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Re-launched Adjudication Scheme for Professional Negligence Claims: a good idea whose time has come?

What can the recently re-launched Adjudication Scheme for Professional Negligence Claims offer parties and practitioners in this area? Those, and don’t worry you’re not alone, oblivious to its original launch as a pilot scheme in February 2015 may be part of the reason for its re-launch 15 months later. The original scheme apparently saw only two adjudications (hardly a sample sufficient to judge the efficacy of the scheme). The re-launched scheme covers a wider range of professionals, the removal of any limit on the amount of the claim and an attempt to cap the fees of the appointed adjudicator within certain bands depending on the value of the claim.

Mrs Justice Carr and Mr Justice Fraser, in their introduction to the re-launched pilot scheme, refer to the success of adjudication in the construction sphere, but that highlights the main difference between the two schemes: adjudication in construction disputes has been compulsory since it was introduced in the UK in 1996 by the Housing Grants, Construction and Regeneration Act (Construction Act); adjudication under the Scheme for Professional Negligence Claims is voluntary and is simply another form of alternative dispute resolution. Under the original scheme, which was limited to claims of up to £100,000 against solicitors, there were apparently only two effective adjudications. Most practitioners have no experience of the scheme. Until such time as the scheme is more widely used and is seen to be an effective means of dispute resolution, the sceptics will hold sway.

One of the biggest advantages of the scheme is that within 56 days of the appointment the adjudicator will provide a reasoned decision. Swift justice indeed, but is the price worth paying? That may depend on the type of claim that is being considered.

The scheme is particularly suitable for relatively straightforward claims that do not require expert evidence or the cross examination of witnesses (although the scheme can be adapted to have both). Such claims are likely to be against legal professionals where the barrister adjudicator (and why can only barristers be adjudicators?) may think he or she has sufficient knowledge of the practices in the area to obviate the need for any expert evidence. Whilst some may detect a certain level of arrogance in that belief, it is difficult to see how any contested claim against other professionals, such as, say, a surveyor or valuer, could be adjudicated upon without expert evidence.

However if adjudication is likely to be more suitable for smaller claims, where the costs may otherwise be disproportionate, the defendant insurers may be tempted to use their superior financial positions to resist adjudication in the hope that a reduced settlement can be reached. The insurer can do that in the knowledge that the courts’ recent application of the relatively new proportionality test has resulted in recoverable costs being slashed on detailed assessment. Further, the adjudicator will have no power to award costs unless the parties have agreed that the adjudicator should have such power. One can see that reaching agreement as to the power to award costs may itself be a stumbling block to the voluntary adjudication process.

The scheme could receive a boost if the courts penalise in costs a party that refuses to agree to adjudication in the same way that a party that refuses to mediate can be penalised in costs. In the context of an existing costs shifting litigation process, refusing to allow the adjudicator to award costs would surely seem unreasonable.

Whilst the Association of British Insurers (ABI) is supportive of the scheme, it is not known how the same might affect their reserving strategy. It is to be hoped that the ABI, as well as being behind the scheme, will urge its members to actually use it.

The reasoned decision of the adjudicator can either be binding until the dispute is finally determined by legal proceedings (so similar to the compulsory construction adjudication process) or the parties can agree that the decision will be binding on the parties, with the only available challenge to the decision being that the adjudicator did not have jurisdiction or that there was procedural unfairness. It would be no defence that the adjudicator was wrong on the facts or in law. Unless the claim is for a modest sum, parties may be reluctant to agree to a binding decision until the scheme has been more widely used, and is seen to be an effective and highly regarded dispute resolution procedure. If the parties agree that the adjudicator’s decision will not be binding, then a disappointed defendant will have to commence proceedings for declaratory relief that it was not liable for the compensation ordered by the adjudicator or that the amount ordered was excessive. Until any such declaratory relief is obtained, the claimant will have a decision that can be enforced.

The scheme can be used at any time during the litigation process. If settlement cannot be reached at a mediation because of, say, a significant difference in views as to the quantum of the claim and the principles to be applied in calculating that quantum, then an adjudication on that issue would break the logjam. This would still result in a significant saving on the substantial trial costs, a trial which may in any event still be many months away. Consensual resolution has proved to be impossible so a decision is needed. At that stage, adjudication may prove more attractive.

The scheme does raise a broader issue concerning the private resolution of claims. The Lord Chief Justice, in the recent BAILII Lecture, suggested that arbitration, and in particular the limited grounds for appealing an award, was seriously impeding the development of commercial law. If the scheme really took off, a consequence would be far fewer decisions from the courts in professional negligence claims. As a result, what was being regarded as outside the reasonable range of valuations, opinions or actions of professionals would become less widely known. Decisions of courts in professional negligence claims can mould what is seen as acceptable advice or conduct in particular professions.

Overall, the scheme is a good idea, but what is less clear is whether it is, at the moment, a good idea whose time has come.

Hardwicke PJ Kirby QC

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