Session Two Dispute Resolution

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Session Two Dispute Resolution

What are the alternative dispute resolutions?Dispute resolution JCT SBC/QDispute resolution NEC 3

DISPUTES

Disputes arise due to series of factors that combine to form disagreements and

ultimately disputes:

People diversity, motivating factors, preconception on roles, project success

or failure, business relations

Causes of contractual disputes in construction:

Late payment

Insufficient payment

Claim for loss and/or expense

Claim for EOT (extension of time to contract period)

Methods of dispute resolution

If dispute arises parties not compelled to resort to the courts for settling it canchoose amicable method needs to be signed and agreed by parties in writing

Non adversarial ADR

Use of courts expensive, uncertain and time consuming, Adjudication,

arbitration or litigation. Usually parties represented by council whose skill lies in

arguing and scoring points over each other Adversarial

Resolution Methods

Steps Non adversarial

Prevention Risk allocation, incentives, partnering

Negotiation direct or step negotiations

Standing Neutral Architects ruling, dispute review board, standing arbitrator

Non binding resolution Mediation, mini trial, early neutral evaluation, expert opinion

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Steps Adversarial

Temporarily binding Adjudication

Binding Arbitration

LitigationNB: As you go through each of these steps costs will increase andcommunication will decrease.

Non-Adversarial route

NegotiationThree recognisable stages

Preparation What would you like to achieve What you intend to achieve

What you must achieve What is your walk away price

Negotiation Explore Formulate alternative solutions Bargaining and settlement

Post negotiation Cards on table, all things settled and drawn up as a contract

Standing Neutral Dispute Review Boards

Panel of 1 or 3 independents Appointed at the beginning of the contract Fees paid by the contractor and the client Will advise on issues as they arise with the aim of preventing them from

escalating into disputes Has a 97% success rate in the US Is to be used on 2012 Olympics construction contracts.

Non binding resolutionThese procedures are informal, cheap and investigatory rather than accusatorial.Interchangeable and therefore collectively referred to as reconciliation privatenon adversarial methods of resolving disagreement. Also known as intermediary

step between dispute and courts

ADR alternative dispute resolution Mediation agreement between parties Conciliation Private enquiry Mini trial

Mediation

Involves a third party helping the parties to the contract to work out asolution between themselves

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The mediator should not express his views, if he cant get the parties toagree then he walks away and the process ends

Mini trial The parties have a short time (a day or two) to put their cases to a panel

made of senior executives from each company Still a negotiated agreement.

Expert Determination The parties put the facts before an expert who gives an opinion on the

outcome

Early Neutral Evaluation Similar to above

ADVERSARIAL ROUTES

Adversarial Three methods Adjudication Arbitration

Litigation

1. Adjudication

History Used in construction contracts since 1976 where parties agreed to

submit disputes of a certain type to an adjudicator Was used on NEC conditions Began to be incorporated into main contracts Latham report recommended adjudication as a 1st instance

resolution method HGCR Act 1996 introduced adjudication as a right for all parties

to construction contracts

AdjudicationTwo routes for decision notification

Decision issued in the form of an order Party who gained an award apply to court for 2nd order(a

mandatory injunction) instructing the other party to comply withadjudicators order

Not often followed in respect of paymentOR Issue proceedings claiming the sum due An application for summary judgement (Macob Engineering Ltd v

Morrison Construction Ltd (1999) Section 108(1)of the Construction Act (Housing Grants,

Construction and Regeneration Act 1996) creates a statutory rightto adjudication, designed to produce a decision which is, at least,

temporarily binding on the parties. It includes the procedures tobe followed

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Prior to Construction Act only Arbitration and Litigation Adjudication revolutionised dispute resolution. Most cases

previously dealt with by courts or arbitration now adjudication.Out of 15000 cases which came to adjudication from May 1998 to2005 only 300 went to courts.

Although decision not binding in adjudication 80% of casesaccepted by parties.Since Construction Act came into force nos of constructiondisputes coming to courts has reduced to about third of what itwas

Key points Either party has the right to give notice at any time of theirintention to refer disputes to adjudication There is a timetable for adjudication

Adjudicator to be appointed within 7 days of the above notice The adjudicators decision must be within 28 days of the referral

(which can be extended by agreement by another 14 days) The adjudicator must act impartially The adjudicator can act on his own initiative to ascertain the

facts and the law related to the dispute The adjudicators decision is binding until its final determination

by litigation, arbitration or agreement. The adjudicator is immune from liability for his actions or

omissions

Key stages in Adjudication Notice of Adjudication Appointment of the Adjudicator A dispute which has crystallised will be referred to adjudication

within 7 days of the notice The Referral Notice The Response to the Referral Notice Decision making by the adjudicator The writing of the decision Correction of the decision Enforcement of the decision

Notice of Adjudication Purpose is to inform the other party that a dispute has arisen

served by the Referring party Requires evidence as to the nature of the dispute minutes,

letters and witnessstatements.

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Appointment of the Adjudicator Three basic routes Parties agree the adjudicator after the dispute has arisen The adjudicator is named in the contract An application is made to the ANB (adjudicator nominating body)

to nominate one

Adjudicators Fee Rate to be agreed with the parties prior to Adjudicator accepting

the appointment Will be paid by both parties equally

The Referral Notice States the referring parties claim Has the tactical advantage of being able to be fully explained

and supported by evidence as it can be prepared before theclock starts ticking. Defending parties do not have thisadvantage

Known as ambush can also be carefully timed e.g. many areserved just before Christmas when parties may be on holidayand the clock is still ticking!

Must contain the same points of claim as those given in theNotice of Adjudication

Response to the Referral

Responding parties reply to the matters referred

Powers of the Adjudicator Adjudicator can carry out investigations to ascertain the facts

and the law concerning the matters in dispute, which caninvolve: Meeting parties together or separately Visit site Carry out tests Obtain legal and technical experts Use his own knowledge

The adjudicator must be careful to comply with the rules ofnatural justice.

The Decision Adjudicators can only make decisions on matters referred to

them. A decision should Give clear directions to the parties as to what they have to do

Be easy to enforce Avoid suspicion of bias

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Power to correct a Decision An adjudicator has no power to change his decision once it is

published

However, the decision can be revised to Correct clerical or accidental errors Provide Clarification Remove ambiguity Make good an omission within a reasonable time.

Adjudication SummaryAdjudication to satisfy Act (avoid intervention of Scheme) contract

must: Enable a party to give written notice at any time to all other

parties of their intention to refer dispute to adjudication Notice includes nature of dispute and relief sought Adjudicator named in contract/nominated body (professional)

5days to nominate an adjudicator, 2 days to confirm Adjudicator must not be an employee of party in dispute Provide a timetable appoint adjudicator and referring dispute

within 7 days Adjudicator can demand documents from the parties, appoint

expert advisors, make site visits etc Adjudicator to reach decision within 28 days can extend by up

to 14 days

Adjudication GenerallyNo method by which decision can be appealed as inherently bindingtemporarily. If dispute dealt with by arbitration or litigation startafresh 3 grounds on which enforcement of adjudicators decisionresisted:

1) Lack of jurisdiction one of conditions not fulfilled (The ProjectConsultancy Group v Trustees of the Gray Trust (1999)

2) Error of law has the adjudicator answered the right question(Bouygues UK Ltd v Dahl Jensen UK Ltd(2000)

3) Procedural unfairness follow principals of natural justice notbias, acts fairly (Discain Project Services Ltd v OpecprimeDevelopment Ltd(2000): Barnes & Elliot Ltd v Taylor WoodrowHoldings Ltd(2004) adjudicators decision not made within time ltds

An adjudicator has no power to change his decision once it ispublished, However, the decision can be revised to Correct clerical or accidental errors

Provide Clarification Remove ambiguity

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Make good an omission within a reasonable time.

Relevant Case law Bouygues V Dahl Jensen (2000)

Error in adjudicators decision stands even if the liquidation ofone party mean that the referring party will not be able to recouplosses.

Glencot Development vs Ben Barrett & Son (Contractors) Ltd(2001) Natural justice and potential bias.

2. Arbitration

Arbitration is a procedure for the resolution of disputes which isunder control of the parties and traditionally been constructionindustries preferred means of settling disputes. Conditions ofarbitration are: Decision/award must be capable of enforcement as if a

judgement of a court Binding contractual agreement to submit dispute to arbitration by

a third party chosen by the parties or in accordance with theirinstructions

Reference to arbitration in accordance with whatever procedure

laid down in the agreement Governed by the Arbitration Act 1996 Requires

A contract A valid arbitration agreement A dispute

Amec Civil Engineering Ltd. v Secretary of State for Transport(2000), defines disputes

A claim is not the same as a dispute

A claim must be rejected and resubmitted in order to become adispute

Process Once a dispute has arisen and it is ascertained that there is a

valid arbitration agreement Claiming party prepares a statement of case Defendants then prepare a statement of defence Defendants can ask for further and better particulars and can

prepare a counterclaim

All documents should be disclosed

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Arbitration Act 1996 procedure:Principles

Object of arbitration is that it obtains a fair resolution of disputesby impartial tribunal without unnecessary delay or expense

Parties free to agree how their disputes are resolved

Court does not intervene unless act states so

Duties Act fairly and impartially Opportunity given for each party to put forward its case Adopt suitable procedures so as to provide fair means for theresolution of the matters to be determined while avoidingunnecessary expense and delay

Arbitration procedure in general Standard set of rules Arbitrator can make provisional awards Arbitrator add interest to any sum due Make orders for any liability for cost

Arbitration Act has bought about two sets of rules: Construction Industry Model Arbitration Rules 2005(CIMAR) 3Nr full procedure, documents only & short hearing

Institute of Civil Engineers Arbitration Procedure 2006(ICE)

However clear cut the dispute is it is still a dispute and if fallswithin a valid arbitration clause defendant entitled to havedispute heard at arbitration ( Halki Shipping Corp v Sopex OilsLtd (1997)

Arbitration Act control by courts Courts power to remove an arbitrator when1. Justifiable doubts as to arbitrators impartiality (Verital Shipping

Corporation v Anglo Canadian Cement Ltd (1966); Turner (EastAsia) PTE Ltd v Builders Federal(Hong Kong) (1988)

2. Arbitrator lacks qualifications3. Doubt to arbitrators physical/mental capacity to conductarbitration4. Arbitrator failed to conduct proceedings

Courts power to give ruling on particular point of law

Advantages of Arbitration

Hearings are private The award is published privately

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Parties can choose their own arbitrator who will be a specialist inthe particular field

Venue and times are flexible dictated by party agreement Less formal Lawyers are optional

Arbitrator can award security for costs Can be cheaper Can have a documents only option Arbitrator can award interest and costsDisadvantages of Arbitration Rights of appeal are restricted Not ideal for multi-party disputes The arbitrator and the venue have to be paid for within the

duration A reluctant party may be less robustly dealt with

3. Litigation Process in which disputes are settled by a court Usually the Technology and Construction Court 8 circuit judges

Litigation dispute settled by action of the courtWhich court will depend on: Size of dispute below certain size go to county court. Building &

civil engineering cases of significant size tried in Technology and

Construction Court specialist division of High Court Nature of dispute which division of High Court Location tried locally or circuit judge for High Court

Litigation procedure April 1999 civil litigation governed by CivilProcedure Rules (CPR); Enables courts to deal with cases justly parties on equal footing,

saving expense, ways which are proportionate (amount ofmoney, importance, complexity, financial position), dealt withexpeditiously & fairly, allotting appropriate court resources

Litigation remedies1) Summary Judgement enables court to dispose of claim, defence

or particular issue without full trial. Saves money and time2) Interim payment enables claimant to apply for an order for

interim payment on account of damages or other sumsdefendant liable to pay

Advantages of Arbitration to litigation

Cost generally cheaper if not complex construction project

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Speed generally on smaller less complex projects which do notrequire a trial

Technical complexity arbitrator has technical expertise andappointed by

both parties

Convenience time and place arranged to suit parties Privacy not officially in the public domain Commercial expediency less confrontational nature parties can

continue business after Parties can insist that arbitrator visits site

Disadvantage Cannot insist on witnesses being present

Advantages of litigation to arbitration

Third parties can be introduced Legal aid available Legal complexity where a point of law better to have it decided

by judge than arbitrator who has no legal qualifications Decisiveness arbitrators tend to not rule wholly in favour of one

party prefer split the difference

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Session Two Dispute Resolution

Documents

Transcript of Session Two Dispute Resolution