CIC Low Value Adjudication Procedure – note on second edition
May 2023The CIC has published the second edition of their low value disputes adjudication procedure (LVD MAP). The below considers the LVD MAP and changes made by the second edition.
The Basics
As shown by studies, including the annual survey conducted by Kings College London and The Adjudication Society, one of the concerns of users and potential users of adjudication for construction disputes is the costs of the process.
In an effort to simplify the procedure and give costs certainty for lower value claims, the CIC produced the first edition in February 2020. This has now been updated by the second edition, published in May 2023.
The LVD MAP provides an adjudication procedure for lower value disputes and determines a cap on the Adjudicator’s fees based on the dispute value. In addition, there is a maximum hourly rate an Adjudicator may charge. The LVD MAP is intended for use where the law of the contract is that of England and Wales – although it includes suggested amendments where the relevant law is that of Scotland.
What value of dispute does the LVD MAP cover?
The second edition defines a low value dispute as one where the total amount in dispute is less than £100,000 (excluding VAT). This is double the limit in the first edition and so should allow more disputes to benefit from the simplified procedure and cost certainty.
However, as with the first edition, the LVD MAP can be used on disputes worth more than the upper limit but only for relatively straightforward disputes and, importantly, where the Adjudicator agrees that it is an appropriate procedure to use.
Relevance of the dispute value to fees
The dispute value directly relates to the capped fee an Adjudicator can charge:
Dispute value Adjudicator’s fee
Up to £10,000 £2,000
£10,001 – £25,000 £2,500
£25,001 – £50,000 £3,500
£50,001 – £75,000 £4,500
£75,001 – £100,000 £5,000
Over £100,000 Negotiable
Where a dispute is valued at over £100,000 uses the LVD MAP, the Adjudicator shall set out to the parties the basis of their proposed fees and expenses.
If the Adjudicator decides that a meeting and/or site visit is necessary, such steps have a cap of £1,000 each for the Adjudicator’s fee plus reasonable travel expenses.
The second edition has made tweaks to the range of Adjudicator’s fees. The maximum fee recovery under the first edition was £6,000 for a dispute valued at between £25,001 and £50,000 – the second edition has reduced the capped fee in this range by £2,500.
The second edition has also included a new provision that sets a maximum hourly rate an Adjudicator may charge of £250 plus VAT. Although it is not clear whether this rate applies to adjudications that use the LVD MAP but are valued at more than £100,000, it sets a good benchmark as to what the maximum hourly rate should be.
The Procedure
Use of the LVD MAP
Parties can use the LVD MAP when:
- The underlying Contact includes a provision to use it; or
- The parties agree on an ad-hoc basis when a dispute arises; or
- Where the Scheme for Construction Contracts (England & Wales) regulations 1998 applies and the Adjudicator decides it is the appropriate procedure following a request by one of the parties or at their own discretion.
Notice of Adjudication and confirmation of procedure
The LVD MAP provides that a dispute can be referred to adjudication at any time and is commenced by a Notice of Adjudication. The Notice should identify the entitlement to use the LVD MAP.
When the Adjudicator is appointed, they are able to decide whether or not the LVD MAP is suitable for the dispute referred. The LVD MAP includes a non-exhaustive list of factors that may show a dispute is not suitable. These are:
- Where the total value of the dispute is greater than £100,000.
- Where a non-financial remedy such as a declaration of entitlement is sought.
- The documents included in the Referral, the Response, or the Reply exceed more than one A4 Lever Arch File (when printed) per submission.
- The dispute is prima facia not suitable for the Adjudicator to make a Decision on a documents-only basis.
- The terms of the Contract are not easily discernible.
- There are any challenges to the Adjudicator’s jurisdiction, which the Adjudicator decides cannot be dealt with by the Adjudicator within two hours of the Adjudicator’s time
It is important that any party that may be able to use the LVD MAP fully considers these factors and decides whether their dispute falls into one (or more) of them and whether there are any arguments that evidence the LVD MAP remains suitable.
In an important and beneficial change from the first edition, if the Adjudicator decides that the LVD MAP is not suitable then the adjudication referred proceeds under the Scheme.
Under the first edition, the Adjudicator would resign if they considered the LVD MAP was not suitable. This led to the potentially unfair position that a Referring Party would need to start again including incurring any nomination fee arising from an Adjudicator’s decision as to the procedure that they would have no control over.
Timetable
The second edition has adjusted the timetable so as to give a better chance of decisions being reached within 28 days from the date of the Referral.
The Response is now due by 7 days from the date of the Referral and any Reply is due by 14 days from the date of the Referral. The first edition allowed 14 days for the Response.
There does still remain the ability to extend the time for a decision beyond the 28 days, with the first 14 days of any extension being with the consent of the Referring Party and any further time at the consent of both parties.
The Adjudicator may direct of their own volition or on submission by one of the parties, to allow further submissions but these should be rare given the value of the dispute and the consideration that has to be given at the outset as to whether the LVD MAP is suitable for the dispute referred.
An extended timetable does not entitle the Adjudicator to an increase in their fee cap.
The Decision
The Adjudicator is to give reasons for their decision unless both parties agree that reasons are not required.
The Decision is binding and can be enforced – it is no ‘lesser’ of a decision because of the procedure used.
In the decision, the Adjudicator can determine which party is responsible for their fees and expenses either in full or on a percentage basis, on the basis of the general principle that costs should reflect the relative success of the parties’ case. However it remains that each party is responsible for their own costs.
Conclusion
The amendments introduced by the second edition of the LVD MAP should broaden the number of disputes eligible to use it, ensuring parties on lower value contracts and/or dealing with lower value disputes can take advantage of the simplified procedure and the costs certainty of capped Adjudicator’s fees.
However, for disputes close to £100,000 in value or that contain complex elements including legal interpretation/entitlement arguments, parties should be warned that the nominated Adjudicator may decide that the LVD MAP is not suitable and so the Scheme’s procedure is used. At that juncture there is no costs certainty over the Adjudicator’s fees and it could result in a more expensive exercise than either party envisaged at the outset.
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