As mediation, med-arbs and collaborative settlement have become more common as a part of the dispute resolution process, these methods have also become more commonly used in the construction arena. As with other disputes, parties to construction disputes value the confidentiality, effective and efficient dispute resolution and the prospect of maintaining working business relationships that these dispute resolution mechanisms can facilitate.
Construction disputes are often complex, with many players, complex issues and large sums at stake. This can make the litigation of construction disputes lengthy and expensive. The time required to get the matter to trial and secure a resolution will frequently exceed the time spent completing the project.
Mediation is gaining acceptance within the construction community as an effective means for resolving disputes both during the life of a project and after it has been completed, in a manner consistent with the construction relationship.
Since mediation is now a mandatory step in the litigation process in many jurisdictions, parties will come together before a mediator at least once before a case goes to trial. Mediators are able to facilitate settlement both directly at a mediation session, and when the mediation prompts a change in the settlement discussion, the approach or the options at play for the parties (see Stitt, Allan J., “A ‘Failed’ Mediation”, Construction Law Letter, Vol 34, No. 3. January/February 2018)
Disputes that are not resolved quickly tend to lead to hardening of positions and become more difficult to settle as the commitment to position and time and resources increases. The more time and money that goes into the pursuit of a dispute, the more entrenched parties become in their positions causing the mediation to be less likely to succeed.
Mediation affords the parties an opportunity to reach complete or partial, permanent or interim, resolutions to keep a project moving while actively working to resolve the dispute. Each party’s rights and interests can be preserved, and work can continue on the project while resolution is pursued.
Due to the direct correlation of time and cost, parties should be encouraged to bring a dispute to mediation sooner rather than later in the process. Addressing disputes immediately after they arise will almost always be a more efficient and cost-effective approach (Olivella Jr. M. A., “Toro’s Early Intervention Program, After Six Years, Has Saved $50m” (1999) 17:4 Alternatives 1; as quoted in Golann, D. Folberg,J., Mediation: The Roles of Advocate and Neutral, 2nd ed. (New York: Aspen Publishers, 2010), p. 96). Parties may be well advised to appoint a neutral project mediator at the outset of a project, before any dispute has arisen (Morrison, S. “The Better Way: Pre-Litigation Mediation of Construction Disputes”, Construction Law Letter, Vol 34, No. 3. January/February 2018).
This individual would remain available during the course of the project to assist parties in the resolution of disputes in a timely and confidential manner whenever the parties choose to seek a resolution. Preventing disputes or resolving them promptly is more effective, indicating that the closer the mediation takes place to the time of the dispute, the more efficient the mediation process may be. Engaging the services of a mediator as early in the dispute process as possible, and even at the outset of the project could make all the difference to an effective resolution process for construction clients.
Med-Arb is a hybrid form of dispute resolution. As the name suggests, it combines both mediation and arbitration. In same-neutral med-arb, the parties work initially with a mediator to determine a solution to their dispute. If the mediation is unsuccessful, the neutral assumes the role of an arbitrator and will make a final and binding determination.
The advantages of this process are that it gives parties the opportunity to try mediation before the commencement of an arbitration, which provides parties with all of the benefits of mediation early in the dispute, before resorting to binding proceedings. The med-arb process allows parties to save time and money on “re-starting” or “re-doing” discovery and document exchange in two separate arenas.
One disadvantage to this process is the use of the same neutral in both the mediation and arbitration elements of the dispute. Parties may not feel as though they can fully participate in a mediation, as they may divulge information to the mediator that they would not want disclosed in arbitration. If they know that the same neutral will then have that critical information when acting as an arbitrator in the same dispute, parties may fear that the neutral may consider or weigh this information in the arbitration (Stipanowich, Thomas J. “Mixed and Changing Roles”, in Golann, D. Folberg,J., Mediation: The Roles of Advocate and Neutral, 2nd ed. (New York: Aspen Publishers, 2010), p. 429).
There is a risk that the power associated with the arbitration phase will overshadow the mediation phase, causing it to be ineffective and redundant.
Collaborative law is a fairly newly introduced process in the construction dispute resolution arena, and is described as combining the facilitative problem solving focus of mediation, with the built-in legal advocacy and counsel of traditional settlement-oriented representation (Glaholt, D. W., Reynolds, R. B., “The Collaborative Settlement of Construction Disputes” (2018) 1:2 The American Journal of Construction Arbitration & ADR 1. This process is unique in that it does not include a third party neutral to assist in the resolution of the dispute. Rather, parties and their counsel work together, agree on how they wish to proceed with all aspects of the negotiation process, exchange documents, select experts and agree on a timeline for the negotiations to take place.
The process can begin with a selective, consensual and meaningful disclosure exercise where the goal is to obtain a reasonable degree of information and mutual understanding of the issues before proceeding with the negotiations.
Collaborative construction industry dispute resolution is designed to equip both counsel with an objectively validated narrative of their opponents case to allow for productive client to client negotiation. (see Glaholt, D. W., Reynolds, R. B., “The Collaborative Settlement of Construction Disputes” (2018) 1:2 The American Journal of Construction Arbitration & ADR 1). Counsel must learn both sides of the case, and should be able to demonstrate to opposing counsel that each side is understood to the other’s satisfaction. This should include a review of the opposite side’s case brief, acknowledging the strengths and weaknesses from both perspectives to objectively look at the case and develop a settlement plan.
The final step in this process is the settlement itself. In the process described by Glaholt and Reynolds, counsel withdrew at that stage and left the clients’ management to use the information gathered to develop an interest-based, comprehensive, commercial settlement.
Crucial to the success of the process was a disqualification provision to the effect that if either party believed that the other had frustrated the purpose and intent of the process, that party could end the process, and thereafter neither lawyer involved in the collaborative process could act in the ensuing litigation or arbitration.
The Future: Adjudication
Adjudication, an up and coming dispute resolution method that will be implemented following the coming into force of the pertinent provisions in Ontario’s new Construction Act, is a swift and flexible mechanism of dispute resolution that has been used with much success in many common law legal systems worldwide. It is a proven, effective and efficient solution (Reynolds, R. B., Vogel, S., Striking the Balance: Expert Review of Ontario’s Construction Lien Act. April 30, 2016).
Adjudication is designed to prevent the stopping of work and delays on construction projects that are normally the result of disputes. This quick and pragmatic solution frees up cash flow and resources during the course of a project disputes so that work may continue, while also reconciling the competing interests of the parties involved.
Adjudication involves the determination of a construction dispute that arises out of a contract by a qualified adjudicator who will conduct an investigation and make an expedited determination, within about 40 days on average. This decision will be binding on an interim basis.
This dispute resolution process is revolutionary in Ontario as it will see to the swift and effective resolution of disputes that cause significant impact on the cost and delay of projects.
Timing in dispute resolution is everything. Adjudication provides the earliest possible timing of effective, binding interim dispute resolution, and involves a quick turn-around for a decision. Adjudication has the ability to resolve issues of payment as they arise, and allows the project to continue while the dispute is being adjudicated (Glaholt, D.W, "The Adjudication Option: The Case for Uniform Payment & Performance Legislation in Canada”(2006), 53 C.L.R. (3d) 8).
ConclusionAll parties suffer when a dispute drags on and is not resolved. Tackling disputes as early as possible can benefit all players, through saving time and resources that would be required in pursuing traditional litigation, while allowing parties to maintain control of their own dispute and its outcome.