Willing agreement needed if professional negligence adjudication pilot is to be successful, experts say

The expansion of the scheme creates more opportunities for aggrieved parties to obtain quick, cost effective and binding rulings in a wider range of professional negligence disputes - although it remains to be seen whether professionals themselves, and their insurers, will embrace the scheme as a way of reducing dispute costs and perhaps request that an adjudication provision is written into their standard terms and conditions.

The scheme, which has the backing of the senior judiciary and the Ministry of Justice (MoJ), was originally launched in February 2015 for solicitors' liability claims valued up to £100,000 in damages. It was re-launched on 25 May 2016, extended to all non-medical professions and with no financial limits on the value of the claim. New adjudicator fee bands have also been introduced, so as to reflect the complexity and value of the particular claim.

Although based on the statutory adjudication scheme for construction disputes, the professional negligence scheme differs in one crucial respect: the process is entirely voluntary. This means that not only will both parties have to agree to participate in the first place, but they will also have to agree on the finality of any ruling and the extent of the power given to the adjudicator on the issue of costs.

There is presently no sanction if a party unreasonably refuses to adjudicate, but if court litigation follows, we anticipate the courts may prove willing to sanction that party on costs. This would create an incentive for parties to participate in the process even if the merits of their particular positions are unfavourable. We expect this point to be tested in due course.

Features of the scheme

The scheme continues to be overseen by the Professional Negligence Bar Association (PNBA), which will continue to provide adjudicators. The process is voluntary, although once committed the parties need to agree to be bound by the rules of the scheme (22-page / 308KB PDF) and to see the process through.

A reasoned decision will be provided within 56 days of the adjudicator's appointment. That decision will be binding unless one or both parties wish to take the matter to court or an arbitration hearing, or unless the parties opted for finality. In practice this would mean commencing court proceedings or recommencing those which are stayed, or declaratory relief that the challenging party was not liable or that the compensation ordered was excessive. The party bringing these proceedings might be at special costs risk if, having taken the matter to court or arbitration, the judge or arbitrator decided against that party.

The scheme can be used at any stage of a dispute. Parties will be jointly liable for the adjudicator's costs which will be within a set limit, but the adjudicator will have the power to require the losing party to pay all or most of the costs. The decision of the adjudicator will not be confidential unless the parties agree otherwise.

Our view

Adjudication is likely to be more attractive to a party at a pre-action stage, if they have a claim with good prospects of succeeding on liability but where the likely damages may make pursuing the claim to trial uneconomic. Claims previously not considered worth the risk of litigation may now be seen as worth pushing forward into adjudication.

It is also clear that adjudication will not be suitable or preferable for all disputes. The procedure may not be suitable where complex expert evidence is required, and this may reduce the volume of claims that become subject to adjudication - or at least to finally binding adjudication. One obvious category of claim which may lend itself well to adjudication is claims against solicitors, where adjudicators can form their own views with less need for expert evidence.

There may be advantages to professionals in giving themselves the option to require confidential adjudication of any dispute made against them, in particular low value claims that are within their excess, within their terms and conditions. If this happens, this may in itself increase the volume of claims that become subject to adjudication.

Law firms that can offer fixed fees for adjudication work will allow their clients the benefit of cost certainty in respect of the process. This would also give those with limited resources the opportunity to resolve a dispute without recourse to third party funding, and potentially secure recoveries in respect of claims that would otherwise have been difficult to pursue.

Michael Fletcher and Suzie Boyd are dispute resolution experts at Pinsent Masons, the law firm behind Out-Law.com.