Conflict avoidance, management and dispute resolution procedures

Question 1

What is mediation?

Answer 1

• Negotiations carried out with the assistance of an impartial 3rd party who is there simply to facilitate a decision but has no power to impose an outcome. The parties can then formally document the agreement.

Advantages

• Non adversarial.
• Voluntary.
• Quick.
• Usually inexpensive.

Disadvantages

• Mediator does not state specialist advice.
• Other ADR may follow anyway - additional costs.
• Cost may not be recoverable is no settlement agreed.

Question 2

What is adjudication? What are its’ advantages / disadvantages?

Answer 2

• A contractual procedure whereby a third party adjudicator is selected by the parties in dispute.
• The adjudicator is either named in the contract or the parties agree to a nominating body (usually the RICS adjudication service).
• Party who wants to enforce adjudication must issue a notice to the nominated person or body and they must appoint an adjudicator within 7 days.
• The adjudicator reviews documents only submitted by the parties and will come to a decision within 28 days unless agreement is made by both parties to an extension.
• The decision made by the adjudicator unless revised by arbitration or litigation.
• Both parties must meet their own costs for the adjudication unless they have agreed the adjudicator has power to award costs.
• Adjudication was introduced by the Housing Grants Construction and Regeneration Act 1996 which all parties to a building contract are entitled to under the act.

Advantages

• Private
• Statutory right
• Quick decision - 28 days.

Disadvantages

• Each party bears their own costs.
• Need to get point across with documentation - no opportunity to voice position.

Question 3

What is arbitration? What are its’ advantages and disadvantages?

Answer 3

• Contractually agreed form of ADR whereby a 3rd party arbitrator or panel is selected by the parties in dispute.
• Arbitrator’s decision is based on material facts, documents and principals of law.
• The process commences when a notice to concur is served by one party to another to facilitate agreement of appointment of an arbitrator, failing this a arbitrator is appointed by a nominating body.
• Arbitration is governed by the Arbitration Act 1996.
• There are three main procedures which can be used:

1. Review of documents only - takes 30 days.
2. Short hearing - takes 30 days.
3. Full procedure - no time limit.

• The decision is legally binding and has very limited rights of appeal.
• Legal costs are usually awarded to the successful party.

Advantages

• Private.
• Arbitrator is usually very experience in the field - a retired legal professional.
• Parties can call on witnesses.
• The outcome is legally binding and hard to overturn and can allow amendments to the existing contract.

Disadvantages

• Expensive.
• Very hard to appeal - only if deemed unlawful.

Question 4

What is litigation? What are its’ advantages / disadvantages?

Answer 4

• This is a lawsuit within a court of law.

Advantages

• Legally binding but can be appealed.
• Can deal with several claims at once.

Disadvantages

• Adversarial and formal.
• Publicly exposed.
• Expensive.

Question 5

What are the three formal forms of dispute resolution?

Answer 5

• Arbitration.
• Litigation.
• Adjudication.

Question 6

What are the main forms of alterative dispute resolution?

Answer 6

• Mediation
• Conciliation
• Negotiation

Question 7

What is conciliation?

Answer 7

• ADR that is similar to mediation.
• Involves an independent third party to aid agreement between the parties.
• Conciliator has no authority to make any decisions.
• Conciliator will encourage the two parties to come to an agreement between themselves whereas a mediator will often suggest their own solution.

Question 8

What is alternative dispute resolution (ADR)?

Answer 8

• Collective name given to the methods available in order to settle a dispute that does not involve the litigation process. The processes include:

1. Arbitration.
2. Adjudication
3. Expert determination
4. Mediation and conciliation
5. Negotiation

Question 9

What are the advantages of ADR?

Answer 9

• Speed - takes less time than court proceedings following the CPR.
• Informality - outside of court.
• Greater opportunity for negotiation.
• Cost less money on professional fees that litigation.
• Quality of decision making “ as its made by experts in the field not judges.

Question 10

What is Expert Determination?

Answer 10

The parties agree by a contract that a third party will make a binding decision on them. In most cases, the decision is final and un-appealable.

Question 11

What is the RICS dispute resolution service?

Answer 11

RICS Dispute Resolution Service (DRS) is the worlds oldest and largest provider of alternative dispute resolution (ADR) services in the land, property and construction industries. Internationally, DRS resolves around $2 billion US dollars worth of disputes every year keeping these cases out of the courts.

Question 12

What form of ADR would you choose typically in construction contracts?

Answer 12

Adjudication:

• Quick (dispute resolution in 28 days).
• Less expensive.
• Adjudicator is named in contract as RICS - oldest provider of adjudication.

Question 13

What does the RICS guidance note on Conflict avoidance and dispute resolution cover?

Answer 13

General principals - Level 1

Conflict avoidance processes

Three pillars of dispute resolution

Dispute resolution techniques

Alternative dispute resolution

Standard forms of contract and their provisions

Practical application of conflict avoidance and ADR - Level 2

Practical considerations - Level 3

Question 14

What are the conflict avoidance processes according to the RICS guidance note on conflict avoidance and dispute resolution in construction?

Answer 14

Main conflict avoidance processes include:

Good management - Surveyor should be proactive when managing projects to ensure concerns are raised early and confidence is instilled in the client and contractor.

Clear contract documentation - Clear contract documents that are consistent avoid ambiguity and each party’s obligations under a contract. If not consistent a contractor’s may exploit these irregularities to work in their favour e.g if they have financial issues.

Good project management - The surveyor should proactively manage time, risk and money associated with the project rather than delegating these elements to others.

Good client management - Surveyor should have good understanding of the clients objectives to ensure satisfaction and ensure good lines of communication are kept so issues and risks to the project can be raised in a timely manner.

Record keeping - Need to keep records to ensure that key decisions made by parties are kept and that a contractor cannot dispute concerns raised and issues with progress during a project. This protects the client when a contractor may dispute not acceptance of a EoT etc. Records such as meeting minutes and contractor progress reports should be kept.

Good payment practice - payment should be carried out in accordance with the contract to avoid straining relationships.

Regular reporting and proactivity - Through meeting minutes etc. Keeping a rolling final account to warn the client of current expenditure means that there are no surprises and issues when agreeing the final account.

Question 15

What are the three pillars of dispute resolution according to the RICS guidance note on Conflict avoidance and dispute resolution in construction (MAN)?

Answer 15

Phrase that describes the three main dispute resolution techniques.

1. Mediation (or third party intervention).
2. Adjudication, arbitration and litigation.
3. Negotiation.

Question 16

What does JCT recommend for ADR?

Answer 16

The JCT contracts make reference to:

• Mediation.
• Adjudication (the adjudicator can be named in the Contract Particulars).
• Arbitration (appointing body can be named in the contract particulars).

Question 17

What is a information barrier ?

Answer 17

A measure put I place as a result of a conflict on interest, to reduce the passing or access of information from within an organisation.

Question 18

What is the difference between Mediation and Conciliation?

Answer 18

• Mediation is a voluntary procedure, which involves the appointment of a third party mediator, who will help to facilitate negotiations between parties. Them aim of mediation is to help the parties reach an amicable agreement.
• Conciliation is also a voluntary procedure, which involves the appointment of a third party Conciliator. The role of the conciliator is to also facilitate negations, however the Conciliator will create a settlement proposal.

Question 19

What are the differences between arbitration and litigation?

Answer 19

• Litigation is more adversarial but allows you to address multiple disputes whereas arbitration only allows you to handle one dispute at a time.
• Litigation also only requires one parties consent to proceed.
• Litigation does not have a maximum time frame to resolve the issue.
• The Arbitrator is also predetermined in the contract whereas you do not get a choice of the judge assigned.

Question 20

What is the different between mediation and conciliation?

Answer 20

• The mediator is a neutral party who help parties to rebuild business relationships and help them to work out a solution that is mutually agreeable
• There parties are directly engaged in the discussions
• It is non-binding and parties can revert to arbitration or litigation at any time
• Conciliation has the same aims than mediation but the processes are different
• The conciliator is usually a figure of authority that the parties have turned to for guidance
• The conciliator makes suggestions and the parties make the final decisions

Question 21

Why might you choose Arbitration over Litigation?

Answer 21

• Arbitration is more private
• You get control over the arbitrator and the duration.
• The arbitrator can amend the contract
• Arbitration deals with any disputes arising out of or in connection with the contract.

Question 22

What is Merrett v Babb ?

Answer 22

• Court case in 2001
• Babb had carried out a valuation as an employee of a company for a house purchased by Merrett
• Valuation later found to be negligent
• The original company no longer existed
• Court ruled Merrett could pursue the individual – Babb – for the losses
• Big shock in the industry

Question 23

What are dispute boards?

Answer 23

• Sit somewhere between avoidance and dispute resolution.
• Three dispute board members are appointed at the start of a project. They become familiar with the project by reviewing some of the project documentation and also regularly visiting the site during the course of the works.
• If and as issues arise they can be asked for their non-binding recommendation. This may relate to general disagreements or disputes. Often their recommendations are used to resolve disputes between the parties, thus avoiding formal disputes.

Question 24

What is the approach by JCT to ADR according to the RICS conflict avoidance guidance note?

Answer 24

The usual approach in the JCT contracts is an express reference to adjudication in the Articles of Agreement, together with a further express reference to arbitration or legal proceedings. In respect of adjudication, either party may refer a dispute to adjudication under the applicable clauses of the relevant JCT contract. The procedural rules are those of the Scheme for Construction Contracts. This avoids the old problem under JCT, which was the question as to whether the Scheme applied or the purpose written JCT Adjudication Rules. The Scheme has withstood the test of time, and has now been adopted by JCT. The parties can either then select arbitration at the outset of the works, or court proceedings. The benefits of arbitration are that the dispute will remain private, however, an employer might choose court proceedings litigation on the basis that it will be easier in court to bring a claim for defects, as those claims are often multi-party. Multi-party disputes are not so easily dealt with in arbitration. Finally, most JCT contracts provide that the parties could, by agreement, seek to resolve any dispute or difference through mediation. The JCT produces a helpful guide for mediation.

Question 25

What does the Conflict of interests professional statement include?

Answer 25

• Outlines what a conflict of interest is (the different types).
• Confidential information - RICS members and firms must maintain confidentiality of information unless disclosure is required by law.
• Firms systems and controls - firms must have effective systems with controls appropriate to their size and complexity to prevent conflicts of interest.
• Supporting commentary on:

1. Record keeping to show compliance with the professional statement.
2. Informed consent
3. Information barriers