Adjudicating Low Value Disputes

14 Aug 2019

ADJUDICATION - LOW VALUE DISPUTE INITIATIVES

 

On the 4th of June 2019 the CIC’s ADR and Management Board issued a consultation on a Low Value Disputes Model Adjudication Procedure (“CIC LVD MAP”). The publication of the consultation coincides with launch on the 21st of June 2019 of the TeCSA Low Value Disputes Adjudication Service (“TeCSA LVDAS”).

Both these initiatives seek to respond to the evidence that the cost of adjudication is a disincentive to parties using adjudication for low value disputes.

The Adjudication Society Newsletter and annual conference have previously referred to this problem and other concerns about adjudication such as the lack of means to introduce new adjudicators to panels and also of increasing diversity. TeCSA has also discussed these issues and the CIC engaged with nominating bodies to consider how these matters might be addressed.

The CIC has responded in part to these concerns with the draft LVD MAP and TeCSA with its Low Value Disputes Adjudication Service. Neither of these initiatives seek overtly to provide any mechanism to respond to those other concerns.They concentrate simply upon the cost for the adjudicating parties of adjudication. For a broader approach that deals with low value claims and introducing new adjudicators to adjudication see the New Zealand model referenced at the end of this article.

In concentrating on the cost for the parties there are two areas that can be considered; firstly the cost of the adjudicator, and secondly the cost of the process.

The approach taken by the CIC is to draft a model procedure. This is aimed at providing some clarity and cost control in terms of process as well as capping the adjudicator’s fees.

The approach taken by TeCSA concentrates solely on the adjudicator’s fees and leaves process to be determined by the Scheme and the contract.

The CIC LVD MAP is adopted by agreement of the parties either by incorporation in the contract or by agreement after the dispute has arisen. It cannot be imposed by the nominating body.

The TeCSA LVDAS is by contrast a choice made at nomination should the referring party choose to use the service.

This difference in approach makes these two initiatives different in terms of the drafting and application.

However when it comes to the capping of adjudicator’s fees and expenses and the kinds of dispute to which each respond there are some basic similarities.

Both are aimed at low value disputes. The CIC LVD MAP sets the limit at £50,000.00 as the amount claimed whereas the TeCSA LVDAS sets the limit at £100,000.00 (excluding VAT and interest)

Both apply a scale of adjudicator’s fees against bands of claim value.

CIC LVD MAP

Claim value Adjudicator’s fee

 

Up to £10,000           

£2,000

 

£10,001 to £25,000

£3,500

£25,001 to £50,000

£6,00.00

Over £50,000.00

Negotiable

 

 

 

TeCSA LVDAS

Claim Value Fee Cap

 

Up to £10,000     

£2,000

 

£10,001 to £25,000

£2,500

£25,001 to £50,000

£3,500

£50,001 to £75,000

£4,500

£75,001 to £100,000

£5,000

 

 

Both however also contain other requirements. The TeCSA LVDAS suggests that the claim must be a claim for a liquidated amount and the relief sought must be for payment of a specified sum.

The CIC LVD MAP requires that the dispute is between parties to a contract for carrying out construction operations.  The TeCSA LVDAS is also limited to claims under construction contracts or other types of contract which incorporate the Scheme or where the contract has very similar adjudication rules. Such as residential occupiers using the JCT Minor Works Contract.

The regulation of which disputes go forward to the TeCSA LVDAS is carried out by the Chairman of TeCSA who has an absolute discretion as to whether a matter is suitable for the TeCSA LVDAS. There are limited circumstances in which once appointed under the LVDAS the adjudicator may resign.

Since the parties have agreed to the use of the CIC LVD MAP any questions of suitability of the dispute for the process are dealt with by the appointed adjudicator. Under paragraph 16 of the rules, if the adjudicator decides the dispute is not suitable, the adjudicator must resign and the LVD MAP cannot be used by any different adjudicator to decide the dispute.  The adjudicator can refer to the guidance set out in paragraph 49 as to whether the dispute is suitable. The guidance is a non-exhaustive list.

The list includes; “

·       Where the documents included in the Referral or the Response or Reply exceed more than 1 lever arch File

·       The dispute is prima facie not suitable for the Adjudicator to make a decision on a documents only basis

·       There is any argument as to whether the parties have consented to use the CIC LVD MAP

·       The terms of the Contract are not easily discernible

·       There are any challenges to the Adjudicator’s jurisdiction”

As with the existing CIC Model Adjudication Procedure 5th Edition there is a general right of an adjudicator to resign at any time. There is no drafting setting out the consequences of resignation in terms of liability for the adjudicator’s fees and expenses.

As mentioned above there are specific circumstances in which once appointed under the TeCSA LVDAS the adjudicator may resign.

These are;

·       where it becomes clear that the Claimant has undervalued its claim,

·       or the claim is not for a specific sum of money,

·       or involves more than 2 parties.

Apart from these or any other contractual provisions there are no rights to resign over and above the usual grounds for resignation. Where the dispute has been undervalued the adjudicator may either resign or claim fees up to the date of the resignation or move to the next valuation band. Where the dispute exceeds the £100,000.00 limit, with the agreement of the parties, the adjudicator can proceed with the adjudication subject to agreeing a basis for fees, or just resign.

Under the CIC LVD MAP if the claim exceeds the limit of £50,000.00 the parties may choose to follow the procedure and agree with the adjudicator the basis for the adjudicator’s fees and expenses.  If no agreement is reached the adjudicator would resign.

The Adjudication Process.

Assuming that the adjudication is proceeded with, the TeCSA LVDAS does not prescribe in detail any procedure to be followed. The adjudication procedure will be governed by the Scheme or the contract. The guidance states The LVD Service can be used where the Scheme applies or where other adjudication rules very similar to it are to apply under the relevant contract.

By contrast the CIC LVD MAP sets out the procedural rules in some detail. The rule are based upon the drafting of CIC Model Adjudication Procedure 5th Edition but with certain changes made in order to streamline the procedure for the parties and provide more detail of what the process involves. The drafting is quite descriptive and is accessible to users who may not have any detailed knowledge of adjudication law and procedure or the legislation.

The main procedural changes are to attach a fixed fee to a site visit and to a meeting with the parties.

Where the adjudicator meets with the parties, in addition to the fee for acting as adjudicator, the adjudicator will be paid £1,000 plus reasonable travel expenses.

Where the adjudicator visits the site, in addition to the fee for acting as adjudicator, the adjudicator will be paid £1,000 plus reasonable travel expenses.

Another feature is that there is a potential constraint on the number of documents that can be included in each submission or the type of factual dispute that might be referred.

Where the documents included in the Referral or the Response or Reply exceed more than 1 lever arch file or the dispute is prima facie not suitable for the adjudicator to make a decision on a documents only basis, the adjudicator might resign. But these constraints only apply if the adjudicator decides that the dispute is not suitable for adjudication using the CIC LVD MAP, and resigns.

The timetable for submissions is also set out.

After receiving the Referral Notice, the adjudicator shall, as soon as reasonably practicable, confirm the date and the adjudication timetable to the parties in writing. Unless the adjudicator directs otherwise, the adjudication timetable will be as follows:-

“• Based upon the Referral being received by the adjudicator on Day 1.

• The Responding Party will respond to the Referral no later than Day 14.

• If the Referring Party wishes to make any Reply to the Response, it may do so in writing no later than Day 21.

• The parties will receive the Adjudicator’s Decision not later than Day 28.”

However against these indications as to process paragraph 23 provides;

“The Adjudicator shall have complete discretion as to how to conduct the adjudication, and shall establish the procedure and timetable. The Adjudicator shall not be required to observe any rule of evidence, procedure or otherwise, of any court or tribunal.”

Further in terms of timetable paragraph 22 provides;

“The Adjudicator shall reach the decision within 28 days of the date of referral, or such longer period as is agreed by the parties after the dispute has been referred. The adjudicator may also extend the period of 28 days by up to 14 days with the consent of the Referring Party.”

It can be seen from these provisions that the drafting constitutes a limited intervention in the process that is ultimately left to the discretion of the adjudicator.

There are potential obstacles to parties successfully using the CIC LVD MAP such as the need for prior agreement, and the suggestion that the adjudicator may resign if there is a jurisdictional challenge or the agreement to use the process is contested.

Conclusions

For anyone seeking to draft adjudication procedural rules there are constraints. The right to refer a dispute to adjudication at any time, the mandatory requirements of the Construction Act and the requirements of natural justice as interpreted by the courts all place limits on what can be achieved to provide a streamlined procedure in the context of adjudication.

The CIC LVD MAP is ultimately not that prescriptive but it does provide a clear process for the parties to follow and to guide the adjudicator.

If the CIC LVD MAP has the desired effect of encouraging parties to use adjudication in low value disputes by suggesting how that might be achieved at a reduced cost, it will serve a useful purpose.  It will not prevent a party who is determined to use the cost of adjudication as a means of deterring others from adjudicating by never agreeing to the procedure or subverting it once the process begins.

Preventing adjudication being used as a fig leaf for deliberate poor payment practices by the paying party is a matter better addressed by parliament.

The TeCSA LVD Service may assist too. It has potentially wider scope than the CIC LVD MAP as it is not based upon the agreement of the parties but it is limited to one nominating body (unlike the CIC LVD MAP ) and one which is often selected as the nominating body on major projects or by clients with legal advice at the contract drafting stage.  

Many of those projects now include other more sophisticated forms of dispute resolution. That said, TeCSA is of course available where no nominating body has been selected, which might catch some of the smaller contracts.

The CIC LVD MAP could be further amended in the consultation process and the TeCSA LVD service will no doubt inform the debate in this area.

 I, for one, look forward to the results of the consultation and to further developments in this area of adjudication.

There are some drafting issues that will no doubt be picked up but there are also some fundamental issues in the area of low value disputes that are demonstrated in the difference in approach of these two initiatives.

Is the TeCSA approach too light touch to provide confidence to users that in a low value dispute cost will be managed any better / differently from any other dispute?

Does the CIC LVD MAP in seeking to keep within the constraints also fail to deliver cost control?

If, in the final analysis, cost control will always have to be matter managed by the adjudicator, does the CIC LVD MAP at least provide some transparency as to what can be expected?

Could it go further?

If these initiatives do not work the conclusion we may have to accept is that we need statutory intervention to provide a model “adjudication procedure” for low value disputes and a standard basis upon which adjudicators for such disputes are nominated.

If the current system is too complex for parties or too open to abuse so that asking adjudicators to work within it at low cost or to “streamline” the process is not desirable or workable, a new statutory process should be devised specifically to fit the requirements of being low cost.

 

Tim Willis MA FCIArb Solicitor Advocate

A copy of the draft CIC LVD MAP is available at http://cic.org.uk/admin/resources/cic-lvd-mapconsultation-draft.pdf

Details of the TeCSA LVD Service is available at https://www.tecsa.org.uk/low-value-disputes-lvd-adjudication-service

The ICE has a simple dispute procedure at https://www.ice.org.uk/ICEDevelopmentWebPortal/media/Documents/Disciplines%20and%20Resources/09-1-ICE-Adjudication-procedure-2012-04-30.pdf

The Building Disputes Tribunal of New Zealand has a Low Value Claim Scheme https://www.buildingdisputestribunal.co.nz/adjudication/fees/low-value-claim-scheme/

The author Tim Willis is on the Working Group for the CIC LVD MAP and is a member of TeCSA. The CIC LVD MAP is being developed by a Working Group drawn from industry bodies, including the Adjudication Society, CIC, CEDR, ICE and the RICS. The views expressed in this article are those of the author.