Practical Law

Never before have there been so many ways to resolve construction and engineering disputes quickly and flexibly in England and Wales. The Technology and Construction Court (TCC) is piloting two speedier procedures and the Royal Institution of Chartered Surveyors (RICS) has recently launched two quicker arbitration procedures, any of which could challenge the supremacy of adjudication as the favoured dispute resolution forum for construction and engineering disputes.

TCC: a new approach

From 1 October and for the next two years the TCC, along with the other courts in the Rolls Building, is piloting two different trial procedures: the Shorter Trials Scheme and the Flexible Trials Scheme.

The aim of both schemes is to achieve judgment in a shorter time frame than traditional procedures and at a lower and more proportionate cost. The procedures for each scheme are detailed in Practice Direction 51N.

Shorter Trials Scheme (STS)

The STS, which aims to reach judgment in just under a year of issuing  proceedings, is the most innovative of the two pilots. It is designed for cases that do not have extensive disclosure or extensive witness and expert evidence. It is unsuitable for multi-party cases. Its key features are:

• The Pre-action Protocol for Construction and Engineering Disputes (Protocol) does not apply.
• Costs budgeting does not apply.
• Cases are managed by a single docketed judge.
• Standard disclosure does not apply. Parties disclose the documents that they rely upon and can request specific documents from the other side. Applications for specific disclosure after the case management conference are discouraged.
• Pleadings should be no longer than 20 pages in length, with witness statements confined to 25 pages.
• Trial takes place within ten months of issuing proceedings and is to take just four days. Judgment is to be issued within six weeks of the trial.

The most notable features of the STS are the absence of the Protocol and costs budgeting, both of which seem designed to make court proceedings more attractive to claimants with straightforward disputes seeking to obtain a quick decision.

A TCC Working Party has been set up to review the Protocol after Jackson LJ’s Final Report. It is currently looking at several options, including whether to abolish the Protocol or make its use voluntary.

The Protocol divides opinion between, on the one hand, solicitors who are often closely involved in disputes which follow the Protocol and, on the other, barristers and the judiciary, who tend only to see those proceedings that have failed to settle during the Protocol.

Our experience of the Protocol has generally been a positive one. Of course, it is open to abuse, but used correctly the Protocol can weed out cases that have no merit and bring early settlement to others.

It will be interesting to see the type of TCC cases that come through the pilots, having bypassed the Protocol.

Flexible Trials Scheme (FTS)

The FTS allows parties by agreement to cherry pick the trial procedure to suit their particular case. In particular, the FTS allows parties to alter pre-trial disclosure, witness evidence, expert evidence and submissions at trial. The emphasis is squarely on encouraging parties to limit disclosure and to confine oral evidence at trial to the minimum necessary for the fair resolution of their disputes. This makes the process more akin to international arbitration, and may be designed to appeal to international parties.

Quicker and flexible arbitration procedures at RICS

RICS has also developed two faster and more flexible alternatives to the usual arbitration procedure: the Fast Track Arbitration Service (FTAS), for disputes under £100,000, and the Select Arbitration Service (SAS), for disputes over £100,000.

The FTAS is designed to provide an arbitral award within six months from the appointment of the arbitrator, although the parties can agree a longer period. The arbitrators’ hourly rate, and the number of hours that can be charged, are capped.

The SAS promises that the arbitrators will estimate their fees and provide the parties with updates if they change.

More certainty as to arbitrators’ fees is to be welcomed. However, arbitration, unlike adjudication, is a quasi-judicial process that finally decides the rights and obligations of the parties, and it therefore requires arbitrators to carefully consider all of the evidence and reach the right decision, rather than any decision. There is a risk that, by capping hours spent, or at least fees charged, arbitrators may be prevented from reaching the right decision. Or of course arbitrators might just set high caps.

The direct competitor of the RICS arbitration procedures, the Construction Industry Model Arbitration Rules (CIMAR), are the default arbitration rules under the JCT suite of contracts. Other industry standard forms of contract also reference CIMAR. These rules provide a choice of three procedures, depending on the size and type of dispute, and allow the arbitrator, rather than the parties, to decide which procedure to adopt. It will be interesting to see whether the RICS procedures are embraced by users as addressing a need that some may see as already being filled by CIMAR.

Do these new fast and flexible procedures offer a credible alternative to adjudication?

Time will tell. The main purpose of adjudication has always been to maintain the cash flow of contractors and sub-contractors. With its 28-day process, albeit often extended, adjudication usually offers by far the quickest route to a “decision”.

While adjudication is accepted as being rough justice, and some decisions can be of questionable quality, most parties accept the trade-off between speed and quality of decision, and are content with a determination that enables them to move on with the project.

However, in certain circumstances, these new fast track and flexible procedures may offer an attractive half-way house between adjudication and the traditionally longer and more costly procedures of litigation and arbitration.

For a number of reasons, there is definitely scope for the introduction of new tactical options:

• Legal costs are awarded to the winning party in both litigation and arbitration. In adjudication, the adjudicator has no power to award legal costs unless the parties agree to this after the commencement of the adjudication, which never happens. Given the possibility of adjudication proceedings for the most complex disputes becoming protracted (up to a year in some circumstances), these costs can be significant, and this might influence a claimant’s decision to commence an arbitration or litigation.
• Arbitral awards and court judgments are final and binding, while adjudicators’ decisions are only temporarily binding and can be re-opened many years later, as Aspect v Higgins demonstrated.

While I see little benefit in adopting these new procedures for the most straightforward disputes, for which adjudication is perfectly suited, there may be a case for using them to decide more complex and high value final account disputes where the need to obtain a well thought out decision is of paramount importance.