DISPUTES IN CONSTRUCTION PROJECT

Disputes in Construction Project Prevention, Managing, Resolution

Dedication

Dedicated to the memory of my late father who would have loved to see me graduate in

no other discipline than in law.

Kobina Andoh 200984350


Abstract

The UK construction industry arguably is the largest industry

attracting an equally large volume of diverse disputes, across a

wide range of values1. It might therefore be thought that

reported causes of construction disputes will not only shed light

on the immediate causes of such disputes, but provide insights

into the industry generally.

The construction industry produces so many varied products

without significant repetition hence a learning curve is

inevitable for every project undertaken. It is further enriched

by the presence of other parties with an interest in the end

result i.e. the funder, the developer, the construction

regulators and the public at large whose built environment is

important to them both economically and aesthetically. Then there1 Gould, 2004



is the contractor, sub contractor, supplier and other

professionals who contribute specialist skills and materials to

build the edifice. It is this variety of interests that provides

the catalyst for dispute in the industry.

The dissertation outlines the causes of disputes in the

construction industry as submitted by other researchers. It then

examines the research conducted in the area of Mediation as

Alternative Dispute Resolution for settling construction disputes

in Scotland. The essential features of ADR are then contrasted

with adjudicatory processes such as litigation, arbitration and

adjudication.

The dissertation further emphasizes that the sole reliance on

Adjudicatory processes such as Litigation, Arbitration and

Adjudication for settling construction disputes seems to be

adversarial and therefore limits the scope for preserving

commercial relationship. Focusing on Mediation although is not a

traditional way of resolving construction disputes may well

prove to be the preferred route once the alternatives have been

considered.



Key words: Construction Industry, Construction Disputes, ADR, Alternative Dispute

Resolution, Mediation.

Title Page

DISPUTES IN CONSTRUCTION PROJECTPREVENTING, MANAGING, RESOLUTION

A Dissertation submitted in partfulfillment of

LLM in CONSTRUCTION LAW

Kobina Bentum Andoh



Glasgow Graduate School of LawA JOINT VENTURE OF THE UNIVERSITIES

October 2010

Declaration of Authenticity or Authors Right

This dissertation is the original of the author’s research. It

has been composed by the author and it has not been previously

submitted for examination which has led to the award of a

degree’.

‘The copyright of this dissertation belongs to the author under

the terms of the United Kingdom copyrights Acts as qualified by

University of Strathclyde Regulation 3.50.’ ‘Due acknowledgement

must always be made of the use of any material contained in, or

derived from, this dissertation’.

Signed: Kobina Bentum Andoh



Date: 18th October 2010

Contents Abstract

ii

Title Page

iii

Declaration of Authenticity or Authors Right

iv



List of tables

x

List of figures

xi

Acknowledgements

xii

Abbreviations

xiii

1 Introduction 1

1.1 Aim of Dissertation

1

1.2 Rationale of Aim

2

1.3 Motivation for the Dissertation Topic

2

1.4 Research Objectives

4

1.5 Research Methodology

5



1.5.1 Data collection

5

1.5.2 Scope of research

5

1.6 Dissertation Structure and Overview

6

2 Disputes in the Construction Industry

8

2.1 Introduction

8

2.2 Nature of the Industry

8

2.3 Construction Disputes – An Overview

12

2.4 Dispute – The Definition

14

2.5 The Fundamental Difference of Dispute Prevention,

Dispute Management and Dispute Resolution

17



2.6 Conclusion

19

3 The Causes of Construction Disputes

20

3.1 Introduction

20

3.2 Disputes – Causation Agents 20

3.3 The contract Conditions

27

3.4 The design deficiency

27

3.5 The construction process

28

3.6 Conclusion

29

4 The Structure of a construction Project

30

4.1 Introduction

30



4.2 The Project

30

4.3 The Dispute Period

31

4.4 The Material Fact

32

4.5 Decision

33

4.5.1Unilateral mistake 34

4.5.2 Authority 34

4.6 The Analysis So Far 34

4.7 Conclusion

34

5 Applicability of Mediation as ADR in Scotland

36

5.1 Introduction

36



5.2 Background

36

5.3 Level of Use and Knowledge of use of ADR. 36

5.3.1 UK Research

36

5.3.2 Other Research

39

5.3.3 Scotland Research 40

5.3.3.1 Satisfaction with Different Element of Settling Dispute

42

5.3.3.2 Attitudes to Mediation

43

5.4 The Impact of ADR on Mediation

45

5.5 Conclusion

48

6 Review of Mediation as ADR in Scotland 49

6.1 Introduction

49



6.2 Encouraging the use of ADR

49

6.3 Judicial Attitudes

50

6.4 Legal Profession

50

6.5 Client’s Awareness

52

6.6 Scottish Government

53

6.7 Conclusion

53

7 How Mediation as ADR Works In Practice 54

7.1 Introduction 54

7.2 ADR Defined

55

7.3 Mediation in Practice 55

7.4 Differences between Mediation and Adjudication Processes 56



7.4.1 Non Binding Voluntary Nature of Mediation

56

7.4.2 Role of Mediator

57

7.4.3 Informality of ADR Processes

57

7.4.4 Nature of outcome

58

7.4.5 Confidentiality

58

7.5 Advantages of ADR – Mediation in Commercial Disputes

59

7.5.1 Cost

59

7.5.2 Speed

60

7.5.3 Preservation of Commercial Relationship

61

7.5.4 Creative Outcomes – Increasing Settlement Options

61



7.6 Conclusion 62

8 – Conclusion 64

8.1 Introduction 64

8.2 Competitive tendering

64

8.3 Changes in Contracts

65

8.4 Partnering

65

8.5 Dispute - The way forward

66

9 Bibliography 67

9.1 Books 67

9.2 Articles 71

9.3 Reports 72

9.4 Others 72

9.5 Websites 73

9.6 Cases 74



10 Appendices 75List of Figures1. Parties in Disputes

75

2. Source of Construction Disputes in the Scottish Construction

Industry 76

3 The Disputes Pyramid

77

4. Causes of Disputes in the Scottish Construction Industry

78

4. Payment and Budget Causes of Dispute in the Scottish

Construction Industry 79

5. Quality Issues resulting into disputes in the Scottish

Construction Industry 80

6. Administrative Causes of Dispute in the Construction Industry

81

7. Contractual Relationships in a Construction Project

82

8. Trained Mediators Professional Designation

82



9. Respondents’ Training in Mediation

83

List of Tables

1. Respondents decision to refuse a proposal for mediation from the opposing party in dispute 84

2. Response of Element of Mediation Process

84

3. Respondents Attitudes to Mediation 85

Acknowledgement

There are so many personalities who have helped me over the years

in the development of my career to date, that it would be

invidious, if not impossible to single out a few to mention, so I



am most grateful to them collectively. Those who have been

closest to me know who they are, and I thank them most sincerely.

There are a number of other special people who have helped me,

either directly or indirectly, in writing this dissertation, and

I shall mention them by name.

My supervisor, Dr. Bryan Clark, for his valuable advice and

suggestions on review of mediation as ADR in Scotland. He has

also helped me in a more direct way with the dissertation as a

whole.

I am most grateful to my course mates George Mandepo, Muhammad

Zin -Zawawi and Abdullah Almedellah. They have all assisted in

diverse ways both by their comments and contributions and that

have served as a sound board for ideas.

I take this opportunity to express my deepest appreciation to my

sister –in- law Naomi Essandoh and the Essandoh family who stood

by me while I have been away in the UK studying and have educated

my children, Tima, Abeiku and Obaa –Yaa. I shall forever remain

indebted. It is not possible to thank everybody within the

compass of this dissertation, but I wish to place on record my

deepest appreciation to Mr. Nicholas Asman for his support both



morally and physically. Nicholas I say Bravo and urge you to lift

high the spirit of brotherhood and fraternity. Then most

important of all, there is my dear wife Antwiwaa and my children

Ebow and Ekow who are here with me in the UK. I cannot say enough

to thank them at least for denying them the needed attention when

it was desirable, all for the sake of my studies.

Finally, this acknowledgement will be like the map of the

continent of Africa without Madagascar, if the Jehovah God who

has matched me with His hours is not recognized. The Omnipotent

God I thank you for everything.

Abbreviations

ADR – Alternative Dispute Resolution

CEDR – Centre for Effective Dispute Resolution

CMI – Construction Management Instruction

CPR – Civil Procedure Rules

DAB – Dispute Adjudication Board

DRA – Dispute Resolution Adviser

DRB – Dispute Review Board

EU – European Union

ICE – Institution of Civil Engineers



ISA – Interim Statement of Accounts

JCT – Joint Contract Tribunal

KBA&S – Kobina Bentum Andoh & Sons

RSE – Royal Society of Edinburgh

SBCC – Standard Building Contract for use in Scotland

SEC – Scottish Executive Commission

TCC – Technology and Construction Court

UK – United Kingdom

USA – United States of America




DISPUTES IN CONSTRUCTION PROJECT PREVENTION, MANAGING,

RESOLUTION 1 Introduction

1.1 Aim of DissertationThis dissertation aims to investigate a better method of

resolving construction disputes within the context of the factual

cause and technical arena rather than in the courts of law. This

is because when disputes are taken to the courts of law the

criteria used for their progress and resolution are those of the

law and the lawyers rather than the parties to the dispute.

However, not only are the courts of law the wrong place to debate

simple factual differences but they are also poorly placed to

resolve technical problems. The courts of law apply the law to

the facts as they are presented and arrive at a judgement. That

being said, this necessarily imply that the problems in putting a

wide range of technical matters before a (legal) judge may be

just as frightening whether the sum involved is in hundreds of

pounds or whether it is in millions of pounds. The parties to a

construction project want to be proactive in how their dispute is

resolved and to have the opportunity to bring about a more

creative and flexible outcome than a court of law can deliver.



RESOLUTIONSo, should it be Adjudicative Dispute Resolution where a decision

is imposed on the parties or Consensual Dispute Resolution where

the parties resolve the dispute by agreement? The dissertation

should answer that question definitively.

Construction disputes are caused by project uncertainties,

problems in the process, or people issues2. So long as the nature

of the construction industry and process is what it is, there

will always be disputes. And those disputes, whatever their kind

must be resolved in an adequate, as quickly as possible, as

cheaply, and as satisfactory manner as possible.

1.2 Rationale of Aim

The Construction Industry all over the world experienced

sweeping changes after the Second World War.3 Notable among

these dramatic changes have been the sharp increase in the

incidence of serious disputes4 between parties to construction2 Gould,N. et al 19993-Whitfield, J. 19944 - Whitfield, J. 1994



RESOLUTIONcontracts. This may be attributable to the fact that contracting

parties have become more commercially aware especially in the

current economic climate5 and increasingly employed Quantity

Surveyors and Construction Lawyers to safeguard the contractual

rights of the said parties. Besides, new contract conditions

have proliferated. This renders even experienced practitioners

uncertain of the terms embodied in the standard form of

contracts. Disputes in construction projects exert enormous

financial strain on the parties involved, even forcing some into

liquidation. In spite of resolution procedures being expensive

they are considered as being generally ruinous to the national

economy6. The construction industry account for 10% of the UK’s

Gross Domestic Product and employs about 1.5million people7 and

any dispute in the industry if not properly handled contribute

towards the diminished efficiency of the construction industry8

and having an impact on the economy.

1.3 Motivation for the Dissertation Topic

The motivation for the research is of two fold:5 Course Note – Dispute Resolution6 Lord-Smith, P.J. 19947 Corporate Watch,20088 Latham,1994



RESOLUTIONa) The authors interest when comparing a good dispute management

team within a construction project with the alternative, and,

b) The benefit to be derived from Negotiation and Mediation

during a lecture on Mediation by Gordon Hollerin of Semple

Fraser LLP and reading the Latham report particularly on

contractual issues and methods of dispute resolution. An area

which drew the author’s attention and of specific interest

was early recognition of areas which are problematic and

potential dispute within a construction project and finding

quick and efficient means of resolving such disputes before

they escalate.

As human beings, we sometimes forget the real issue in the heat

of battle and the disputes generate into an emotive personality.

In such situations it is quite natural for one party to score

points against the other by going the extra mile. In this

damaging, and often escalating type of dispute nobody really

wins. If so, then the prevention, managing and resolution of

construction dispute are absolutely essential to avoid any

unpleasant experience.



RESOLUTIONThe construction industry as a body needs to be creative in

resolving disputes and move away from the lose/lose9 situations

of the past and even win/lose10 scenario prevalent in the

industry. In so doing we can then identify and pursue the

win/win11 result that would be so advantageous for the industry.

Some sceptics may argue that there can never be two winners and

that one side may always be the loser or at least give something

up in order to reach a compromise. This seems to be an undisputed

fact but it is not always the case. Inventive and forward looking

Negotiators have often increased the size of the cake, making it

possible for both parties to receive a fair share12. This type of

invention exists only in a situation when there is no ‘them and

us’ environment and this is only possible when there is a good

dispute management team. But it is sometimes assumed that it is

too costly to have a good dispute management team who are well

trained and enjoy interpersonal skills within a construction

project. In all probability it is cheap when compared with a

dispute of any proportion because as has been emphasised already9 Ury, W. 200810 Ury,W. & Fisher,R. 199911 Ury,W. 200812 Whitfield, J.1994



RESOLUTIONputting a wide range of technical matters before a (legal) judge

may be just as frightening whether the sum involved is in

hundreds of pounds or whether it is in millions . The cost of

training such a team will be compensated against any litigation

or arbitration that would arise if it had been prevented, managed

or resolved13. This will eventually translate into cooperation

and the principle that co-operation is a more efficient method

of working14 than the approach resulting from traditional

contracting in which each party is driven toward looking after

their own independent objectives.

It can not be over emphasised that the downside of disputes

generally exceeds the perceived benefit. This suggests that

disputes must be addressed properly and a critical approach

adopted to the causes that are likely to result into disputes

prevalent in the construction industry.

1.4 Research Objectives

The construction industry is very large and accounts for about

10% of UK’s Gross Domestic Product and employs 1.5 million13 Baden Hellard, R. 198814 Whitfield, J. 1994



RESOLUTIONpeople. Being such a large industry there are contracts signed

every day. Some projects are very simple, others complex, some

may involve just two organisations; others may involve hundreds

of suppliers, sub-contractors and consultants. Irrespective of

the size of a project, be it simple or complex project, it can

still go wrong. These developments make it imperative to identify

the differing meanings of disputes within the construction

industry and understand the causes of each defined meaning. By

this process we will be able to consider a dispute resolution

mechanism which can bring about a satisfactory result.

In summary in order to realize the aim of this research, the

following objectives were formulated:

Identify disputes in construction projects

Analyse Mediation as Alternative Dispute Resolution process and how it works in

practice and contrast the essential features of the process on the one hand with

adjudicatory processes such as litigation, arbitration and adjudication on the

other.

1.5 RESEARCH METHODOLOGY



RESOLUTIONThe research methodology adopted was non-experimental, as no

intervention was involved, but the situation as it existed is

being investigated. As the research was only making observations

on the state of affairs and did not become part of the observed

phenomenon, it employed qualitative research methodologies, and

is presented in the following general structure:

Data collection

Scope of research

1.5.1 Data collection

The data collection as a research methodology to be adopted for

this topic will be based on a comprehensive literature review

drawn from databases of the following sources:

Academic and practitioner literature that has previously

been written in the field of disputes in the construction

industry.

The internet, Westlaw and Lexis Library websites.

Technical and academic Journals and text books.

Reports from government and other bodies.



RESOLUTION Building Industry Journal.

Course Notes: Dispute Resolution ( Glasgow Graduate School

of Law, 2010)

1.5.2 Scope of research

The research as a whole will be focused on the Scottish

construction industry. Although the research is limited to the

Scottish construction industry, there is considerable evidence to

suggest that the case history is peculiar to other parts of the

UK and as such comparisons will also be drawn from relevant

scenarios in the UK, the United States of America and other parts

of the world.

1.6 Dissertation Structure and Overview

Following the Introduction chapter, in Chapter 2 an attempt is

made to explain the nature of the construction industry, define

what a dispute is in relation to the construction industry.

Clearly, in many instances, dispute can and should be eliminated.

In the construction industry, a great many destructive disputes

have arisen which could have been prevented. Of course, with so

many imponderables, and human nature being less than perfect,



RESOLUTIONsome degree of dispute is inevitable and our ability to prevent,

manage and resolve a dispute successfully will depend largely

upon our recognition of the real causes which this chapter sets

out to do.

Chapter 3. The real causes of dispute within the construction

industry are wide ranging and varied and those are discussed and

the more common ones are highlighted in this chapter.

In chapter 4 the focus is on a structure of a construction

project. Chapters 2 and 3 have been considered in a theoretical

way and we are now going to examine it in the context of a

construction project. The analysis is based on a fictional

project which has progressed to adjudication and then unto

litigation.

Chapter 5 Sets out to review a research of the use of Mediation

as an ADR in UK and other common law jurisdictions by other

Researchers and discusses the impact of ADR on litigation.

Chapter 6 – Provides a framework for the ADR concept and examines

a number of reasons put forward as barriers which have existed to

date to the growth of Mediation in Scotland.



RESOLUTIONChapter 7 Explains how Mediation as ADR works in practice and the

benefits to be derived in using such a method for settling

commercial disputes.

Chapter 8 Finally in the concluding chapter, an attempt will be

made to answer the searchable question: Is there a real hope in

the future for a general reduction in construction dispute in

Scotland? If the answer is yes, then this will be as a result of

preventing, managing and resolving dispute in a fashionable way

hitherto undreamt of in Scotland.



RESOLUTION

2 Disputes in the Construction Industry

2.1 Introduction

This chapter outlines several areas within the construction

industry that could lead to dispute. The chapter raises awareness

between the main parties involved in the building contract, the

risks that lay in wait during the course of the project and what

steps can be taken in an attempt to prevent those risks. Some,

risks however, will always be present and are part of the

commercial environment. In these cases the duty is to be aware of

those risks in advance and manage them so that they are contained

and do not damage the commercial viability of the project.

2.2 Nature of the Industry



RESOLUTIONThe Construction Industry is made up of role players like the

employer, the contractor and consultants who endeavour to create

long – term, unique and complex building projects and

infrastructures15 . A diverse arrays of stakeholders i.e. the

client who may be either individual or local authority, the

consultant, the main contractor, sub-contractors, suppliers,

financial institutions, legal representatives and others all

contribute to a building project from planning through design,

construction and occupancy. These role players sometimes bring

varying and sometimes conflicting expectations to a project. They

operate in an environment in which their influences over a

project swing as the project progresses. They demand to deliver

projects in less time and at lower cost. It is a lamentable fact

that many clients, especially those with no experience of

building, imagine that it is possible to construct a quality

building at breakneck speed for a knock-down price.

The construction industry is a project- based industry with each

project being unique16 hence noted for high levels of disputes

15 Levy, 200716 Chin, 2003



RESOLUTIONand conflicts. A failure on the part of one party involved in a

project can spread to other participants within the project

culminating to the rise of a dispute. The complex dispute found

in construction projects stems from the fact that construction

projects are increasingly complex17. The industry has often been

described as one of the most adversarial and a problem prone

industry, where claims and disputes on construction projects are

frequently considered as the rule rather than the exception18.

Cost overruns and schedule delays can be the subject of expensive

and protracted claims and litigation. This particularly poses

serious risks for all parties to a construction project. The

Scottish construction industry covers a diverse range of

activities making it complex with comprehensive field of

activities. It entails many operative skills and conditions with

every project being a prototype. The uniqueness of every project

is a prolific source of dispute and it erupts at any point in

time during the construction process. Arguably, a project may be

filled with individuals with differing beliefs who are happy to

promote their belief or opinions loudly. This will of course lead17 Harmon, 200318 Steen, 2002



RESOLUTIONto dispute where those beliefs do not concur with the beliefs of

others.

According to Kennedy, Conlin and Langford19 the stakeholders in

the Scottish construction industry consists of Local

Authority/Planning, Sub-Contractors, Civil/Structural Engineers,

Quantity Surveyors, Client, Architects, Suppliers, Others and

those carrying extra contractual duties. Appendix 2 illustrates

each stakeholder’s contribution to dispute in the industry.

Kennedy and Milligan20 present useful diagram21 comparing the

various parties in dispute in the construction industry for a

specific period.

The construction industry has been besieged with sweeping changes

in the form of dispute after the Second World War, it can be

considered to be less adversarial in the early 1960’s compared to

the present22. In 1960 some 250 writs were issued in the whole of

UK relating to construction disputes, yet within 30 years this

number increased ten-fold23 or even more. During this period the19 1996, Appendix 220 200721 Appendix 122 McGuin, 198923 Whitfield, 1994



RESOLUTIONdesign and construction environment was such that friendly and

pleasant relationships generally existed between all of the

parties involved in a project. To put it mildly, construction

project and processes were not complex and complicated compared

to the present where construction projects are increasingly

complex….. often resulting in complex disputes24. The

construction players were few and developed long-term

relationships. Clients admitted the fact that undertaking

construction projects embodied inherent risks and, therefore

accepted a certain amount of errors. Claims were not prevalent

and, surprisingly, design consultants and construction firms

worked together to maximise project performance25. The focus of

the construction industry was team work centred for the overall

success of the project.

One may ask what happened during those intervening years to bring

about such a transformation. Perhaps this may be attributable to

the fact that during this period construction companies became

more commercially aware and employed a number of Quantity

24 Harmon, 200325 McGuin, 1989



RESOLUTIONSurveyors and Construction Lawyers to safeguard the contractual

rights of contractors, sub-contractors and even suppliers26.

Again during the late 1960’s and early 1970’s claims consultants

emerged, purposely to promote the claims advanced by both sides

of the industry27.

The construction industry today is different28. In the 1980’s

upwards, somewhat piously the writer submits that there was a

shift from significant public financing of construction by

central and local government, and so the industry became reliant

upon profit-oriented speculative development. The strong

relationships and trust between clients, contractors and sub-

contractors has been replaced with growing distrust and conflict

as noted by Sakal29. Sakal is also of the view that, the

construction industry has continually fragmented into narrow

specialty areas that have resulted in an ever-growing number of

potential participants. This phenomenon is difficult for the

contractors and sub-contractors cum the client’s expectation of

26 Whitfield, 199427 Whitfield 199428 Sakal,200429 2004



RESOLUTIONperfection in the contractor’s performance culminating in

contract disputes and claims being common30.

The infinite complexities of delivering a building or

infrastructure project, the multiplicity of organisations and

individuals involved and the quantum of money at risk, it is

perhaps not surprising that the construction industry has been

characterised by an adversarial operating environment that

generates disputes and claims31. Stipanowich32 was of the view

that disputes are estimated to arise in 10% to 30% of all

construction projects and that one in four construction projects

end up in a claim leading to a dispute.

All the above factors point toward the industry’s fragmentation

resulting in conflicts and disputes plaguing the industry like

chronic disease. The fragmentation ranges from work undertaken

(building or civil engineering), technologies employed, clients

(public and private), and the firms/companies (professional and

contracting) involved. The fragmentation has resulted in non

coordination and integration between different disciplines at30 Sakal, 200431 Stipanowich,199832 1998



RESOLUTIONvarious stages of the project procurement process and the

construction process33. And as a result, failure on the part of a

party involve in a project to fulfil a contractual obligation

results in a claims, counter claims and disputes which has

characterised the industry. Sometimes it may not be the

fulfilment of contractual obligation which results in dispute.

The dispute may be based on the law of delict34.

In summary, all of these factors, arguably have impacted on the

relationship between main contractors and sub contractors’,

clients and main contractors etc and increased the incidence e of

dispute35.

2.3 Construction Disputes – An Overview

The last four decades have witnessed the construction projects

continually becoming much more dynamic in nature36. The

construction projects are accomplished today in an environment

33 Love et al, 199834 BT V James Thompson & son Ltd, [1999]35 Appendix 1

36 Sakal, 2004



RESOLUTIONwhich is completely complex, uncertain projects within tight

budget and time constraints. The dynamics of the construction

industry by virtue of it continual fragmentation37 contributes

specifically to it complexities - more parts, more interfaces.

The dynamic environment of the industry forces client to attempt

to reduce cost and time while at the same time demanding high

quality finished products. But the grim reality is that quality

and speed do not always sit easily together. Clients also include

bespoke clauses in an attempt to offload risk to contractors.

This subsequently leads to the main contractor passing the risk

onto the sub-contractors. In an attempt by project participants

to safeguard their contractual rights backfires resulting in

adversarial relationships and expensive litigation. The plethora

of these factors unsurprisingly negatively affects project

performance resulting in dispute arising between parties involved

in construction projects. The result of these conflict is heated

disputes and ultimately litigation claims that are detrimental to

project participants economically. But irrespective of the nature

of dispute, one thing is certain for all, the efficiency and

37 McGuin, 1989



RESOLUTIONproject performance is impaired38 due to mistrust between project

participant and decline in teamwork in an attempt of the major

players trying to offload risk.

Construction disputes however are as old as the recorded history

of man’s building structures and other projects. In the UK as a

whole and Scotland in particular, construction disputes have

increased dramatically in number, complexity in cost as project

become imponderable with ever increasing competing interest

involved in execution of project39.

In an ideal environment construction projects would be team led

where the effectiveness of each participant is utilised to the

realisation of the project performance. This is the reverse

expectation since most parties enter into construction contract

with ulterior motives. The adversarial situation stems from the

fact that a good framework for developing good relations between

the parties are missing. The contract is written to include a

bespoke clause to favour the drafter of the contract. The

mistrust of one another cause the increased antagonistic

38 Latham,1994, Sakal, 200439 Canterbury Jnr, 2007



RESOLUTIONrelations between the client and contractor40 that are clearly

not in the best interest of the project41.

Arguably, construction projects are amongst the most complicated

of human enterprises and as such, not free from problems such as

disputes and that, so long as human nature is what it is,

disputes will always prevail and those disputes whatever their

nature must be prevented, managed and resolved as early as

practicable42. Prevention, managing and resolving of disputes43 is

considered as a sound business practice and a very important

management process which enables project objectives in terms of

cost, time and quality to be achieved. Nystrom44, noted that

disputes prevention encompasses a shared, cooperative effort

between potential disputants in pursuit of a common goal namely;

success of the project so that potential disputes could be

prevented as early as possible before they start. Therefore the

prevention, managing and resolving of disputes are considered as

the most important areas for the future of the construction

40 Appendix 141 Steen,199442 Motsa, 200643 Nystrom, 199544 1995



RESOLUTIONindustry to curb the problems of disputes. It is no longer

acceptable for professionals in the construction industry to sit

back and tinker with contracts and commercial arrangements,

hoping that the resulting decline in dispute will be as rapid as

was the growth. Intensive action is needed now to manage the

disputes which seem to arise inevitably from every construction

project.

2.4 Dispute – The Definition

The terms ‘conflict’, ‘claim’ and ‘dispute’ are used

interchangeably. They are sometimes used separately or in pairs

and frequently without clear indication of the precise meaning of

each. There is often a lack of clarity as to whether the research

is about claim, conflict or dispute. To fully unearth the sources

of construction disputes, these three terms need to be properly

explained because under section 108 of the HGCRA 1996, it is only

a ‘dispute that can be referred to adjudication’.

Gardiner & Simmons45 defines conflict as any divergence of

interest, objectives or priorities between individuals, groups or

45 1992



RESOLUTIONorganisations. Powell-Smith & Stephenson46 also defines claim as

an assertion of a right to money, property or a remedy and can be

made under the contract itself for breach of the contract, for

breach of a duty in common law; or a on a quasi-contractual basis

while Brown & Marriot47 also defines dispute as a class or kind

of conflict, which manifest itself in distinct justifiable

issues. It involves disagreement over issues capable of

resolution by negotiation, mediation or third party adjudication

while the oxford advanced learners dictionary of current English

also defines dispute as a heated contention, a disagreement in

which opposing views are strongly held. The ICE arbitration

procedure states that: a dispute can be said to exist when a

claim or assertion made by one party is rejected by the other

party and that rejection is not accepted48. Fenn et al49 advise

that stake holders involved in a project should understand the

essential difference between the terms ‘conflict’ and ‘dispute’.

They assert that conflict is manageable and impact positively on

construction while dispute impacts negatively on projects.46 198947 199348 Kumaraswarmy & Yogeswaran, [1997]49 1997



RESOLUTIONAccording to Ellenberg50 dispute ranges in levels, the lowest

being disagreement followed by argument and the third level being

dispute. The distinction between conflict and dispute is not

substantiated by Eilenberg51 but consideration of the suggestion

made by Fenn et al52 implies that conflict could be the lowest

level of dispute in any construction contract. Thus in this

context, it is fair to conclude that if there is no action taken

to manage the conflict in the first place, it could possibly

generate to dispute.

It is generally assumed that every dispute in the construction

industry leads to litigation or arbitration but Gould53 suggests

only very few dispute result in litigation or arbitration.

According to Sarat54 greater number of claims and grievances

emerge but are not pursued. He therefore demonstrates the stages

of a disputes manifestation and escalation visually as a

pyramid55. The “dispute pyramid” represents the stages in the

disputing process. A reference to the dispute pyramid was made by50 200351 200352 199753 200454 198555 Appendix 3



RESOLUTIONGallanter56 and stated that the lower layers relate to

construction of dispute while the upper layers refer to the

lawyers and the courts.

Despite the simple meaning of the word ‘dispute’ there has been

much litigation over the years as to whether or not dispute

existed in particular situations. This litigation has not

generated any hard-edged legal rules as to what is or is not a

dispute. However, the accumulated contractual wisdom of

generations (case laws) has produced helpful guidance. A number

of general comments can be made about the courts approach to what

constitutes dispute. The tenor of the courts approach to dispute

has depended on two schools of thoughts in determining whether a

dispute has arisen i.e. the narrow approach and the wider

approach.

In using the narrow approach to determine whether a dispute has

arisen in the case of Fastrack Contractors Ltd v Morrison

Construction Ltd57 and Edmund Nuttal Ltd v RG Carter Ltd58, it was

held that for a dispute to have arise, it is necessary for a56 1983, Gould, N. 200457 [2002] B.L.R. 168; 75 Con. L.R. 3358 [2002] EHWC 400 (TCC)



RESOLUTIONclaim to have been made and for the responding party to have “had

an opportunity of considering and admitting, modifying or

rejecting the claim or assertion”. In contrast to that, in the

case of Cowlin Construction Ltd v CFW Architects59 the court in

adopting the wider approach intimated that “there is a dispute

once money is claimed unless and until the defendants admit that

the sum is due and payable”.

In light of the definitions given above, it is the submission of

the author to entreat project managers involved in a construction

project to actively focus on ways of preventing, managing and

resolving conflicts from escalating into claims and resolving

claims to prevent them from becoming disputes60 resulting in

arbitration or litigation61. Moreover, Singh62 is of the view that

the paramount task or obligation of any construction industry

practitioner is to prevent dispute from arising in the first

place and given their potential adverse ramification on a

particular construction project.

59 [2003] B.L.R. 24160 Ng,H.S. et al 200761 Gould, N. 200462 2003



RESOLUTIONIn sharp contrast to the above, Gerber63 indicated that there has

been lack of focus on prevention of dispute. Gerber is on record

of saying that: “To date, our efforts have been largely reactive

rather than proactive. We have focused on resolving disputes as

quickly and efficiently as possible rather than systems to

prevent disputes in the first place. To the extent that we have

been proactive it has been in the project delivery vehicle arena

(partnering, alliancing etc) rather than in early intervention

conflict resolution”.

The inference from the above definitions seem a simple enough

concepts to appreciate and the author submits that the word

‘dispute’, as it occurs in many arbitration clauses and also in

section 108 of the HGCRA64 should be given its normal meaning. It

would be for all practical purposes and the purpose of this

research to adopt the definition as contained in the narrow

approach65 and it is therefore assumed that the genesis of claim,

conflict and dispute are synonymous.63 200064 199665 Fastrack Contractors Ltd v Morrison Construction Ltd and Edmund Nuttal Ltd v RG Carter Ltd i.e. a dispute to have arise, it is necessary for a claim to have been made and for the responding party to have ‘had an opportunity of considering and admitting, modifying or rejecting the claim or assertion’



RESOLUTIONThe alternatives to resolve disputes in the industry are becoming

imponderably expensive in terms of time, finances, personnel and

opportunity costs. The visible expenses (solicitors/advocates,

expert witnesses etc) speak for itself. The less visible costs

(e.g. company resources assigned to the dispute, lost business

opportunities) and the intangible cost (e.g. damage to business

relationships, potential value lost due to inefficient dispute

resolution) are also considerable, although difficult or

impossible to quantify66.

2.5 The Fundamental Difference of Dispute Prevention, Dispute

Management and Dispute Resolution

Having defined dispute and the meaning understood, it is

important to differentiate between dispute prevention, dispute

management and dispute resolution. It is also important to

recognise the purpose and objective of each method by

establishing its identity and creating a conducive environment in

which it can operate.

66 Michael,1999, Penamona et al, 2003



RESOLUTIONGenerally, the mechanisms of dispute resolution can be

categorised into two main methods67, namely Adjudicative Dispute

Resolution - a decision is imposed on the parties in dispute and

Consensual Dispute Resolution – the parties resolve the dispute

by agreement. Dispute resolution will only come into existence if

there is a dispute and is being referred to it, which it has to

study the claims submitted by both parties and to appreciate the

underlying cause of the dispute, which is usually complex in

nature. This neatly fits into the concept of Adjudicative Dispute

Resolution where the dispute referred to a third party imposes a

decision on the parties. Under this type of dispute resolution

mechanism, we have arbitration, litigation and adjudication and

the decision is binding on the parties.

On the other hand an objective evaluation of dispute prevention

suggests that it is to handle and resolve conflict as early as

possible before it escalates into the third level of disagreement

otherwise known as dispute, an indication that the system is

already in operation even before any dispute rear it ugly head.

The fact that it is already in place consequently enables them to67 Glasgow Graduate School of Law 2010



RESOLUTIONhandle and detect dispute as soon as possible68 and to resolve

the dispute with less difficulty should it occur. As observed by

Gerber69 in this regard, it may appear in the form of several

identities and distinct approaches, namely the DRB, DAB and DRA.

Furthermore, according to Chan et al70 the dispute prevention

can be categorised under the theme of ‘structured facilitation’,

or ‘willingness to compromise’, ‘rough and ready’, or ‘binding

but not final’ and ‘hybrid system’ or ‘advisory’.

Again Brewer71 opines that dispute management is a subset of

dispute prevention. Also, Brewer is of the view that dispute

management aims to reduce risk through proper project planning

and selection of appropriate procurement route during the

inception stage of a project. In a nutshell, dispute management

aims to prevent disputes from cropping up, which may unwittingly

require reference to some sort of dispute resolution process. In

view of this dispute management could also be termed

interchangeably as dispute prevention. That said, dispute

68 Harmon 200369 200170 200571 2007



RESOLUTIONmanagement can be termed as a non-binding process while dispute

resolution can be grouped under binding and non-binding

processes. However, dispute management may arguably also include

a binding process as an enhancement to the procedure; such

examples are by way of agreement between the parties and through

the third party’s decision as may be provided in the contract.

2.6 Conclusion

The chapter indicated that mechanism for preventing construction

dispute needs to be in place to save the industry from enormous

amount of money. Again, following the invaluable lesson learned

in the construction of the ‘tower of the Babel72’, it is appropriate to

identify the generating sources or the potential triggers of

construction disputes, especially from the view point of the

stakeholders73 (i.e. the client, consultants, contractor and sub-

contractors) to a construction project. In this way, it will help

resolve dispute as early as possible, reduce or manage inevitable

disputes occurring and above all, prevent disputes escalating

into formal and informal costly resolution procedures.

72 Genesis chapter 11 v 1-873 Appendices 1 & 2



RESOLUTION

Chapter 3- The Causes of Construction Disputes

3.1 Introduction

This chapter is to review the causes of disputes on construction

projects as indicated by other researchers.

When a dispute has been defined adequately and the causes for it

occurrence is known within the industry, a meaningful way



RESOLUTIONacceptable to all those involved in the project will be sought

for managing the dispute.

3.2 Disputes – Causation Agents

Inevitably, disputes are a reality on every construction

project74. They may arise on a construction project for a number

of reasons and can be grouped into 3 main categories75

Organisational – Increased project complexity has resulted in

varying forms of contract76, each with varying interfaces where

misunderstandings occur giving rise to dispute.

Contractual – This area covers the majority of construction

disputes, i.e. extension of time, liquidated damages,

variations, loss and expense, payment, late deliverables,

adverse weather etc.

Technical – Poor/Incomplete design, workmanship, material

selection etc.

Notwithstanding the categorisation of disputes, it still arises

on projects with best intentions. Even when every possibility of

74 Steen, 200275 Scwczuk, B. 1996, Carmichael, 2002, Steen, 2002, Kennedy, Conlin and Langford,199676 Steen, 2002, Kennedy, Conlin, Langford, 1996



RESOLUTIONdisagreement has been potentially eliminated, problems can still

occur. Consequently, understanding how disputes arise on project

site can be very helpful for anticipating situations that may be

turbulent. While it may seem, at times, that anything can start a

conflict and when not eliminated can result into a dispute,

especially in the present economic climate construction disputes

will typically revolve around defects and payment77.

Arguably, many construction disputes have their origin in the

seeds sown by or in, the client’s error78. This often happens

when the client expects something unrealistic to be done such as

the buildability of a complex design or the client taken

possession of his building within a very short time not taking

into consideration unexpected delays and unforeseen setbacks. As

indicated by Hellard79, there are four sets of contractual

relationships which are common in the construction programme and

thus when any of this relationship get strained, minor issues can

fester and grow into disputes with crippling consequences for the

projects participants. These relations can be summarised thus:

77 Glasgow Graduate school of Law, 78 Hellard, 198779 1987



RESOLUTIONa) The relationship of the client to the designer

b) The relationship of the designer to another designer

specialist(s)

c) The relationship of the client to the prime contractor;

and

d) The relationship of the prime contractor to suppliers

These four basic relationships have been studied over the years

by interested individuals as well as professional committees of

varied membership from all corners of the industry, along with

private and public attorneys. The result of these studies have

been the publication and wide usage of standard form contract

documents which are published in different construction

industries all over the world. Appendix 1 illustrates parties in

disputes collated by the Adjudicator Nominating Bodies for the

period 2000 to 2004.

In a study by Levy80, it was shown that, the principal reasons

for misunderstandings leading to disputes on construction

projects in the United States of America were the following:

80 2007



RESOLUTIONI. Plans and specifications containing errors, omissions and

ambiguities or which lack proper degree of coordination

II. Incomplete or inaccurate responses or non responses to

questions or resolutions of problems presented by one party

in the contract to another party in the contract.

III. The inadequate administration of responsibilities by the

client, consultants, contractor, subcontractors or

suppliers.

IV. An unwillingness or inability to comply with the intent of

the contract or to adhere to industry standards in the

performance of work.

V. Site conditions which differ considerably from that

contained in the contract data.

VI. Unforeseen subsurface conditions.

VII. The uncovering of existing building conditions which differ

materially from those indicated in the contract drawings

situations that occur primarily during rehabilitation or

refurbishment work.

VIII. Extra work or change order work.

IX. Breaches of contract by either party in the contract.



RESOLUTIONX. Disruptions, delays or acceleration to the work that creates

any deviation from the initial baseline schedule, and

XI. Inadequate financial strength on the part of the client,

contractor or subcontractor.

However, giving a comparative analysis of construction disputes

in the UK generally and Scotland in particular, Kennedy, Conlin

and Langford81 survey found that the cause of disputes is due to

the following:

Administrative

Managerial/Material/Workmanship/Quality

Negligence

Schedule

Performance

Payment and Budget

The above mentioned causes of dispute are illustrated

diagrammatically in Appendix 4 indicating the proportion each

contributes to dispute in the industry. The construction industry

as described by Kennedy, Conlin and Langford may not be still the

81 1996



RESOLUTIONsame, but no research has been conducted since then so we will

assume the situation is as depicted by Kenny and Milligan82

In the survey conducted by Kennedy, Conlin and Langford83 to

ascertain the causes of dispute in the UK construction industry,

it was indicated that Payment and Budget contribute significantly

to dispute in the industry. The integral parts of payment and

budget causes contained in the survey are as follows:

a) Additional work

b) Over budget

c) Basis of fee

d) Additional fees

e) Non return of retention money

f) Liquidated damages claimed by client

g) Extension of time costs and expenses claimed by contractor

h) Non payment of balance of contract sum to subcontractor

82 2007, Appendix 183 1996, Appendix 5



RESOLUTION i) Non payment of interim payment to subcontractor

j) Non payment of interim payment to contractor

k) Variation claim by contractor

In a study conducted on the US construction industry by Osborn,

the following were found to be the ten most contentious sources

of construction disputes.

i. The lack of focus up front, failure to choose the most

appropriate delivery method

ii. Inability to assemble the right project team

iii. Inability to coordinate the project team and scope of works

iv. Failure to understand local conditions

v. Inaccurate or too elaborate schedules

vi. No periodic job meeting minutes or failure to keep minutes

vii. No vision on dispute resolution; and

viii. The failure to recognise that quality wins

The failure to recognise that Quality wins was also a separate

survey conducted by Kennedy, Conlin and Langford84 and it was

84 1996, Appendix 6



RESOLUTIONfound that the below summarised issues constitute quality issues

and contribute significantly to the cause of dispute in the

Scottish construction industry.

a) Restrictions placed on contractors working method

b) Differing site conditions

c) Poor construction coordination

d) Poor coordination of subcontractors

e) Design information not timeous

f) Poor design coordination between consultants/subcontractors

g) Poor design coordination between consultants

h) Clients perception of construction design

i) Clients perception of specialists sub contractors design

j) Clients design team perception of contractors quality of

workmanship

k) Defective material.

From the above, the survey concluded that Poor construction

coordination was the major cause of dispute slightly followed by

defective materials85.

85 Appendix 6



RESOLUTIONA similar investigation in the Hong Kong construction industry,

Yates revealed that contractual incompleteness and consequent

‘post-contract’ adjustments, asset specificity in terms of

client’s investments in respect of purchase of land for the

project and opportunistic behaviour in particular on the part of

the contractor are the root causes of conflicts, claims, and

disputes.

The two causes of construction disputes that drive into

litigation process in the construction industry in the UK

according to Nystrom86 are uncertainty and imperfect contracts.

Furthermore, a research conducted by Hall87 during his practice

as a lawyer in the UK also found out that, the common cause of

construction dispute is ineffective communication. This is due

to the failure for someone to communicate effectively with

another concerning design issues, compensation and payment

issues. This was confirmed earlier by Kennedy, Conlin and

Langford88 in their research on the causes of dispute in the

Scottish construction industry and rather called it

86 200387 200288 1996



RESOLUTIONadministrative issues89. Other issues which also result in legal

dispute include scope of changes or variations and in the

Scottish construction industry; arguably it is the major source

of disputes90.

The findings of Silver & Furlong91 on the main causes of

construction disputes were attributable to the complex set of

dependencies and interrelationships and delays and payment

schedule problems. Also indicated in his article ‘avoiding

construction disputes’, Walton92 was of the view that most

disputes have their root causes in one of the following:

A clash of expectations, usually entrenched during the

tender process, and not assisted by one party being overly

opportunistic in contract negotiations, with the other party

being overly aggressive or perhaps optimistic in pricing.

Poor allocation of risk.

Poor communication and contract administration.

89 Appendix 490 Appendix 591 200492 2005



RESOLUTION Failure on the part of the parties to deal properly with

issues as they crop in.

In other common law jurisdictions such as Sri Lanka, Weddikara &

Abeynake93 revealed that disputes in the construction industry

are normally those that arise under contracts for the procurement

of supplies and services and the installation of equipment,

breaches of contract by any party to the contract, inadequate

administration of responsibilities by either the client,

contractor or sub-contractors, plans and specifications that

contains errors, omissions and ambiguities and sudden tax and

cost increases due to either inflation or sudden economic

changes.

As evidenced from examination of factors leading to disputes in

construction as outlined by Levy and Campbell among other

researchers, it is possible to fairly comprehensively tune that

the factors put together very much stick and carrot.

In a study conducted by Hellard94 into the sources of

construction disputes, his findings collaborated with factors of93 200794 1987



RESOLUTIONother research reports as contained in their various studies and

papers and it is as follows:

3.3 The contract Conditions

This is made up of:

Imperfection in the contract document

Inability to quantify cost

Interpersonal relationships of people involved in construction

i.e. sociological issues, psychological issues and

physiological issues.

3.4 The design deficiency

This consists of:

o The underground or subsurface problem, changed, and differing

conditions

o Poor and unfair allocation of risks

o Defective plans

o Construction methods and specification performance

As indicated by Hellard95 and supported by other researchers the

ground or subsurface problem, changed and differing conditions

95 1987



RESOLUTIONare a subset of design deficiency but the author is of the view

that it should be a cause on its own. The writer offers no

opinion in this but set it forth as a discussion point since

these conditions are almost unforeseen when the documents are

prepared and do not just occur.

3.5 The construction process

A major cause of construction dispute arises as a result of

the construction process according to Hellard96 and this view

is supported by other researchers. Although Hohns97 supports

Hellards view on construction process as a major cause of

construction dispute, he is of the view that it is difficult

to differentiate between design error and the consequence of

the process.

It is thought that provided the contractor carries out the

work strictly in accordance with the contract documents, he is

not responsible if the works prove to be unsuitable for the

purpose which the employer or architect has in mind. On the

other hand, it is probably the contractors implied duty to

96 198797 1979



RESOLUTIONbring any obvious errors in the architect’s design of which

the contractor had actual knowledge to the architect’s

attention.

Research into disputes during the construction process

according to Kennedy, Conlin and Langford98 and classified as

administrative causes is as follows:

Poor feed back from contractors

Contractor’s non adherence to administrative procedure

Lack of information from design team/client

Lack of Working information from design team

Design teams non adherence to administrative procedure

Sub contractor’s non adherence to administrative procedure

Extra contractual third party coordination

Certainly, the above list is not exhaustive but by standard

professional ethics, the items thereon is an indication of

failure on the part of someone to do that which was required by

the contract and having an impact on the project in question and

resulting into dispute.

Conclusion 98 1996, Appendix 7



RESOLUTIONThe chapter spelt out many causes of construction disputes from

different researchers which all suggest that there is the need to

ascertain time and time again whether the causes as outlined by

different researchers are improving or getting worse and thus

design a strategy to prevent them from occurring.



RESOLUTION

4. The Structure of a construction Project

4.1 Introduction

In the earlier chapters we have examined in some detail the

component parts of a construction industry dispute. It is now

apparent that there are many aspects to contention between

parties on a construction project. Each area identified has been

examined in an almost theoretical and we now have to examine the

dispute in a context of a construction project. In reality, do

any or all of these issues arise in a typical construction

project? This chapter should partly answer that question.

The construction industry is marked by disputes, many of which

lead to litigation99. It might therefore be thought that

reported construction cases will not only shed light on the

immediate causes of such disputes, but provide insights into the

industry generally and the debates surrounding it. In this

chapter we have chosen to base the analysis on a real project

which has now progressed to litigation. All procedural issues are

99 Latham 1994, Gould, N. 2004



RESOLUTIONdefined and a hearing is set. There are many reasons for choosing

this particular project, but of particular importance is realism

and variety and to test this hypothesis. Whilst those familiar

with the case may recognize some of the incidents, the account

given below is a fictionalized version to protect the anonymity

of the project and those involved.

4.2 The Project

The client K. Bentum Andoh & Sons Ltd also known as KBA&S Ltd a

multinational company wants to develop a new West African

headquarters in the City of Abuja. This major project, on a

difficult and confined site, consisted of the erection of two

large buildings and the refurbishment of some existing buildings.

Ankoben Ltd was engaged as construction manager for the project.

Its role was to coordinate the work of the trade contractors and

to carry out administrative work in relation to the contracts.

Ankoben Ltd was represented onsite by Ms.Obaa-Yaa . The

contractual relationships between the various parties involved in

the project are shown in Appendix 8



RESOLUTIONThe project involved several trade contractors. Abeiku Ltd was

to undertake toilet fit-out works. The contract between KBA&S

Ltd - Abeiku Ltd was negotiated specifying Ankoben Ltd as the

construction manager. It was not possible for Abeiku Ltd to

price all the fit-out works at this stage, as not all of KBA&S

Ltd toilet facility requirements had yet been sufficiently

designed or specified. Abeiku Ltd was to carry out its works for

a specified period. Despite this timescale, the contract was not

signed immediately, by which point Abeiku Ltd had been on site

for months. Abeiku Ltd appointed Ms. Tima as its project

manager. Ms. Tima was based onsite.

Under the KBA&S Ltd - Abeiku Ltd contract, Ankoben Ltd was

entitled to issue formal (“CMIs”) to Abeiku Ltd. Many of the

CMIs issued by Ankoben Ltd did not affect the contract price;

some, however, instructed considerable additional works. Of

these, CMI 0100 is the most significant: It specified very

extensive additional works which Abeiku Ltd could not have priced

at the original negotiation stage. Under CMI 0100, Abeiku Ltd

contract period was extended but could not complete its works

within this extended period due to it not receiving possession of



RESOLUTIONall work areas timeously. It eventually completed its works by

having been late for several months.

4.3 The Dispute Period

Abeiku Ltd submitted its “Final Account” in the sum of nearly

¢6.5 million100 to KBA&S Ltd through Ankoben Ltd. This figure

included claims for loss and disruption, the latter being in the

sum of ¢2.5million. Abeiku Ltd justified this claim on the

basis that its works had been delayed or disrupted as a result of

the late completion of preceding works. It claimed that the late

completion of these works was due to Ankoben’s Ltd failure to

manage other contractors. Ankoben Ltd immediately rejected this

statement, stating that was bound by a document signed on its

behalf by Ms. Tima, which specified a figure in full and final

settlement of all its claims outstanding to that date. If

Ankoben Ltd could successfully maintain its position, the value

of Abeiku Ltd disruption claim would be greatly reduced. The

case was referred to adjudication of which Abeiku Ltd lost; it

100 Appendix 14



RESOLUTIONthen applied to the courts for a declaration that the document

referred to did not have the effect contended for by Ankoben Ltd.

4.4 The Material Fact

The court had to consider various terms of the contract and

evidence of the parties’ claims. Clause 20 of the contract dealt

with variations to the trade contract works. In terms of clause

20.3, Abeiku Ltd was required not to execute any variations

instructed by Ankoben Ltd unless it provided Ankoben Ltd with an

assessment of (i) the value of the variations (i.e. the cost of

labour, plant and materials), (ii) the impact of the variations

on time and (iii) any “direct disruption costs to which Abeiku

Ltd might be entitled101”. Clause 23 set out the payment

mechanisms for works carried out under the contract. Clause

23.6.4 regulated monthly ‘ISAs’. Generally, Ankoben Ltd was

required to issue Abeiku Ltd with ISAs in a standard form

detailing all CMIs issued to Abeiku Ltd which would entitle

Abeiku Ltd to an adjustment in the trade contract sum; Abeiku was101 This clause is similar to clause 61.2 under NEC 3 whereby the contractor isinvited to provide a quotation for a compensation event that is under contemplation. This reflects the real world where an Employer may decide to instigate a change but only if it is not going to have horrendous repercussions.



RESOLUTIONto value each ISA, taking account of the value of variations, and

return it to Ankoben Ltd. Once Ankoben Ltd had agreed with

Abeiku Ltd valuation, Abeiku would sign the ISA, thus accepting

the total valuation as “the full and final value of our contract

works at the date of this statement.” As Abeiku Ltd project

manager, it was Ms. Tima that valued the CMIs listed in each ISA

and signed it ISA on Abeiku Ltd behalf.

The terms of the referred document differed significantly to the

standard ISA’s. It was headed “Final Statement of Account, Stage

1” and declared that Abeiku Ltd agreed that the final payment

specified in the document “will be accepted by Abeiku in full and

final settlement of all its claims… arising out of or in

connection with the Trade Contract Works which have accrued up to

and including the date of this statement. The origin of this

document was a critical issue for the court.

The court was unable to substantiate the exact background to

this document. Indeed, the court commented that “at the start of

the exercise it does not appear to have registered with Ms. Tima

that he was embarking upon an accounting exercise of a markedly



RESOLUTIONdifferent kind to the consideration he had to give each month to

the value of the CMIs in order to complete the ISA Form.” Abeiku

Ltd in reviewing the evidence of meetings and contact between

Ms. Obaa-Yaa and Ms. Tima in a certain period of the project

currency, the court found that these were concerned only with the

valuation of CMIs; they did not touch upon the general issue of

contractual claims. After agreeing on a valuation for a specified

period, Ms. Obaa-Yaa then provided Ms. Tima with the referred

document. Ms. Tima signed the referred document without reading

it properly. The court found that he had not been alerted by Ms.

Obaa-Yaa to the changes that differentiated it from the standard

ISA. The court said that;

When Ms.Tima prepared her "Final Account" and met with Ms. Obaa-

Yaa and signed the referred document, she did not understand that

she was being requested to deal generally with the issue of

contractual claims and to allow for them, and there was no reason

why she should have thought that she was…. She did not appreciate

that, by the terms included on the last page, Ankoben Ltd was

inviting Abeiku Ltd to forego any and all as yet unrecognised



RESOLUTIONcontractual claims for additional costs that it might have. These

terms had been included, without any prior hint that they were to

be there and they were, unfortunately, overlooked by Ms. Tima.

4.5 Decision

Abeiku Ltd succeeded before the court on two alternative grounds.

4.5.1Unilateral mistake Ms. Tima had been mistaken as to the

nature of the referred document, the terms were considered contra

preferentum (i.e. favoured KBA’S Ltd and prejudiced Abeiku Ltd).

As Ms. Obaa-Yaa was found to have actual or constructive

knowledge of Ms. Tima’s mistake, Abeiku Ltd was entitled to a

remedy under the equitable doctrine of unilateral mistake.

Accordingly the court granted Abeiku Ltd rectification of the

referred document. The effect of such rectification would be

that the document would record agreed values for the last CMI,

with reference to general contractual claims being struck out.

4.5.2 Authority Ms. Tima’s authority only extended to matters

specified under the trade contract. The contract did not specify

any such document as a Final Statement of Account, Stage 1. In

view of this the, referred document could only bind Abeiku Ltd if



RESOLUTIONit was a valid variation of the contract. Thus, even if there

could be no finding of unilateral mistake, Ms. Tima did not have

the authority to vary the contract. Accordingly, Abeiku Ltd was

not bound by the referred document.

4.6 The Analysis So Far

To allow clear analysis the major issues that beset construction

projects i.e. measurement, variations and late payment was not

the source of dispute but rather what is explored below:

Time – The project is being rushed leading to mistakes being

made and those errors costly to rectify.

Honesty – The client is deliberately withholding information

which the contractor needs in order to price the works properly.

An increase in suspicion and mistrust, and an ignorance of the

facts, provides fertile ground for parties to dispute.

Fairness – The Management contractor has altered the contract

terms to increase the Package contractors risk and the Package

contractor, not being aware of the cleverly worded contract which

removes any remedy he may have, is not in a position to identify

that risk.



RESOLUTION4.7 Conclusion

The chapter has shown the ways in which dispute, in all its

forms, can arise in a normal constructional project. The client

failed to be honest in dealing with the contractor and allowed

dispute to grow rather than deal with them. It cannot be repeated

often enough that record keeping is the single most effective

method of preventing a conflict from turning into dispute. If

facts can be established early, the disputes will be more

manageable.

From appendix 1 it would be seem that dispute between Management

contractor and Package contractor is not prevalent. This is not

to suggest that Management contracting as a Procurement Method is

less adversarial and does limit dispute102. In Scotland we see it

but not often. Some colleagues down south think it is being used

more but that is not a universal view.

102 Copthorne Hotel (New Castle) Ltd – v- Arup Associates and Others



RESOLUTION

5 Applicability of Mediation as ADR

5.1 Introduction

Some disputes are quite unavoidable as seen in the previous

chapters. Proper management of the dispute will ease the impact

it has on a construction project, but resolution must follow

quickly. How then do we set about resolving disputes? It is

either formally or informally. This chapter will focus on the

informal process of dispute resolution. Informal resolution has

two major avenues down which disputant may pursue. They are

Negotiation and Mediation but Mediation as an Alternative Dispute

Resolution mechanism would be examined and the research conducted

in this area analysed.



RESOLUTION5.2 Background

The term ADR has generated a lot of debate in legal and quasi-

legal field since mid 1980s103. An enormous growth of ADR debate

was witnessed in the 1990’s when academics, lawyers and

consultants expressed interest and joined in the debate. Although

the concept of ADR is not new, the recent more formalised

technique as an alternative settlement procedure to the court has

it roots from the USA104. This was due to a variety of reasons;

notable among them was the workload of the court system and the

resultant inability of parties to a contract or any other

commercial transaction to have their dispute resolved in a timely

and cost effective manner105.

5.3 Level of Use and Knowledge of ADR.

5.3.1 UK Research

The commencement of the use of ADR in the UK can be traced to its

launch in November 1990106 by a non profit making body known as

CEDR supported by CBI to promote knowledge and use of ADR to

resolve commercial disputes in the UK.103 Gould, N. 2004104 Phen,L.S. 1996, Gould,N. 2004105 Uff, J. 2005106 Third mediation audit report of November 2007



RESOLUTIONAccording to CEDR107, the growth of the use of ADR has been steady

with a particularly rapid increase in the last five years or so

in the period of just under 20 years of its launch.

The report further states that cases with a total claim value of

over £4 billion are now mediated each year in England and Wales

and that the cumulative value of mediated cases since November

1990 was £23.5 billion. These cases have been referred from a

wide range of industry sectors, with the construction industry

one of the largest users being responsible for 6% of the total

mediation cases.

ADR has now found wide-spread use and is encouraged by the formal

court systems the world over, with some now requiring that before

a case is placed before the court, the case should have been put

through some form of ADR procedure108.

The Civil Procedure Rule109 proposed by Lord Wolf, empower judges

in England to stay proceeding for one month either with the

consent of both parties or on their own initiative to allow a

period of time for an ADR process to be conducted.

107 Third mediation audit report of November 2007108 TCC Pre Action Protocol109 April 1999



RESOLUTION In the UK, Gould110 pioneered a major research into dispute

resolution in the construction industry in 1994. The research

indicated that less than 30% of the respondents had actually

being involved in an ADR process. The research further indicated

that the UK construction industry lacked an understanding of the

principle of ADR. Another research in this area conducted by

‘Brooker and Laver111 in construction disputes concluded by

accusing contractors of running away from mediation112.

From this survey, Brooker and Laver113 could be justified in

concluding that ADR is seen as being in its infant stage in the

UK. The Turner Kenneth Brown Report114 indicated that 75% of the

respondents considered ADR developments as a positive step with

6% considering it negative when executives responsible for

company legal services were interviewed. A comparative analysis

of construction arbitration and mediation in Australia and the UK

suggests that mediation is the preferred route115.

110 1994, Gould, N. 2004111 2000112 Gould, N. 2004113 2000114 1993, Gould, N. 2004115 Watts, V. and Scrievener, J. 1994, Gould, N. 2004



RESOLUTIONA recent research by Gould et al116 into the use of mediation in

UK construction disputes focussed on parties at TCC in London,

Birmingham and Bristol. The respondents were interviewed on how

they settled their disputes as well as their experiences with

mediation during litigation. The results of the survey indicated

that 35% of the cases that settled after commencing litigation in

the TCC used mediation. The survey concluded that cost savings

attributable to successful mediations were enormous and

successful mediation were undertaken within the stipulated

litigation timetable.

In another research undertaken by Brooker and Laver117 with

respect to processes, perceptions, and predictions of dispute

resolution indicated that the use of adjudication would make the

most significant increase in the UK construction industry over

ADR processes such as mediation or expert determination.

The above snippets make it particularly noteworthy to delve into

Kennedy’s research118 into adjudication over the past 20 years.

The work of Adjudication Reporting Centre at Glasgow Caledonian

116 2009, Agapoui and Clark, 2010117 2000118 Kennedy, 2005



RESOLUTIONUniversity119 appears to represent best practice for collecting

data on the adjudication process and produced periodic reports on

the progress of adjudication in the UK. The centre has being

issuing regular reports from 2000 with information obtained from

Adjudicator Nominating Bodies .The data covered includes:

Number and skill base (discipline) of adjudicators

Trends in adjudications (growth, decline, fluctuations)

Performance of adjudication (complaints)

Best practices, major sources, causes and effects of

disputes in the construction industry

Such approach has been adopted by others within a number of other

jurisdictions, such as Hong Kong120, Egypt121 and Malaysia122. The

Kennedy and Milligan123 report concluded that there seems to be

some drift in terms of the original mission to replace litigation

and arbitration. The Latham report of 2004, commissioned to

review the successes of the Construction Act 1996 of the types of

disputes being referred to adjudications i.e. simple payment

119 Kennedy, 2005120 Cheung et al, 1999, 121 El- Aldaway et al, 2007122 Zulhabri et al, 2006123 2007



RESOLUTIONdisputes as against complex disputes’ involving highly technical

matters and legal issues and recommend any necessary amendments

was consistent with Kennedy and Milligan report.

5.3.2 Other Research

A similar research aimed at establishing the perceptions,

attitudes and experiences of industry participants towards

arbitration and mediation as ADR mechanisms has been conducted in

the construction industry in other parts of the world. Notable

among them include, New Zealand, England, South Africa, Hong Kong

Malaysia and Australia. The importance of ADR in justice delivery

is acknowledged in Ghana, and the Ghanaian judiciary had

integrated it into the country’s justice system. As a result of

that ADR has been advocated as the most appropriate mechanism for

the peaceful resolution of disputes in the country’s oil

industry124.

Some empirical investigations which exist suggests that

Stipanowich125 found that construction disputes in the USA

represents one of the first attempts to explore non binding

124 www. Modernghana.com, 2010 125 1992



RESOLUTIONdispute resolution in the context of construction126 and this

research has documented the rise of mediation127. From the survey,

Stipanowich concluded that, the Army Corp of Engineers pioneered

the process in order to reduce the high costs of litigation128.

In South Africa, Povey’s survey129 of mediation practice in the

construction industry was a notable addition to the empirical

evidence and suggests that there is a plethora of research and

literature on mediation as it is used by mediators and litigators

world wide and in various fields of dispute resolution. Barth130

investigating the suitability of arbitration in the South African

construction industry found that mediation was considered a more

suitable dispute settling mechanism than arbitration or

litigation by the industry participants (including attorneys).

Schindler’s131 research into the role of mediation and arbitration

as dispute resolution mechanism in the South African construction

industry focused on the awareness, experience, attitudes and

perceptions of architects, engineers and contractors and126 Agapoui and Clark, 2010127 Gould, N. 2004128 Gould, N. 2004129 Povey, 2005, Agapoui and Clark, 2010130 1991131 1989



RESOLUTIONconcluded that these participants did not have much experience in

mediation and as such have negative attitudes and perceptions

about the process.

5.3.3 Scotland Research

However, the vast majority of the mediations which take place in

the UK take place in England and Wales. In terms of related

research in Mediation, few authors have been identified in

Scotland. Agapoui and Clark132, May and Clark133, Clark and

Dawson134 dealt with Mediation as ADR as a continuum and

therefore provided valuable input into the corresponding part of

research in this area of the dissertation.

Agapoui and Clark135 dealt with Mediation practice in Scotland

which yielded useful attitudinal information. The research was

very informative in that, it provided useful insights to the

knowledge and level of use of ADR to resolve disputes in Scotland

by investigating into commercial litigator’s attitude and

experience of ADR generally and commercial specifically. Since

132 2010133 1996134 2006135 2010



RESOLUTIONthis is the major research on ADR in Scotland and did not address

the construction industry, it can be said that research and

literature on the mediation of disputes in the Scottish

construction industry is limited and generally found to be of an

advisory or anecdotal in character.

A report by the Scottish Consumer Council136 entitled “Consensus

without court” noted that: While there are considerable numbers

of trained Mediators in Scotland there remains little demand for

their services in commercial and consumer disputes. The Scottish

Consumer Council Report echo those from Agapoui and Clark137, and

it would be comforting to keep one’s finger on the pulse and

observe if and to what extent Mediation as ADR is able to deliver

on these expectations. Agapoui and Clark 2010 presents useful

diagrams and tables illustrating breakdown of trained mediators,

their professional designation, element of the Mediation process

etc. and put these into continuum to illustrate their

applicability to a dispute and is contained in the Appendices.

136 August 2001137 2010



RESOLUTIONA recent survey conducted by Agapoui and Clark138 on trained

mediators found that 82% of the respondents had receive some form

of training in mediatory techniques while 26% have attended

external courses on mediation and 14% attended in-house training

sessions. Figure 8 indicates the breakdown of respondents’

training in mediation.

The RSE139 noted in a report called “Encouraging Resolution”-

Mediating Patient/Health Services Disputes in Scotland and

concluded:

“In Scotland…. the use of ADR process such as Mediation is

negligible”.

The picture demonstrated in the RSE140 report may not be

different today but at least Table 1 suggests some changes,

although could not be compared to England and other common law

jurisdictions. Agapoui and Clark141 recent research on the

knowledge and level of ADR indicates 90% of the respondents were

able to provide an explanation of the process with confidence in

terms of knowledge of Mediation. 138 2010139 January 2002140 January 2002141 2010



RESOLUTIONIn the RSE report, it was outlined that approximately 500 medical

negligence claims were pursued each year in Scotland. The report

further indicated that 70% of the total claims were dropped at

some stage prior to going to court. Those pursued in court were

settled before hearing and that amounted to 25%. The report

stated that only 5% went to a court hearing. It was also noted in

the report that the time taken to settle a claim from the date

when a formal claim was made was on average in the range of 31/2

and 41/2 years.

From the above, it could be concluded that a better method of

resolving disputes could be appreciated by the parties.

5.3.3.1 Satisfaction with Different Elements of Settling Disputes

According to Lord Coulsfield report142 aimed at finding out

satisfaction with elements of settling disputes noted that the

disputes decided by the courts, less than 50% thought the result

was fair – interesting as you would always expect to satisfy at

142 November, 2005



RESOLUTIONleast 50% but a result which probably explained by the costs

which even the winner of a court action has to incur143.

In a comparative analysis, 80% of those who had reached a

settlement extra-judicially thought they had in part or

completely achieve their objective compared to 43% of those who

had gone to court and received a hearing. The report found that a

high number of respondents – 43%, had never heard of Mediation.

However, of those involved in a dispute 50% of respondents said

they would have preferred their case to have gone to mediation

rather than to court. Among those who were surveyed and had gone

through Mediation expressed general satisfaction with the

process.

The Lord Coulsfield report further discussed the processes

available for solving civil justice problems and suggested that

there should be ‘a menu of choices’ available for parties in

dispute ranging from Negotiation and Mediation at the ‘least

intervention’ end of the scale to arbitration and litigation at

the ‘most intervention’ end.

143 Multiplex v Cleveland Bridge- the cost of photocopying amounted to £1million. Then guess the cost of legal fees.



RESOLUTIONAgapoui and Clark144 investigating the satisfaction with different

elements of the Mediation process found that around 33.3% of the

cases which go to formal Mediation were always satisfied and

43.3% with the speed of the process. Between 27% and 43% of

respondents were either always satisfied or often satisfied with

the cost of mediation respectively. From the survey, Agapoui and

Clark145 concluded that, overall, it would seem that a large

proportion of the respondents who had experience of mediation in

particular were satisfied with the process since almost 50% of

the respondents expressed satisfaction with the mediator and

63.3% satisfied with the outcome of mediation.

5.3.3.2 Attitudes to Mediation

The SEC report entitled ‘Modern Laws for a Modern Scotland146 –

opined that: “there is a need for an in-depth look at the

structure and procedures of the civil courts with a remit to

produce recommendations for changes to achieve a system which

deals with cases partly within a reasonable cost by incorporating

144 2010145 2010146 Report on Civil Justice in Scotland, February 2007.



RESOLUTIONMediation into the civil justice system in the not too distant

future”.

Agapoui and Clark147 investigation into respondent’s perception of

dispute resolution, ADR as Mediation found out that about 80% of

the respondents considered Arbitration unsuited to the needs and

practices within construction. Arbitration which until recently

has been a favoured method of resolving such disputes, is under

attack in the UK because of its “perceived complexity, slowness

and expense”148. Similar criticisms149 have been levelled in the US

where arbitration for many years have been well entrenched as the

preferred method of construction dispute resolution.

Interestingly, the survey found out that 84% of the respondents

strongly and somewhat agreed that Adjudication was generally well

adapted to the construction context. Agapoui and Clark150 research

conforms to international trends and show that ADR was not always

understood or agreed by respondents and that although the system

has taken off so far, the knowledge base needed to be expanded.

147 2010 148 Latham, supra. Note 1 p.90149 Thompson. Supra. Note 3 p.140150 2010



RESOLUTIONIn expanding the knowledge base as suggested above, the Lord

Gills Review151 specifically dealt with the reform of civil

procedure emphasising on the role of Mediation and other methods

of dispute resolution and further described the growth of

interest in methods of dispute resolution other than formal

adjudication by the courts as one of the most notable

developments in civil justice over the past decade or even more.

Perhaps even more relevant research work cited by others like

Agapoui and Clark152 suggest that this line of reasoning will be

welcomed in the construction industry as a large proportion of

the respondents, 62% strongly and somewhat agreed that contracts

should have a Mediation clause, such as Adjudication clause

provided by the SBCC/JCT standard forms of contract. Agapoui and

Clark153 present useful table comparing breakdown of frequency and

percentage response of respondents’ attitude to mediation and is

illustrated in Table3 in the Appendix.

5.4 The Impact of ADR on Litigation

151 A chapter of consultation paper issued in November 2007152 2010153 2010



RESOLUTIONThere has been great encouragement of the use of ADR from the

judiciary in England and Wales in cases resulting in a highly

significant decision in the English courts regarding cost order

against successful litigants on the grounds that those litigants

failed to seriously consider Mediation. The first of these154 was

Susan Dunnet v Railtrack Plc 155 in the court of Appeal.

In this case, there was appeal and counter appeal, from the first

instance decision, and because of it highly flexibility, the Lord

Justice suggested Mediation or a similar process for it

resolution. Regardless of the court suggestion, Railtrack failed

to engage in Mediation. Railtrack effectively won the appeal, but

the court of appeal found that as Railtrack has failed to mediate

then a costs order should not be made against the unsuccessful

claimant. In concluding one of the appeal court judges said that

“a skilled Mediation could achieve results far beyond the courts,

and a party who dismiss the opportunity for mediation without

proper thought suffer the uncomfortable consequences”.

154 Gould, N. 2004155 22 February 2002, Gould, N. 2004



RESOLUTIONIn a survey conducted on factors leading to mediate in Scotland156

it was found that these include reduction in client legal costs,

achieving a speedier settlement and the possibility of achieving

a creative settlement to dispute. The findings concluded that

other factors associated with the decision to recommend Mediation

such as gaining information on the other side’s case etc seem

much less relevant and critical in respect of a decision to

mediate. These findings may not be in consonant with

circumstances of Susan Dunnet v Railtrack Plc but serves as

encouragement for the use of ADR in Scotland.

This ability in the English Rules to encourage the use of ADR has

been backed up by comment and orders from judges in a series of

cases since Susan Dunnet v Railtrack culminating in the decision of

the court of Appeal in Hasley v Milton Keynes NHS Trust157. Of particular

concern to the court of Appeal in this case was the question of

when a costs sanction would or would not be imposed on a

successful party who had unreasonably refused to enter into ADR.

156 Agapoui and Clark, 2010157 [2004]ECWA Civ 576



RESOLUTIONIn determining that issue the court said that the following six

factors were to be considered:

The nature of the dispute

The merits of the case (on the basis that a successful party

who reasonably believed it had a watertight case could be

justified in refusing to mediate)

The extent to which other settlement attempts had been made

Whether the cost of ADR would have been disproportionately

high

Whether delay in setting up ADR would have been prejudicial

Whether ADR had a reasonable prospect of success.

The facts and circumstances in Hasley v Milton Keynes NHS Trust suggest

that it is not in every situation that ADR has reasonable

success.

In finding out whether ADR always has reasonable success, a

survey conducted on the decision to refuse proposal for mediation

from the opposing party in the dispute in Scotland158, it was

found that 31% of the respondents always considered the clients

wishes not to use mediation as relevant while one – fifth of the158 Agapoui and Clark, 2010



RESOLUTIONrespondent was of the view that the opposing party would not take

part in good faith as always relevant. More details of the

research are presented in Table 1 and are contained in the

Appendices.

In another case, The Wethered Estate Lt v Michael Davis and Others159, the

court was of the view that for the fact that mediation has taken

place will not prevent a party from claiming that a delay in

going to mediation was unreasonable. On the facts of this case,

the defendants had not shown that the claimant was unreasonable

in refusing to agree to mediation commencing proceedings. The

judge in this case was sympathetic to the claimants’ belief that

mediation would have had greater prospects of success in

formulating the issues considering the case having disputed

facts. At the mediation itself, the court was required by the

defendant to scrutinise the claimants’ behaviour. A mediation

being entirely without prejudice was confirmed by the court and

this privilege must be maintained unless there is clear

unequivocal waiver consent to a mutual waiver.

159 2005



RESOLUTIONThe determining factor in making a cost award by the judge based

on the conduct of the parties resulting in the failure of the

mediation settlement is demonstrated in the case Earl of Malmesbury

v Strutt & Paraker160. In this case the judge was able to pry into the

parties conduct because of the waiver of the confidentiality of

the mediation process. Commenting on the conduct of the

mediation, the judge said:

“I consider that the claimants’ position at the mediation was

plainly unrealistic and unreasonable. Had they made an offer

which better reflected their true position, the mediation might

have succeeded”.

In the opinion of the author, for a party who agrees to mediation

but then causes the mediation to fail by his reason of his

unreasonable position in the mediation is in a similar situation

as a party who unreasonably refuses to mediate. The conduct of

such party is tantamount to an unreasonable refusal to engage in

mediation.

There will be times when a party to a dispute will be insincere

in his intentions to settle. Some will cynically use ADR to defer

160 2008



RESOLUTIONsettlement of a dispute. In these instances formal dispute

resolution will be necessary utilising adjudication, arbitration

or litigation.

These cases express the position in England regarding mediation.

It is a testimony that the English courts will not excuse

unreasonable refusal to mediate where the parties have express a

desire to mediate or the courts is of the opinion that a

settlement outcome could be achieved.

5.5 Conclusion

As a result of CPR changes and the conduct of the judiciary, it

can be concluded that the position in England relating to the use

of ADR processes and mediation has taken off beginning from the

introduction of the CPR. On the other hand as evident from Gill

Report and research conducted by Agapoui and Clark161, Scotland

has of date not followed the trend as seen in some other

jurisdictions, where mediation as ADR is on the ascendancy.

161 2010



RESOLUTION

6 Review of Mediation as ADR in Scotland

6.1 Introduction

The question now is, is there any reason to appreciate that the

standing barriers which have existed to date and have prevented

significant growth in the use of ADR in Scotland have a turning

point?

In the authors view that is the case and it is useful for the

moment to get a framework of this concept and examine a number of



RESOLUTIONreasons put forward as barriers which have existed to date to the

growth of mediation in Scotland, many of which are as strong now

as they have been to date.

6.2 Encouraging the use of ADR

The opportunity to introduce procedures for mandatory mediation

in appropriate cases or for cost sanction for unreasonable

refusal to engage in mediation on the model of the English CPR

has not been adopted in Scotland. The Gill Report162 which was

expected to accelerate the growth of ADR also rejects the idea

that parties should have taken averments in their pleadings about

the steps, if any; they have taken to resolve their dispute by

alternative means.

However, the Reports recommendation was to increase measures to

increase some awareness of mediation such as information on the

Scottish Court Service website, leaflets and a helpline in

addition to the introduction of a mediation service for small

claims.

It is unlikely; therefore, that anything in Gill Review will lead

to a rapid growth in the use of mediation for resolution of

162 October 2010



RESOLUTIONcommercial disputes in Scotland as was seen when the Woolf

Reforms was introduced in England and Wales.

In the author’s view a major reason which may influence changes

especially in the construction industry is the growing

disenchantment with statutory adjudication both because of its

perceived unpredictability and also because of the increasing

role that appeal to the courts appear to be paying in the

adjudication process.

6.3 Judicial Attitudes

It is difficult to trace similar judicial enthusiasm in Scotland

either from the Gill Review or prior to that. So far Scotland has

no mandatory rule encouraging the use of ADR either in the Court

of Sessions rule or the Sheriff Court rules. The court of Session

Commercial Action rules provide at chapter 47.11(2) that “both

parties may wish to consider whether all or some of the dispute

may be amenable to some form of ADR. The Sheriff Court Commercial

Action rules provide that at case management conference the

sheriff is to seek to secure the expeditious resolution of the

action”. Rule 40.12(3) m provides that one of the orders the

Sheriff may make in order to achieve that expeditious resolution



RESOLUTIONis any order which the sheriff thinks will result in the speedy

resolution of the action – including the use of ADR. The power

to make an order for ADR to take place already exists in the

Sheriff Court commercial cause rules. It is anticipated that this

power will begin to be used in appropriate cases. There is also

realisation that commercial judges in the Court of Session are

favouring the use of ADR and are prepared to support it use.

In spite of the introduction of above measures there is no

indication or little evidence of the use of ADR being encouraged

to resolve commercial disputes either by the Court of Session

judges or by Sheriffs in the Sheriff Courts.

6.4 Legal Profession

According to Clark and Dawson163 only 1/3 of respondents had any

experience of representing clients in ADR processes. This figure

notwithstanding over 2/3 had recommended participation in ADR to

clients, the survey added.

Taking cognisance of this fact, it would be for all practical

purpose point out that there is the ‘unknown quantity’ element of

ADR. As is evident in a recent survey by Agapoui and Clark164,163 2006164 2010



RESOLUTIONmany lawyers in charge of the conduct of litigation in Scotland

have little knowledge of what ADR is and how it operates, far

less any experience of the operation of ADR in practice. Many

have had no training either at the University or subsequently and

accordingly are subject to, on the one hand, the fear of the

unknown as opposed to on the other hand an adversarial process

which for all its imperfection they understand inside out.

That latter reference confirms that lawyers in Scotland are by

and large inherently conservative in their approach to the

conduct of disputes brought to them by clients. They tend to play

the game according to familiar rules. When instructed initially,

there may be steps taken to reach a negotiated settlement with

the other party’s advisers if that is what the client instructs

but for the most part a lawyer instructed in a commercial dispute

will tend to quite quickly enter into the tried and tested

process he knows best. Agapoui and Clark165 found in their recent

survey that 52% of respondents considered mediation to an

opponent were a sign of weakness. This reaffirms earlier

research by Gould166 where a section of the respondents argued165 2010166 2004



RESOLUTIONthat to suggest ADR or mediation demonstrates a weakness in the

case. This leads to the ‘door of the court settlements’ which are

such a common feature in Scottish litigation. The litigious

nature of Scottish dispute in general was brought to light in

Lord Cullen’s review of Court of Session business. The report

stated that, 94.3% of the 300 sample actions he considered

settled but of those which settled 30% did so within one week of

a proof. From the above supported by Agapoui and Clark167

research it can be concluded that there has been a drift in terms

of the original mission to replace litigation and arbitration

with ADR.

Then, there is the argument to threat of income. Arguably,

certainly not all but some litigation lawyers in Scotland are of

the view that ADR is a threat to fee income than an opportunity

to expand their dispute resolution business by offering

commercial clients a process more attuned to the needs of their

business. This perception has been contrasted by Agapoui and

Clark168 recent research where 78% of the respondents strongly

disagree that the growth of mediation would be detrimental to167 2010168 2010



RESOLUTIONfuture earnings. Indeed, a large majority, about 88%, strongly

and somewhat agreed that mediation would provide an opportunity

to offer further services to their clients.

In economic parlance as the demand grows more of the items will

be supplied169. In the same vein, as client demand grows lawyers

will have to become acquainted with the use of ADR or risk

endangering their client relationship. With increased awareness

from lawyers will result, in the author’s opinion, an awareness

that ADR is to be embraced rather than suspect it as threat to

fee income. Once lawyers embrace it and involve in the resolution

of disputes to the satisfaction of clients, there is the

possibility of expanding their dispute resolution businesses.

Cynically, it has been suspected that as young lawyers come

through the profession who are aware of and have an understanding

of ADR through their University training the fear of the unknown

factor will vanish.

6.5 Client Awareness

169 Stanlake 1994



RESOLUTIONThis may neatly roll up the’ chicken and egg’ factor, that

because ADR is little used in Scotland and lawyers are by and

large reluctant to promote its use, there is a lack of awareness

amongst commercial clients both of the existence of ADR and of

its benefits to them in many cases.

Agapoui and Clark170 research into decision to recommend Mediation

to client suggests that recommending mediation to client was

inversely proportional to representing a client in mediation.

This stems from the fact that experience and track record in

mediation would seem to be critical factors for legal counsel in

respect to their recommendations to clients171.

It would be understandable to conclude that the lack of demand

from Scottish clients for ADR to be used to resolve their

disputes may be attributable to lack of awareness. The growth of

the use of ADR in England, the USA, Hong Kong and other parts of

the world and the satisfaction which users normally express

regarding the process suggest that clients who have used ADR

processes want to use it again than to use litigation172. Equally

170 2010 171 Agapoui and Clark, 2010172 Gould, N. 2004



RESOLUTIONit is reasonable to believe that since many of the large

commercial disputes in Scotland involve UK or international

companies, as the use of ADR grows in other jurisdictions the

demand for ADR to be used to resolve disputes in Scotland will

also grow.

6.6 Scottish Government - The Civil Justice Review being

announced in Scotland is an indication that the Scottish is ready

to support the use of ADR in appropriate cases notwithstanding,

the results of the review been a disappointment for supporters of

ADR.

6.7 Conclusion

Reports from other common law jurisdictions seem that ADR has

attained a de facto finality in its use, and though it has

challenges, it is believed that through regular reviews173,

performance reporting174, and the expansion of its knowledge base

through workshop and the like175, its position in the Scottish

Construction Industry dispute resolution can get stronger.

173 Latham, 2004174 Kennedy, P. 2007175 Van Langelaar, 2001



RESOLUTION

7 How Mediation as ADR Works In Practice

7.1 Introduction

It would be useful at this stage to define ADR and explain how it

works in practice.

Available literature indicates that ADR is a widely discussed

discipline within the jurisprudence of construction disputes. An

anecdotal review of the subject matter has been provided by many

academics. Few writers are careful and dare go beyond the

normative to describe ADR definitely, some also suggest that this

term only refers to Mediation. Others have also revealed their

attitude towards the subject by labelling it one of the

following:



RESOLUTIONAlternative Dispute Resolution

Amicable Dispute Resolution

Assisted Dispute Resolution

Appropriate Dispute Resolution

Another Disappointing Result

Another Drink Required

Another Dammed Rip-off

Alternative Dispute Resolution is the most widely used phrase.

ADR involves a change of mind set to some extent and is generally

viewed as being consensual and conducted outside formal court

system176. It involves getting away from looking exclusively at

how lawyers and judges operate and adopting a more sociological

approach. For example in the formal dispute resolution, there is

a ‘winner’ and ‘loser’, whereas ADR should be attempting to make

both parties feel like ‘winners’. In a nutshell ADR is any

process whereby disputes are resolved through negotiation between

the parties with the assistance of a neutral party.

7.2 ADR Defined

176 Uff,2005



RESOLUTIONThe definition of ADR as given by Brown & Marriot177 is a range of

procedures that serve as alternatives to litigation through the

courts for the resolution of disputes, generally involving the

intercession and assistance of a neutral and impartial third

party. The authors go on to state that most definitions would

exclude not only litigation, but all other forms of adjudication

or third party determination. In other words the process is one

of assisted negotiation rather than third party decision-making.

7.3 Mediation in Practice

The most widely used ADR process is Mediation. The origins of

Mediation and conciliation can be traced to China some 3,000

years ago. China has used these techniques as a primary dispute

resolution process in order to maintain harmony in the

community178. In the UK, Mediation under the banner of ADR was

first used for settling family disputes and the ICE in 1988

incorporated this process in its standard form of contract179. The

courts in UK have recently piloted a court-based mediation

177 1993178 Gould, N. 2004179 Gould, N. 2004



RESOLUTIONscheme180. According to Gould181, research by Stipanowich has

documented the rise of Mediation in US construction industry.

In Mediation, the mediator through a combination of open sessions

with both parties and private or ‘caucus’ sessions, assists the

parties to reach a negotiated agreement. Mediation is therefore a

process of facilitation. The parties to the dispute use the

assistance of an impartial third party to help them to arrive at

an agreed resolution of the dispute, but the mediator has no

power to make any decisions that are binding on the parties.

This assisted negotiation technique is intended to reconcile the

parties in dispute by using the good offices of independent and

impartial professionals who are skilled in the techniques and

experienced in construction. The mediator has, as his main aim,

the resolution of the dispute by the parties to achieve a

practical and commercial remedy. The distinction between

mediation and formal adjudication is the lack of legal procedure.

This is an advantage in encouraging the parties to come to

mediation, because the hearings are usually without prejudice.

180 Butter, N. 1997, Gould, N. 2004181 Gould, N. 2004



RESOLUTIONThis is not to say that it does not have disadvantages. Perhaps

the most difficult of these disadvantages is the lack of a

legally binding result.

7.4 Differences between Mediation and Adjudication Processes

According to Gould182 there are five main areas of distinction and

it will be explored below.

7.4.1 Non-Binding Voluntary Nature of Mediation

The first important distinction is that while Adjudication

methods are binding and mandatory once commenced, Mediation is a

non-binding voluntary process. What this highlight is either

party’s ability to ‘walk away’ from the Mediation at any time.

That ability is in fact an important factor in bringing about

resolution of the dispute. This suggests that so far as the

parties remain engaged in the process, the parties impliedly

accept that they retain a desire to arrive, with the assistance

of the mediator, at a solution to the dispute.

182 Gould, N. 2004



RESOLUTIONAccording to CEDR183 statistics, the success rate of ADR in

achieving settlement is very high, and is between 75-80%.

However, even if no settlement is reached, the original

commitment to the process will, at the very least, get the

parties to meet round the table in a shared, though initially

unsuccessful, desire to resolve the dispute. That alone may well

help to break down barriers and clarify the issues in dispute and

will often commence a dialogue which will later lead to

resolution.

7.4.2 Role of Mediator

In ADR, the parties resolve the dispute by agreement whereas in

litigation and sometimes arbitration, a decision is imposed on

the parties. Arbitration which used to be the preferred method of

resolving such disputes is unsatisfactory because of frequent

delays and the “constant spectre of appeal”184. The Mediator helps

the parties to reach an agreement and not to make any decision on

183 2007

184 King, V. W. 1999



RESOLUTIONeither the facts or the laws. The essential aspects of being a

Mediator as suggested by Brown and Marriot185 is as follows:

The first consist of the basic elements which are

theoretical understanding, practical skills, ethical

awareness and emotional sensitivity.

The next element is that the mediator must bring sound

judgement, personal empathy and substantive knowledge of

legal, technical or practical aspects of matters which are

relevant to the dispute.

The third is that the mediator must be creative and

flexible.

Finally the mediator must have balance - he must

demonstrate impartiality and an even handed approach to the

issues and the parties involved.

7.4.3 Informality of ADR Processes

In ADR how the process works is up to the parties and the neutral

to decide. This results in the third important distinction,

namely the respective formalities of the procedures. In Mediation

the parties agree the procedure. They do that having regard to

185 1993



RESOLUTIONthe nature of the dispute they wish to resolve. They are at all

times in control of the timetable, the agenda and essentially the

outcome.

Notwithstanding the informal nature of ADR, the parties can give

them a structure which is akin to the formal processes, in order

to formalise them. This suggests that the procedure is under the

parties’ control.

Contrast that with adjudicatory methods such as litigation and

arbitration. How often has one heard the criticism that, once

lawyers get involved in a dispute it develops a life of its own

with complicated and difficult rules of pleadings and evidence,

disclosure of documents and the like. More and more that approach

to dispute resolution is not acceptable to commercial clients.

They want to be proactive in how their dispute is resolved and to

have the opportunity to bring about a more creative and flexible

outcome than a court can deliver.

7.4.4 Nature of outcome

Another principal distinction relates to the outcome achieved.

The whole thrust of ADR is the voluntary, consensual nature of

the process. The parties enter the process and remain in it



RESOLUTIONbecause they want to reach settlement. They choose the Mediator

and the procedure is under their control. Again, it is the

parties who arrive at the settlement. If the outcome achieve is

not acceptable to both sides, then the parties can walk away and

if they choose, go back to court or Arbitration. If an agreement

is reached, it will reflect their respective business interests.

In contrast to adjudicatory methods, if they proceed to a

conclusion it will produce a decision of fact and law based on

principle which will be imposed on the parties whether they like

it or not. In some cases, that is exactly what the parties’ want,

in which case adjudication methods are appropriate. In the vast

majority of cases however, the dispute settles prior to the

decision being given.

7.4.5 Confidentiality

ADR is, like arbitration but unlike litigation, an entirely

private and confidential process and that will be explicitly

agreed by the parties and the Mediator in the agreement to

mediate. No publicity is given to the fact that the parties are

engaged neither in ADR nor to the outcome or conduct of the

mediation unless with the consent of both parties. There is a



RESOLUTIONgeneral confidentiality attached to the whole process and also

where the mediator meets a party in a private session, he will

have agreed not to disclose anything said to him during that

session without express authority.

The parties will also agree in the mediation agreement that the

process is privileged and without prejudice so that anything

disclosed during the process cannot be referred to in any

subsequent court or arbitration proceedings.

7.5 Advantages of ADR- Mediation in Commercial Disputes

An objective evaluation, after a depth study and analysis of the

many factors of ADR, the writer opine that there are four

principal advantages:

7.5.1Cost

The first and perhaps most obvious advantage of ADR is cost –

both in relation to legal and other fees to be paid, and also in

relation to the hidden cost of loss of management time.

In formal dispute resolution mechanism, i.e. litigation and

arbitration, parties are faced with lawyers’ fees often for

Solicitors and Counsel, and in more complex litigation, often



RESOLUTIONalso with fees for experts witness. In Arbitration, the costs

also include fees for the Arbiter and his clerk and the cost of

hire of the arbitration avenue.

In both litigation and arbitration, the rules on taxation of fees

mean that even the winner can usually recover no more than

approximately 60% of those fees from the unsuccessful party186.

The costs in both litigation and arbitration are high because the

emphasis in preparing the case for hearing is on the factual

detail. It is on the exploration of every relevant fact and

production of every document to substantiate your own side’s case

and to repudiate the evidence of opponent. There is a tremendous

additional cost of management time both in preparing the case

prior to hearings and in relation to attendance at hearings.

For ADR to work properly, it is essential that parties or their

lawyers prepare the case properly. Often lawyers will play an

important role in the preparation and presentation of their

client’s case at Mediations. So in ADR parties will very often

have legal cost to incur. Putting these elements together very

186 Glasgow Graduate School of Law 2010 Course work



RESOLUTIONmuch stick and carrot and however produces total costs which are

a small fraction of costs than in long-running litigation or

arbitration processes – even where those processes produce a

settlement before a hearing takes place.

7.5.2 Speed

Closely linked to the cost advantage is the speed with which ADR

brings settlement about. The system in both litigation and

arbitration tends to be slow in focusing the real issues in

dispute. There is a tendency for case management practices to be

such that preparation for a hearing takes place late in the day.

Lawyers and their clients will often be reluctant to propose

settlement early on in the process in case that should be

interpreted as a tacit acknowledgement that their case is weak.

All of these reasons lead to “door-of-the court” settlements

induced more by fear than anything else, particularly by fear of

the cost of proceeding with the hearing. Because the settlements

are often last-minute, they tend to be on the basis of a

compromise position between success for the respective parties



RESOLUTIONrather than truly creative solutions on the basis of the genuine

business interests of the parties.

Once the parties have agreed to try to mediate, they will agree

on the appointment of a Mediator. They may have an initial

meeting with the Mediator to agree on procedure. They will then

usually be allowed a relatively short period to prepare brief

written statements to the Mediator, backed up by a supporting

document where appropriate. A full day, or sometimes more, will

then be set aside for the Mediation. If the process produces a

settlement a binding agreement will be arrived at there and then.

In the UK the success rate187 is over 75%.

Above all the whole process will in most cases have taken a

matter of weeks, compared with the several years which litigation

or arbitration can often take to produce a negotiated settlement

or a binding decision.

7.5.3 Preservation of Commercial Relationships

The third important advantage in the writer’s opinion arises from

voluntary nature of the process. Litigation and Arbitration are187 CEDR 2007 statistics



RESOLUTIONadversarial processes. Parties adopt position where they seek to

justify their highest possible claim and to destroy the other

side’s case. Aggressive positions are adopted, trenches are dug

from which parties and their lawyers find it difficult to get

out. All that leads to a breakdown of commercial relationships

between the parties, which may often be permanent, between

parties who in many cases are only in this position because

previously they were happy to contract together for their mutual

benefit, for example a main contractor and a subcontractor in a

building contract or a client and his professional adviser.

When the parties get together in ADR, they do so not out of a

desire to defeat the other, but out of a shared desire to reach

agreement. They come to that process voluntarily and they only

remain in it as long as they want to. If a settlement is reached

it is the parties’ settlement – not the lawyers’ settlement and

not a third party imposing a ruling on the parties. The nature of

the process therefore enables parties who are in dispute to

resolve it in a way which will enable them to preserve their

relationship and so give them a much better chance to work again



RESOLUTIONin the future. This is particularly relevant to parties to

construction and engineering disputes where the concept of

partnering has become so important.

7.5.4 Creative Outcome – Increasing Settlement Options

To some extent, the writer is of the view that the most

important and telling advantage which ADR has is the opportunity

which it gives the parties, assisted by a Mediator, to be

creative in finding a solution to their dispute.

It enables them to move beyond the parameters of the ‘win – lose’

outcome based on strict interpretation of past events, and arrive

at a solution on the basis of their own business interest and

future commercial options.

Litigation and Arbitration cases proceed on the basis that, if

the matter goes to its conclusion, one side will win and the

other side will lose and a sum of money is awarded by the judge

or arbiter to the winning party. The ‘win – lose’ may not be the

solution which is most appropriate for the parties’ commercial

needs. Think of the building contract situation, if say a main



RESOLUTIONcontractor has a claim against his sub-contractor and is

successful, the judge or arbiter will award the main contractor a

sum of money. The sub-contractor may not be able to pay. He may

go into insolvency with the result that the main contractor gets

nothing except a large legal bill, the loss of management time

over 2 to 3 years. It may be that in that situation a better

solution for both parties could have been found in negotiating

terms for future contracts whereby, for example, the sub-

contractor could have carried out work for a period for the main

contractor on discounted terms. Does that not have the potential

to be a better outcome for both sides? The commercial

relationship is preserved, legal fees and management time are

minimised, and the settlement is a creative outcome for both

sides. That is the kind of settlement which ADR can offer but

which litigation and arbitration by their nature cannot.

7.6 Conclusion

The aim of ADR is to bring the parties together to find a joint

solution which is mutually acceptable. The ADR refers to another

way of settling disputes beyond litigation and arbitration. The



RESOLUTIONkey to this method of resolving disputes is always to ask the

question “what is it that will help the parties resolve the

dispute”. This provides an agenda for the resolution process that

excludes laying the blame, digging up old arguments and

criticising the behaviour of others. The ADR process can be

either reactive or proactive. It can be in place preventing and

managing disputes from arising as early as it can be and for

resolving those that have arisen.



RESOLUTION

8 Conclusion

8.1 Introduction

In the previous chapters we have sought to set out the symptoms,

causes and effect of disputes in the construction industry. The

behaviours and techniques which need to be developed to prevent,

manage and resolve disputes in order to preserve commercial

relationship has been addressed. Whilst all of this has been

necessary and worthwhile, perhaps the greatest emphasis should be

placed on the prevention of disputes rather than managing and

resolution.



RESOLUTIONThe conclusion chapter will therefore place emphasis on the

concept and ideas which can be addressed to alleviate the

pressure on the construction industry to disputation. That being

fulfilled, the harmonisation of construction and its related

industries will come as a result of examining all possibilities

and finding useful contributions from each of them and then

answering the searchable question for this dissertation.

Is there real hope in the future for a general reduction in construction disputes?

8.2 Competitive tendering

The letting of contracts by competitive tendering has been much

criticised188. It is contended that it encourages contractors to

bid low to secure work in the hope of securing additional

payments through variations and claims. The system might also

lead to “motivational problems”, once contractors are locked into

executing work at a very low price189. An associated problem is

that the system of competitive tendering selects contractors by

price and might not ensure value for money, competency or

efficiency.

188 Egan 1998189 Winch 2002 p. 101



RESOLUTIONThe pattern of delay and the inefficient and defective execution

of works in the construction industry can, to some extent at

least, clearly be linked to the disadvantages of competitive

tendering.

8.3 Changes in Contracts

In construction and engineering, not only in the UK but the

world all over, contracts have been designed to be fair and well-

balanced, and a great deal of effort has been exerted to achieve

this. Perhaps now is the time to make them less adversarial and

more investigative.

We need to be innovative in the field of preparing contract

documentation to ensure that dispute is prevented wherever

possible. Furthermore, contracts can be simplified to avoid

misunderstanding, and certainly can be improved in terms of

cooperation.

8.4 Partnering

Pursuant to laws governing competition in trade and fair trade in

the EU, partnering may be a way forward towards more harmony on

construction projects. Some large clients, such as supermarkets

have now developed links with contractors and subcontractors on



RESOLUTIONwhom they can rely. The ongoing relationship created by this

partnering has two significant benefits when it comes to reducing

disputes.

An interest in an ongoing relationship, so that small disputes

are put into a proper perspective.

The relationship is based upon mutual trust and cooperation

This is not to say that, Partnering will exclude the dispute in

totality, but it will certainly encourage the parties to minimize

the impact which the dispute has upon the project and upon the

future relationship.

A widely accepted definition of partnering is: “A management

approach used by two or more organisations to achieve specific

business objectives by maximising the effectiveness of each

participant’s resources. The approach is based on mutual

objectives, an agreed method of problem resolution and an active

search for continuous measurable improvements”190. Egan argued

for partnering, defined in this way, to be implemented throughout

the supply chain; this would allow benefits to accrue to the

190 NAO 2001, quoting Bennett and Jayes’ Trusting the Team at the Reading Construction Forum 1998



RESOLUTIONclient through rigorous implementation of lean production

techniques. Many bodies have subscribed to the Egan agenda.

8.5 Dispute - The way forward

The dissertation as a whole has examined, with some optimism, at

the future how current trends can assist in preventing, managing

and resolving construction disputes. Having identified dispute

in construction projects, a more nuanced approach be adopted in

order to promote changes in culture which are adversarial in

nature. By this procedure, a step forward would have been taken

to answer the searchable question “Is there real hope in the future for a

general reduction in construction disputes”?

The End



RESOLUTION

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RESOLUTION

9.2 Articles

Clark, B. and Dawson, C. 2006 – Scottish Commercial Litigators,Published in the Journal of the Law Society of Scotland inSeptember 2006

Gould, N. (2004) Dispute Resolution in the Construction Industry:

An Overview

Fenn, P and Gould, N. (1994) Dispute Resolution in the UKconstruction Industry, DART Conference, Lexington, Kentucky, USA,16 – 19 0ctober

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Lavers, A. and Brooker, P. (1997) Contractors Negative Attitudesare hindering the Development of ADR, paper delivered to Arbixclub, Kings College London

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9.3 Reports

Civil Procedure Rules – Woolf Reforms

CEDR Commercial Mediations: CEDR Statistics, 2007



RESOLUTIONLord Coulsfield report, November, 2005 - The Scottish ConsumerCouncil Justice Advisory Group. – The Civil Justice System inScotland – A Case for Review

Modern Laws for a Modern Scotland- A Report on Civil Justice in

Scotland- February -2009

Modern laws for a modern Scotland: A report on civil justice inScotland, 2007

Official Report on Scottish Parliament Debate on ADR -1 November

2007

Paths to Justice! – Essays Prompted by the Gill Review- Scottish

Legal Action Group 2007

Report of the Scottish Civil Review – October 2009Scottish Civil Courts Review - A Consultation Paper – November2007, and Responses to the Consultation Paper:

TCC Pre Action Protocol (2000) – The Pre –Action Protocol forConstruction and Engineering Disputes

The Civil Justice System Scotland – A case for Review- Finalreport by The Civil Justice System in Scotland – A Case for Review! FinalReports by Scottish Consumer Council Civil Justice Advisory Group– November 2005

Third mediation audit report of November 2007

9.4 Others



RESOLUTIONCourse Note – Dispute Resolution, Glasgow Graduate School of Law,2010

Course Note – Context of Construction Industry, Glasgow GraduateSchool of Law, 2010

Genesis chapter 11 v 1-8 The New International Version of the

Holy Bible

9.5 Websites

www.aci.adr.com

www.brewerconsulting.co.uk

www.cedr.co.uk

www.coremediation.com

www.fernwick-elliot.co.uk

www.leanconstructionjournal.org

www.lib.strath.ac.uk

www.scotscourt.gov.uk/civilcourtsreview

www.scottish.gov.uk

www.scottishlawreports.org.uk

www.scotscourts.gov.uk/civilcourtsreview


http://www.scotscourts.gov.uk/civilcourtsreview

http://www.scottishlawreports.org.uk/

http://www.scottish.gov.uk/

http://www.scotscourt.gov.uk/civilcourtsreview

http://www.lib.strath.ac.uk/

http://www.leanconstructionjournal.org/

http://www.fernwick-elliot.co.uk/

http://www.coremediation.com/

http://www.cedr.co.uk/

http://www.brewerconsulting.co.uk/

http://www.aci.adr.com/


RESOLUTIONwww.modernghana.com

www.publications.parliament.co.uk

www.tonybingham.co.uk

www.wlv.ac.uk

9.6 Cases

BT V James Thompson & son Ltd, [1999]

Copthorne Hotel (New Castle) Ltd – v- Arup Associates and Others[1997]CILL1318/2997

58 ConLR 138/1997 85 BLR 22

Cowlin Construction Ltd v CFW Architects [2003] B.L.R. 241

Earl of Malmesbury v Strutt & Paraker, [2008]

Edmund Nuttal Ltd v RG Carter Ltd [2002] EHWC 400 (TCC)

Fastrack Contractors Ltd v Morrison Construction Ltd [2002] B.L.R. 168; 75 Con. L.R. 33

Hasley v Milton Keynes NHS Trust [2004]


http://www.wlv.ac.uk/

http://www.tonybingham.co.uk/

http://www.publications.parliament.co.uk/

http://www.modernghana.com/


RESOLUTIONSusan Dunnet v Railtrack [2002]

Wethered Estate Lt v Michael Davis [2005]

10 Appendices

Appendix 1: (Figure 1)

Parties who have been in dispute with each other over three time periods (provided by the Adjudication Reporting Centre, Glasgow Caledonian University).



RESOLUTION

Source: Kennedy, P. and Milligan, J. 2007


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

to Feb 2000 to Oct 2001 to July 2004Parties in dispute

M ain Contractor & Dom esticSub-contractor

Client & M ain Contractor

Client & Nom inated Sub-contractorSub-contractor & Sub sub-contractor

Client & consultant

M ain Contractor & Nom inatedSub-contractor

Consultant & Contractor

Trade Contractor & Em ployer

M anagem ent Contractor &Package Contractor


RESOLUTION

0

Appendix 2 Sources of Construction Disputes in the ScottishConstruction Industry (Figure 2)

Local Authority/Planning4%

Sub Contractor13%Others1%Civil/

Structural Engineer

6%Quantity Surveyor

2%

Client15%

Contractor29%

Extra Contractural

1%

Architect23%

Supplier6%

Sources of Construction Dispute

Source: Langford, Kennedy and Conlin, 1996



RESOLUTION

Appendix 3 (Figure 3) The Dispute Pyramid

Litigation

Third Party Alternatives

Lawyers

Success of Claim

Claim Accepted

Compromise

Claim Rejected

Claim

Grievance

Perceived Injurious



RESOLUTIONExperience

All Events /Transaction

Source: Sarat, A. 1985, Gould, N. 2004

Appendix 4 (Figure 4)



RESOLUTION

Administrative Managerial/Material/

Workmanship/Quality

Negligence Schedule Performance Payment & Budget0%

5%

10%

15%

20%

25%

30%

35%

40%

28%

34%

3%

14%

5%

16%

Causes of Disputes in the Scottish Construction Industry

Causes of Dispute

Percentages




RESOLUTIONAppendix 5 (Figure 5)

Payment and Budget Causes of Dispute in the Scottish ConstructionIndustry

Additional Work

Basis of Fees

Non - Return of Retention Money

Extention of Time Cost & Expenses Claimed by

Contractor

Non Payment of balance of interim payment to sub

contractor

Variation Claim by Contractor

0% 5% 10% 15% 20% 25%

5%

10%

4%

6%

14%

5%

8%

5%

14%

9%

20%

Payment & Budget Causes

Payment & Budget Causes

% Causation Agent leading to dispute in the Scottish Construction Industry

Langford, Kennedy and Conlin, 1996



RESOLUTION


Breakdown of Quality Issues resulting into disputes in theScottish Construction Industry

0%2%4%6%8%

10%12%14%16%18%20%

4%5%

18%

11%

15%

2%

11%

14%

2%

16%

Quality Issues

Percentage of Quality Issues causing Dispute




RESOLUTION


Administrative Causes of Dispute in the Construction Industry

Extra Contractual third party coordination

15%Sub-contractor non adherence to administrative

procedure8%

Design team's non adherence to administrative

procedure8%

Lack of Working information from

design team2%

Lack of information from design team/client

24%

Contractors non adherence to administrative

procedure25%

Poor feed back from contractors

18%

Administrative Causes



The Client(KBA&S Ltd)

‘(Trade Contractor)

(Trade Contractor)

Abeiku Ltd (Trade

Contractor)

Other members of KBAS’s professional team

Ankoben Ltd(Construction Manager)


RESOLUTION


Contractual relations in the project




RESOLUTION

Solicitors82%

Commercial

Attorney6%

Advocates5%

Solicitors/Advocates4%

QC3%

Trained Mediators Professional Designation

Source: Agapoui and Clark, 2010




RESOLUTION

Received Training during

Degree or Diploma

Accredited Mediator

Attended External Training courses

Received Training In- house

No Training0%

5%

10%

15%

20%

25%

30%

Respondents Training in Mediation

Source: Agapoui and Clark 2010



RESOLUTION

Appendix 11 (Table 1)

Respondents decision to refuse a proposal for mediation from theopposing party in disputeFactors to consider to refuse a proposal for mediation from the opposing party in dispute

Always Relevant

OftenRelevant

Sometimes Relevant

RarelyRelevant

NeverRelevant

Total0%

Client did not want to use mediation

831%

727%

935%

28%

00%

26100%

Belief in the strength of the clients case

14%

519%

1350%

519%

28%

26100%

Belief that the opposingparty would not take part in good faith

519%

623%

935%

415%

28%

26100%

Case type not appropriate for mediation

312%

831%

935%

415%

28%

26100%

Belief that negotiation was capable of settling the case

28%

623%

1246%

519%

14%

26100%

Belief that recovery of documents was essential before reaching settlement

14%

14%

1039%

1039%

415%

26100%


Appendix12 (Table 2) Response of Element of Mediation Process.Element of the mediation process

Always satisfied

Often Satisfied

SometimesSatisfied

Rarely Satisfied

Never Satisfied

Total0%



RESOLUTIONThe speed 10

33.3%1343.3%

723.3%

00%

00%

30100%

The Cost of Mediation 826.6%

1343.3%

620%

310%

00%

30100%

The Mediator 516.6%

1446.6%

1033.3%

13.3%

00%

30100%

Outcome of Mediation 413.3%

1963.3%

723.3%

00%

00%

30100%


Appendix 13 (Table 3)Respondents Attitudes to MediationAttitudes Strong

ly Agree

SomewhatAgree

SomewhatAgree

Strongly disagree

Don’tKnow

Total%

If a lawyer participated in mediation his/her status among colleagues would suffer

00%

12%

1122%

3774%

12%

50100%

Mediation is detrimental to the development of law

36%

1938%

1326%

1224%

36%

50100%

Mediation is inappropriate where there is a power imbalance between parties

12%

816%

2754%

1326%

12%

50100%

Judges should refer more cases to mediation

24%

2652%

510%

1224%

510%

50100%



RESOLUTIONMaking a mediation mandatory first step would be a positive development

24%

2040%

714%

1632%

510%

50100%

Legal Practitioners make the best mediators

12%

1632%

2142%

12%

1122%

50100%

Litigation is generally well adaptedto the needs and practices of the construction community

24%

1632%

2346%

918%

00%

50100%

Arbitration is generally well adaptedto the needs and practices of the construction community

12%

816%

2346%

1734%

12%

50100%

Adjudication is generally well adaptedto the needs and practices of the construction community

1224%

3060%

714%

12%

00%

50100%

Default to adjudication in many construction disputes renders mediation obsolete

00%

1734%

1734%

1428%

24%

50100%

Mediation suffers froma lack of coercive power

12%

1224%

2040%

1428%

36%

50100%

Mediation is an opportunity for lawyers to offer further services to their clients

1122%

3366%

24%

24%

24%

50100%

Lawyers will lose money if mediation grows

00%

36%

2346%

1632%

816%

50100%

Suggesting mediation to an opponent is a sign of weakness

00%

12%

2040%

2652%

36%

50100%

Construction contracts 6 25 9 5 5 50



RESOLUTIONshould contain a mediation clause

12% 50% 18% 10% 10% 100%

A barrier to mediation’s development in Scotland is its negative perception among clients

24%

1734%

1530%

48%

1224%

50100%

A barrier to mediation’s development in Scotland is its negative perception among lawyers

12%

1224%

2652%

510%

612%

50100%


Appendix 14

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Documents

DISPUTES IN CONSTRUCTION PROJECT