication schemes – one of the legal industry’s best kept secrets

Professional negligence claims can cost a huge amount to both parties involved. Typically most businesses believe the only option available when mediation has not been successful is litigation through the courts, which can take up to two years to conclude and – because of the time and complexity of issues – costs can rocket. However, a less well known option – where the courts could be avoided thereby reducing costs by up to 75 per cent and having a binding decision within only 56 days – is the revamped adjudication scheme.

What is it?

This voluntary scheme has been around since 2015 and was intended to enable parties in a professional negligence dispute to obtain a ruling from an independent adjudicator that would be adhered to by both parties (if this was agreed at the beginning.) Once parties agreed to the scheme, they were bound to its rules.

It recently received a makeover whereby it doesn’t just have to focus on claims against your solicitor. It now can be used in a dispute against any non-medical professional (such as accountants, surveyors, valuers, insurance brokers and pension and financial advisors) and there is no cap on the amount under contention. The costs of the adjudicator are graded so that they reflect the complexity and cost of the claim. Both parties are liable to pay the adjudicator’s costs which will remain within a set limit, but the adjudicator will have the authority to require the losing party to pay all or most of the costs. 

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Why haven’t more businesses used the scheme?

Both parties have to agree to the scheme and, as it is entirely voluntary at the moment, there is no guarantee this will happen – particularly if one party is confident of winning through the courts. But since the scheme is so flexible and can begin at any point in the dispute, this will be an attractive proposition since both parties retain the authority to determine both the magnitude of the adjudicator’s role and whether his or her ruling will be binding.

When is it useful?

Did your accountant fail to file company accounts on time (or made a mistake), and you faced additional tax or penalties as a result? Or did your solicitor miss the deadline to renew the lease of your commercial premises contributing to loss of business? Then the adjudication scheme could be the best option for you. It’s also useful in disputes where the involvement of an experienced adjudicator might help if a crucial point has become a barrier to reaching a settlement. It’s also worth noting that adjudicators are experts in their field with a wealth of experience so will be able to get to the crux of an issue quickly.

It is also likely to be more appealing to a party, if they have a claim with good prospects of winning on liability but where the likely damages may make uneconomical if they pursue the claim to trial. Many claims previously not considered worth the risk of litigation may now be seen as worth pushing forward into adjudication.

Moreover, there is a risk of reputational damage by going through court as all decisions by the judge will be made public, whereas all information will remain entirely confidential in a adjudication scheme if both parties agree to it.

What’s the alternative?

It’s important to note that adjudication may not be suitable for all disputes, such as those where complex expert evidence is required. For example, when a surveyor misses the presence of asbestos and there is dispute around liability. Or there are complex legal issues about causation or quantification of damages, which could happen, for example, when you rely on the advice of more than one solicitor. Adjudication is normally decided on paper submissions and in these complex disputes without hearing the parties, they might be unable make a reliable decision just on reading the papers.

Currently there are no specific sanctions for a party that unreasonably declines adjudication and chooses litigation through the courts instead. But we expect this point to be considered by the judiciary in due course.

Adjudication schemes are worth considering as they are designed to make negligence claims affordable, provide cost certainty (lawyers can offer fixed fees for adjudication work) and they’re quick, so owners can get on with growing their company, developing their product and hiring the right people.

Nick Hallchurch is a partner in B P Collins’ litigation and dispute resolution team.

Image: Shutterstock

In usual circumstances, anybody wanting to sue for negligence has six years from when the cause of action accrued to bring a negligence claim. However, there is an exception to this general six-year rule.

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