News

Resolving disputes doesn’t have to cost the earth

21 Oct 2015

I suppose compared to building the Olympic Park or Wembley Stadium it wasn’t a big job, it wasn’t even a middle sized job but at £40k it was certainly major works to the house owner and probably the builder too.

It all started off ok. The builder and his team started when they said they would and pulled the house apart ready for the alterations and improvements. The first few weeks passed full of hope for the client and the builder. The first interim payment was invoiced and paid on time and, squinting through one eye, the job was starting to take shape, except it was probably at this point when it started to go wrong.

The client noticed there were fewer operatives on site each day and then there were some days when nobody turned up at all. When challenged the builder complained about being held back by long delivery times for some of the materials the client had specified after the job started, the special windows, the radiators and so on. But the client felt there were plenty of other jobs the builder could be doing. And so it went on. The planned completion date came and went and the only thing that was consistent was the builder’s monthly interim invoice.

It all came to a head when the builder submitted an interim invoice that took the total above the original quotation of £40k but the works were nowhere near finished. The client didn’t pay, the builder walked off site and the vultures gathered in the trees at the entrance gates.

This is the point where both sides feel very aggrieved and they’ll see the other side ‘in hell’ before they pay up or finish off the works. They rush off to their respective lawyers and look for them to resolve the problem. Unfortunately this is also the point where both sides costs escalate at a rate they didn’t think was possible and they’re still nowhere near solving the problem. It’s a bit like playing poker they keep adding more money to the pot thinking that they will win so what they have put into the pot is returned to them. But it doesn’t because even if they do win, they won’t recover all they paid in. At best it may be 70%.

It doesn’t have to be like this. The one thing I can guarantee is neither side really wants to go to court and be cross examined by a barrister, they just want the dispute sorted out fairly and economically. The other thing I can guarantee is neither side fully understands the other side’s case until they have to face up to it. On that basis the sooner the client and the builder get together in the same room, talk it through and negotiate a settlement, the sooner this problem will be resolved and the lower the costs will be. This negotiation of a settlement by the parties with the help of an independent intermediary, is known as an ‘Alternative Dispute Resolution’ process, often referred to in legal circles as ADR. You might have heard it referred to as ‘Mediation’. Mediation isn’t one side showing a weakness, on the contrary they are showing confidence in their ability to keep control of the dispute and get it resolved on terms acceptable to them.

Strangely the courts are keen to push parties to ADR processes rather than waiting for them to come into court and have a slanging match before a Judge. This is not some Osborne inspired cost cutting exercise to reduce the courts workload but a genuine attempt to get problems sorted out quickly and cheaply, leaving the courts to deal with issues of law rather than commercial problems.

When the parties are at the forefront of resolving the dispute, you can guarantee it only gets sorted when both are happy, otherwise it doesn’t get sorted. Our client and builder did resolve their problem and both were happy or at least happier than they had been previously! Best of all they could get on with their normal lives and stop being pawns in the courts process.