Construction dispute resolution

By - , Build 170

Choosing the right style of professional resolution to the growing number of disagreements and stand-offs in the current booming construction sector is key.

THE CONSTRUCTION Contracts Act 2002 established a complete and speedy process for the resolution of a dispute between the parties to a construction contract.

Sixteen years after its much-heralded introduction, what’s interesting is how much that worthy goal depends on the calibre of those helping find resolution to the sector’s thorniest disagreements.

Difficulties resolving disputes

At a time when the construction sector is experiencing a boom, the sector’s ability to resolve many serious disputes within its own ranks remains more of a bust. According to one recent survey, more than half of the industry leaders think the industry is in about as good shape as a leaky home. And yet at the same time, the sector has more bustle and activity to it than ever before.

Misunderstanding of roles prevails

What accounts for this apparent disconnect? And how can dispute resolution expertise best help bridge it?

At least part of the reason for the first question is in the construction process and what appears to be a widespread misunderstanding of the roles of the participants.

At its simplest, as construction specialist and adjudicator John Walton recently explained in The New Zealand Herald, an owner provides the site, resource consents and designs and pays for the work.

The contractor organises the work to the design and to the required legal standards for the agreed price and within the allocated time. Price and time are adjusted for unforeseen events and for changes instructed by the owner, and construction contracts legislate for uncertainty.

All well and good. But that uncertainty is exacerbated by an incomplete understanding of other project risks including ground conditions and supply chain issues like subcontractor and supplier pricing and availability.

Another risk is unrealistic expectations on the part of owners, particularly that they can fill in the gaps in the design and instruct changes seemingly at their whim without cost consequences.

Thorns in the tender process

The tender process therefore becomes anything but tender. It encourages opportunistic behaviour, forcing contractors to compete on incomplete, unrealistic or unfair contract terms, which in some cases virtually guarantee some kind of dispute resolution will be required down the line.

Small wonder that we are seeing more disputes in the current environment. Projects are being delayed, sometimes in substantial ways, which in turn creates entrenched positions crying out for resolution.

High demand for dispute resolution experts

In cases where resolution is sought through the courts, the time and cost involved will often cause hardship – not to mention increased stress – for either or both sides. That’s where dispute resolution professionals can help with the health of the sector.

It’s not surprising – at least from my vantage at an agency for dispute resolution professionals – to see the surge of demand for suitably credentialled and experienced experts to be involved in the process.

Our approach at AMINZ, where we oversee one of the country’s main nominating authorities, ensures that, whether people need an adjudicator or mediator, a qualified person is appointed via an advisory panel usually within 48 hours.

Choose the right process

Mediation is sometimes used in construction-related cases, notably leaky buildings. This may not be the most effective way to get the best results if both sides aren’t prepared to compromise.

Many construction cases are reasonably black and white, notes Andrew Hazelton, a construction lawyer and adjudicator who believes these disputes are often better settled with a muscular ruling. ‘There’s a mediation clause in NZS 3910:2013 Conditions of contract for building and civil engineering construction, and I’ve never known it to be used,’ he says drily.

Adjudication

Andrew appreciates the efficiency of adjudication – the fact such rulings are seldom challenged. It’s quick. It’s private. It’s binding. It allows things to be settled and business life to go on.

‘The thing about adjudication is you can’t avoid it,’ he says. ‘You can’t stop it. You get taken along for the ride. It encourages parties to put cards on the table early or before adjudication. Often the case doesn’t proceed. It settles.’

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Mediation

Senior construction adviser Graeme Christie, on the other hand, has appreciated the ‘pragmatism’ of mediation in many cases.

‘It’s horses for courses,’ he says. ‘You have to truly assess the right process for the particular dispute and the parties. Too many people don’t do that and throw themselves into adjudication, throwing in claims that are expensive for an adjudicator to determine.’

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Dispute resolution boards

He notes that dispute resolution boards are growing in popularity for big projects. ‘They could be used more to keep a project on course and out of disputes, like they are used so often overseas.’

No matter what the solution, however, the advantages of the right style of professional resolution to the inevitable disagreements and painful stand-offs in the booming construction sector are obvious. No disputing that.

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For more

See www.aminz.org.nz.

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