Much has been written about low value disputes and the challenge they pose in terms of achieving costs effective dispute resolution mechanisms. The government has now produced a call for evidence which is exploring alternative mechanisms to resolve disputes and to avoid court procedures more generally.
One option would be for the current statutory process of adjudication to be made available more widely. It is a suggestion that many lawyers would not automatically be aware of but for some of us who are construction solicitors it is a change that has already taken place. The Housing Grants Construction and Regeneration Act 1996, which gives effect to adjudication (The Construction Act) came into force in May 1998.
It is also a quarter of a century after the Woolf report, and in the words of the call for evidence “litigation is still far from the last resort and too many cases still go through the court process unnecessarily. The provision of dispute resolution schemes remains patchy, even though there are welcome developments including a wide range of Ombudsman schemes, private dispute resolution services and judicial early neutral evaluation projects. But more still needs to be done to increase uptake of less adversarial options.”
The call for evidence is broad in its scope and while it has a focus on mediation or conciliation there is also room for a process such as adjudication which has its own peculiar status of providing a decision that is binding on an interim basis and which has the effect in practise of providing a “final” resolution of the dispute. The practical resolution is usually for a party to comply with the outcome or to have that outcome enforced by the courts through a summary process. Either party can then have the dispute referred to the courts or arbitration for a final resolution but they must comply with the outcome of the adjudication.
Most disputes are resolved at the adjudication stage. The process has been enforced by the courts for many years and there is considerable judicial support for the procedure both in the Court of Appeal and the Supreme Court and more broadly there strong evidence of its success.
The legislation works by introducing the process into contractual relationships from which parties cannot derogate. It has the effect of creating a process that a party may use and that will have effect against the other party even where there is no consent to the procedure by both parties.
The statutory process is the basis for most adjudications and standard contract drafting. It is open, however, to parties to agree to the process in the same way arbitration might be agreed to and in that context the parties may choose to depart from the process as set out in the legislation provided that agreement is reached after the dispute has arisen.
The parties cannot include in their contract a process that conflicts with the legislation.
By this mechanism the legislation provides a standard procedure that a party may use without the agreement of the other party being necessary and that is enforced by the courts.
The area in which the process has been less successful is in the context of disputes of lower value, which in a commercial context is seen as being below £50,000 or below £100,000
Attempts have been made to cater for these types of dispute by using procedures for appointing adjudicators or setting procedural rules with the object of reducing the cost of the process to the parties. While it is relatively simple to control the fees of the adjudicator by adopting a nomination route which requires the adjudicator to agree a capped fee (see the TECSa model) it has proved more problematic to influence the cost of the process. The reason is that the statute sets a procedure which allows considerable flexibility to parties or one party as to how it chooses to conduct the adjudication. While an adjudicator has control over the process once appointed, in practice that begins with the receipt of the referring party’s case and the responding party is given almost unfettered scope to respond as it chooses. In short, costs can escalate and a responding party can make the process more expensive if it chooses not to engage constructively or to be deliberately obstructive.
There are also limited powers of the adjudicator to control process in terms of the number of submissions the parties make. Where the sums in dispute are quite modest, the cost of being given assistance through the process can become prohibitive. Typically the fees of adjudicators are £200 to £300 per hour and parties may be charged very significant fees by people who have experience of the process assisting them. The costs could therefore be in the region of £20,000 to £30,000. The parties’ costs are not recoverable. Given the uncertainty of outcome and stress of the process, for some parties the process is not attractive.
With some minor changes to the Construction Act a more effective process for low value disputes would be possible (See for example the CIC LVDMAP procedure) and with the removal of the current exclusions for residential occupiers, or broadening its scope beyond the construction sector the process would be available for more people.
The existing government consultation would be a good place to start the discussion. The document can be found at https://www.gov.uk/government/consultations/dispute-resolution-in-england-and-wales-call-for-evidence. I will respond as an individual but I hope that the nominating bodies and trade bodies who deal with disputes take the opportunity to raise adjudication as a model that could be improved upon and used more widely.