Adjudication - have we created a monster?

Adjudication - have we created a monster?

Adjudication - have we created a monster?

I beheld the wretch – the miserable monster whom I had created

Mary Shelley, Frankenstein

Some twenty years after its introduction, the adjudication halo is becoming tarnished. Originally hailed as a cheap, quick and flexible way to deal with disputes and facilitate cash flow, adjudication is now increasingly being seen as an expensive and time consuming war of attrition which may not be a suitable forum, especially for lower value claims.

Why has the dream turned sour?

There are a number of reasons, many which appear to have come to a head recently, prompting industry bodies to react by launching new adjudication procedures and the government to consult on what is happening.

Originally envisaged as being a process mainly to ease the flow of money through a project, adjudication is now increasingly being used to resolve complex disputes, for example over defects or final accounts. These types of dispute are inevitably more complex, require much more evidence and are much more time consuming for the parties and the adjudicator to deal with.  Inevitably these factors lead to greatly increased costs and adjudicator’s fees.

Parties’ representatives and their clients must also take a share of the blame for seeking to over complicate the procedure, coming up with ever more ingenious arguments to try to stop an adjudication.  As witness the inevitable arguments over the jurisdiction of the adjudicator, which now seem to be virtually compulsory, most of which are without merit but seen as worth a punt.

That ingenuity has extended to enforcement proceedings in the courts. The TCC have done their best to stem the tide, initially handing down a series of extremely robust judgements which took many in the industry by surprise, but as parties have run ever more convoluted arguments the courts have had to consider a cat’s cradle of factual and legal issues and the case law has become ever more involved.

Three bodies have now seized the initiative.

TeCSA has been first off the mark and has introduced a Low Value Disputes Adjudication Service which is running as a pilot until November. Designed for disputes of up to £100,000 and only for claims for specified amounts such as a liquidated sum, the Service has a sliding scale of maximum adjudicator’s fees depending on the amount claimed. To weed out unsuitable claims, the Chairman of TeCSA has the absolute discretion to decide whether or not a matter is suitable for the procedure. Legal fees are not capped.

The Construction Industry Council has launched a consultation over a Low Value Disputes Model Adjudication Procedure, designed for disputes of £50,000 or less. The adjudicator’s fees are also capped on a sliding scale and the adjudicator can resign if the dispute is not suitable for the procedure. There is a non-exhaustive list of factors for her to consider which includes any challenge to her jurisdiction and the total paperwork extending to more than one A4 File of Documents. Legal fees are not capped.

The RICS is also set to launch a new Low Value Adjudication procedure soon.

The Government’s consultation on the impact of the 2011 changes to the Construction Act closed in January last year. One of the main issues being considered as part of the consultation is the cost of adjudication and whether it has become too expensive.  We shall just have to sit tight and wait to see if the Government is going to propose any action, when this might happen is anyone’s guess in the current political climate.

So, if you have a lower value dispute brewing, it’s well worth taking a look at the TeCSA procedure to see if you can use it.  Hopefully the CIC and RICS procedures will be finalised soon so that there is more of a choice and adjudicating smaller disputes may become more attractive.

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