The benefits of talking things over, by Anthony Harrington
When economic conditions get tough, people take a fresh look at their contractual obligations with third parties either to lessen the obligations on themselves or to see if greater returns or increased discounts can be extracted from projects. The construction sector has always been a somewhat disputatious place in which much can go wrong and harsher economic conditions simply exacerbate this trend.
However, as Janey Milligan, managing director, and Lisa Cattanach, director, at the aptly named Construction Dispute Resolution point out the industry has its own legal mechanism, known as adjudication, which resolve parties’ differences and prevent the requirement of going to court. Both Milligan and Cattanach are practicing adjudicators, arbitrators, mediators and expert witnesses.
They advise both contractors and sub-contractors, on the one hand, and employers and public bodies on the other, and have considerable experience in achieving settlements for clients by providing effective solutions to construction disputes.
"The construction dispute market is usually quite active and buoyant every year in the run up to the festive season and this year is no different," Milligan says. Quite a few construction companies have a calendar year end and even for those who don’t there is a sense that potential disputes should be cleared out the way, if possible, prior to Christmas, so the new year can start afresh.
"This is also the time when people have come back from their summer holidays and find that the company is not where they thought they would be in terms of income earned. This prompts them to look at disputes and potential risks and where their strong points lie in any argument with third parties," Cattanach adds.
One of the strengths of statutory adjudication is the time in which the adjudicator has to reach a decision, usually within 28 days of him or her having the dispute referred to them. "The oil and gas sector is not immune to disputes, but it has always been strong on mediation or arbitration. Construction was always about arbitration and court, which is binding on the parties, until statutory adjudication was introduced in 1998," she notes.
The whole point in taking advice early in potentially disputatious circumstances is to put yourself in a position where you can open negotiations with the other party, from a position of advantage. "This is all about prevention rather than cure." Milligan adds.
To date, the construction industry has never really embraced meditation. "There are disputes that can be dealt with successfully through mediation or through general negotiations but there is a good deal of disclosure required in full blown mediation and this is quite a cynical industry. There are concerns about what you are disclosing to the other side in a "full-and-frank" exchange," Milligan notes. However, mediation is an appropriate method of dispute resolution that those in the construction industry should open their minds to more.
Adjudication, on the other hand, has proven to be a successful method of dispute resolution which has been embraced by the construction industry. The firm has long been involved in researching the statistics behind adjudication in conjunction in recent years with the Adjudication Society. "There was a peak in 2002 in the case load going to adjudication, with just over 2000 cases a year making use of adjudication right across the UK, through appointments by Adjudicator Nominating Bodies. However, by 2011 this had fallen to around 1,000 cases a year. Since 2011 adjudications have again been on the increase, and this year we are back up at around 1,500 cases a year.
"Typically, about 5 per cent of the cases going to adjudication across the UK, will take place in Scotland," Milligan says.
Janey Milligan decided to set up Construction Dispute Resolution in 1997, having worked as a professional Chartered Quantity Surveyor. "I was very interested in claims and contract issues throughout my career, so founding CDR was a natural progression of this interest," she comments.
Lisa Cattanach was also a Chartered Quantity Surveyor working out of the same offices as Milligan, and again, had an interest in construction contracts. In 2000 she accepted an offer from Milligan to join the firm full time and the practice has continued to grow over the past 19 years.
"We have a number of disciplines in the practice, including architects, engineers and quantity surveyors, and all our key staff are dual qualified with a Masters degree in construction law."
"One of our chief selling points and main attraction to clients is that we are able to offer all these disciplines under the one roof, with everyone able to bring their different skill sets and perspectives to a dispute which provides the client with rounded advice," Milligan notes.
Every case, of course, is different. Some cases are weak, even if the client has strong feelings about their side of the dispute, and some are virtually overwhelmingly positive. If a client has a weak case that, in CDR’s expert opinion, is unlikely to achieve the result that the client is looking for, this will be made abundantly – but tactfully – clear to the client.
"One of our key strengths is that we are very honest with clients. If they bring a case to us that does not stack up, we will tell them so and will work with them to assess how their case can be improved and advise them on the best way of resolving the dispute," Cattanach says.
"Quite often, you have to take even the hardest-minded clients through the case, step by step, so that they can understand what the likely implications are of progressing, and how things are likely to turn out. The first thing we ask clients when they come to us is: are you still able to talk to the other party? Are the channels of communication still open? It gets much harder if things have got so fraught that people are not able to talk together any more," Milligan says.
Things have definitely improved in the construction sector over the last few years, Milligan says. But margins across the sector are still incredibly tight. "These tight margins are themselves the source of a lot of the difficulties, since it does not take much to turn a project from being profitable into being loss-making," she notes.
Apart from adjudication, arbitration, mediation, and expert witness appointments CDR does a good deal of contract advice to both employers and contractors.
"Very often we will be in the background from an early stage in a project, advising a party on an ongoing project, so that the project stays on track, according to contract," Milligan concludes. However, where issues arise, CDR will work with the specific client to provide an effective solution to the construction dispute.
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