With over 10 years experience in the dispute resolution section of an international consultancy, dealing with projects ranging from runways to power stations to highrise buildings, John Boanson’s advice on the subject is worth having.
Starting the process
To begin with, you cannot resolve what is not expressly disputed. If you are feeling aggrieved, then you must first register your disagreement with the opposing party.
What is the next step? Do not go straight to your solicitor, or start contacting the arbitrators named in the contract to see if they are available. Instead, stand back, take a deep breath, perhaps swallow some pride, and then contact your opposite number. Discuss the problem calmly and objectively. Often one or both parties feel so badly done by that they cannot take a dispassionate view of the problem. If you find yourself in this position do not stop trying – it is far easier, cheaper and quicker to resolve the dispute in this way. Ask your commercial manager, director or senior partner to contact his or her opposite number. Nine times out of ten a resolution will come from such an action and a ‘commercial’ settlement will often result.
If, however, a settlement is not forthcoming then what action can you take? There are four principal options – litigation, arbitration, adjudication, and mediation or conciliation.
Litigation is an action under the contract when there is no provision for arbitration within it. It is action outside the contract (in tort) for such things as misinterpretation or negligence (and this can be professional negligence). A case may involve both.
Hearings may be heard in the Technology and Construction Court (TCC – formerly the Official Referees’ Court), the County Court, the High Court followed by the Court of Appeal and finally the House of Lords. The TCC is the specialist court of the construction industry. The presiding judge is experienced in construction matters. A TCC judge can also be appointed as arbitrator.
Once the case enters the hearing stage the parties have little or no control over proceedings. All they can do is sit back and watch the fight, while their money (possibly) disappears. The decision is binding.
1. Pre-action protocol
Before pursuing litigation there are now specific actions that must be taken in accordance with the Civil Procedure Rules. The objectives of these pre-action protocols are:
- to encourage the exchange of early and full information about the prospective legal claim;
- to enable the parties to avoid litigation by agreeing a settlement before commencing proceedings; and
- to support the efficient management of proceedings where litigation cannot be avoided.
The purpose of the pre-action meeting is to consider, with respect to each issue:
- whether the issue can be dealt with without recourse to litigation (consider alternative dispute resolution, such as arbitration); or
- if litigation is unavoidable, what steps are to be taken in accordance with the Civil Practice Rules. These might include:
- Appoint joint expert.
- Extent of disclosures.
- Conduct of litigation to minimize cost and delay.
Except for certain procedural details, everything said at a pre-action meeting is treated as being ‘without prejudice’, i.e. cannot be used in court against the opposing party.
2. Summary judgments
Summary judgments are a means of stopping weak cases dragging on and reducing complexity and cost by eliminating issues on a rolling basis as the case proceeds. By stripping the case to its essentials, early settlement should be encouraged. Summary judgment is available to defendants as well as claimants, or can be invoked by the court. The test for summary judgment is whether the claimant or defendant has a real prospect of success in relation to a claim or issue.
Applications for a summary judgment must:
- identify concisely any point of law or provision in a document on which the applicant relies; and
- be based on the belief that, on the evidence, the opposing party has no real prospect of succeeding on the claim or issue nor of successfully defending it.
The hearing of the application will normally take place before a master or a district judge who can direct that a High Court judge or a circuit judge hear the application. The orders the court may make include:
- judgment on the claim.
- striking out or dismissing the claim.
- dismissal of the application; or
- a conditional order to:
- pay a sum of money into the court; or
- take a specified step in relation to the claim.
Arbitration depends upon a written agreement between the parties to go to arbitration. This is normally found in the contract. You cannot go to litigation if you have already agreed on arbitration. The process is subject to strict notices and timings.
Although originally introduced as a cheap alternative to litigation, it is now by no means cheap. It can involve the same numbers of solicitors, barristers and experts and be just as costly as litigation.
The Arbitration Act 1996 significantly extended the arbitrator’s powers. The arbitrator:
- can ascertain the facts rather than just listen to the submissions;
- can award compound interest and limit in advance the recoverable costs in the action; and
- need not tolerate lethargic disruptive tactics – he/she can resign. The arbitrator’s decision is binding, subject to matters of law. There is no appeal.
Adjudication is a statutory procedure by which any party to a construction contract has a right to have a dispute decided by an adjudicator. Even if adjudication is not expressly provided for in the contract, the Scheme for Construction Contracts (introduced through the Housing Grants Construction and Regeneration Act 1996) imposes the right to adjudication on all parties to a qualifying construction contract. It is intended to be quicker and more cost effective than litigation or arbitration. It is normally used to ensure payment (although most types of dispute can be adjudicated).
The adjudicator must generally decide the dispute in less than 28 days from referral. This can be extended to 42 days with the agreement of the referring party and to any period with the agreement of both parties. The contract may either list possible adjudicators, or one or more adjudicating nominating bodies. Adjudicating nominating bodies are defined in the Scheme.
Most standard form contracts and adjudication rules provide that parties cannot recover their own costs in the adjudication. Neither party can claim any fees incurred by lawyers, experts or anyone else who helps prepare his/her case. Hence, if you are the party to initiate an adjudication procedure, make sure you have a strong, or at least arguable, case. Both parties are jointly and severally liable for the adjudicators’ fees. In common with the Scheme, standard forms usually provide that the adjudicator can decide who is to pay his/her fees and reasonable expenses by apportionment between the parties. The adjudicators’ decision is binding unless it is later over-ruled by:
- legal proceedings;
- arbitration; or
- agreement between the parties.
Adjudicators’ decisions are usually upheld by the courts.
Mediation and conciliation
Promoted in the UK principally by the Centre for Effective Dispute Resolution (CEDR), mediation and conciliation are informal non-compulsory processes. Exchanges are ‘without prejudice’ to any formal reference, and the decision is not binding until agreement of all parties is reached and formalized.
The mediator or conciliator acts as a facilitator, and does not advise the parties regarding their rights, but seeks to find and foster common ground by bringing the parties together. Unlike a mediator, a conciliator will recommend a decision if no agreement between the parties can be reached. This recommendation is binding if not rejected within a specified period.
No matter what route you pursue with your dispute, your case will be helped greatly if your records (correspondence, minutes, etc.) are up to date and comprehensive. Bear this in mind even when commencing a project – you never know from what direction an action against you might come. Impress on your colleagues these three important words: ‘records, records, records.’