The Institution of Civil Engineers (“ICE”) has recently published a Payment Notice Dispute Adjudication Procedure (the “Procedure”). In other words, there is now a specific procedure for dealing with “smash and grab” adjudications. Whilst there are a variety of adjudication schemes for lower value disputes already available, this is the first procedure I am aware of that is specifically targeted at smash and grabs. It has been produced on the basis that such disputes are “technical” and therefore “should be quicker and less expensive than a true valuation”.

The Procedure takes some care in defining the type of dispute it applies to. It also expressly excludes: (a) any dispute relating to the underlying value of the sum claimed in a payment notice; (b) the underlying value of any set off in relation to the potential payment notice; and (c) any claim for declarations such as the meaning of a particular contract term (see Article 2 of the Procedure). As such, the Procedure is deliberately limited in scope, applying only to the clearest and most straightforward smash and grabs where the contract wording is not an issue. This should be kept in mind when deciding whether to propose the Procedure.

So, what does the Procedure offer? Well, the feature that immediately jumps out is its capped fee for the Adjudicator’s fees. The fee cap is determined by claim value. For example, the Adjudicator’s fee would be capped at £2,000 for a smash and grab claim under £25,000. For a higher value claim, such as £50,001 to £100,000, the Adjudicator’s fee is capped at £5,000. The capped fee for a claim between £175,001 to £250,000 it is £10,000. The Procedure sets out additional caps outside of these examples.

Once the smash and grab claim is over £750,001, the Adjudicator’s fee becomes uncapped. This presumably reflects an assumption that, as the sums at stake increase, adjudications are more likely to involve additional submissions and procedural hurdles, thereby increasing the dispute’s complexity. There is some logic to this, albeit claim value and complexity do not always have a direct correlation. In any event, once the financial stakes exceed a certain threshold, the objective of keeping the Adjudicator’s fees low perhaps becomes secondary to a different concern: ensuring that the Adjudicator has adequate time to consider the dispute and reach a properly reasoned decision without being limited by a capped fee.

The fee cap feature is the key to the procedure’s attractiveness. Due to the relatively low fees involved, Adjudicators on the ICE Panel need to specifically agree to act as Adjudicators for this procedure. To date, there has been good take up from the ICE Panel.

There is also a fee of £1,500 that the Adjudicator may charge in adjudications where a jurisdictional challenge is raised. This may prove useful, especially to start with, when respondents are unfamiliar with the Procedure and may therefore be more disposed to object to its use and the Adjudicator’s jurisdiction accordingly.

As to the Procedure itself, it is relatively straightforward. The Referring Party must actively choose the procedure and undertake to comply with it in its Notice of Adjudication. To the extent there is a conflict between anything in the underlying contract and the Procedure, then the contract provisions will take priority to the extent they conflict. There is also a reminder that the Referral Notice should include the payment notice, the pay less notice and any other documents required (as applicable). The Procedure notes all communications and submissions are to be paper only and all communications will be electronic only (see Rule 3) which makes sense given the fee cap (and reflects a large number of adjudications in any event).

Under Rule 4, the Adjudicator can also opt out of the Procedure if they think it isn’t fair (or for any other reason), and then they have the choice of resigning or continuing with consent. The Referring Party is liable for the Adjudicator’s fees as at the date of any resignation. Otherwise, the Procedure is careful not to add any more detail than required by the Housing Grants Act which could make challenging the procedure easier.

Overall, the Procedure is a useful tool for straightforward smash and grab adjudications where a party wants to ensure that the costs of securing payment are proportionate. Given that smash and grabs can sometimes grow arms and legs, the fee cap will be particularly attractive – though not exclusively so – to the Referring Party, especially if cash flow is an issue.

The Procedure can be downloaded for free from the ICE’s website at: ICE Dispute Services | Institution of Civil Engineers (ICE)