Problem: Final account cannot be agreed. How can a dispute be resolved?
In September of last year, the construction company that I work for completed a new-build project for a client. The project was administered under the JCT Intermediate Form of Contract 2011. My company has since been attempting to agree a final account for the construction, but a year on from completion, we remain poles apart.
It does look like that the only way this account will be finalised is through some form of dispute resolution process. Can you please advise me what the possible options are for resolving the building dispute, and their advantages and disadvantages?
Response: Construction dispute resolution options:
Firstly, given that the Rectification Period would have expired by now, you would be wise to make sure that the Final Certificate has not been issued. This is because under the JCT IFC, if the Final Certificate has been issued then you only have 28 days after the issue date to challenge the same; otherwise, it becomes final and conclusive as to the amount certified.
Subject to any amendments that may have been made to the standard clauses, you will have the option of construction adjudication and construction arbitration as formal processes to resolve the dispute. Or if the arbitration clause has been deleted, litigation will then become an option.
Providing the employer is not acting in the capacity of a consumer / residential occupier (which your client will not be), then even if the adjudication clause is deleted, adjudication will still be implied by virtue of the Housing Grants, Construction and Regeneration Act 1996 (as amended) – commonly referred to as the ‘Construction Act’.
The main advantages of construction adjudication are speed and enforceability: Once a matter has been referred to an adjudicator, a decision can be made within 28 days (although this can be extended), and the decision can be enforced in the High Court, with enforcement rates running in excess of 95%. Other advantages are that it is [usually] cost-effective, especially when compared to arbitration and litigation (the speed being the factor), it is flexible and confidential. The disadvantages of adjudication are that relationships are soured, there is no joinder in proceedings and costs are usually irrecoverable, even for the successful party.
If an arbitration clause is retained in the contract, the main advantages will be the expertise of the arbitrator (who will be selected by the parties), flexibility (i.e. the venue), confidentiality, recovery of party costs and that the award will be binding. Disadvantages include no joinder in proceedings (unlike litigation), the cost (in particular for the losing party), and relationships are soured.
You could also consider construction litigation, even if the arbitration clause remains in the contract, although there would be a risk that the other party obtains a stay of proceedings.
You should, however, consider alternative forms of building dispute resolution (“ADR”), prior to adjudication, arbitration or litigation, with negotiation and mediation at the top of that list for consideration. Both forms of ADR are relatively inexpensive whilst mediation, with the right mediator and a willingness from both parties to settle, having a high success rate.
© Michael Gerard 2017
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.