25 November 2016
Adjudication schemes: the legal industry’s best kept secret
Professional negligence claims can cost a huge amount to both parties involved. Typically most people believe that the only option available to them 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% and having a binding decision within only 56 days – is the adjudication scheme.
What is it?
This voluntary scheme enables 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 longer any cap on the amount under contention.
The scheme can begin at any point in the dispute and both parties can retain the authority to determine both the extent of the adjudicator's role and whether his or her ruling will be binding.
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 very modest limit, and the adjudicator can have the authority to require the losing party to pay the costs.
When is it useful?
Did your accountant give you poor tax advice that has cost you money? Or did your solicitor miss the deadline to renew the lease of your commercial premises causing you a sizeable loss of business? Then the adjudication scheme could be an option for you.
It’s also useful in disputes where the involvement of an experienced adjudicator might help if a crucial technical point has become a barrier to reaching a settlement. It is 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.
The scheme is 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 it 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 an 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.
Currently there are no specific sanctions for a party that unreasonably refuses to engage in adjudication and chooses litigation through the courts instead. However, this point may be considered by the judiciary in due course.
Nick Hallchurch adds: “Adjudication schemes are worth considering as they are designed to make claims affordable, they can provide cost certainty (lawyers can offer fixed fees) and they’re quick, so owners can get on with running their business and people can get on with their lives.
"The dispute resolution team have substantial experience in negligence across a range of industry sectors."
For advice, contact Nick by calling 01753 279035 or emailing your enquiry to firstname.lastname@example.org.