METHODS OF DISPUTE RESOLUTION

It is sometimes, perhaps too often, thought that any dispute arising from a construction
contract must be resolved by court action or arbitration. This is simply not true. Whether or
not there is an arbitration agreement in the contract, it must always be remembered that
contracting parties can alter the terms of their contract at any time, by mutual consent. This
fact is not stressed, or even hinted at, anywhere in the clauses of any JCT building contracts.
The ICE 7 form, by contrast, introduces a procedure designed to exercise negotiated
approaches before resorting to more litigious routes. In any event, whatever the contract says,
in the event of a dispute, the parties are not compelled to resort to the courts for the settling of
their differences. They can choose instead to attempt to settle their differences amicably. Of
course, if this should happen, it is extremely important to record exactly what has been
agreed, and to have it signed by both parties, in case of any future disagreement about what
was agreed.

The use of the courts for settling disputes is expensive, uncertain and time-consuming. It is
also very public. The development of Alternative Dispute Resolution (ADR) techniques
arises from dissatisfaction with and alienation from the legal system (Brown and Marriott
1993). Indeed, arbitration was originally devised as an alternative to litigation but is prone to
many of the problems that beset litigation, not least because of the Arbitration Act.

Several techniques are available to help contracting parties to come to some form of
settlement without resorting to arbitration or litigation. These procedures are informal, and
the terminology used to describe them is rather loose and vague. Their chief features are that
they are cheap, non- binding, and investigatorial rather than accusatorial. Although they are
informal, there is an emerging trend to formalize them.

The terms most commonly found to describe these procedures are Conciliation, Quasi-
conciliation, Mediation, Private Enquiry, Adjudication and Mini-trial. However, these terms
are often used interchangeably, and sometimes inconsistently. Collectively, they may be
referred to as Reconciliation (Shilston 1988). Reconciliation, as a generic term, indicates
private, non- adversarial methods of resolving disagreement. Shilston’s definitions form the
basis for those given below.

These techniques can be seen as an intermediate step between having an argument or

disagreement, and referring to the courts. Since reconciliation is voluntary, either party may
pull out at any time and refer the matter to the courts instead, if satisfactory progress is not
being made. What is more, the parties are not bound to accept the decisions of the person
deciding the issue. As Brown and Marriott (1993) point out, ADR is based on a philosophy of
empowering the disputants, putting them back in control of their own dispute. Much of the
dissatisfaction with traditional dispute resolution procedures is because of the lawyers’
professionalization of a dispute, which leads to a legal dispute having a life of its own, almost
displacing the disputants from the process. ADR techniques tend to place the disputants at the
center of the process and seek to help them to find their own way out of an impasse. This
requires a will on both sides, without which ADR procedures are probably doomed.

Adjudication, arbitration and litigation

These three methods of dispute resolution are adversarial in nature. Contrary stances have to
be taken, and this frequently results in people becoming entrenched in their views. Often in
arbitration, and always in litigation, the parties are represented by counsel whose skill and
ability lies in the art of arguing and scoring points over each other. They ‘play’ the
adversarial roles with much skill. Unfortunately, this is not conducive to amicable settlement.
The expense of litigious actions is so enormous that most cases are settled out of court shortly
before they get there, after the parties have done all their preparation work and are aware of
each other’s stance. The scale of costs leaps up once an action starts in court, and even the
winning party will never be able to recoup their full costs. This is why so many cases are
settled ‘on the steps of the court room’.

Conciliation

A ‘conciliator’ must be absolutely independent of the parties to the contract. Impartiality is

essential, since the purpose of this process is to precipitate an agreement by persuasion and
suggestion. Conciliators do not take sides, take decisions or make judgments. They talk to
each party in private, and must be sure not to reveal anything to the other party.
Confidentiality is essential in order for discussions to be frank and meaningful. The
conciliator may bring the parties together after a while for an open discussion, which he or
she chairs and leads.

The conciliator will be seeking to establish common ground, ascertaining the facts that are in
dispute. In order to undertake this function effectively, the conciliator needs considerable
knowledge of construction disputes. There may be previous judicial precedents which are
appropriate to refer to, and the conciliator must be able to advise the parties of these, if
necessary.

Where conciliation is adopted, it is ultimately up to the parties themselves to reach an

agreement, and to decide upon the precise terms of that agreement.

Quasi-conciliation

Although it is a variation on the procedure described above, quasi-conciliation starts in a very

different way. It comes about when one of the parties unilaterally appoints an expert
professional to advise on a dispute, perhaps in order to obtain a second opinion. The purpose
of the appointment is not simply to maximize the return on a claim, as would be the case
where a claims consultant is engaged, but rather to help the party to overcome some technical
or contractual difficulty. The investigator may be appointed to discover the facts and to make
a recommendation to the party about how to proceed. It is often the case that this quasi-
conciliator will need to talk to the other party and find out exactly what is at issue. If the other
party also appoints such a professional, then the two of them may get together and compare
their findings and their conclusions. In theory at least, they ought to do this impartially.

This type of process is often likely to happen in the public sector, because it is very difficult
for a public sector agency simply to appoint such a person without first seeking relevant

approvals from various committees. There are many factors to consider when spending
money because of the notion of accountability. However, a private contractor, working for a
public sector client, has the freedom to appoint someone unilaterally. In this case it is not
unheard of for the public sector agency to listen to an expert second opinion.
Once the quasi-conciliator has reached a decision, a report is made to the client, which can
then be used as a negotiating instrument. In addition, if the dispute continues and goes to
court, the report may be used as evidence.

Mediation

This procedure is like an extended version of conciliation. The initial stages will probably
follow a very similar process, often referred to as shuttle diplomacy, as the mediator consults
first with one party and then with the other. However, the end of this process is very different
from conciliation in that, if no negotiated settlement results from the process, the mediator
will make recommendations to settle based on his or her findings. This process accordingly
retains the flexibility of conciliation, while encouraging a slightly more interventionist role
for the mediator. As a result, it tends to be less open-ended. It is expected that neither party
will pull out and that both will accept the decision of the mediator. It is also expected that this
process will give the parties a useful indication of the outcome of arbitration. This is probably
why recourse to arbitration seldom follows mediation. Mediation is referred to from a
footnote in JCT 98, where reference is made to JCT Practice Note 28.

Private enquiry

This procedure involves the appointment of an independent professional to investigate some

aspect of the project. It is commonly used for highly technical disputes, but is also valuable
where the issues to be resolved are sensitive. Because the uses to which such enquiries are
put are so wide-ranging, there is no fixed procedure for such an enquiry; it has to be created
each time to suit the occasion. On the basis of the report produced, the parties are in a much
better position to negotiate and reach a settlement.

It is very important that the appointee is given precise terms of reference in order that he or
she can identify and carry out the intended task. Where this is done, it is usually found that
private enquiries discover technical facts much more quickly than would a judicial enquiry.
This is partly at least because arbitrators and judges are prohibited from using their own
experience, and must reach a decision purely on the basis of upon what is put before them.
This is by contrast with a private enquiry, where the person conducting the enquiry can make
use of his own knowledge and professional expertise in arriving at a conclusion.

One of the greatest benefits of a private enquiry is its speed. It is interesting to note that the
private enquiries set up to investigate the Lockerbie air disaster and the King’s Cross fire
came

to their conclusions after a few months had elapsed. This is by stark contrast to litigation. It is
not untypical for litigated cases to take years, perhaps decades.

Mini-trial

This procedure actually requires the disputing parties to present their cases to a board
consisting of themselves! To be more precise, it means that representatives of the employer’s
and contractor’s organizations will conduct something like a trial in front of a panel of senior
executives from those organizations. It is important that this group should have the necessary
authority to reach and implement decisions, and also that its members should not have been
personally involved in the dispute up to this point.

Strictly speaking, this does not really fit the definition of Reconciliation given above, because
it is adversarial in nature. The two parties are expected to take opposite stances and to argue
their cases in front of the panel. Having heard the evidence, the panel can then negotiate their
respective positions until they reach agreement.