Last edited 14 Sep 2016

Construction litigation

Contents

[edit] Introduction

Litigation is the process of engaging in or contesting legal action in court as a means of resolving a dispute. The court is able to enforce or determine one party's rights or obligations.

Litigation is not uncommon in the construction industry because of its adversarial nature and the tendency for disputes to arise. A combination of environmental and behavioural factors can lead to construction disputes. Projects are usually long-term transactions with high uncertainty and complexity, and it is impossible to resolve every detail and foresee every contingency at the outset. The basic factors that drive the development of construction disputes are uncertainty, contractual problems, and behaviour.

In 2013, an NBS survey, the National Construction Contracts and Law Survey, found that 30% of firms had been involved in at least one dispute in the previous 12 months.

See Construction disputes for more information.

Advantages:

  • Generally regarded as the highest quality decision making
  • Judges can compel the parties to comply with time frames and have powers of sanctions for non-compliance
  • Judges have the power to make orders to provide interim relief to protect a party's position pending the final judgement
  • There are defined rights of appeal in cases where errors of fact or law are made

Disadvantages:

  • Potentially greater costs if the dispute is not well managed or the other party seeks to delay the proceedings. It can last between 12 - 18 months.
  • Potentially longer time period to obtain a judgment
  • Proceedings are generally conducted in public
  • Judgment will be subject to appeal

[edit] Alternative dispute resolution

Construction contracts usually provide for disputes to be dealt with by agreed dispute resolution procedures involving mediation, adjudication and arbitration, or a combination of all three. The construction industry is also subject to statutory schemes which impose adjudication procedures in the absence of contractual agreement (such as the Housing Grants, Construction and Regeneration Act 1996 and the Local Democracy, Economic Development and Construction Act 2009). Many contracts for large and complex projects now have additional tiered dispute resolution procedures with obligations to negotiate in good faith and to establish dispute resolution boards, steering committees and partnering meetings.

If the contract sets out procedures for dispute resolution, then the parties must follow those procedure unless they agree otherwise.

See Alternative dispute resolution for more information.

Whilst often seen as the last resort, if alternative dispute resolution procedures fail, or if the situation involves circumstances that alternative dispute resolution cannot deal with (such as multiple parties on some forms of contract), or where a decision needs to be enforced, litigation may still be necessary.

Even where litigation proceedings are commenced, it is common for the parties to reach a settlement before trial begins. Indeed the parties may be penalised by the court if they have failed to properly enter into discussions before bringing proceedings. However, where positions have become entrenched or the parties positions are too far apart, a case may proceed to court.

Depending on the nature and complexity of the case, litigation is generally considered to be more expensive and slower than other forms of dispute resolution, although this is not always the case, and in some situations litigation can be faster than arbitration. There is also a perception that litigation is more confrontational and more likely to result in an extreme decision, ie you are right or wrong, rather than an equitable settlement. This may or may not be in any of the parties interests. In addition, decisions are public and may reflect badly on the reputations of the parties.

[edit] Process

An action founded on simple contract cannot be brought after six years from the date on which the cause of the action accrued. The limitation period for a contract under seal is 12 years. See Contracts under seal v under hand for more information.

Proceedings are started by the claimant sending a claim form to the appropriate court setting out the case against the defendant and the remedy that is being sought. This claim is served on the defendant, and they may then admit liability, or part liability, and offer proposals for settlement, or may deny liability and serve a defence.

The court will then allocate the case to a 'track' (small claims track, fast track or multi track) depending on its size and complexity and will lay down a series of directions for the parties to comply with (such as the disclosure of evidence to the other party).

A trial will then be held so that the judge can listen to evidence presented by both parties, and they will then decide whether the claimant has proved their case. A variety of remedies are available to the court, but most commonly the remedy will be payment by the defendant of damages to compensate the claimant for their losses. They may also order the defendant to carry out some action, or issue an injunction to prevent the defendant from carrying out some action. In fast track and multi track cases the losing party is also likely to be required to make a contribution to the winning parties costs.

Judgements are enforceable, but can be appealed if the court gives permission.

[edit] Technology and Construction Court

The Technology and Construction Court (TCC) is a specialist court, which deals principally with technology and construction disputes. Proceedings in the TCC are governed by the Civil Procedure Rules (CPR) and supplementary Practice Directions. The Civil Procedure Rules were introduced in 1999 to speed up court proceedings and reduce costs.

The TCC Practice Direction gives the following examples of claims which it may be appropriate to bring as TCC claims (this list is not exhaustive):

In many cases, there is a compulsory Pre-Action Protocol the purpose of which is to encourage the frank and early exchange of information about the prospective claim and any defence to it; to enable parties to avoid litigation by agreeing a settlement of the claim before the commencement of proceedings; and to support the efficient management of proceedings where litigation cannot be avoided.

See Technology and Construction Court for more information.

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