There is more than one way to skin a cat in Construction Disputes
Fri 28 Apr 2017
The earliest printed citation of this proverb according to google is a short story by the American humourist Seba Smith in The Money Diggers, 1840: "There are more ways than one to skin a cat," so are there more ways than one of digging for money”.
Often clients, for very good commercial reasons, want to compromise claims. Contract drafters have also sought to mitigate disputes by introducing, for example, early warning notices as standard in construction contracts. However, compromise might not be the right way to skin the cat, especially if it means giving up very valuable rights.
What are the options?
Where a dispute is purely about money and payment is late one option is to issue a statutory demand for payment. This is a cheap and relatively straightforward way to apply pressure to a very late payer. Any solvent company should want to avoid an application to be wound up on expiry of the statutory demand.
Adjudication is available to all parties to a construction contract unless one of the parties to the construction contract is a residential occupier or another exclusion applies. Adjudication is a creature of the Housing Grants, Construction and Regeneration Act 1996 and imposes is a set procedure on parties via the Scheme for Construction Contract Regulations 1998 (unless the parties have agreed appropriate alternative terms).
Adjudicating takes between 28 and 56 days from start to finish. Depending on the contract terms the adjudicator’s decision binds the parties on an interim or final basis. If it binds on an interim basis the parties must either agree to treat the decision as binding, commence arbitration proceedings or apply to the courts for a Part 8 declaration.
Legal costs are not generally recoverable in adjudication proceedings (although there has been some recent debate about this) but adjudication doesn’t necessary need to involve lawyers. Using internal counsel or claims consultants can often reduce the cost of adjudication. A note of caution, however, if the decision is not finally binding and / or there are looming further disputes be mindful that internal counsel and claims consultants do not necessarily benefit from legal professional privilege so emails and letters between you and them may be disclosable – always be careful about what is written down in an argument!
An added bonus of adjudication is that the Technology and Construction Court (TCC) in England and Wales has developed its own quick form of enforcement procedure. This means if you have an adjudication decision in your favour and the other side isn’t paying up you can apply for summary judgment pdq. The expedited procedure takes between 28 and 56 days to get a judgment, depending on court availability.
Between commercial negotiation and adjudication lies expert determination or some other form of Quick Dispute Procedure (which may take the form of a dispute resolution board if FIDIC standard terms apply). Parties can set their own rules about the type of disputes that are referred; the procedure for looking at those disputes; and the length of time the expert has to issue a decision. Parties can also decide whether the decision of the expert will be binding or not. Generally expert determination is finally binding with a very limited right of appeal.
Expert determination is very useful for technical disputes and may become more prevalent as modular construction gathers pace. If there is a dispute about whether, for example, a proposed alternative material or component is acceptable the expert could be given the facts and specifications, and asked to make a decision within 7 days. The parties would be bound by that decision and the works could continue.
Beware of referring something to a binding tribunal if you want some wriggle room on an issue. Binding means binding (to paraphrase Ms May) and parties will find it very difficult to get behind the expert determination.
For cases of high value and / or where there are complex issues litigation or arbitration remains the better route, especially if you are advised you have a strong claim. Adjudication, expert determination and quick dispute procedures are all forms of “rough justice”. A fast(ish) way of getting resolution, often whilst works are ongoing. Litigation or arbitration allows parties to look more carefully at the issues in dispute by providing for disclosure of documents, witness evidence, expert evidence and a full hearing. Further, if Party A brings or defends the claim successfully it will normally get back the majority of the legal costs it paid out.
In litigated matters parties can also take advantage of ancillary orders, for example applying for security for costs or to freeze assets pending the outcome of the proceedings.
To assist parties reduce time and costs the TCC has been running a shorter trials pilot that seeks to resolve construction disputes in less than 9 months. This pilot scheme seems to be working well and we expect it will be adopted permanently in due course. As court proceedings can often run for a year or more it seems sensible that the construction industry’s court should look to adopt a litigated procedure that aligns with more closely with the statutory adjudication procedure.
Nobody wants to be in dispute but knowing your rights and options will help ride an uncertain market in uncertain times.