All forms of dispute resolution involve a scary degree of uncertainty, complexity or cost. Now a proposed shake-up of the courts promises a better alternative
Outline proposals were announced in July for the unification of the High Court and county courts. Such a simplification of the dispute resolution process runs counter to recent trends but should be warmly welcomed.
Over the past 10 years, the number of processes and forums that are commonly used for the resolution of construction disputes has multiplied. This has resulted from the introduction of statutory adjudication and the increasing use of mediation and other alternative dispute resolution processes. The larger number of forums has meant that construction disputes are increasingly not about substantive issues but rather about the processes themselves.
Let me illustrate how such procedural disputes can arise, with an example stemming from uncertainty about the scope of the parties’ contract. Suppose that work on a project has started with no formal signed contract but with an exchange of documents between the parties. As a result there may be uncertainty over whether a contract has been formed and, if one has, what documents it consists of. The claimant wishes to start an adjudication but is unsure whether it can because of uncertainty over whether the contract is “in writing” for the purposes of the legislation. If it starts an adjudication it might spend much of its time arguing with the other side over whether the adjudicator has jurisdiction.
The documents could also incorporate an arbitration agreement, which might require the parties to follow that particular process. If there is a debate about whether there is an enforceable arbitration agreement, then starting litigation could prove risky. Any claim in the courts could be met with lengthy applications from the respondent trying to bring it to an end in favour of arbitration. And, whether or not arbitration or litigation applies, the claimant could feel obliged to first mediate, to avoid being accused of wasting costs. These common uncertainties surrounding the formation of a contract can thus lead to a situation where the claimant does not know whether to adjudicate, arbitrate, litigate or mediate.
Despite this, the claimant can normally be sure of one thing. Whichever forum is proposed, it will be rejected by the respondent. As a result, a straightforward claim about an architect’s unpaid fees can easily turn into a complex legal debate about jurisdiction.
Adjudicators strive to be seen as the common sense cavalry. They try to ensure that the technical legal arguments about jurisdiction don’t get in the way of a good claim. However, adjudicators’ decisions are only worthwhile if they can be enforced in the courts. While adjudicators may brush away technical jurisdictional arguments, the courts don’t. And for the claimant to run a case through adjudication and then on to court enforcement can be expensive. Especially if it loses at the enforcement stage and becomes liable for the other side’s costs. None of this would be quite so bad if the claimant had lost because it had a bad case. But all this wasted time and cost can simply be the result of choosing the wrong forum.
This trend for claims to turn into arguments about process rather than substance has been exacerbated by the introduction of statutory adjudication. Although adjudication was intended to make our lives simpler the gradual build-up of jurisdictional arguments from decided cases has made the process increasingly uncertain. That said, when adjudication is free of jurisdictional arguments (which occasionally does happen) it is normally preferable to the court process.
However, a unification of the High Court and county courts may make litigation much more attractive. At present the High Court (that is, the Technology and Construction Court) has experienced construction judges, but the process there takes too long for the type of claim for which adjudication was designed. But the county court, although much quicker, is perceived to have limited construction expertise. There are no detailed proposals, but if the merger results in the TCC developing a county court-style fast-track procedure, this could prove popular.
We may then get to spend a little more time arguing about the merits of claims and a little less time arguing about the forum.
Michael Sergeant is a partner in London-based solicitor Winward Fearon’s construction department