"Smash and grab" adjudications are one of the most common ways a contractor can seek to recover outstanding debts under a construction contract.
Small to medium-sized contractors can often face difficulties, however, when the value of the unpaid debt is below £20,000.
Whilst adjudications are a quick, cost-effective process for the recovery of outstanding sums in comparison to court proceedings, each party is still liable to pay their own legal fees as adjudications are cost-neutral.
In addition, both parties are jointly and severally liable to pay the adjudicator's fees, and the adjudicator is free to determine which party should be responsible for them.
However, in most cases, the losing party is liable to pay the adjudicator's fees in full.
The effect of this is that the costs of pursuing a debt below £20,000 may well become disproportionate.
In an attempt to circumvent this issue and as a direct response to the economic effect of COVID-19 on the construction industry, in spring 2020, RICS launched a summary adjudication service to deal with disputes below £20,000.
The key differences between the RICS summary adjudication service, RICS low-value dispute (LVD) adjudication service and RICS construction adjudication service are set out in the following table:
|
|
Summary Adjudication (dispute value of £20,000 or less) |
LVD Adjudication (dispute value of £100,000 or less) |
Construction Adjudication |
|
Nature of Dispute |
The sum claimed must be less than £20,000 and the issues must not be complex |
The sum claimed must be less than £100,000 and must not involve multiple or complex issues. |
Applies to any dispute, regardless of the complexity. |
|
Application Fee |
£300.00 |
£425.00 |
£425.00 |
|
Adjudicator’s Fees |
Capped at £1,000 plus VAT |
Capped depending on the value of the claim e.g., for a claim with a dispute value between £75,001 to £100,000, the fees are capped at £5,000. The adjudicator’s hourly rate is capped at £250.00 plus VAT. |
Not capped and are dependent on the adjudicator’s fee terms. |
|
Length of Adjudication |
14-day procedure |
28-day procedure |
28-day procedure |
|
Size of Submissions/Decision |
Adjudicator will deliver a summary decision, with outline reasons only, restricted to 1 A4 page. |
The adjudicator is expected to limit the length, or time for submission of any statement, response or argument. The parties are required to limit their documents to no more than 1 A4 lever arch file (or electronic equivalent) per submission. |
There is no size limit for the parties’ submissions or the adjudicator’s decision. |
|---|
Further information regarding each service can be found on the RICS website at: Adjudication Services (rics.org).
It is worth noting that the summary adjudication procedure is only available to those parties who have selected RICS to be the adjudicator nominating body, and the above time periods and adjudicator's fees are subject to change via agreement between the parties and the adjudicator.
The key and most beneficial differences between the summary adjudication service and the LVD adjudication service are that the adjudicator's fees are capped at £1,000 plus VAT and that the adjudicator's decision is delivered within 14 days of receipt of the referral notice from the referring party.
This means that the dispute can be drawn to a swift close without the parties having to incur significant legal fees.
The fact that the adjudicator's fees are capped at £1,000 plus VAT also lowers the financial risk on the referring party in the event that they lose.
For more information about adjudications generally, see our blog post: Don't hang about, Adjudicate!
At Myerson, we have experience in advising on and issuing adjudications using the summary adjudication service, and we can offer advice on all aspects of contentious construction matters.
For more information on the range of legal services Myerson LLP can provide, please call Myerson's Construction Team:
