REUTERS | Paulo Whitaker

Decision day negotiations – it’s never too late to settle

Summer is swiftly drawing to a close, but while many of us have been on our holidays, the construction industry appears to have been running at full-bore throughout the summer. Although there was a minor stagnation in July, there is still a significantly greater volume of work than compared to five years ago, and labour shortages are clearly a problem. For example, I was speaking to a sub-contractor recently who is struggling to get labour and has seen his labour rates increase by over 15% in the last year, and yet he is still winning work.

This increase in the volume of construction work has clearly also put pressure on surveying staff, as I have seen an increase in adjudications where money is being claimed as a result of technical breaches such as a failure to serve a pay less notice. While that may partly be due to the “new” payment regime under the Construction Act 1996 (even if it is almost three years old), I think it is also down to the fact that surveying staff are unable to cope with the volume of work they are responsible for. Consequently they are missing important deadlines for these notices and working nine to five is once again becoming unusual for most of them.

Early peace talks

Another result of this increased volume of work is that parties may be more inclined to negotiate and settle disputes in order that they can move on to concentrating on more profitable work.

Clearly negotiations can take place at any time, including during an adjudication. I know that some party representatives issue notices of adjudication simply to try and get the other party to engage and negotiate, and they have no intention of issuing a referral. This is clearly a successful tactic in some circumstances, but if the notice contains limited details of the dispute, the responding party might not be prepared to negotiate until it has seen the referral.

Sometimes parties agree to suspend the adjudication after the referral is issued so that they can attempt to settle the dispute. This has happened on a number of occasions when I’ve been acting as adjudicator and I would say that, in the majority of instances, parties have successfully settled the dispute. There are obvious advantages, not least that the parties avoid the costs of lawyers, experts and possibly the adjudicator, and don’t tie-up their staff resources in dealing with a dispute.

D-Day negotiations

However, up until a couple of weeks ago I’d never had a dispute settle after the response was issued. There are obvious reasons for this, namely that a significant chunk of the parties’ costs have been incurred by the time the response is issued, so there is little perceived benefit in settling.

In my adjudication, we had all the usual ingredients of a sub-contractor payment dispute (that is, time, variations, loss and expense, and so on) and a seven-figure sum was at stake. On the morning of the day my decision was due, I received an email asking me not to issue my decision until later in the day as the parties were in advanced negotiations. That email was quite fortuitously timed as I was just putting the finishes touches to the decision and was planning on issuing it not long afterwards. Anyway, later in the day I received another email saying that the parties had settled the dispute and I was not to issue my decision.

While that was obviously great news for the parties, I confess to feeling slightly deflated as a great deal of work had gone into the decision. However, it got me thinking about the advantages of settling on or near to D-Day, which might include:

  • The parties get certainty of outcome. They may have an inkling about which way the adjudicator will go, but they can never be sure until they see the decision.
  • Other disputes can be settled in the process. For example, the dispute I was asked to decide was an interim payment dispute, but the parties may have also taken the opportunity to resolve the final account at the same time.
  • The parties may be able to salvage damaged relationships during the negotiation process.
  • The parties avoid any of the costs associated with enforcing the adjudicator’s decision.

I know that Matt has previously been asked to halt pretty near to the end of an adjudication, as well as another adjudicator whose finger was hovering over the send button when time was called. However, overall I think that it’s pretty rare to settle so late in the day as the parties still have to meet the costs of their representatives and the adjudicator, and this is often an overriding factor.

I’d certainly be interested to know whether others have experience of settling disputes so late in the adjudication process. As usual, answers on a postcard please!

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