The threat of adjudication

Structured negotiations with a clear end date often allow the parties to put their cards on the table and air their grievances

Author: Charles Blamire-Brown and David Greenwood

09 September 2019

Q: My subcontractor is threatening to adjudicate for a relatively small sum. How do I resolve matters without incurring disproportionate and potentially irrecoverable costs?

A: The promise of repeat business and good relationship management usually help parties to resolve disputes over small sums on an amicable basis. However, there are always exceptions to the rule, such as where a subcontractor is facing insolvency, realises there will be no repeat business, or where there is perceived unfairness or a personality clash.

Warning signs that a dispute may be on the horizon include a sudden change in the tone of your subcontractor's letters or emails, an increase in contractual notices, reference in correspondence to a dispute, requests for early payment or a refusal to meet, and a general breakdown in dialogue.

In these circumstances, you have a number of options if you want to avoid the cost and disruption of defending a claim as part of a formal dispute resolution process such as adjudication.

Communications sent as part of a genuine attempt to resolve a dispute are inadmissible as evidence in court; in other words they are private, and any concessions offered in communications made without prejudice cannot be used against you later. On this basis, such as 'without prejudice' meetings and communications are a good, candid way to get to the nub of the issue early on, and pinpoint the subcontractor's true motives and expectations.

Structured or timetabled negotiations with a clear end date often allow the parties to put their cards on the table and air their grievances. You might ask key members of the team on both sides to focus on a particular issue with a view either to reaching agreement or reporting back what cannot be agreed and why. This often narrows the disputed issues.

Alternatively, you might propose that a representative from each side – ideally someone with the entrenched position – presents their case to an executive panel, who can then discuss the claim on a more objective basis. Hearing one side's arguments presented after the other's will often enable the senior representatives of the parties to reach a sensible resolution.

It is commonly assumed that the party doing the work will have the most accurate contemporaneous records, but this is not necessarily the case. Providing samples of your records to show that you can substantiate your position might make the subcontractor realise its position is less clear-cut than it thought.

The sorts of records you might provide include progress reports, sequences of works or amended programmes, datedphotographs, meeting minutes, invoices and so on. A strongly worded, well-reasoned letter, potentially from external lawyers, can often have the same effect as such records, calling the subcontractor's bluff.

If correspondence and negotiation do not resolve matters, then bringing in a third party might help to unlock the resolution. Expert determination, for instance, involves an independent specialist in a relevant discipline producing a binding determination on the dispute. If the dispute revolves around a point of contractual interpretation rather than a technical issue, an independent legal review by a mutually agreed lawyer might be similarly helpful.

Another alternative is mediation, a voluntary, non-binding and private process where a neutral person helps the parties reach their own negotiated settlement. Mediations are usually conducted in a single day, and the mediator's focus is on getting the parties to resolve their impasse rather than on the rights and wrongs of the arguments. No two disputes are the same, and as such there is no standard solution. However, it is advisable to try to break each dispute down and resolve as much as you can as early as you can, before it snowballs into something that is expensive and becomes difficult to manage.

Charles Blamire-Brown is a partner and David Greenwood a senior associate at Pinsent Masons charles.blamire-brown@pinsentmasons.com david.greenwood@pinsentmasons.com

Related competencies include: Contract administration, Legal/regulatory compliance

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