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Technology disputes and the NHS – the SCL Adjudication scheme – Eyes wide open

Where parties to technology projects have disputes finding a timely and cost effective resolution process, one that provides access to justice whilst allowing relations and cash-flow to be maintained, has long been the holy grail of dispute lawyers. Through its adjudication scheme, launched in October 2019, the Society of Computers & Law (SCL) hopes to encourage parties to adopt a process, which if not the holy grail is advocated as being a major step in the right direction.

I am always keen to adopt whatever type of resolution process provides the most timely and cost effective solution in the circumstances. I therefore applaud the SCL’s initiative and believe adjudication offers a potentially highly effective option. However, likewise I apply a note of caution. Whilst very welcome, adjudication is not in my view a silver bullet and rather like the adoption in the early noughties of expert determination in many contracts, nor is it a one size fits all solution. Rather, it’s adoption, either as a term of the original contract, or via an ad hoc referral, carries with it risk and hence the need for careful consideration before it is adopted.

The above is particularly so in the context of the NHS, which over the years has had a chequered history with IT. Certainly there have been many successes, but also a number of very costly failures. The main reason for this is that, in embarking on what are often high value business critical projects with a long timeline, where the scope needs to be driven by clinicians and baselines are not set in stone, the risks are large. Against this backdrop therefore, whilst resolution processes such as adjudication may be suitable for run of the mill project issues, it is their potential application in the worst case scenario i.e. project termination, that needs to be given the most careful consideration. In particular, where there are multiple parties, issues of whether reasonable skill and care has been applied, and/or the evidential issues are complex, adjudication is unlikely to be the best process to adopt.

Before commenting on the SCL scheme, to put it in context I will firstly briefly explain what adjudication is and comment on its use in the construction industry.

What is Adjudication?

Strictly, it simply means a legal process whereby an expert 3rd party reviews submissions and evidence before ruling on who is right or wrong. That definition could of course cover a Judge, an Arbitrator or an Adjudicator. However, in contrast to litigation or arbitration, via adjudication the parties contractually commit to adopt a tight timetable/process and pay for a skilled Adjudicator to provide a quick decision.

The Construction Industry

Before May 1999 few would argue that construction was blighted by parties using the drawn out nature of litigation/arbitration, and particularly the associated costs, as a means of keeping one party wrongly out of its money. To address that problem the Government introduced a mandatory adjudication scheme.

Under this scheme, there are limited exchanges and an adjudicator gives a decision within 28 days (or up to 42 days if agreed). The decision is final and binding, unless subsequently challenged in litigation or arbitration, and is enforceable via a speedy application to court. Both parties are jointly and severally liable for the adjudicators fees, but unless agreed by the parties after the referral the adjudicator has no power to award costs.

Critics say it is a ‘rough and ready’ form of justice in which you ‘pay first, argue later’ . However, it has undoubtedly been very popular and has generally succeeded in providing an efficient means of safeguarding cash-flow and helping projects to run smoothly. Further, whilst ideally used in disputes relating to delay and disruption, extensions of time and final account issues, the breadth of the adjudication regime has also seen it used for termination and other more complex disputes. It is though in my view not best suited for multi-party disputes or where issues of negligence arise.

The construction industry has many similarities with the IT industry, but there are also important differences. Both often involve large, business critical, projects. However, unlike the construction industry, the IT industry has generally adopted a ‘can-do’ approach and has never been blighted in the same way as the pre May 1999 construction industry. Further, IT projects generally involve a customer who has little visibility of the end solution until a very late stage with the result that the majority of IT disputes still have at their heart complaints, often by that late stage evidentially complex, about whether the solution delivers the agreed scope/baseline.

The SCL scheme

The success of adjudication in the construction industry no doubt acted as a driver for the SCL scheme, but it is not yet a mandatory scheme. Rather, it up to the parties to agree to adopt the scheme, which is designed for use in any contract for the delivery of technology related goods and services. This includes: software development, outsourcing, systems integration, software licensing, IT consultancy, block-chain/smart contracts and cloud computing.

The key features of the scheme are:

  • The SCL has defined eligibility criteria to become an Adjudicator and it maintains a panel of both lawyer and industry specialists
  • It is a 3 month procedure, which is quick but longer than construction adjudications. The initial Dispute Notice is limited to two A4 pages and the Response Notice must be made within 3 working days. The Statement of Case, which shall be limited to 10 pages and accompanied by no more than one lever-arch file of supporting papers, must be delivered within 10 working days. The Response and any Counterclaim is then due 10 working days thereafter.
  • The Adjudicator has the power to make directions about the conduct of the adjudication, but shall give their decision no later than 3 months after the date of their appointment. Their decision is to include reasons. It is also provisionally binding, unless either part decides to litigate or arbitrate. However such a process must be commenced with 6 months of the decision. If that does not happen the Adjudicator’s decision is binding
  • The Adjudicator is required to conduct the process in a timely, cost-effective manner and to avoid unnecessary expense. In this regard, the SCL registration fee is currently £500 and the Adjudicator/3rd party Advisors fees are capped at £450 ph exc. VAT
  • The parties are under an express duty to act in good faith during the adjudication process
  • The Adjudicator’s decision is enforceable in the Technology and Construction Division of the High Court (via an expedited process)
  • The parties are jointly and severally liable for the Adjudicator’s fees. The Adjudicator also has the power to award interest and to order one party to pay all or some of the reasonable costs incurred by the other party, both before and after issue of the Dispute Notice.

It is early days yet for the SCL scheme and IT dispute lawyers will be watching its progress with much interest. However, I am concerned that the adoption of the SCL Adjudication scheme in the context of many NHS technology projects, often with multi-parties and the potential for evidentially complex scope and termination disputes, but with provision for only limited submissions and evidence, plus a tight timescale, is at best challenging or in many cases, potentially prejudicial to the NHS Trust concerned.

Any proposed inclusion of the SCL Adjudication scheme in an NHS technology contract therefore needs careful consideration beforehand.

How can we help?

Ward Hadaway has a team of recognised IT dispute and commercial specialists, who are ideally placed to both advise on the suitability of the SCL scheme, including the merits of any carve-out of certain types of dispute. For more information please contact Tim Toomey or Melanie Pears who will be happy to assist.

The views expressed in this article are those of the author.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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