Practical considerations for utilising mediation in construction disputes

Adam Chaffer, Associate, Dispute Resolution & Construction

As a sector, the nature of construction makes it a rich ground for disputes which may arise at any stage of the process. While all parties in a construction project have a common goal to complete the project, the multiple parties working together can naturally lead to tension and disputes whether that be the personalities of the parties, delays or variations in the work, issues with funding or resolving defects. Against that backdrop, the common goal of completing the works can be eroded.

Whilst the primary drivers of construction dispute resolution remains adjudication, a forum which parties to a construction contract cannot contract, an alternative that can be considered is utilising mediation.

The process of mediation is facilitative, which means the mediator will not make a decision, judge or advise the parties on the dispute. This provides an environment in which the parties can reflect on the dispute, their position and the wider commercial issues in the construction project to seek out where a compromise can be achieved. This environment is unique in dispute resolution because it allows parties to consider and, if they want to, express how they feel about the dispute and what they really want to do to resolve it.

It is entirely voluntary, and parties are not obliged to settle their case at the mediation or stay at the mediation if they do not feel persuaded by the other party. Equally, the process does not close the door on seeking to resolve the dispute through adjudication or litigation.

Before engaging in mediation, it can be beneficial for the parties to consider the format of the process. With the assistance of the mediator, the parties can shape the procedure on the day to suit resolution of the particular dispute. No two disputes are the same, and no two mediations will be the same. A good mediator will consider this before hand which allows them to get a sense of what needs to be achieved in the time available.

When the parties come to an agreement, it must be written down and signed before it is binding. It is not for the mediator to draft the agreement but the parties themselves.

If settlement is not reached during the mediation, it does not automatically mean that settlement will not be possible in the future. Indeed, it is not uncommon in the hours, days or weeks following the mediation that parties may build on the progress made during the mediation to come to a resolution.

The courts are active supporters of mediation. In addition to the practical advantages of mediating, the courts generally consider litigation to be a last resort. Certainly, in the Technology & Construction Court there is a clear encouragement for parties to use alternative dispute resolution including inter-party negotiations or a mediation conducted by a neutral mediator. The use of mediation in construction disputes was aptly summarised by Coulson J in Nigel Witham Ltd v Smith [2008] EWHC 12 (TCC) when he said:

"The trick in many cases is to identify the happy medium: the point when the detail of the claim and the response are known to both sides, but before the costs that have been incurred in reaching that stage are so great that a settlement is no longer possible."

To discuss how mediation could work for you, get in touch with Adam.