If you have a construction dispute your biggest problem isn’t the other party - it’s deciding which dispute resolution option to go for
In the good old days one party or another could say “I’ll see you in court” or “the writ’s in the post”. Things have changed. There are now a variety of methods of resolving construction disputes. Those include mediation, adjudication, expert determination, arbitration and litigation. So if you are thinking of resolving your dispute, which one might you choose and why?
First, how do you get the right to use any of them? The right to adjudicate comes from a construction contract to which the Construction Act applies. Therefore that right is given by law. Similarly the right to go to the courts is a legal right unless you have agreed to do something else, that is, agreeing to resolve your differences by mediation, expert determination or arbitration.
Secondly, in all the mechanisms except mediation, the parties hand over the control of the dispute to a third party: a judge, adjudicator or arbitrator.
- Mediation is a good option when the parties want to keep control themselves and feel they can keep things amicable. The concept that mediation allows parties to keep control and that other processes do not has become watered down in recent years because of the introduction of the pre-action protocol. That process, which involves the parties exchanging information before involving the courts, also allows the parties to keep control, subject to the rules of the process. Only when those parties can no longer make progress by the protocol will it be necessary formally to issue proceedings.
- The pre-action protocol process can be used with a reservation of the right to adjudicate at any time. It also involves a “without prejudice” meeting and can often form the basis for negotiations. Often the parties agree for the pre-action meeting itself to be formalised as a mediation. Also, just because you have got expert determination or arbitration written into your contract, this does not mean that you cannot set out your position in a claim letter in a similar manner to how you would under the protocol.
- Parties are often concerned at how long it takes to resolve disputes. In broad terms, adjudication is probably the quickest method: 28 days or 42 days, plus a period for crystallising the dispute before the adjudication is commenced. Pre-action protocols and mediation are pretty quick but generally take longer with time lags to enable parties to reply, have meetings or mediations.
- Expert determination is a bit of a wild card. Some expert determination clauses, such as those built into leases, require rapid determination in a matter of days or weeks. If, however, no time period is prescribed, an expert determination is likely to take a similar time period to arbitration, months or even years. A while back, the perception might have been that litigation was the slowest option of all but a lot has changed in the court list and in the way that disputes are handled, so litigation can be very time efficient. Indeed, there has been some judicial comment on the length of time that some parties have spent in multiple adjudications when they could have gone to the court and got a quicker decision.
One of the reasons that the court might be the place to go is that, putting aside the risk of appeal, the court will give a decision that is final and binding. An arbitrator’s decision is similarly final and so is an expert’s decision. In fact, an expert’s decision is arguably the most final of the lot because unless the expert exceeds his jurisdiction, the parties are bound by that decision and cannot appeal to the courts. Mediation and negotiations through the pre-action protocols are very different: nothing is binding unless and until the parties reach a final settlement of all or part of the dispute. This sometimes leads to a concern that in agreeing to mediate there is no certainty whether or not a final outcome will be reached. However, mediation has a high success rate. Adjudication gives rise to the greatest uncertainty as to whether or not a decision will be binding. First are the issues of whether or not an adjudicator’s decision is enforceable. Second, even if it is enforceable it has what is known as a “temporary finality” - it is binding and to be abided by unless and until it is set aside either by negotiation or by further process such as litigation or arbitration.
So, which is best? That is the simple question to which it is impossible to give a simple answer. Each process offers different advantages and disadvantages and the experienced operator may recommend using a blend of those processes to achieve an acceptable outcome. It’s horses for courses.
James Bessey is a partner in Cobbetts