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A quantum of solace for the construction industry

The options for dealing with disputes changed this week with the launch of the CEDR Construction Adjudication Panel.

There are two new features – there is no appointment fee and the rules allow for adjudication first, followed by, if the parties agree, mediation.

This is in contrast with the more traditional approach – for example, the ICE Conciliation Procedure and the Construction Conciliation Procedure – where the conciliator attempts to conciliate, or mediate, the dispute followed by a recommendation if there is no settlement.

Parties will have to consider whether the dispute involves sufficient sums to justify going through the adjudication procedure first – the suggestion is the adjudicator prepares the decision but does not disclose it prior to mediating.

The judgments in two recent industry disputes – Multiplex v Cleveland Bridge and Burchell v Bullard – demonstrated why the CEDR’s new adjudication rules are particularly timely.

Lord Justice Jackson’s last judgment in the TCC in Multiplex v Cleveland Bridge made clear the benefit of mediation. At the conclusion of the preliminary issue trial in May 2006, the judge had said that “it may now be possible for both parties to arrive at an overall settlement of their disputes, either through negotiation or else with the help of a mediator, who is unconnected with this court.”

But in his recent judgment, the judge said that, though the parties did attend a mediation following the judgment, it had been unsuccessful. The judge said that instead of reaching a resolution, “the parties spent the next two years litigating”.

The judge held that Multiplex was entitled to £2 nominal damages for Cleveland Bridge’s repudiation of the subcontract and £2
nominal damages in respect of Cleveland Bridge’s repudiation of the purchase order. This was after the parties had incurred
£22 million costs.

The judge was critical of both parties and highlighted the fact they had ignored judicial advice regarding the “wisdom of settling this litigation”.

Saving millions

He added: “Once this court has decided questions of principle, the parties can save themselves and their shareholders millions of pounds by instructing their advisers to agree reasonable figures for quantum, if necessary with the assistance of a mediator unconnected with the court.”

This is another judicial pronouncement upon the appropriateness of mediation in the industry following the judgment in Burchell v Bullard where the defendant had to pay about £5,000 to the claimant compared with the estimated costs incurred by both parties of £185,000.

Mediation on what was a simple domestic building dispute was rejected on the grounds the case was “too complex”. The Court of Appeal disagreed, saying claims of this type suited mediation.

The judge’s observations in Multiplex reinforced the comments of the Court of Appeal in Burchell, namely that “the profession can no longer with impunity shrug aside reasonable requests to mediate”.

David Miles is head of the construction department at Glovers Solicitors

Related news:

Profit claim dismissed as 'unsound' - CBUK's argument for £2 million quashed

Wembley saga continues as both sides prepare formal appeals

COURT BLOG: Wembley

REACTION: Multiplex Vs CBUK

Timeline: The Road to Wembley