Articles

This piece is a discussion  of good practice approaches to building dispute resolution and construction dispute resolution. It is an interview with a construction lawyer that has practised building and construction law since the late eighties.

Interviewer:  Tsigereda Lovegrove, Law Graduate,  Lovegrove & Cotton – Construction & Planning Lawyers

Interviewee: Professor Kim Lovegrove MSE RML, Senior Lawyer and Consultant at Lovegrove & Cotton – Construction & Planning Lawyers

Kim, you have practiced construction law for more than 30 years. In this interview I am going to try to extrapolate some of your key take-outs.

In your experience what are the main Building Dispute Drivers?

Building disputes are typically characterised by one or more of the following elements: –

• Alleged defects;
• Late payment, partial payment or non – payment;
• Time delays;
• Delay damages, liquidated or general;
• Negligent contract administration;
• Design negligence;
• Compromised building approval outcomes;
• Contractual breaches; and
• Wrongful contractual suspension or termination.

Who are the parties that typically are involved in a building dispute?

• Contractors;
• Subcontractors;
• Designers such as architects and draftspersons;
• Property owners and developers; and
• Statutory authorities and building officials such as building surveyors.

When would a building dispute be characterised as a building dispute?

• When there are irreconcilable differences;
• When parties cannot achieve a convergent outcome; and
• When there is a breach of contract.

Once a building dispute crystallises what to do?

Appoint a construction lawyer, who will be briefed to:-

• Take instructions;
• Get on top of the facts;
• Familiarise themselves with material documentation;
• Advise on the case merits or lack of, preferably by way of written advice;
• Appoint an expert witness building consultant; and
• Advise the other side that he or she is on record.

How do you find a good construction lawyer?

• Referral is often the best way but regardless due diligence is required to find an expert, i.e. a lawyer who practices either exclusively in the area or substantially;
• Preferably the lawyer will have many years of experience in the resolution of building disputes;
• There are specialist boutique law firms that practice exclusively in construction law and there are construction law divisions in most first and second tier law firms;
• Absent there being a relationship with a construction lawyer then carry out thorough due diligence to find a  construction law expert.

What are good practice initial dispute resolution steps?

• Once the construction lawyer is on top of the facts said lawyer will typically make contact with the other-side by way of a letter of reply or letter of demand.
• Some clients initially want their advocate to be very adversarial, to be tough with  the opponent but cantankerousness can destroy negotiation bridges.
• There is a lot to be said for the adoption of a tempered and measured approach to communications with letter content. Belligerence and aggression have their limitations. Just because one is an adversary does not mean that one is an enemy.
• Furthermore, cases are by and large won on the basis of the strength of the case and the competency associated with the articulation and the prosecution of those strengths.
• At the geneses of a dispute, the respondent will either be open to negotiations or will want to litigate the matter, you will be able to figure this out pretty quickly.  Obviously an early negotiated outcome is the most cost effective way of resolving a dispute, but this is not common. That which is more common is for the matter to find its way into the adversarial  dispute resolution theatre, be it a court, tribunal or an arbitration. I use the term dispute resolution theatre or DRT as an all – encompassing dispute resolution construct.

Front end negotiated outcome

Ideally both parties will be represented by capable construction lawyers intent on achieving a convergent outcome. It is critical that there is a preparedness on the part of all advocates to listen to the opposing perspective, to be open to the possibility that a given case may be attended by certain limitations which creates the potential for compromise and concession.

If either of the parties are intransigent or stubborn in their desire to meet half way then little time should be devoted to negotiations that lack bona-fides and the negotiations should be concluded with alacrity. Reason being fruitless negotiations can waste a lot of time and more importantly cost the client a lot of money and clients don’t like money to be spent when matters are not being progressed or pushed a long.

If the matter settles carefully drafted terms of settlement should be signed by both parties and the terms of settlement need to be comprehensive in covering of all bases that are germane to the dispute

Explain in brief the construction Litigation process?

The typical interlocutory critical path  proceeds along the following lines:-

• a statement of claim is filed;
• the Dispute Resolution Theatre (‘DRT’) will convene a directions hearing where the DRT will hand down a set of interlocutory steps and deadlines for the parties to follow. Typical orders will be as follows:-
• statement of defence and counterclaim if any;
• reply to defence and counterclaim;
• the joining of any third parties or co-defendants;
• where additional parties are joined there will typically be an additional hearing to afford the joined parties the ability to plead their cases;
• an order for discovery of documents that are relevant to the proceedings;
• a date by which the parties must have concluded an inspection of the other side`s discoverable material;
• the filing of expert reports to ensure that building consultants that are retained and are afforded the opportunity to file the evidence that they are intent on relying upon; and
• once the initial interlocutory steps have been complied with in many jurisdictions a further directions hearing will be convened to organise a date for the matter to go to mediation.

What are your thoughts on the Choice of expert witness(es)?

It is critical that capable expert witnesses are retained to:-

• Identify defects;
• Diagnose the cause;
• Work out the rectification methodology;
• And the cost of rectification;
• It is paramount that the expert has skills that are bespoke to the case, has appeared and given evidence before a DRT and possesses the ability to be candid and forthright about the technical merits or lack of, of the case; and
• It is very important that the expert is resilient and not disposed to any exaggeration of the technical merits or lack of the claim.  This means that the expert will be assertive in not necessarily tell the client what the client wants to hear, rather the expert will convey an unsentimental and un-bias opinion.

Years ago early in career an expert provided a report to the interviewee that had a very best case scenario characterisation. During negotiations it became evident that the rectification estimates lacked credibility. When the interviewee called the expert to account in private caucus and queried the calculations, the expert confessed that the client had pressured him into embellishing claim value. The interviewee then impressed upon the expert the dangers of coercion, a more realistic adjustment was made and the matter settled.

Please explain the Mediation process?

Most DRTs in this millennium compel the parties to mediate before a matter goes to hearing.

Best practice DRTs ensure that mediation occurs at an early stage of judicial proceedings in order to provide the parties with the opportunity to settle their disputes and differences without having to spend large sums of money on adversarial dispute resolution.

The mediation process typically runs along the following lines:-

• An independent mediator is appointed to preside over the mediation.
• The parties prior to the mediation will furnish a position paper, an articulation of the matters in dispute and the relief sought.
• In the main the parties will be legally represented, sometimes expert witnesses will attend.
• The parties to the dispute will attend and will have the authority to settle.
• The plaintiff will ordinarily put their position first and it is always best for the opponent to listen, absent interruption.
• The respondent or joined parties will then be afforded the opportunity to have a right of reply.
• Once the positions are aired the mediator gives the parties the opportunity to privately caucus with the mediator.
• The mediator sometimes reconvenes the mediation to enable further dialogue but often elects to be a messenger of positions  in an attempt to facilitate a convergent position.
• As the mediator cannot force an outcome the destiny and control over whether the matter settles is exclusively the domain of the mediator.
• Mediations tend to take a full day and if at the end of that day a settlement is engineered, it will be written up and signed. Great care must be deployed with respect to the wording of the terms of settlement and the devil will often be in the detail.
• Poorly or rushed terms of settlement have a tendency to come undone and the dispute can flair up again.

What are some of the skills that make for best practice mediation negotiation?

• Being thoroughly prepared.
• Being bold and confident but not arrogant.
• Good manners and a preparedness to listen and not interrupt.
• Patience and unflappability as mediations can start in the morning and go well into the night.
• An eye for detail because when the terms of settlement are written up as great care must be applied to content and wording.

What happens if the mediation does not settle?

• A directions hearing will be convened and the matter will be set down for trial

Why is this a paradigm shift?

• A failure to settle a case at mediations suggests that the parties are becoming intransigent
• The closer a matter gets to trial the greater the costs of dispute resolution will be.
• Shakespeare’s MacBeth comes to mind ‘I am in blood stepped in so far returning were as tedious as go’er. This famous quote has become a metaphor for the notion that there is often a tipping point where the parties have become so invested in the battle or a course of action that it is very hard to untangle or deaccelerate. Law cases can become juggernauts, if you will where it is hard to turn back or change direction once negotiation and mediation circuit breaker mechanisms have been exhausted.
• Of course cases can be settled post mediation and before or during trial and prudence will often dictates this occurs.

What is to be expected at trial?

• Building dispute trials tend to be lengthy and very costly.
• Specialist barristers will assume the prime advocacy roll, typically there will be an instructing solicitor and in the high dollar value cases there may be a queens counsel and junior barristers.
• Typically the claimant opens.
• The defence replies and articulates the defence and basis of any counterclaim.
• Often the claimant will be given a right of reply.
• Evidence is led by both sides.
• Adversaries are at liberty to cross examine witness.
• Expert witness will be wielded in and their expert diagnostic testimony often determines who wins.
• At the end of the trial each party will often be given the opportunity to provide closing statements.
• Sometimes supplementary written submissions are sought by the decision maker.
• As a rule of thumb, the higher the dollar value, the greater number of contested items the longer the trial.
• The greater number of joined parties will also impact upon trial length and cost.
• Unlike mediation where the parties have control over their dispute resolution destiny such control is ceded to the DRT decision maker.
• Once the trial concludes it generally takes quite a while for a written judgement to be handed down.

The Decision?

• There will typically be a winner and a loser but depending on the jurisdiction the victor does is not always awarded costs and where costs are awarded full indemnity or full cost recovery is rare.

What are your concluding take outs?

Negotiated outcomes are prudent because if a matter goes to trial there will be a winner and a loser. The loser will have to fathom why they lost and the client will be very determined in the finding out of the why. This is particularly the case in post mortem discussions with the legal team because it`s very much a case of to the victor the spoils and losses in a court of law can be devastating. It thus follows that if one is hell bent on going to trial the legal team must be supremely confident in the success aspiration.

Allied to this should be a preparedness to settle at any stage and this is enhanced if adversaries maintain a civil relationship. Furthermore building law is a very, very complex and labyrinthine area of the law. It is an amalgam of very intrusive statute law, tort, contract law which in turn requires the deployment of a very high level of expertise. It is not really suited to general practice as in many jurisdiction the law changes quickly, so its not for the dabbler.

This article is written for general information only and is not to be construed as a legal advice.

Lovegrove & Cotton Lawyers to the Building Industry

For thirty years, Lovegrove & Cotton have represented builders, building surveyors and building practitioners in Melbourne, Canberra, Sydney and Queensland.  Doyles Guide has ranked Kim Lovegrove as one of the leading construction lawyers in Australia. Justin Cotton, likewise, is a leading Australian construction lawyer and widely respected in the building fraternity. Lovegrove & Cotton can help practitioners resolve any type of building dispute and are preeminent in the area of building practitioner advocacy.  If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.