In the last 20 years, there have been major changes in the way the average construction dispute is resolved. In the “old days,” it was rare to have a mediation or an arbitration. It was common to see many construction disputes occupying our courts. The trials of some of those cases lasted months or years. Some of the disputes were many years old by the time all appeals were concluded.
Today, there are far fewer construction cases in our courts and far more are in arbitration. In many cases, construction disputes start out on the arbitration track either through an arbitration clause in the construction contract or by later agreement of the parties. In the vast majority of cases, today’s construction disputes are settled at mediation. Most practitioners of construction law would probably agree that the average construction dispute is usually resolved more quickly through the use of arbitration and mediation.
Although arbitration has its attractions, it is not the best option for all parties in all cases. For example, the parties must pay the arbitrator. If the amount in dispute is relatively small, the cost of the arbitrator may be prohibitive and the parties may be much better off in court. Once in court, the parties may be surprised at how quickly and cost effectively a dispute can be resolved if the parties are willing and if all of the available rules, including summary procedures, are employed.
As well, many construction disputes ultimately involve quite a few parties. In court, the rules provide for the joinder of all necessary parties. Unfortunately, an arbitrator can only resolve disputes between the parties to the arbitration agreement. There have been many instances where this has resulted in a multiplicity of proceedings with attendant costs, delays and uncertainties.
Another feature of arbitration, often not properly considered by counsel or parties, is that many arbitrators of construction disputes will be reluctant to allow the parties to turn the process into something akin to litigation. The parties may find themselves without equivalent discovery processes, with witness statements rather than examinations in chief, with more relaxed evidentiary procedures and potentially with time limits on cross- examination. While these differences will generally shorten the hearing, some would argue that they also increase the odds of an unfair result. Others might argue that the risk is mitigated through appointing an arbitrator with special expertise. Still others might argue that the average construction dispute does not involve matters which would give an arbitrator a significant advantage over a judge.
One of the features of arbitration which should not be overlooked is that the successful party will often be awarded full indemnity costs. In many arbitrations, this raises the stakes substantially. Some would argue that it is one of the reasons why more arbitrations than court cases proceed to final disposition.
Another important feature of arbitration is the reluctance of the courts to interfere with awards. Arbitral awards are appealable in more limited circumstances than court judgments, and courts are increasingly hesitant to disturb those awards.
Lawyers leading their clients down the arbitration path, either through including arbitration provisions in contracts or otherwise, need to consider all of the above matters and decide whether arbitration will be a benefit for the client.
As well, and particularly because almost all construction disputes settle at a mediation, lawyers need to understand when a matter is “ripe” for mediation, the steps necessary to that ripening, and how to conduct the mediation process to obtain the best possible result.