Disputes will happen so Be Prepared
Despite your best intentions, disagreements will often occur between parties in a building project. Common sense says you should have reference to a dispute resolution process or processes in your contract.
Litigation is the resolution of disputes between parties via the court system. However construction disputes do not generally use litigation because of the delays and high costs. The Disputes Tribunal, formerly called the Small Claims Tribunal, does offer a simple legal process that can be applied to construction disputes on the basis that it is used to recover a disputed debt up to $7,500, increased to $12,000 if both parties agree. Here, parties present their own cases before a referee at a tribunal hearing with no lawyers being allowed to attend; however, you can bring witnesses. Following the hearing and if the referee cannot mediate a resolution, a referee's decision is made (with limited rights of appeal).
Alternative dispute resolution processes to litigation for construction matters can also include:• adjudication • mediation• conciliation• facilitation• negotiation• arbitration
Adjudication This is now the statutory dispute resolution process under the Construction Contracts Act 2002, and is expected to become the main method of resolving construction disputes. It is primarily for disputes that affect the payment of money and cannot be used for performance related issues, however, performance issues can often be related back to the hold up of cash flow so dispute resolution provisions under this Act can be used for these.
Note that suppliers and professionals are not covered by this Act and there are special provisions for residential construction contracts where one party is a residential occupier.
Mediation, Conciliation, Facilitation, Negotiation
The terms and conditions for mediation, conciliation, facilitation and negotiation will depend upon individual contract requirements or agreements. The exact role of dispute resolution is sometimes spelt out in the conditions contract. For example NZS3910 NZ Standard Conditions of Contract for Building & Civil Engineering Construction refers to a set of rules for both Mediation and Arbitration, noting all discussions in mediation shall be ‘without prejudice’ and shall not be referred to in any later proceedings.
From this list, Mediation has more recently been adopted as the most common term used for the process of resolving a dispute. It is a consensual approach, where the mediator helps parties openly explore the issues and hopefully reach a mutually acceptable resolution. Mediation is especially useful, where:
• Continuing relationships are important.
• Speed of resolution would be an advantage.
• There is a desire to minimise costs.
• Misunderstandings and lack of communications are major contributors.
• Confidentiality is required.
• there are several parties involved
Note: Mediation only works when both parties have a genuine desire to get it sorted and are in full agreement to adopt the outcomes
Arbitration Arbitration is the internationally recognised dispute resolution process used in construction. The arbitrator acts like a judge. This whole process is governed by the Arbitration Act 1996 that sets out all the rules and conditions.
While arbitration is not as formal as a court of law, it generally follows a similar format and the process is legally binding
While there are those who say construction disputes are inevitable, poor documentation and communications are often found to be the root of the problem leading to most disputes. Often there is no real winner in any dispute as they come at a “cost” to the building project and to all the parties involved.
The Key is to keep communicating and speak up if you think something is wrong and pre-empt problems before they arise.