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Mediation in construction

1 Introduction
2 Types of mediation
3 Typical procedure
4 Adoption
5 Case study 1: Pre-litigation mediation
6 Case study 2: Post-pleadings mediation
7 Related articles on Designing Buildings
8 External references

[edit] Introduction

Mediation is a consensual process off dispute resolution in which a third party mediator, appointed by the parties to the dispute, assists in the negotiated resolution of the dispute.

Advantages:

It is an informal process.
It can be initiated at any time agreed between the parties.
It allows commercial relationships to be maintained during and after the dispute.
Parties can reach agreement incorporating flexible approach to outcomes.

Disadvantages:

If the parties do not agree, there is no outcome and the mediation has failed.
The mediator has no power to order the parties to do or to refrain from doing anything.
Information may be 'given away' in the process.
The process is non-binding.

[edit] Types of mediation

[edit] Facilitative mediation

Facilitative mediation involves a neutral third party (the mediator) whose primary role is to assist the parties in reaching a negotiated solution. As a facilitator, the mediator manages the negotiation process, helping the parties overcome deadlocks and encouraging them to think creatively about solutions.

They help the parties to focus on their underlying interests and concerns and move away from fixed positions that often obscure the real issues. They assist in identifying common ground and act as a reality tester, encouraging the parties to reflect realistically upon their position and the consequences of failing to reach a negotiated solution.

[edit] Evaluative mediation

The mediator learns the facts of the case and each party's position. They then express a view on the overall merits as they see them. Conciliation, may be considered as a form of evaluative mediation in so far as, if a settlement is not reached with the conciliator acting in facilitative mode, then they issue a 'recommendation' setting out how, in their opinion, the matter should be resolved.

[edit] Settlement mediation

Also known as 'compromise mediation', this process aims to arrive at an eventual compromise at a 'central point' between the parties' original positions. The mediator's role is to determine the parties' 'bottom line' and to use their influence to foster re-consideration of priorities until compromise is achieved.

[edit] Therapeutic/Transformative mediation

Therapeutic, or transformative, mediation focuses on the underlying causes of the parties' dispute with the final settlement being enhanced by an improved relationship. The mediator works to encourage the parties to vent their feelings and emotions in order to learn from one another, and hopefully repair their relationship as opposed to just arriving at a 'quick fix' compromise solution.

Primarily, this approach is taken in family/social disputes but can also be beneficial in a construction situation, as it offers a real resolution to the dispute where a continual healthy relationship between the parties is a priority (where there is a Joint Venture Agreement between them for instance).

[edit] Other techniques

The range of procedures provided by the Centre for Effective Dispute Resolution (CEDR), a leading mediation organisation, includes:

Assisted negotiation and independent chairing.
Coaching.
Early neutral evaluation.
Expert determination.
Independent intervention.
Independent investigation and review.

[edit] Typical procedure

Mediations have no rigid procedure but a typical one might proceed along the following lines:

The first step is for a mediator to be chosen, either by agreement between the parties, or by selection by an organisation such as CEDR or CIArb. A proposed mediator should not accept an appointment unless all parties have agreed to the appointment.

A date, time and venue for the mediation meeting will be fixed. Commonly the venue will comprise a large room capable of accommodating all the participants, which is used for joint sessions, and a separate room for each of the parties involved in the mediation.

At a set time (usually two to three weeks) before the date fixed for the mediation meeting, the parties simultaneously produce written statements, together with any documents which they wish the mediator to see, and serve these on the other party or parties and the mediator. There is commonly a limit on the length of the written submissions and the numbers of documents.

On the appointed day for the mediation meeting, the mediator will meet all the parties in an initial joint session at which each will present a brief oral summary of their case, possibly through their legal advisers. A limit on the time allowed for each party is common.

Each party will then retire to their separate rooms and the mediator will talk to each party in turn, either by visiting them in their separate rooms or by calling them into the main room. Such private meetings are known as 'caucuses' in the jargon of ADR practitioners. Everything that takes place in the caucuses is private and confidential and their purpose is to enable the mediator to establish his understanding of the possibilities for reaching agreement and the approach most likely to encourage settlement.

The mediator will then shuttle between the various parties as required in an effort to find a settlement to the dispute. Nothing disclosed to the mediator in confidence in the caucuses will be disclosed to any other party without the express permission of the party disclosing the information. Private meetings between the mediator and only some of the parties may take place.

Working with the parties, the mediator will examine the issues arising in the dispute. The mediator does not take sides but they may challenge a position being adopted by one or other party. The mediator may suggest looking at the dispute from a different angle. They may test out possible ways of resolving the dispute. In short, they will examine the dispute and work with the parties to find an acceptable solution.

During the various joint and private sessions, the mediator will be using the conventional negotiating techniques such as:

separating the people from the problem – being easy on the people and hard on the problem;
getting behind the position to find the interest;
encouraging a constructive problem-solving approach rather than dwelling on past quarrels and arguments.

The mediator may decide at any time to bring the parties together in joint session to report progress and seek mutually agreeable ways forward.

When and if the mediator reaches the position at which a settlement has been achieved, they will bring the parties together in joint session for a final time and will work with the parties to reduce the settlement to writing by means of a binding legal agreement and/or a consent order.

If no settlement can be reached at the meeting, but some progress has been made, it is still open to the parties to adjourn to another time and place. The evidence is that even when no settlement is reached at the meeting itself, the parties will often reach an agreement shortly afterwards as a consequence of the discussions and progress made at the meeting.

The process is voluntary, confidential, non-binding and without prejudice to the parties' legal positions. The fact that legal action is underway does not prevent mediation although the cost benefits of achieving settlement through mediation are obviously greater the earlier mediation is employed to resolve the dispute.

[edit] Adoption

Mediation is now very much a core procedure in construction contracts and, whilst it must of necessity remain consensual, the courts will enforce mediation clauses in contracts. The courts cannot insist that the parties reach an agreement, however they will order parties to engage in the mediation process if there is a contractual obligation and can stay legal proceedings pending mediation. An unreasonable refusal to mediate may prejudice the right of a successful litigant to an award of legal costs.

Mediation has strong public policy support from the UK Government, public authorities and the private sector.

[edit] Case study 1: Pre-litigation mediation

This dispute concerned an artificial sports pitch that was not performing as anticipated in that it flooded during heavy rain. Initially the argument was between the main contractor, subcontractor and consulting engineer; but, in all, six parties were affected by the dispute:

the local authority which originally commissioned the works;
an educational trust who inherited the pitch;
a main contractor;
a specialist subcontractor;
a consulting engineer;
a sports surfaces consultant.

Various tests and attempts at curing the problem had been undertaken, none of which were conclusive or resolved the problem. The cost of taking up and completely relaying the surface, including the sub-base and drainage, would have been in the order of £250,000.

At the instigation of counsel consulted by the local authority's in-house solicitor, mediation was suggested, as the prospect of six parties in dispute, some of whom had arbitration clauses in their contracts and some of whom did not, was extremely daunting.

All the parties agreed to refer the dispute to mediation and, unusually, the local authority agreed to pay all the mediator's fees. A mediator was agreed and he required written submissions and responses, each party being given the opportunity to respond to all the other parties' submissions. This took about eight weeks.

A mediation meeting was held about four weeks after close of written submissions and it lasted all day. All the parties represented themselves and the only lawyer present was the local authority's in-house solicitor. The mediator was an experienced civil engineer.

The mediation meeting followed the usual format, commencing with a joint session, at which each party made brief oral submissions followed by the mediator shuttling between the parties. The meeting concluded successfully in the late afternoon with a draft agreement having been reached which required formal approval by the local authority's elected members before it could be finalised, but which had the support of their solicitor who attended the meeting.

The settlement included the waiving of claims and fees by some of the parties and undertakings concerning the guaranteed life of the surface together with a contribution by the contractor/subcontractor towards additional maintenance of the pitch.

Formal approval was obtained about six weeks later and the settlement concluded.

Apart from the internal costs of the parties' own staff, the only external costs were those of the mediator, which were about £3,500.

[edit] Case study 2: Post-pleadings mediation

The dispute concerned an industrial building in the UK which had developed a defect about six months after practical completion. The main contractor for the work was a major UK contractor who had subcontracted – to a small, local specialist contractor – the work which was apparently the cause of the defect.

Several attempts to correct the defect were made without success and eventually the architect issued an instruction requiring the whole of the subcontractor's work to be taken out and re-executed strictly in accordance with the specification. Both the main contractor and the subcontractor were by this time convinced, that the problem lay with the design, and refused to carry out the instruction.

The building owner then employed a consultant architect to advise him about the problem and in due course employed another contractor to strip out and re-execute the defective work to what was, in effect, a different design.

The building owner then commenced proceedings in the High Court naming the architect as first defendant and the main contractor as second defendant. The basis of the building owner's claim was failure by the architect to design and supervise the works and alternatively failure by the main contractor to carry out the works in accordance with the specification.

The main contractor then issued third party proceedings against the subcontractor, but the subcontractor was successful in applying to the court for those proceedings to be stayed to arbitration, as there was an arbitration clause in the subcontract.

The situation was clearly very complex with the main contractor having the additional problem of having to fight both the litigation and the arbitration. Mediation was suggested by solicitors, for one of the parties at the stage in the proceedings when an eight-week hearing had been fixed in the High Court at a date about 10 months in the future. Pleadings had been exchanged in the main action and the commencement of discovery was the next major step to be taken.

A without prejudice meeting was then held between solicitors for all the parties, including that of the subcontractor. It was agreed to explore the possibility of attempting to resolve the matter by mediation and an exploratory meeting for the solicitors was arranged under the auspices of CEDR, following which, all four parties agreed to take part in a mediation.

CEDR proposed that the mediation tribunal should comprise both a mediator and a pupil mediator, and in due course suggested the names of two persons, both of whom had dual technical and legal qualifications. All four parties agreed to both the names suggested and a date for the mediation meeting was agreed.

Each party was allowed to submit a written statement of its case (plus whatever supporting documents it required to be appended) to CEDR not later than 14 days before the mediation meeting. These were then simultaneously circulated to all the other parties.

The mediation itself commenced at about 9.30 a.m. The mediator, pupil mediator and the parties with their respective solicitors and advisers first met in joint session. In all, 16 people were present. After a brief introduction to the proceedings by the mediator and the mutual introduction of all those present, each party was allowed 10 minutes to make a brief, oral presentation of its case, following which each party was given an opportunity to comment on the other parties' presentations. This phase took no longer than one hour.

Each party then retired to separate rooms and the mediator and his pupil commenced their meetings with each party in turn. The process was very protracted. There were three major matters to be resolved:

The building owner was clearly the 'innocent' party and had to be persuaded to accept a figure less than he had expended in remedying the defect. Arguments concerning some potential 'betterment' of the revised design and the irrecoverable legal costs of the litigation were no doubt advanced by the mediator.
The question as to whether the defect was due to a failure in design or workmanship and the risk to both the architect and the main contractor of the court finding against them. The mediator had the task of persuading both parties to make a contribution.
The split of any responsibility for defective work between main and subcontractor. In practice, this matter was resolved between the main and subcontractor without assistance from the mediator.

The mediators had at least three private sessions with each party and a greater number with the building owner and architect. Some of the private sessions were very long, lasting over one hour each. At no stage did the mediator overtly express his own opinion as to the merits of the respective parties' cases. He concentrated on the costs and risks of litigating and the difficulties of proving in court the various allegations each party sought to advance in its favour.

By 10 p.m., the parties were getting close to a settlement, but some needed to take further instructions from their respective head offices – by then closed for the evening. The meeting was terminated on the understanding that discussions would continue the following day by telephone via the mediator.

The dispute was finally settled about 48 hours later. The building owner accepted significantly less than the amount of his claim. The architect, main contractor and subcontractor each contributed amounts which were far less than they would individually have had to pay had they had been found to be 100% liable by the Court.

Each party no doubt thought that it had conceded too much!

The amount in dispute was about £500,000 and it was generally agreed that the total litigation costs would amount to a similar figure if the matter went to trial.

The estimated costs of the mediation process were about £10,000 per party.

This mediation was a good example of how a mediation process was still viable even though litigation had already commenced, and the process was easily 'slotted in' during a quiet period in the litigation, without in any way adversely affecting the litigation timetable.

This article was created by --University College of Estate Management (UCEM) 16:23, 11 December 2012 (UTC)