Mediation is widely used in the construction industry to resolve construction disputes. Between a third to a half of the disputes that we are involved in are mediated at some point and our experience of this form of ADR is that it can prove successful, even in the most unlikely of circumstances.
One circumstance which can pose very specific issues concerns one of the most common features of construction disputes: multiple parties. The recent case of Roundstone Nurseries Ltd v Stephenson Holdings Ltd left one of the parties facing a cost penalty as a result of not grappling with the timing of multi-party mediation at the outset.
Here are some of the issues we have experienced recently, together with suggested ways to overcome them.
With a large number of parties, the challenge for a mediator is to get enough “face time” with each one of the parties over the course of the mediation. The amount of idle time can be considerable, and can lead to parties disengaging with the process.
One effective way that we have found of maintaining the parties’ momentum towards settlement is to employ co-mediators. Two people moving continuously amongst the parties is far more productive than one. A co-mediating team, or one mediator who nominates a co-mediator (so as to ensure a harmonious pairing), should be considered.
However, do not appoint one mediator as the “leader” as parties tend not to want to engage with the perceived “junior”. Also, don’t be put off by having to pay two sets of fees: in our experience, the increased interaction with the mediator(s) and reduced idle time are well worth the extra expense.
Timing and the “tail end charlies”
Under the Construction Pre-action Protocol parties are required to attend a meeting during which they should discuss the appropriateness of ADR. Many, at that early stage, wish to avoid the risk of major litigation and are tempted to mediate. However, large multi-party mediations can sometimes be as expensive as court proceedings and it is always worth considering whether or not you are choosing to mediate too early.
Certainly, the earlier you mediate, the cheaper resolving the dispute can be but the greater the risk becomes that not all of the parties are fully prepared or in the right frame of mind to settle. Settlement can prove difficult until the parties, issues and risks have crystallised, they are understood by each party and everyone is engaged in the process; in particular the “tail end charlies”. In general, multi-party mediations should go at the pace of the slowest defendant.
In our view, mediating too early can leave stragglers behind: as a multi-party defendant you will end up paying more; as a claimant you will end up conceding more and everyone risks the success of the entire process being undermined.
Time span of the mediation
In order to maintain the right level of momentum to achieve a settlement, one day mediations are usually encouraged by mediators. However, with large multi-party mediations it can prove difficult to get around all of the parties within a day. As a consequence, it is tempting, when so many parties are involved, to schedule the mediation over a number of days.
In our experience, a tightly planned process over two days usually provides enough time to meet the needs of multiple parties. Generally, you will not achieve a better settlement if you go beyond two days.
The choice of venue in which to hold your mediation is more critical when there are more parties involved. It is easy to underestimate how many people will need to be accommodated comfortably. A poor quality venue may result in parties being bad tempered at the end of the day when the deal needs to be done. One successful, large multi-party mediation with which we were recently involved took place at the Emirates Stadium!
It’s all about the money
The key concern for a mediator is the size of a claim rather than liability. The dispute will not settle until all of the parties have a clear sense of their financial risk. This is true of all mediations, but is particularly so when many parties are involved as the money needs to be carved up in more ways than one.
The claimant can only do so much. Thereafter, the defendants need to get to grips with their respective financial risks in order to put a meaningful settlement pot together. In our experience, it is useful if the mediator(s) instigate a meeting for all of the paying parties (without the claimant being present) which will give each of them greater freedom to negotiate payment amongst themselves.