Adjudication, the low-cost way

For some years there have been calls for a fresh approach to adjudication in lower-value disputes – those that are essentially simple liquidated demands for small sums. This is principally in reaction to the rising cost and complexity of adjudication procedures and to the level of fees charged by some adjudicators, lawyers and claims consultants – resulting in turn from an escalation in the time they need to spend on legal, evidential and procedural issues. 

At the Technology and Construction Solicitors’ Association (TeCSA) conference in November a paper was fielded by Andrew James of Harrison Clark Rickerbys on a proposal for a new, low-cost adjudication service. The overwhelming reaction was positive. While TeCSA cannot control parties’ legal costs, it can seek to make adjudication more attractive by providing a low-value dispute (LVD) service for claims of up to £100,000 that caps adjudicators’ fees in line with the claim value.

The LVD service is intended as a more agile and cost-effective way to enable small businesses to attain fair, inexpensive and transparent decisions on their quarrels

In the following months we have worked up a proposal and consulted with our panel of adjudicators, and to their credit the majority of them (a combination of lawyers, QSs, architects and engineers) have agreed to participate in the LVD Service, which we are launching today in the form of a six-month pilot. 

The service is intended as a more agile and cost-effective way to determine disputes, allowing small businesses to attain fair, inexpensive and transparent decisions on their quarrels. There is an obvious access to justice point in all this too.

While TeCSA would not expect adjudicators to routinely incur a loss in terms of fees, equally most adjudicators have earned a good living out of the construction industry and therefore if they do deal with LVDs and recover less in terms of fees, it should be viewed by adjudicators and TeCSA as “putting something back” into the industry. An LVD adjudication procedure will provide a valuable service to the industry, to those who currently feel ill-served and those who have adjudication clauses in their building contracts. 

I am aware that the Construction Industry Council, RICS and the Federation of Master Builders are also looking to develop bespoke adjudication procedures for low-value disputes for claims valued at less than £50,000, but that service is not yet finalised and launched. It will be interesting to see how that shapes up, and if we end up with a variety of schemes with different attributes, that may be no bad thing. 

So, how will the service work? The applicant will self-certify the claim value when applying to TeCSA and the chair will appoint an adjudicator on this basis. Thereafter it is a matter for the parties and the adjudicator to proceed with the adjudication. Crucially, as the LVD Service only restricts the adjudicator’s fees, there is no need to get the agreement of the opposing party to use the service, and therefore there is little scope for awkward opponents to seek to derail the process. 

The proposed fee caps for each level of claim value are set out in the table. This is a cap, not a fixed fee and the claim value excludes VAT and interest. The fee is all-inclusive (except for VAT).

The LVD service will apply to adjudications under the Construction Act or under contractual procedures equivalent to an adjudication under the Construction Act. Other than the fee levels, the normal TeCSA adjudication rules will apply – it will be important that TeCSA maintains the quality of its service. Nevertheless, as it is likely most of the disputes will be fairly straightforward, adjudicators may consider limiting the number and length of submissions, while being mindful of complying with the rules of natural justice, and will endeavour to issue their decisions on or before the 28-day deadline – a deadline frequently extended in larger adjudications.

Claims will be limited to those for a specific liquidated sum, but for the sake of simplicity and accessibility the types of claims are not otherwise prescribed. So there could be claims for interim or final payments, claims for damages, loss and expense and variations – but it is likely that in the majority of cases they will be straightforward claims for retention monies or interim payments based on a failure to give a payment notice or a pay less notice (“smash and grab” adjudication). 

TeCSA does recognise adjudicators will need to appreciate that as a respondent can raise any defence there is a possibility of matters becoming more complex than they first appear – but that will not give the adjudicator the right to resign or charge higher fees. So there will be an element of taking the rough with the smooth. 

But while for the very lowest-value adjudications the fee recovery will be modest, the new service will serve an important need. Not everyone in our industry of small margins has deep pockets for small disputes to “go legal”.

TeCSA will review the experiences of users and adjudicators once the pilot is completed and I will update readers then.

Simon Tolson is honorary president of TeCSA and senior partner in Fenwick Elliott. This article was co-authored by Andrew James, partner in Harrison Clark Rickerbys and TeCSA committee member