Mediation under the microscope

The use, and in particular the effectiveness, of mediation in construction disputes is usually based on anecdotal evidence. In order to address this problem, King’s College, London, with the assistance of the Technology and Construction Court, has been doing some research. The aim is to:

• Reveal in what circumstances mediation is a real alternative to litigation; that is, a value-added alternative that settles the dispute.
• Assist the court in determining whether, and at what stage, it should encourage mediation in future cases.
• Identify which mediation techniques are particularly successful.

The representatives of each party that has settled, resolved or received a judgment from the TCC after 1 June 2006 and until June 2008 has, or will, receive a survey form, asking whether mediation was used, the form that it took and at what stage in the litigation process it occurred. Specific details about the dispute resolution process are then collected.

So what do the finding show so far?

During the first six months a response rate of 26% was recorded. Initial analysis shows that 32% of those disputes that settled were as a result of a mediation. This is more than had been anticipated. Of the remaining 68%, 61% settled by conventional negotiation while 7% settled as a result of some other process.

The nature of the cases dealt with is also interesting. A noticeable proportion of the cases related to defects (28%), design issues (15%) and professional negligence (15%). A survey dealing will similar categories of disputes arising from the TCC 10 years ago revealed that most of the issues leading to litigation were those relating to payment, variations, delay and site conditions.

During the past 10 years there has been a reduction in the number of cases starting in the TCC. Some of this in part relates to the introduction of the pre-action protocols, also in part to the increase in mediation, but undoubtedly it is also due to the increase in adjudication.

Many believe that most settlements are reached on the court steps. These results show this is not the case. There are in fact a variety of ‘pinch points’

Perhaps it is the case that time and money-related issues, often prevalent in construction disputes, are now being dealt with by way of adjudication, and during the pre-action protocol process, while defects, design and negligence are remaining within the court’s domain. This might be because those issues are frequently not only more complex, but often multiparty and therefore not well suited to adjudication.

Respondents were asked to identify at what stage litigation settled or was discontinued. This is particularly interesting as many believe that most settlements are reached on the court steps. Clearly, this is not the case. There are a variety of “pinch points” in the litigation process.

According to the respondents, those pinch points are:

• During exchange of pleadings (33%)
• During or as a result of disclosure (14%)
• As a result of a payment into court (10%)
• Shortly before trial (24%).

Of the settlements reached 81% were reached at one of these stages. The remaining 19% occurred somewhere between the issuing of the claim form and the issuing of the judgment. Of the mediations undertaken, 81% were as a result of the parties’ own initiative, just 5% as an indication of the court, and 14% as the result of an order of the court. Barristers (48%) and construction professionals (38%) were the most frequently encountered mediators; only 14% were solicitors.

Many of the respondents believed that costs had been saved as a result of mediation.The amounts saved reflect the point in the litigation at which the dispute was settled. Some suggested that the savings were between £200,000 and £300,000. No doubt, those were the disputes that settled early during the pleadings stage; those who saved £25,000 or less perhaps represented those disputes that settled shortly before trial.

Mediation is clearly being used successfully. A limited number of mediators are being used repeatedly by those parties that have commenced or are responding to litigation in the TCC. The mediations that are being undertaken are on the parties’ own initiative. However, mediations are not occurring at one particular point in the litigation process, but at several distinct points, namely: pleadings, disclosure, payment in and shortly before trial. These results are only a snapshot, based upon an analysis of the first quarter of the research period; a more detailed report will be available towards the end of next year.