Wigging out: Litigation costs

Sometimes when you are hard at work at the coal face you fail to notice what’s creeping up behind you. However, there have been a number of recent developments that suggest that we might be seeing the wholesale privatisation of disputes in the domestic construction industry. In the future, a visit to court may be the exception rather than the rule.

It would be easy to seize on the undoubted popularity of adjudication as the reason parties to construction contracts are increasingly avoiding going to court. However, adjudication is not the only option and many disputes are now resolved by correspondence under the pre-action protocol, by the exchange of offer letters or by mediation or other forms of alternative dispute resolution. The rise of all of these methods has been far from accidental.

First, the courts have long been concerned about the time and cost of construction disputes. The Woolf reforms and the new procedural rules were an attempt to address this. The pre-action protocol process has probably done most to prevent disputes ending up in litigation. The courts do, however, still appear to be concerned about the costs that can be incurred when proceedings do go to trial. One only has to consider what happened in the case

between Multiplex and Cleveland Bridge over Wembley National Stadium, where the cost for the photocopying alone was £1m. Bearing in mind that the judge in that case, who is now in the Court of Appeal, is carrying out a review of the costs of civil litigation and one can conclude that the courts are not yet finished with efforts to drive down legal costs.

There are two main risks with cutting costs. The first is that cases may not be prepared to the standard expected, or that court litigation itself develops some element of rough justice. The second is the risk that the successful party will recover less and less of the costs they have incurred.

An adjudication consisting of 37 lever arches, six witness statements and two expert reports served immediately before Christmas was allowed by the court to proceed

Against this, we have the continuing success of adjudication. The courts have, in the main, supported the process and enforced its decisions. Although Building’s legal columnists often consider the recent case law on adjudication, the cases reaching the courts are but a small fraction of those actually taking place. Therefore most adjudication decisions are not challenged and they do effectively resolve the dispute.

The courts have also been willing to recognise the need for speedy decisions that may involve, at times, an element of rough justice. In the Dorchester Hotel case (Dorchester Hotel vs Vivid Interiors) an adjudication on the final account consisting of some 37 lever arches, six witness statements and two expert reports served immediately before Christmas was allowed by the court to proceed. This approach is to be contrasted with the observations of the court in the case of Fitzpatrick vs Tyco that even a case involving some £20m in dispute was unlikely to justify hundreds of files in the trial bundle.

The courts have been active in supporting and encouraging parties to use alternative dispute resolution. Many cases now involve a stay to mediation and in the exceptional case where the court questions the need for such a stay it is normally because it is not convinced that one of the parties has sufficiently addressed the issues or defined its case, at least, not well enough to allow those processes to be successful within the period of the stay.

Industry bodies have started to recognise these broad changes. Two examples are the amendments to the JCT2008 suite which provide for a senior management negotiation process as an alternative or a precursor to adjudication (thereby recognising both the adoption and significance of adjudication as a dispute resolution method). The Centre for Effective Dispute Resolution has also developed procedural rules providing for adjudication and then for mediation between the parties (again recognising an adjudication decision as a likely basis for future resolution). Finally, the amendments to the Construction Act will allow adjudicators to decide the terms of a contract, so there is one fewer scenario in which is it is necessary to go to court.

Perhaps for the construction industry, adjudicators and mediators are becoming the real judges of first instance. If this is so then the quality of adjudicator decision-making will become more, not less, important.