Adjudication – a voluntary ADR alternative in professional negligence disputes

A revised pilot scheme for Adjudication of Professional Negligence claims was recently launched, expanding the range of cases that may benefit from this form of ADR.

The original scheme ran from May 2015 and was limited to solicitors’ negligence cases capped at a value of £100,000. The revised scheme abandons the cap and opens itself to any professional negligence dispute.

How it works

Both (or all) parties must agree to utilise the scheme. They may agree to select one of the panel adjudicators (with the adjudicator’s agreement) or, when referring their case to the scheme, ask the chair of the PNBA to select an adjudicator.

If the adjudicator accepts the appointment (and the parties continue to accept the appointment after any disclosure by the adjudicator), then the Terms shall be agreed in writing by the parties.

Once appointed, the Adjudicator will give directions for the exchange of witness evidence and may seek additional documents. A short hearing in person or telephone may take place but is not the intended norm - the Adjudicator will usually decide the dispute based on the documents only.

The decision will be in writing with reasons, within 56 days of the appointment (unless extended by agreement).

The extent to which the decision is binding on the parties shall be agreed by the parties by the time of the appointment. If temporarily binding only, a losing defendant would have to pay any award in the claimant’s favour and then seek to recover that payment by issuing proceedings itself.

The parties can select pre-defined options as to how the adjudicator will deal with costs, or agree the costs rules themselves.

Focus of the scheme

The scheme is now intended for all professional liability disputes. ‘Professional’ isn’t strictly defined but the parties should be able to agree by reference to established categories.

Although the financial cap has gone, the scheme is not intended to be used where detailed and complex evidence of experts and lay witnesses is required to deal with issues of, for example, breach of duty and causation.

Why use it?

  • Mutual pragmatism and cooperation – agreement by the parties to the scheme may indicate open-mindedness and that neither side seeks to be combative for the sake of it.

  • Option of confidentiality – this is ‘user-defined’ in advance, avoiding becoming the final hurdle to an otherwise agreed settlement, for example.

  • Speed – the administrative steps of nomination after referral, acceptance of appointment and directions after receipt of signed terms of appointment are each to take place within 5 working days and the decision within 56 days of acceptance.

  • Reduced procedural costs (e.g. avoiding application fees, hearings, costs budgeting) and reduced lawyers’ costs – pre-action correspondence may suffice for the adjudicator without the need for fully pleaded cases.

  • Greater prospect of proportionality – the fee-band of the claim can be communicated when referring to the scheme.

  • Decisions can be sought on party-defined issues, not necessarily the whole action.

Some Practicalities

  • Only sensible parties need apply.

  • The benefit can be lost – particularly by the defendant – if the parties don’t agree to be bound by the decision.

  • The scheme is best suited to claims of lower factual complexity.

  • There may be an increased costs risk to the losing party, in any subsequent litigation.

  • It is essential to appreciate the consequences of the agreement to adjudicate (e.g. finality, costs).

  • Joint and several liability for adjudicator’s fees. A winning defendant could pay the lot against an unsuccessful, impecunious claimant. It isn't for the adjudicator to bear a costs risk.

  • There are five trial adjudicators. Whether high take-up impacts capacity remains to be seen, but experience of efforts to agree choice of mediators indicates there is a risk the limited pool may deter claimants.

  • For defendants, the prospect of a claimant giving up due to the attrition of litigation or a loss of interest, is lost.

Ultimately, identifying the right cases and the right opponents with which to take the step into voluntary adjudication may not be straightforward, but the expanded scheme appears to be one which defendants and their insurers would do well to keep in mind and to seek to trial, particularly in those cases where the value of the claim lends itself to costs swiftly becoming disproportionate.