08_Dispute Resolution

Dispute Resolution     

·         It is important that when a dispute is raised by the Contactor or Employer it is taken seriously from the outset and it is our role as the CA to advise the parties of the facts of the claim, how it relates to their responsibilities set out in the Contract and the options for dispute resolution.

·         The first method of dispute resolution which should be attempted is negotiation as this can be structured to avoid a formal dispute from materialising.

·         This is a neutral fact finding exercise which depends on the co-operation of both parties.

·         This could not only be conducted via email exchange or face to face discussions but could also be with the help of an independent third party who could propose an agreement that the parties could accept.

·         The advantage of this could be the speed at which the dispute could be resolved and in theory no cost implications.

·         If after initial attempts at negotiation fail, I would recommend that they peruse mediation.  Again this is a consensual process where no binding award can be imposed.

·         A third party mediator, appointed by both parties assists in the negotiated resolution of the dispute.

·         This process is private and confidential, and can be seen as a speedy and cost effective way to resolve disputes.

·         I would then advise the client on further options available, the next being Adjudication.  Again a private process but this time the decision is binding on parties unless/until revised by litigation and a decision will be determined within 28 days of starting proceedings.

·         The contract will state how to appoint the adjudicator, and this method is a statutory right under the construction act.

·         Reaching this point will of course be damaging to the Client/Contractor relationship

·         In the case that they cannot reach a decision through these alternative dispute resolution (ADR) processes they would have arbitration & litigation available to them.  I would strongly advise against these as they are expensive, and in the case of litigation become a public process which for many clients would be undesirable.  Arbitration would potentially be a more desirable option than litigation due to the speed, and being kept out of the public forum.

·         In both Arbitration and Litigation the parties could both be penalised if they had not made any attempt to resolve the dispute through ‘ADR’ process.

·         I would strongly advise any client to attempt to resolve any dispute through negotiation, but where that is not possible to use mediation & adjudication.  Arbitration & Litigation should be seen as a last resort

 

 

Dispute Resolution:

Definition:

-          Legal Process

-          Menu of rule-based processes & events

-          Indicates a failure of management processes (arguably)

Methods of resolution:

-          NEGOTIATION

-          MEDIATION

-          ADJUDICATION

-          Dispute Review Boards

-          Expert Determination

-          ARBITRATION

-          LITIGATION

 

First actions:

-          Seek professional legal advice at an early stage and to explore the options that now exist

-          Inform insurer at earliest opportunity to keep them in the loop and avoid the possibility of insurer refusing to cover

Negotiation

·         Can be structured to avoid a formal dispute, with an independent third party proposing an agreement that the parties could accept

·         Most frequently used resolution technique

·         Neutral fact-finding

·         Expert appraisal

·         Voluntary non-binding process

·         Direct communication

·         Structured to avoid formal dispute

·         Outcome can be accepted or declined by both parties

 

Negotiation process:

·         Email exchange

·         Telephone conversation

 

Advantages / Disadvantages:

+ Speed

+ Cost efficiency (In theory no cost incurred)

 

Before entering the following dispute resolution technique’s the architect must inform insurer

 

Mediation:

·         Long been encouraged by the Technology and Construction Court

·         Informal process

·         Third party mediator, appointed by the parties in dispute, assists in the negotiated resolution of the dispute

·         Consensual process

·         No binding award can be imposed without consent of both parties

·         Private & confidential process

·         Mediation is encouraged as a first step when a dispute arrives in court

·         Conducted on a ‘without prejudice’ basis

 

Mediation process:

·         Dispute arises & parties agree to mediate

·         Independent, neutral mediator appointed

·         Phases of mediation:

§  Introductions

§  Mediation opening to establish grounds

§  Parties opening statement

§  Private meetings

§  Joint meetings for specific issues

§  Written settlement drawn up if reached

·         Typically lasts one day

 

Advantages / Disadvantages:

+ Speed (no more than 2-3 days)

+ Cost efficiency

+ Settlement rate is high (Up to 75% of cases settles on the day)

- Additional cost of unsuccessful mediation on top of litigation

- Compromise plays a large part in mediation – if one party is not willing to do so then the process can fail

 

·         The process is voluntary, confidential, non-binding and without prejudice to the parties’ legal positions. The fact that legal action is underway does not prevent mediation although the cost benefits of achieving settlement through mediation are obviously greater the earlier mediation is employed to resolve the dispute.

 

 

Adjudication:

Adjudication is an adversarial dispute resolution procedure, which can render a decision in a 28 day timescale which is temporarily binding on the parties as long as the dispute is not taken further to arbitration or litigation.  The fees for adjudicator must generally be paid before the dispute can be challenged in Arbitration, which is a deterrent to progress the dispute in some cases.  The Construction Act has

 

·         Referral to adjudication is now a statutory right under the Construction Act.

·         Private process

·         Neutral 3^rd party imposes a binding decision

·         Decision is binding on parties unless or until it is revised in litigation or arbitration

·         RIBA appointment will tell you how to appoint adjudicator

·         Referral to adjudication now a statuary right under the Construction Acts

·         Adjudication is often subject to a strict timetable and may be based purely on documentary submissions

·         If parties to a construction contract do not agree an adjudication procedure, then one is imposed by statute (see the Housing Grants, Construction and Regeneration Act 1996 Part II Section 108 and the Local Democracy, Economic Development and Construction Act 2009 Part 8

·         The adjudicator is either named in the contract, agreed by the parties or appointed by a nominating body, usually named in the contract

·         Adjudication does not apply to an appointment with a residential occupier, unless their contract terms expressly incorporate the Construction Acts.  For example an architect can contract with a residential occupier on the basis of a standard form appointment such as the RIBA Standard conditions or the RIBA Conditions for a Domestic Project, which provide for adjudication.  Architect must make client aware of this possibility

·         Costs of adjudication can be greatly reduced if your paperwork is already comprehensive and up to date

·         Pay now & argue later

 

Adjudication process:

·         Dispute crystallises

·         Notice of adjudication is served on a party

·         An adjudicator is appointed within 7 days of the notice of adjudication

·         A referral is served to the adjudicator and the responding party & the responding party is entitled to serve a response

·         The adjudicator comes to a decision within 28 days (Note: this can be extended by agreement of the parties)

·         The decision can be challenged in court; however, on only very limited grounds (i.e. no jurisdiction or rules of natural justice breached)(Note: if challenged the process is no longer confidential)

 

Advantages / Disadvantages:

+ Reach an enforceable final decision

+ Speed

- /+ Cost (relatively affordable)

- Damaging to client relationship, a non-confrontational procedure such as mediation may be a viable alternative

 

 

Arbitration:

·         Has rules set down in the Arbitration Act 1996.  Similar to litigation.

·         Private formal process

·         Dispute is determined by tribunal - It provides for the determination of disputes by a third party arbitrator or arbitration panel, selected by the parties to the dispute

·         Arbitrators decision is final & binding

·         THE ARBITRATION ACT 1996

§  A statutory framework for the procedure

§  Contains mandatory provisions that cannot be varied

·         The arbitration process is very similar to litigation

·         Arbitration awards are enforceable at law

·         Can be subject to appeal on limited grounds and legal costs are usually awarded to the successful party

·         Signed arbitration agreement to commence process – typically a clause in the contract

·         Disputes are resolved on the basis of material facts, documents and relevant principles of law

·         Arbitration clauses are traditionally found in all standard form contracts used in the UK, often with related adjudication clauses (for example JCT 05, and ICE 7th Edition (now withdrawn in favour of NEC3))

·         Arbitration remains the favoured method of dispute resolution for international projects (for example FIDIC contracts)

·         Arbitration is now usually combined with adjudication and mediation in tiered dispute resolution procedures (see for example the Chartered Institute of Arbitrators' ‘catch all’ dispute resolution clause and the Construction Industry Model Arbitration Rules 20011 (CIMAR).

 

Arbitration process:

·         Dispute crystallises

·         Arbitration commences with a notice to concur which provides for agreement on the appointment of an arbitrator failing which an arbitrator may be appointed by a nominating body (which should be named in the contract)

·         The parties state their cases and disclose the evidence on which they intend to rely

·         There is a hearing of the case

·         The arbitrator makes an award

 

Advantages / Disadvantages:

+ Speed (arguable) - quicker process than litigation

+ Cheaper than litigation, no ‘disclosure’ of documents process

+ Private process

- Arbitrator does not have same powers as a judge to insist on compliance

- Arbitrator has no power to order that other parties should be ‘joined’ into original dispute, arbitration not set up to deal with complex overlapping

 

 

Responsibility of Architect - Dispute Avoidance

-          Approach to management of contract / appointment

-          Terms of contract arranged to avoid disputes

-          Process to minimise chance of dispute

ARB CODE OF CONDUCT 2010 – Standard 10: ‘Deal with disputes or complaints appropriately’

-          You are expected to have a written procedure for prompt and courteous handling of complaints which will be in accordance with the Code and provide this to clients. This should include the name of the architect who will respond to complaints.

-          Complaints should be handled courteously and promptly at every stage; and as far as practicable in accordance with the following time scales:

·         an acknowledgement within 10 working days from the receipt of a complaint; and

·         a response addressing the issues raised in the initial letter of complaint within 30 working days from its receipt.

-          If appropriate, you should encourage alternative methods of dispute resolution, such as mediation or conciliation.

 

How Do Disputes Arise?

-          Formation of Contract / Breach of Contract

·         Was there a contract? Ambiguous terms

·         Breach of an express or implied term of the contract (9/10 cases breach of contract)

·         No terms in contract for this issue / circumstance

-          Tortious Acts

·         Negligence – professional negligence / breach of contract

·         Trespass

·         Nuisance

-          Criminal Acts, Public Rights, EU Legislation, etc..

·         Listed Buildings

 

Negligence Claims

-          Firstly it is important to get a clear understanding of the issue

-          It must be understood if the design of the cladding panels along with the fixing requirements was set out in the contract documents prepared by us, or within the Contractors Design proposals. 

-          In a negligence claim, time will usually run for 6 years from the date when the negligent act or omission caused damage to occur

-          In a claim based on a contract executed under hand, the limitation period is 6 years, running from the date when the contract was breached.  The period is extended to 12 years if the contract was executed as a deed and the limitation period runs from the date when the contract breach happened.