Lorna Carter

+44 (0)1223 785299 lecarter@greenwoodsgrm.co.uk

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George Elliman

+44 (0)1223 785298 grelliman@greenwoodsgrm.co.uk

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Finding a way forward: mediation and construction disputes

Construction / 15 April 2020

Mediation continues to be a widely used alternative dispute resolution (ADR) method of resolving construction disputes. Mediation involves the appointment of a neutral middleman to facilitate a discussion between the parties, their legal representatives and potentially insurers, offering them a chance to put their respective positions to each other in a confidential and (hopefully) conciliatory setting away from the public domain. The mediator may also have a more specialist construction background fitting for a technical dispute.

The generally accepted wisdom is that mediation is a cost and time effective alternative – especially when successful – compared to proceeding through the court system.  Also, bearing in mind the limitations on what a court can order, a mediation done right can open the door to more ‘creative’ settlements rooted in commerciality rather than the purely legal judgment.

The current position

There is no compulsory duty for parties to construction disputes to mediate, nor will a court order the parties to mediate (but they may give strong indications). However, note that:

1) Parties are bound by the Civil Procedure Rules (CPR) to consider whether forms of ADR may enable settlement without court proceedings;

2)  Failing to follow the CPR can have significant cost implications. Consider the recent case of DSN v Blackpool Football Club Ltd [2020] EWHC 670 (QB), where a losing defendant was ordered to pay indemnity costs ‘on a broader basis and for a longer period’ than would otherwise have been the case, purely due to its failure to engage in ADR.

3) The Technology and Construction Court Guide states that the court will ‘provide encouragement to the parties to use alternative dispute resolution (“ADR”) and will, whenever appropriate, facilitate the use of such a procedure’.

4) As a part of the Pre-Action Protocol for Construction and Engineering Disputes, parties should already meet before any claim is issued and ‘the meeting can itself take the form of an ADR process such as mediation’.

So, while mediation (and other forms of ADR) are not compulsory, there are many persuasive ‘nudges’ built into the civil litigation framework that have made mediation increasingly common.

The future: court-ordered mediation?

Will a court ever order the parties to mediate? The answer to this for the longest time has been a clear no – the position (largely built on the 2004 Halsey case) being that the courts should not compel parties to mediate and obstruct their access to the courts. But this case was 16 years ago, when the ADR landscape looked very different, and there are signs that the dial is moving slowly in the other direction. A recent Court of Appeal decision (Lomax v. Lomax [2019] EWCA Civ 1467) concluded that the parties did not need to consent to early neutral evaluation, a different form of ADR. It follows that the leap is not far to apply the same reasoning to mediation – this question is already being asked in more recent cases.

The other question worth asking is whether, on the current trajectory, the court’s encouragement of mediation/ADR will become so forceful, and the costs implications so great, that this is mandatory in all but name? This is certainly a trend that the Greenwoods GRM construction team have picked up on from recent experience of the TCC.

Footnote: Will Covid-19 change how we mediate?

Necessity is the mother of invention, and that spirit is alive and well in the current climate. Just as we at Greenwoods GRM continue to be responsive and agile for our clients in these difficult times, it’s worth noting how established practices are also having to be adapted to fit with the times.  Mediation is no different.

While remote mediation has existed as a concept from some time (carried out over video conferencing software, often with bespoke solutions for virtual breakout rooms and document sharing), it has never acquired mainstream appeal. Any good mediator will tell you that there is no substitute for bringing the disputing parties face to face in the same room, and that remains true.

But, that being said, the current situation has seen mediation chambers and other providers reacting to Covid-19 by rolling out more remote services to clients. There is no reason to think this will not remain as a real option once normal service is resumed. This could be particularly useful for disputes with an international element and/or where gathering the parties’ decision makers is logistically difficult. Even in normal circumstances, it may be preferred by the parties as a cost-effective option.

If you have any questions about this or any other construction issue, our specialist team are here to help.

Visit our Coronavirus Resource Hub for insight and guidance to help you and your organisation during this complex time.

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