02/09/2015
Over the past 20 years, construction contracts have become more and more complex in an attempt by both owners and contractors to control risks. This has in turn provided fertile ground for disputes to arise. When it comes to disputes resolution, one of the most cost-effective and efficient procedures construction professionals can adopt is mediation. To understand how mediation can be so beneficial to resolving construction disputes, it is vital to understand the procedure and advantages of the process.
Mediation as a First Port of Call in Construction Dispute Resolution
Because mediation is so cost-effective, amicable and quick, it is often the first option taken by individuals to resolve a construction project dispute. However, the process will only work if both parties are able to cooperate enough to work together throughout the proceedings.
Mediation is a purely consensual form of dispute resolution, and parties can agree to send their disagreement to mediation at any time. There are two types used in construction disputes:
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Facilitated mediation
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Evaluative mediation
Facilitated Mediation
In facilitated mediation, the Mediator, (who is well-versed in construction issues) works with the parties to assist them in coming to a resolution of their own making. The Mediator does not decide who is right and who is wrong, instead facilitates a win/win solution.
Evaluated Mediation
During an evaluative mediation process, the Mediator (who is often a legal practitioner) takes account of all the facts of each parties position and then offers their view on the cases strengths and weaknesses from a legal point of view and may indicate what the likely outcome of a court decision would be. They will then work to assist both parties to agree to an equitable settlement.
Another great advantage of mediation is it is confidential, thus protecting each parties professional reputation.
An Outline of the Process
Although mediation proceedings follow no strict order, the basic process consists of the following steps:
Step One – Choosing a Mediator and a Date
Parties to the dispute can choose a mediator themselves, or have one selected for them by a professional organisation such as the Centre for Effective Disputes Resolution (CEDR). A date is then agreed for mediation to take place.
Step Two – The Serving of Written Statements
Two to three weeks prior to the mediation date, each party will give each other (plus the Mediator) a written statement outlining their position together with any documents they wish the Mediator to see, such as the construction contract.
Step Three- The Mediation Hearing
On the day of mediation, the Mediator will meet with both parties, both together and separately. The separate meetings are known as ‘caucuses’ and everything that takes place inside is private and confidential. Their purpose is to enable the Mediator to gain an understanding of the possibilities for reaching an agreement and the approach most likely to encourage settlement.
The Mediator will then work between the parties to reach a settlement by encouraging them to look at the facts from a different angle and take on the other party’s perspective.
Once a settlement has been reached, the parties to the dispute will be brought back together to finalise the details of the settlement and put it in writing to create a binding document if the parties choose to do so.
Mediation enjoys a high success rate, with around 70% of disputes being settled at this level. However, if no agreement can be reached on the day but progress is being made, the parties can consent to adjourn mediation proceedings to a later date.
Mediation and the Pre-action Protocol
If litigation becomes inevitable, the parties to a construction dispute will have to follow the Pre-Action Protocol for Construction and Engineering Disputes laid down in the Civil Procedure Rules.
The Pre-Action Protocol requires the parties to set out their claim and defence in detail and then hold a without prejudice meeting to see whether the dispute can be resolved or issues narrowed. If both parties can agree to turn the Pre-Action Protocol meeting into a mediation proceeding, there is a much better success rate in resolving the dispute. The mediator can also remind the parties of the risks and costs involved in taking their dispute to Court, a fact which often leads to an amicable agreement.
The Consequences of Refusing to Mediate
If a construction dispute goes to Court, and costs are awarded to the successful party, the unsuccessful party to the dispute can apply to the Court for some or all of the costs to be disallowed, if the ‘winning’ party unreasonably refused to partake in mediation proceedings when offered to do so at the first Case Management Conference.
The Enforceability of Mediation in Construction Disputes
If the mediation results in an agreed settlement, that settlement is legally binding and will be enforced by the courts if one party does not comply. In practice, most parties do comply as the agreement has been reached voluntarily.
Mediation is supported by the UK Government and the Judiciary as a way to successfully resolve construction orientated disputes.
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Fisher Scoggins Waters is a leading construction, engineering and manufacturing litigation firm, specialising in disputes and disasters. For further information on this article or any of our litigation services, please contact us on: +44 (0) 207 993 6960.