The Current Landscape For Construction Disputes

Following the Wembley Stadium litigation, in this article we

examine the current trends in dispute resolution and consider the

options available to construction professionals.

After £22 million in legal fees (including a £1

million photocopying bill!), two rounds of preliminary issues, two

trips to the Court of Appeal, and finally a three month trial,

Multiplex was awarded £6 million in damages in its dispute

with Cleveland Bridge, the steelwork contractor for Wembley

Stadium. With Multiplex being awarded only 20 per cent of its

costs, as Mr Justice Jackson observed, the result of the litigation

is that neither party has gained any significant financial

benefit.

Does the Multiplex dispute represent a return to the old days of

"trench warfare" litigation for the construction

industry, or was it a one off? We examine the trends in dispute

resolution below.

Adjudication

Adjudication remains the most popular method of resolving

disputes in the construction industry. The adjudication process

involves an independent third party (an "adjudicator")

making a rapid decision (usually within 28 days) in relation to a

dispute between the parties. The process is more informal than

court proceedings, often conducted without any oral hearings. It is

generally seen as a quick and relatively inexpensive process. The

adjudicator's decision is binding subject to the parties'

right to refer the decision to arbitration or the courts. Following

the glut of appeals to the courts after adjudication was first

introduced through the Housing Grants Construction and Regeneration

Act (HGCRA) 1997, it is now rare for an adjudicator's decision

to be challenged.

The number of adjudications (as reported by the Adjudication

Reporting Centre) has generally fluctuated between 1,500 to 2,000

per year. There has been a slight reported decline over the last 12

months. This may reflect the concern we have felt in the industry

over the quality of some adjudicators and their decisions and the

fact that the process does not end up being as cheap as envisaged.

The fact that the successful party generally cannot recover his

costs from the loser, can make the process a painful one, which

absorbs huge amounts of management time over the short term.

After a lengthy consultation process, the Construction Act 2008

is expected to come into force next year. This is expected to make

significant changes to the adjudication process. In particular, it

will no longer be a requirement for a contract to be in writing for

it to be subject to adjudication. This is likely to lead to an

increase in...