Knowledge Hub | Cases

31 July 2013

Mediation success following longstanding construction dispute

It is entirely expected in most commercial situations that parties work to a deadline. That is especially relevant in the construction industry where, often, considerable sums of money are at stake if development is not completed on time. However, care should be taken as significant problems can arise when parties are in such a rush to get the job done that they simply don't think to agree the actual scope of the work, before doing it.

B P Collins LLP were recently instructed by a large regional manufacturing company, which had commissioned groundwork and the construction of foundations in connection to its new modular offices, to resolve a dispute with the building company after it became aware of movement after completion of the work.

After expert investigation it transpired that there were significant problems with the foundation design. The building appeared to be under stress and our client was faced with considerable leakage from movement in walls, joints, and restricted use of doors in its main office premises. 

Despite attempts to correspond directly with the building company the parties were unable to agree upon the cause of the problems and the building company took the view that, despite having arranged for design architects to prepare the necessary building consent and planning permission, it had no responsibility for the foundation's design and it had made no such enquires. Correspondence with the design architects was similarly unsuccessful as their initial position was simply that they had no contractual relationship with the customer.

When it became clear that the rectification costs were likely to be considerable, our client had no alternative but to issue proceedings against the building contractor. Whilst the architects were not a party to the proceeds, a request was also made to them to disclose all relevant documents for consideration. Despite the ongoing litigation, the parties were able to agree to mediate at an early stage on the proviso that both parties went through a process of disclosure beforehand.

The disclosure provided enough relevant evidence for the parties to consider the potential strength of their position and enable the Litigation and Dispute Resolution team to adopt a strong and persuasive position at mediation. After thorough consideration of parties' respective positions and some persuasive arguments in support of the case, B P Collins was able to successfully engineer discussions and the parties were then able to reach a satisfactory commercial agreement that ultimately put our client in funds and enabled it to begin rectification work.

Whilst the parties' in this case were ultimately able to secure a satisfactory commercial outcome, assisted in no small part by the pressure of a commercial mediation environment, this case highlights the importance of commercial clarify when engaging contractors and sub-contractors alike. One of the central factors which led to the considerable delay in this case was the absence of clear agreement at the outset, indicating where the parties' respective responsibilities lay.

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