ICE Adjudication Procedure for Payment Disputes

For many years the Institution of Civil Engineers (“ICE”) has acted as an Adjudicator Nominating Body (“ANB”) and has provided other forms of dispute resolver, with a particular focus on disputes under the NEC form of contract. To supplement this offering, the ICE has recently launched a new Payment Notice Dispute Model Adjudication Procedure (“PND MAP”) for contracts that allow for ICE appointed adjudication proceedings.

This article provides a brief summary of the scope of the PND MAP, pre-conditions for using the PND MAP and the procedure.

Scope

The scope of the procedure is limited to payment or ‘pay less’ notices under a construction contract and does not apply to wider construction related adjudication. In simple terms, this scenario is one where party A, who owes sums under a contract to party B, fails to serve a valid payment notice or pay less notice, in respect of the sum owed to party B. In these circumstances, Party B can use the ICE PND MAP to initiate adjudication to recover the amount due provided there is an identifiable notified sum, for example as contained in an application for payment. These are typically called ‘smash and grab’ adjudications.

Pre-conditions

The contract must provide for dispute resolution through adjudication, and specifically the ability for ICE to select the adjudicator. The dispute must also be related strictly to the failure of provision of notice to pay or pay less. Claims as to the value of the underlying sum, the possibility of offsetting payment through notice or claims relating to contract interpretation or declarations are excluded from its remit.

Procedure

The party wishing to engage the PND MAP must in their Notice of Adjudication: (i) give notice that is using this procedure; and (ii) agree to pay the adjudicator’s fees if the matter referred is found to constitute a case unsuitable for this procedure. Although untested, this presumably would be where a payment notice or pay less notice is found to be valid or there is no notified sum on which to base the adjudication.

The usual requirements remain for the Notice of Adjudication. It must identify the dispute and the redress sought so as to establish the jurisdiction of the adjudicator.

The adjudication is conducted using the adjudication provisions in the underlying contract. If there is a direct conflict between those contractual provisions and the PND MAP, the contractual provisions will apply only to the extent of the conflict.

Once the Notice of Adjudication is served the Referring Party has seven days to issue the adjudicator with the Referral Notice. The adjudicator will then set directions leading to a decision within 28 days.

The adjudication is carried out electronically, with submissions conducted through documents only.

The adjudicator can in their decision require the payment of interest as appropriate.

Suitability

An adjudicator is entitled to find that the claim is unsuitable for adjudication on a finding of a failure to fulfil the subject matter requirement, an inability to conduct proceedings fairly or for any other reason in accordance with the PND MAP. An adjudicator on making such a decision is entitled to resign from proceedings or continue adjudicating, but outside the constraints of PND MAP with the consent of both parties or the Referring Party exclusively, if the adjudicator considers it appropriate to do so in the circumstances.

Costs and fees

Parties shall bear their own costs and become jointly and severally liable for the payment of adjudicator fees where the matter is suitable for the PND MAP. The adjudicator is free to alter this position of payment as seen fit.

To encourage cost certainty the PND MAP caps the adjudicator’s fees based on the value of the claim, as below:

Commentary

The process is meant to be fast, inexpensive, and focused on limited issues. This is facilitated through quick document-based interaction and strict adjudicator suitability assessments. It also seeks to provide certainty with regards to the adjudicator’s fees and expenses.

The PND MAP has a narrower scope compared to other low value adjudication procedures. It applies only where a party has failed to issue a valid payment or pay less notice, and subsequently fails to pay an identifiable notified sum. In contrast, the CIC low value adjudication procedure (“CIC LVD MAP”) is for non-complex disputes but may still include a valuation exercise.

Given its limited scope, it is not curtailed by a financial limited, whereas the CIC LVD MAP is for claims of less than £100,000.

Whether it proves a useful addition to the procedures available to construction industry waits to be seen, but at the very least its limited focus will mean a Referring Party will need to be sure of its entitlement to bring a claim under this procedure.

Beale & Co specialise in construction and insurance disputes and have vast experience in adjudicating these matters. For guidance on CIC PND MAP applicability, procedure, and enforcement, please contact James Vernon.