The Canadian construction landscape has a myriad of alternative dispute resolution processes available which avoid traditional litigation. Sometimes, specific ADR steps are mandated by the applicable construction agreement, or a statute.
Although arbitration is an alternative to going to court, it too results in a judgment rendered by an arbitrator, or an arbitration panel. Nonetheless, there may be advantages to having construction disputes determined by arbitration.
In contrast to a trial or an arbitration, ADR processes arrive at a resolution which is negotiated and crafted by the parties themselves, with the assistance of a trained professional acting in a neutral capacity. Mediation is one of those ADR processes and is an excellent choice for the resolution of construction disputes.
Using a variety of techniques, the mediator helps the parties to arrive at a resolution, or partial resolution. At the Mediation the object is not to persuade the mediator, who has no power to determine who wins or loses, but rather for the parties to supply sufficient, but succinct, information and documents to ensure the mediator understands the key matters at issue and the special nuances of the dispute. The mediator will use this information, and their other skills and knowledge, to persuade the parties that a negotiated resolution is a much better alternative to proceeding through the court process or an arbitration process.
Mediations can take place at any time – when the dispute first arises, before anyone has commenced an action or preserved a lien, at any point in the litigation or arbitration process, or close to the courthouse doorsteps. The chances of arriving at a mediated resolution are better if the Mediation takes place when the issues, and their evidentiary basis, are sufficiently understood, but before the parties have invested too much time, money and emotional energy and have become intrenched in their positions. That said, there is never a ‘bad time’ to mediate.
There are basic principles which apply to Mediations which should encourage parties to voluntarily choose this option. The Mediation is conducted on a without prejudice basis and is confidential. No person may use information disclosed at the Mediation for any other purpose and must keep it confidential. No settlement offers made during the Mediation will be admissible in court or in an arbitration proceeding. The mediator cannot be later called as a witness. These basic principles promote open and frank discussions and encourage parties to participate in good faith and in an honest and forthright manner. There is no downside to a Mediation.
Choosing a mediator with construction law expertise, or expertise in the specific subject matter of the dispute, will add value. A mediator with construction experience will have an innate understanding of the construction climate and will be better able to tailor the process for maximum effect. The judge ultimately assigned to hear the trial of a construction action may not be blessed with construction law expertise.
The issues in construction disputes are often complex. Delay claims, for example, are complicated and incredibly difficult to litigate. It is rare that delays on a project are caused by one party alone or that they occur independent of each other. It is almost impossible to get competing experts to agree on the cause(s) of delay, or the method to calculate the impact or the measure of the resulting damages. A battle of the experts is a costly exercise which is fraught with risks and should be avoided, if possible.
Construction contracts can be complex with many terms and conditions which shift risk from one party to another and are replete with notice requirements and other preconditions to the right to seek redress. Which party repudiated the contract or whether a termination is rightful or wrongful is hotly contested and the answer has serious consequences to the success of a party’s claim or defence.
Rare is the construction dispute which is restricted to two parties. More often, owner, contractor, subcontractors, suppliers and design professionals are involved. The existence of other available remedies, such as preserving and perfecting a construction lien or interim adjudication, may result in multiple proceedings running concurrently.
With the assistance of a mediator with expertise in construction, a resolution can be crafted which resolves the interconnected disputes for all parties, or cuts off some of the tentacles of the octopus.
A judge or arbitrator is only permitted to determine who is liable and how much one party is to pay the other party. The determination is limited to an award of money. The successful party is left with the task of trying to collect on the judgment, if the unsuccessful party does not voluntarily pay, after appeal options have been exhausted. By contrast, with the assistance of the mediator parties may be able to arrive at an innovative and practical solution which brings finality to the dispute and makes sense having regard to the nature of the dispute and the parties. For example, deficiencies can be remedied, extended warranties can be given, payments can be made over time, part of the consideration can be ‘in-kind’, apologies can be given, non-disparagement agreements can be made, and more. The creativity that can be applied to crafting a resolution is only limited by imagination.
Whether mandated or not, the mediation of construction disputes is an excellent choice that should not be overlooked.