Adjudication – claimant says “no”

The Pre-Action Protocol for Professional Negligence claims (the Protocol) has been amended to include a requirement for claimants to consider adjudication at an early stage in proceedings. The amendment provides further incentive for parties to consider ADR from the outset of a dispute in the hope that more claims can be resolved at a proportionate cost.

Background

The amendment to the Protocol came into force on 30 April 2018, following a lengthy pilot scheme offering adjudication for all professional negligence claims excluding engineering, medical or defamatory disputes. Prior to the amendment, adjudication was only referenced in the Protocol in relation to construction claims.

The amendment imposes an obligation on the claimant to indicate in a Letter of Claim whether they wish to refer the dispute to adjudication. If they do, the claimant is required to propose three adjudicators or seek nomination from the nominating body. If claimants do not wish to adjudicate, they need to provide reasons as to why not. Interestingly, the amended Protocol makes no provision for defendants to provide a response to any proposal for adjudication.

The overriding purpose of the amendment to the Protocol is to enable parties to a professional negligence dispute to obtain a quick adjudication of their dispute, at proportionate cost and avoid costly litigation.

How it works

The parties can select an adjudicator with experience in the subject matter of their dispute and the adjudicator will provide written reasons for its decision within 56 days of their appointment. The parties must agree in writing

• To be bound by the provisions of the scheme.
• Whether the adjudicator's decision will be binding and final or binding and not final (the parties have the benefit of deciding whether the process is binding or whether it is temporarily binding pending determination by a court).
• Whether the adjudicator will be entitled to direct one party to pay another party's costs. There is likely scope for costs sanctions for unreasonable failure to engage in adjudication, similar to those applied in mediation cases (although this is yet to be tested).

Benefits

As Rasmay J set out in the foreword of the Protocol “…adjudication is particularly appropriate in resolving disputes in professional negligence cases where without some fundamental views on the merits, the parties may not be able to resolve their dispute…”

If parties are willing to engage in the adjudication process it provides a cost effective option for parties to either:

1. Resolve the dispute at an early stage before costs become disproportionate.
2. Obtain an independent view on the legal issues and merits of the claim which may assist in setting the parties’ expectations at a realistic level in early course and aid reaching an early settlement.

For the right case, the scheme should help the parties avoid court proceedings and reduce costs - which will no doubt be welcomed by insurers.

Comment

In contrast to construction adjudications, the adjudication process cannot be imposed by one party on the other; it has to be agreed. Therefore it remains to be seen what take up the voluntary adjudication scheme will have.

We expect that parties may not wish for an adjudicator’s decision to be binding so early into a dispute and will not agree to be bound by an adjudicator’s decision unless they are confident of success. For this reason, we expect that the majority of parties will either not want to engage in the scheme or will insist that the adjudication is not binding and use it as an opportunity to explore the merits of their case. However, this then begs the questions as to why adjudication would be a chosen method of ADR, as opposed to a mediation, or even dealing with issues via correspondence, which would be cheaper and arguably just as effective.

Only time will tell how inclined claimants will be to proposing adjudication to defendants so early into a dispute. From our experience, however, in 80% of cases where the defendant proposed that the claim be adjudicated this was rejected by the claimant. It therefore seems unlikely that there will be a significant increase in the numbers of claimants proposing adjudication. Equally, how receptive defendants will be to proposed adjudication when there is no requirement for them to respond is far from clear. However, although the amendment to the Protocol is not without its flaws (a party cannot for example rely on expert evidence which is often key in professional negligence claims) it is welcomed as it offers the parties, in the right case, a quick and relatively inexpensive process to dispose of the case at early course.

Read other items in the Professions and Financial Lines Brief - June 2018