Dispute resolution clauses in Appointment Documents
After often painstaking negotiations between Client and Architect on appointments, the most successful projects will be those where the completed contract is filed away and never referred to. Nevertheless, a properly worded dispute resolution clause may give the parties the best chance of arriving at a sensible resolution, if problems arise.
Ultimately, a dispute resolution forum will generally be either the Courts or arbitration. Arbitration will have certain “start-up” costs which litigation will not, for example the Arbitrator’s fee and the hire of the venue of any hearing. Nor is Arbitration markedly less formal than the legal process because it will be subject to the Arbitration Acts and the rules of the High Court which Arbitrators will be nervous about departing from. The reforms in the Civil Procedure Rules, in contrast, have encouraged Judges to play a greater role in managing cases in order to speed up the legal process.
Parties to a dispute, therefore, may feel that their interests are better served by agreeing that the courts should have ultimate jurisdiction, particularly given the Pre-Action Protocols which are likely to apply to construction disputes. However, before matters reach the Court/Arbitration stage, there are a number of processes that could be built into the appointment contract in an effort to short circuit the expensive dispute process.
Firstly, it would be sensible for there to be a clause requiring any identified dispute to be submitted for good faith discussions, either between personnel involved in the project who are best informed about the relevant facts or between senior representatives of each side who have no personal position to defend. Whilst both options could be attempted sequentially, it is probably better to opt for discussions at a senior level where stances are less likely to have become entrenched. It would then be up to each side to make sure that those senior representatives are properly briefed.
Should such discussions fail, the next stage is generally mediation. This is a non-binding process before an impartial third party who can pass messages between the warring parties and try to navigate a path to a resolution. It is a consensual process which the parties are free to leave at any point if they are not happy. Its success therefore will depend upon the manner in which it is approached by each side. It might be felt that if the parties are prepared to consider exploring a compromise, they will do so anyway and a compulsory provision is unnecessary. However, a specific mediation clause is a good discipline. In the hands of the right mediator, a solution which the parties could not themselves have envisaged may be worked out, and a third party, carrying messages to and fro removes the worry of losing face before an opponent. If each side, in a monetary dispute, confidentially provides the mediator with their true bottom line figure, the mediator will be able to assess what truly separates the parties and possibly achieve settlement.
Once a solution is arrived at in a mediation, the parties would be well advised to commit the settlement to writing immediately to avoid anyone changing their mind.
A further pre- litigation option could be for the matter to be referred to an independent expert for determination. The parties could agree the expert’s terms of reference and the matters to be determined. This process is likely to be considerably quicker and cheaper than either arbitration or litigation, provided the expert is properly briefed and has the right qualifications.
Best of all, though, is to keep the contract firmly in the safe and avoid arguments!
A version of this article has also featured in Architects Journal.
For more information, please contact Mark Klimt, Partner, on 020 7280 8802
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.