Benefits of Construction Dispute Resolution by ADR

Litigation or ADR

When used successfully, alternative dispute resolution (ADR) may be quick, cost effective and preserve confidentiality. All disputes, whether in difficult negotiations or full-scale litigation, can become a drain on resources – sapping money, time and focus. Generally, with alternative dispute resolution, the parties remain in control. If no settlement is reached, they retain their legal rights. For these benefits to be achieved, at the commencement of alternative dispute resolution both sides must have a genuine interest in seeing an end to the dispute or in re-starting effective negotiations.

Civil Procedure Rules

Judges, using their powers under the Civil Procedure Rules, may direct parties to attempt to resolve their dispute through non-litigious means. Anticipating this prior to such court intervention has the potential to save time and money. The earlier the dispute is resolved, the greater the potential benefits in terms of costs, timesaving and preservation of business relationships.

The Value of ADR in Litigation

Some indication of the value of ADR in litigation is given by looking at the Commercial Court, which, since 1993, has been identifying appropriate cases for ADR. A study of 233 of these cases that were before the court between July 1996 and June 2000, where the court had directed the parties to attempt to settle through ADR, has revealed the following: [1]

  • ADR was undertaken in a little over half of the cases in which an ADR Order had been issued;
  • of the cases in which ADR was attempted:
    • 52 per cent settled through ADR,
    • 5 per cent proceeded to trial following unsuccessful ADR,
    • 20 per cent settled some time after the conclusion of the ADR procedure,
    • 23 per cent of cases were still ‘live’, or the outcome unknown, when the survey was carried out.
  • There is some information on the results of cases in which ADR was not attempted following an ADR Order,
    • 63 per cent eventually settled (about one fifth of these said that the settlement had been as a result of the ADR Order being made),
    • 15 per cent proceeded to trial.

About 95 per cent of cases settle before a final court judgement. With hindsight, those to whom this happens often wish they had achieved this settlement before starting litigation.

The effectiveness of A.D.R.

The effectiveness of A.D.R.

Where is ADR Likely to be Most Beneficial

In summary, alternative dispute resolution may be of particular benefit where:

  • the cost of litigation is expected to be disproportionately large when compared to the value of the claim,
  • negotiations are deadlocked,
  • there are certain multi-actions involving common parties,
  • the issues are of a complex technical nature particularly if they involve multiple parties,
  • the issues involved are sensitive or require the disclosure of sensitive information,
  • the parties do not wish for any publicity.

Alternative dispute resolution is unlikely to be suitable when the dispute involves novel or unprecedented legal issues. It is better used for technical and commercial issues.

Similarly, it is not appropriate where summary judgement is available quickly and efficiently such as, for example, certain disputes arising out of party wall awards.

It cannot serve parties requiring emergency injunctive or other protective relief.

On the rare occasions where publicity is actively sought by one party but not the other, alternative dispute resolution may be the least suitable approach.

Most importantly, where there is no real interest in settlement by any of the parties to a dispute, commencing alternative dispute resolution can be a frustrating and expensive waste of time.

[1] ‘Court-Based A. D. R. Initiatives For Non-Family Civil Disputes: The Commercial Court And The Court Of Appeal’ by Professor Hazel Genn.