Construction Contracts and its Relation with Alternative Dispute Resolution - Case Study Example

Construction Contracts and its relation with Alternative Dispute Resolution Executive Summary This essay will deal with the question: What advice would you give to the Chartered Building Surveyor in the case of Burchell v. Bullard The essay will present relevant provisions of the Housing Grants, Construction and Regeneration Act of 1996, the Pre-Action Protocol for Construction and Engineering Disputes, The Woolf Report, as well as information about litigation, arbitration and Alternative Dispute Resolution or ADR and the costs involved. In advising the Construction Building Surveyor to agree with the mediation proceedings, the essay will point out the relevant circumstances which lead to the aforementioned advice. Introduction In every cultured and enlightened society, there are set of laws, rules and regulations which govern every aspect of human and juridical relationship with one another. These set of laws preside over the operation of government and safeguards the rights of individuals. As such, it is the very system of a well organised society. This essay will examine the importance of Alternative Dispute Resolution in resolving and expediting cases between and among the parties. In order to shed light to this, the case of Burchell v. Mr. and Mrs. Bullard will be used along with relevant provisions of the Housing Grants, Construction and Regeneration Act of 1996, The Woolf Report, Pre-Action Protocol for the Construction and Engineering Disputes and other current and relevant materials to Alternative Dispute Resolution and Construction Contract Law. Among the difficulties encountered in forming this paper was that due to the relatively new case of Burchell, materials used for this paper are limited to current case laws and articles which relates to the case. Summary of the Case of Burchell v. Mr. and Mrs. Bullard In the instant case, Mr Burchell, the claimant, had agreed to build two large extensions to the home of Mr and Mrs Bullard, the defendants, for which he was to be paid in four stages, as stated in their agreement. The Spouses Bullard refused to make the third stage payment, amounting to 13,540.99 and find fault about the work that had been done. The claimant's solicitors initially wrote to the defendants suggesting that the matter be referred for an Alternative Dispute Resolution through "a qualified construction mediator". Subsequently, this approach was discarded by the defendant's surveyor on the grounds that the matters complained of are technically complex, and as such mediation is inappropriate to settle the issue in the case. The claimant claimed 18,318.45. The defendants responded by counterclaiming 100,815.34 and further damages which were then not fully particularised. The claimant then brought a Part 20 claim against a sub-contractor in relation to the roofing works. There were no payments into Court and no Part 36 Offers made. At first instance the Court rendered judgment in favour of the claimant on his claim and awarded him 18,327.04 but likewise gave judgment in favour of the defendants on the counterclaim in the amount of 14,373.15. The result was that the defendants had to pay the claimant the difference, which with interest and VAT came to only 5,025.63. The claimant was awarded 79.50 on his counterclaim against the sub-contractor. The defendants were ordered to pay the claimant's costs of the claim and in turn, the claimant was ordered to pay the defendant's costs of the counterclaim. The claimant was also ordered to pay the Part 20 defendant's costs on the basis that the Part 20 defendant had only had 79.50 awarded against him and had made offers to settle from the beginning. The claimant appealed the costs award and made a further proposal for mediation, requesting the defendants to submit to the Court of Appeal scheme. The defendants, thereafter responded in the negative stating that they did not consider that this would be either "necessary or appropriate". In determining whether the circumstances of the case justified a departure from the general rule that costs follow the event, the Court of Appeal held that whilst there had been faults on both sides the defendants had conducted the litigation more unreasonably than the claimant; Furthermore, the Court of Appeals ruled that the defendants had certainly exaggerated the extent of their counterclaim and had also unreasonably refused to mediate. Discussion on Contracts In shaping the rights and obligations of the parties, it is necessary to examine the validity of the contract entered into by the contracting parties. A contract is a promise or an agreement between the parties wherein one party binds himself, with respect to the others either by giving something or rendering some services or an imposition of a duty not to do something. Failure to comply with the terms of the contract is a breach thereof. As such, it is recognized by law and legal remedies can be availed of. A breach of contract allows the party to bring an action for damages in a court of law or arbitration. The contract between Mr. Burchell and the Spouses Bullard, particularly how it came to an end is an important factor in the assessment of the case. Generally, contracts are obligatory among the parties thereto. A contract, once perfected, the parties are bound to its fulfilment and its consequences. The contract has the force of law between the parties and they are obligated to comply with it in good faith. The aforementioned contract is classified as a construction contract. The Housing Grants, Construction and Regeneration Act of 1996 The Housing Grants, Construction and Regeneration Act of 1996, defines construction contract as an agreement with a person for any of the following: the carrying out of construction operations; arranging for the carrying out of construction operations by others, whether under sub-contract to him or otherwise; providing his own labour or the labour of others; for the carrying out of construction operations. It likewise include an agreement to do architectural, design or surveying work or to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape. This being the circumstance, the party in any construction contract is entitled to the rights and remedies as provided for in the Housing Grants, Construction and Regeneration Act of 1996, so as to safeguard his or their rights. Among the rights accorded by the Housing Grants, Construction and Regeneration Act of 1996, is the right to refer disputes to adjudication. The Housing Grants, Construction and Regeneration Act of 1996 lay down the procedure for the adjudication of an assailed contract. It clearly manifests that the dispute can be determined either by legal proceedings, by arbitration or by any agreement among the parties. The said provisions give the right to either party to facilitate the adjudicator to take the initiative in ascertaining the facts of the law which may be relevant to the case. In that order, the adjudicator's decision is binding until it is finally determined by litigation, arbitration or agreement, and by itself, expedites the proceeding in the settlement of the dispute. Pre-Action Protocol for Construction and Engineering Disputes One more significant rule which will be of help in the enforcement of the contracting parties in case of breach of a construction contract is the Pre-Action Protocol for Construction and Engineering Disputes. The Pre-Action Protocol encourages the exchange of early and full information about the forthcoming legal claims; it likewise enables the parties to avoid litigation by agreeing a settlement of the claim before the commencement of the proceedings; and to support the efficient management of proceedings where litigation cannot be avoided. As such, the Pre-Action Protocol for Construction and Engineering Disputes is a rational procedure to pre-action conduct. Correspondingly the Pre-action Meeting is sympathetic to the parties, for the reasons that they can identify the cause or causes of disagreement for each issue and it likewise enables them to consider the possibility of resolving the case with out litigation and if litigation becomes unavoidable, the pre-action meeting ensures what steps have to be taken in compliance with the Civil Practice Rule. The Pre-action Protocol likewise endeavours to resolve the dispute, despite the parties' incompetent agreement on the methods of resolving the dispute other than by litigation. The Pre-Action Protocol persuades the parties to agree on expert evidence, the extent of disclosure of documents with a view of the reduction of costs and the conduct of litigation with the aim of minimising cost and delay. Dispute Resolutions In cases of contravention of the provisions of a contract, the law and the rules afford the parties to assert their respective rights. In the same light, these laws and rules make available set of methods to resolve disputes. In line with this, the subsequent paragraphs will discuss about the characteristics of these disputes resolutions, as well as the costs related to each. Litigation is the conventional type of a dispute resolution. It involves court proceedings. The parties in the litigation seek the resolution of a legal contest by judicial process. By its character, court proceedings are formal and it centres on legal rights and wrongs. The procedure therein is fairly rigid. Recent developments call for a pre-action protocol before the court proceedings. This promotes the active management of cases, as well as the exchange of information along with the documents so as to facilitate a settlement among the parties before the case reaches the court. The outcome of the aforementioned instance with respect to costs is that costs are now considered as front loaded and weighty costs will be incurred at the start of the successful party; it is improbable that more than 50% of the total costs will be recoverable. Similarly, the successful party is likely to have substantial legal costs if a dispute does not settle before trial. Arbitration on the other hand, is a process of resolving a dispute or a grievance outside the court system by presenting the dispute to an impartial third party or panel for a decision that may or may not be binding. Arbitration proceedings are similar to court proceedings, but it is more flexible and less formal than litigation. It is usually held in private and is capable of either following the procedures to be decided by the arbitrator in agreement with the parties or they can follow the rules of certain administrative body as the case may be. The parties on the other hand can agree in contract or in writing to refer disputes to arbitration for a binding decision. Amongst the advantages of Arbitration is the parties' ability to choose the arbitrator. As such, the appointment of the arbitrator with the necessary and relevant background and technical expertise ensured. Another advantage is that an arbitration process is a consensual and confidential process. With regards to the costs, Arbitration can comprise as much expense as litigation costs are concerned, since the arbitrator's fees as well as the facilities needed for the process have to be paid in addition to the legal costs. Alternative Dispute Resolution or ADR take account of numerous methods of dispute resolution. It is the collective term for the ways which the parties can settle civil disputes with the help of an independent third party and without the need for a formal Court hearing. ("Alternative Dispute Resolution," n.d.) Mediation is the most common form of Alternative Dispute Resolution. It involves a neutral, independent mediator appointed by the parties to make possible discussion in order to accomplish the settlement of the dispute. One of the essential features of mediation is tits process. It depends on the good faith of each parties and eagerness to settle. The parties talk about and examine the issues and the mediator help out the parties in the accomplishment of an agreement that all the parties find acceptable. Woolf Report The Woolf Report provides for the review and recommendation of the Civil Justice System. The report imparts intuitive perspective on the access to justice and the reduction of the cost of litigation amongst others. The Woolf Report provides that to ensure access to justice, the Civil Justice System should be It should be just in the results it delivers, It should be fair and be seen to be so by: ensuring that litigants have an equal opportunity, regardless of their resources, to assert or defend their legal rights; providing every litigant with an adequate opportunity to state his own case and answer his opponent's; treating like cases alike. Similarly, the Procedures and cost should be proportionate to the nature of the issues involved. It should deal with cases with reasonable speed., it should be understandable to those who use it, it should be responsive to the needs of those who use it. Likewise, it should provide as much certainty as the nature of particular cases allows and it should be effective: adequately resourced and organised so as to give effect to the previous principles. (Woolf, n.d.) In this light, Lord Woolf futher recommended that there should be "new ehtos of co-operation on the part of the litigants and their legal reperesentatives before proceedings are begun. (Woolf, n.d.) Correspondingly, the report encourages the reasonable and ahead of schedule settlement of the proceedings. Furthermore, it emphasizes the resolution rather than trial as stated in his recommendation on offers to wit: The present practice of making payments into court should be replaced by a system which permits the parties to make an offer of settlement. Offers to settle can be made by a plaintiff as well as a defendant. Offers to settle can relate to individual issues. Offers to settle can be made before the commencement of proceedings. Offers to settle can result in substantially enhanced costs and interest being payable. The extent of entitlement to costs and interest in respect of an offer should be in the court's discretion and should depend on the extent of disclosure by the parties. (Woolf, n.d.) Conclusion I will advise the Chartered Buidling Surveyor that he should agree to take the dispute to a qualified construction mediator so as to exhaust all the probalbe remedies provided for by laws and the rules, and correspondingly, settle the dispute without the rigid of a court litigation. In giving an advice to the Chartered Buidling Surveyor, it is necessary to made the Surveyor understand the four Halsey Factors namely: the nature of the case, the merits of the case, the cost of mediating and the prospects of success. ("The Costs of Alternative Dispute Resolution," n.d.) The aforementioned factors should be considered for the reason that if taken all together will defintely expedite the proceedings and the chacnes for mediation will be increased the costs will not be as exhorbitant. This is necessary in order that the Chartered Buidling Surveyor can fully assess and consider their options of having the case in an ADR method. In line with this, it is important to point out to the Chartered Buidling Surveyor that the nature of the dispute of the instant case was not among theose which the rules provides as not suitable for mediation. The dispute neither falls under the any of the following circumstances namely: where parties wish to determine issues of law or construction which may be essential to future trading relations; where a party wants to resolve a point of law and it is considered that a binding precedent would be useful; or where injunctive or other relief is essential to protect the position of the party.(Clark & Russell, 2005) Aside from the foregoing, I would advice the Chartered Building Surveyor about the provisions embodied in the Housing Grants, Construction and Regeneration Act of 1996. The Act likewise provides for the rights of the parties to adjudication which can be either be determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. For the Right to refer disputes for adjudication, as well as the methods to be used for the said adjudication is a right enshrined in the Housing Grants, Construction and Regeneration Act of 1996. It is also important to point out the insightful recommendations of Lord Woolf. This is because the Woolf Report reiterates his advocacy for the accessibility of justice and the speedy settlement of disputes other than litigation. The Report likewise mentioned the issue of disproportionate costs. It should be noted that at the outset of the conclusion, this representation states the need to assess the costs for the dispute. In line with this, the Woolf Report made mention of the problem of disproportionate cost which occurs throughout the system And what is noteworthy about this disproportionate costs is that often times this occurs with smaller cases where the costs of litigation, for one side alone, frequently equal or exceed the value of what is at issue. Consequently, it impossible for ordinary people to take or defend smaller cases unless they are legally aided, have insurance backing or believe they can be certain of winning their case and their costs. The Woolf Report thereafter recommends that Case management will facilitate and encourage earlier settlement through earlier identification and determination of issues and tighter timetables. Other measures to encourage settlement will include the introduction of plaintiffs' offers and a requirement to report on costs at key stages. (Woolf, n.d.) These recommendations proved to be feasible in attaining the immediate and prompt dispositon of cases which consequently is beneficial for the parties and the judicial system as well. References Alternative Dispute Resolution. Retrieved November 24, 2006, from http://www.dca.gov.hk/civil/adr/index.htm#1 Clark, L. & Russell C. (2005) Mediation and Costs-The Present Position. November 24, 2006, from http://www.pla.org.uk/documents/Dec05article.doc Dispute Resolution. November 24, 2006, from http://www.out-law.com/page-420 Housing Grants, Construction and Regeneration Act 1996. November 24, 2006, from http://www.opsi.gov.uk/ACTS/acts1996/1996053.htm Lord Woolf. Access to Justice. November 24, 2006, from http://dca.gov.uk/civil/interim/contents.htm Mr. N.F. Burchell v. Mr. and Mrs. Bullard and others (2005)EWCA Civ 358 Case No. B2/2004/1172 Pre-Action Protocol for the Construction and Engineering Disputes. November 28, 2006, from http://dca.gov.uk/civil/procrules_fin/contents/protocols/prot_ced The Cost of Alternative Dispute Resolution. November 24, 2006, from http//www.mccormicks-solicitors.com/article/get_pdf_datphpid-77 Read More