Problem: I am a director and co-owner of a medium sized building company, carrying out work within a 50 mile radius of the Leicester. In September of last year, we finished a big project (well, big for us), which was refurbishing and extending an old care home that was being converted into flats. However, we have since been involved in a dispute over our final account with the employer. We are owed just over £90,000, but the employer is disputing this and stating that we have been overpaid!
We have written many letters and provided lots of substantiation to the employer, but all we seem to get back are bare-faced denials. I have consulted our solicitors, but I am feeling a little confused as they went on about different ways of resolving the dispute including adjudication, issuing a protocol letter, arbitration and mediation. Can you enlighten me please?
Manjit, Leicester
Response: Hello Manjit. I am sorry to hear that you are a little confused at the different ways of resolving your dispute, especially as your solicitors should have ensured that you clearly understood their advice.
Firstly, adjudication. The Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and. Construction Act 2009), gives a party to a construction contract the right to refer a dispute arising under the contract to adjudication. Although there are certain limitations, in your case you will probably have the right to refer the dispute to an adjudicator.
The Act, therefore, gives you a statutory right to have the dispute decided by an adjudicator, and this right cannot be contracted out by the employer. The main advantage of adjudication is that it is quick – usually a 28-day process, and you end up with a court-enforceable adjudication decision.
If you decide against adjudication, you will then need to refer to the contract (if one exists), as the primary method of resolving the dispute may state arbitration, which will be in lieu of litigation.
However, whether or not an arbitration clause has been incorporated into the conditions of the contract, before issuing a Notice of Arbitration or a Claim Form, you will need to send to the main contractor, a Letter of Claim.
A Letter of Claim is a requirement under the Civil Procedure Rules Pre-Action Protocol [for construction and engineering disputes], which requires the proposed claimant to send to the proposed defendant a Letter of Claim. A Letter of Claim essentially sets out your case. The Protocol lists what the letter must contain and this should be carefully followed. The Protocol also states the time period for a response.
Once the defendant’s response is received, the Protocol requires a meeting takes place between the parties, the intention of which is to narrow and / or agree what the issues are. The Protocol then calls for the parties to consider whether some form of alternative dispute resolution procedure would be more suitable than litigation, like for example, mediation.
Penalties for failure by a party to follow the Protocol can be severe including having costs be awarded against, even where there has been a significant ‘win’. Only once you have followed the Protocol, and the dispute remains unresolved, then you should commence proceedings.
© Michael P. Gerard
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Practising Solicitor, Barrister, Chartered Builder, Registered Construction Adjudicator & Accredited Expert in quantum and planning matters. He is based in Leicestershire.