On Tuesday 9th June 2020, Michael Gerard presented to the Norwich and Cambridge branch of the Chartered Institute of Building (CIOB). The webinar, which was described by Les Carter, chairman of the Cambridge Hub of the CIOB as ‘thoughtful and insightful’ was also well received by the 72 construction industry professionals who attended. Indeed, many delegates took advantage of the opportunity to ask Michael questions about the presentation once it was over.
Resolving disputes in the construction and engineering industry
The presentation, titled ‘Introducing Adjudication and Mediation as Part of the Alternative Dispute Resolution Family’, began with an explanation of the steps involved in Pre Action Protocol under the terms of the Civil Procedures Rules (CPR), which must be followed before any proceedings can begin. This is crucial as it gives both parties the chance to make their respective cases and attempt to reach settlement before any proceedings are instigated. If this is not possible, it is often a useful way of enabling parties to narrow the issues down.
Once the letter of claim is issued, the contents of which are prescribed under the protocol, the recipient has 14 days to acknowledge it, and 28 to reply (although this can be extended). The next step is the pre-action meeting.
“In my experience, this process is extremely effective in resolving disputes,” says Michael.
Comparing methods of dispute resolution
Next, Michael highlighted the different methods of dispute resolution and their pros and cons.
This clearly shows the advantages in terms of time, cost and confidentiality that the processes of negotiation and mediation can result in. While adjudication is more costly than say mediation, it is clearly also preferable to the processes of arbitration or litigation in terms of time, cost and stress. Indeed, so robust and effective is England’s adjudication process in the construction industry, that it has been adopted by many countries including some states in Australia, New Zealand, Hong Kong, Malaysia and Singapore.
Insolvency as a factor
Adjudication is enforceable in the High Court (TCC) and although the losing party can try and resist enforcement, some 95% of adjudicators’ decisions are successfully enforced. However, in the current climate of Covid-19, where cases of insolvency will inevitably rise as the country faces recession, it is worth considering that alongside error of law on the part of the adjudicator, insolvency of one of the paying parties can lead to the court setting aside the decision. It’s also important to be aware that 2019 was a very busy year for cases involving insolvent companies, with some interesting developments. Michael was able to illustrate these circumstances with a number of real-life examples.
How mediation works
Michael then explained the process of mediation as follows:
- Both parties agree to appoint a mediator
- Selection of a mediator (often a lawyer with a working knowledge of the construction industry)
- Venue agreed to accommodate a room per party
- Position statements sent to mediator before proceedings
- On the day:
- openly air the dispute
- identify each case’s strengths and weaknesses
- understand that accepting less than expected is the hallmark of a fair settlement, and
- agree on a satisfactory solution
Michael stressed that accepting less than you would ideally like is necessary for a successful mediation, saying, “the sign of a successful mediation is that every side walks away feeling hard done by to some extent.” After all, this is far preferable to the lengthy, costly and stressful option of litigation.
While adjudication and mediation are effective in dispute avoidance, the ideal scenario is for conflict not to arise in the first place. While this happy outcome can never be guaranteed, the risks can be minimised and mitigated by ensuring the following:
- Good quality contract documentation
- Written contract
- The correct [standard] form of contract
- Competent CA who understands duties under the contract and is familiar with the Construction Act and all regulations
- Competent professional team/contractor/subcontractors
- Clear communication
- Meticulous record-keeping
- A willingness to commit to an early dispute resolution method like negotiation or mediation
In short, when it comes to disputes, prevention is always better than cure and the key to success is well written, well thought out standard forms of contract designed to cover all eventualities.
Following the presentation, Michael discussed the following areas that delegates chose to question him on:
- The legal implications of international contracts and the importance of putting in place the correct terms and conditions in circumstances where the Construction Act will not apply so that adjudication is mandatory under the contract.
- NEC contracts as a means of reducing risk by resolving a problem before it becomes a dispute.
- The issues that frequently arise when contractors use their own contracts rather than standard forms of contract under the JCT or NCT.
- The trend away from adversarial forms of dispute resolution such as arbitration and litigation towards ADR, particularly in circumstances where it is beneficial for the working relationship to endure beyond the dispute.
- The pros and cons of having arbitration clauses in contracts as a last resort.
- How it is debatable whether Covid-19 can be classified as a Force Majeure under the JCT and how employers and sub-contractors agreeing to close sites and/or release resources mean this has not been the huge issue some were expecting.
- The average costs of mediation and how it can be capped by using existing premises, sticking to a timetable and not employing unnecessary legal representation on the day.
Specialist ADR advice for the construction and engineering industry
“The webinar was an absolute pleasure to deliver and I am looking forward to answering more written questions that have come up,” commented Michael Gerard in summary.
If you have any queries about the expert services Michael Gerard Solicitors provide in resolving disputes in the construction and engineer industries, please contact us on 01858 414 290 or email email@example.com.