Legal disputes: The Olympics and Wembley

In January, here in Building, Sir Steve Redgrave paid tribute to the Olympic and Paralympics venues now nearing completion. He commented that they appeared to be the best designed, constructed and project-managed Olympics in the history of the Games. This being the more remarkable when set against the backdrop of the worst recession in living memory. The projects have been procured using the NEC3 suite of contracts using comprehensive dispute avoidance and resolution procedures. The emphasis is on dialogue and negotiation as opposed to confrontation. No high-profile acrimonious disputes have as yet taken place - but will this remain the case? If the main contractors’ final accounts are resolved, this will still leave their subcontractors’ claims. Subcontractors will be interested in knowing what the included amounts and terms of any settlement may be. But can the main contractor be compelled to disclose these details and to what extent are they relevant to determining the subcontractors’ entitlement?

It is interesting to make a comparison between the Olympic projects and the construction of the stadium at Wembley. This, conversely, did give rise to much publicised litigation. Ultimately, Wembley National Stadium Ltd (WNSL) negotiated a settlement of its and Multiplex’s outstanding claims in 2006. Most of these focused on the causes of delay and their financial consequences. Honeywell Control Systems was engaged by Multiplex as its subcontractor to undertake the design and installation of the electronic systems. By the time that Honeywell started its work, the stadium was delayed which gave rise to disputes. Honeywell felt that it was in its interests to be aware of the terms of the Multiplex settlement. It could include certain admissions and benefits which were material and would assist the pursuit of its own claims against Multiplex. Thus it would be more difficult, for example, for Multiplex to deny Honeywell’s delay claims if these had already been accepted by WNSL and included within the settlement. Multiplex claimed that the terms of the settlement were confidential and privileged and thus should not be disclosed.

Public policy dictates that settlement of disputes should be encouraged

The legal position is clear. Where negotiations leading to a settlement, as well as the settlement itself, had been identified as being “without prejudice,” the privilege was not lost subsequently by the fact that the settlement was concluded. The logic is that to do otherwise would be a barrier or an obstacle to settlement. Little or nothing would ever be committed to paper which would be a disaster in difficult negotiations. Public policy dictates that settlement of disputes should be encouraged wherever possible. However, Honeywell succeeded in part when the court concluded that it was entitled to inspect those parts of the settlement agreement which varied the terms of the main contract but not otherwise.

Although the Olympic projects have been noticeable by their absence of disputes, this may not forever be the case. When the main contractors’ final accounts are agreed, subcontractors will want to know whether they should share in any of the benefits. If the settlement is not a favourable one, the main contractors may be more eager to disclose it so that the subcontractors share some of the pain if they are to be blamed. Adjudication does not compel a party to disclose documents which do not assist its case but may assist its opponent’s. This is not the case however where there is arbitration or litigation. Exchanges between the main contractor and the project manager will be disclosable although the terms of any privileged settlement will not.

There will not always be situations where the main contractors’ and the subcontractors’ liabilities are back to back. The NEC3 contracts compel the parties to work in the spirit of mutual trust and co-operation. There is a requirement for openness and early warning procedures for the resolution of difficulties at the earliest opportunity. This should lead to communication and a willingness to share documents, including correspondence with interested third parties even though some may be privileged. Both main contractors and subcontractors will benefit from this approach. In this way, the undoubted success of the London 2012 Games will not be tainted by any later litigation legacy.

Jeffrey Brown is a partner in the London office of Veale Wasbrough Vizards