Guidelines to Good Practice in Construction Dispute Resolution

Guidelines to Good Practice in Construction Dispute Resolution

Contract Documents: If you’re responsible for the drafting and negotiation of the contract documents your input now will help avoid potential claims and failing which may give you the advantage in and future dispute resolution. Try to ensure that:

Contracts are drafted properly and comply with the applicable country law.

Record terms expressly, accurately and unambiguously

State the governing law of the contract and jurisdiction. When doing so consider the most favourable jurisdiction for resolving the dispute this is especially relevant ii International contracts.

Specify the mechanism for resolving any disputes including the identification of the most favourable method of dispute resolution be it; mediation, expert determination, arbitration or litigation through the courts.

Include important clauses in the contract, for example: limitation of liability, entire agreement clause, termination provisions

Retain evidence in the form of contract negotiation minutes or similar documentation, accepted and endorsed by the parties to the contract.

Retain evidence in the form of documentation as this will be crucial in establishing arguments in any dispute. To this end it is encouraged that a comprehensive document retention policy is adopted and maintained which as a minimum will:

Help ensure procedures are followed by all staff;

Make senior management responsible for document retention enforcement and implementation;

Encourage implementation of electronic data organisation and retention in addition to hard copies;

Categorise documents and make retention periods clear for each category. Documents is a wide definition and period of retention will vary according to statues of the countries or jurisdiction involved; these statutes should be fully investigated and researched before establishing a document retention procedure in relation to a project. For most documents in Malaysia the period is six years.

Be a clear policy for the destruction of documents – documents not to be retained must be destroyed in accordance with the policy and not on a random basis, not only can this result is lost documentation it can also create suspicions if third parties are used to resolve disputes.

Help ensure electronic information is systematically archived by backing up.

Once a dispute arises it is important to immediately consider all the risks and implement a plan to mitigate these together with early agreement on the course of action to be taken whether the dispute is instigated by you or otherwise. In many instances failure to address this will result in you losing at least part of your entitlement or make a defence that much more onerous if the other party is engaging more resources it what may appear in the first instant an unrealistic or unenforceable argument in a dispute. You should always consider and decide on:

Involvement of advisers at a very early stage;

Obtaining legal advice at an early stage on the merits of the dispute, the drafting of responses and notices, preservation of privileges, the correct interpretation and following of formalities and legal procedures, the presentation of evidence. Ensuring always that the selection of legal advisors is done taking account of their track record and expertise in the resolution of disputes relating to the specific subject matter;

The involvement of media consultants if the other party to the dispute or project itself is high-profile or sensitive such as the case with some prestigious project, projects in environmentally sensitive fields or projects which have a high public profile or are politically sensitive;

Establishment at an early stage what a “win” would be in respect of the dispute;

Notifying insurers as such notification would be considered privileged;

Get advice and research the courts as different jurisdictions have their own idiosyncrasies and customs.

Instigate documents control measures if not already practiced so that all documents relevant to the dispute are discoverable in the event of litigation, which means they must be ‘controlled’ as soon as the dispute arises;

Avoiding the creation of unnecessary documents.  Emails can be of a particular risk due to their informal nature so always consider in the event that a communication were a letter or memo and not an e-mail would the content be the same before sending such a communication. Avoid the circulation of internal e-mails/memos with impulsive judgments or comments and consider what a judge would interpret were he to read the document/comment. If in doubt, do not commit it to writing.

Enforcing a policy where original documents are not the subject of unnecessary comments as the judge will have the opportunity to read and consider these comments in the event of litigation.

Suspension of routine document destruction immediately to avoid accidental destruction of relevant documents. It is relevant also that the courts look of the destruction of potentially relevant documentation very seriously and the consequences can be the Court ruling that you have deliberately attempted to pervert the course of justice and strike out your claim of defence as the case maybe.

Preparation of your case is essential to its success, there for:

The senior management must be prepared to commit time and attention to the matter for the duration of the dispute;

You need good key witnesses – they must give straight answers; tell the whole truth as understood/remembered;

Contemporaneous evidence is very important;

Evidence must be legitimately obtained;

Engage good experts (remember that they are ultimately there to assist the court) with their relevant expertise.

Bringing the dispute to its conclusion

Attempt settlement through amicable settlement, don’t be afraid to make the first offer or propose alternative dispute resolution options. Such options can be binding or otherwise where they are proposed by the parties as alternatives to those prescribed if any in the contract. In considering alternative methods first weight up the potential cost benefits and the likelihood of a settlement in the event of adopting an alternative approach.

Negotiation is a powerful tool in potentially resolving disputes and is covered in a separate article. Settlement should always be the consideration in any dispute and negotiation should be targeted towards achieving settlement.