Mediation in Construction Engineering Disputes

Mediation is an increasingly important and effective way of resolving construction and engineering disputes. It allows parties to explore settlement in a confidential and commercial forum, often preserving relationships and avoiding the cost, delay and uncertainty of formal proceedings.

The construction team at Davis Woolfe regularly advises and represents clients in mediations across the full spectrum of construction and engineering disputes, both before and after court or adjudication proceedings have been commenced.

Why Consider Mediation?
There are three principal reasons why mediation should be considered in almost every construction dispute:

• Judicial encouragement – the courts actively encourage parties to attempt mediation.
• Costs consequences – an unreasonable refusal to engage in mediation can lead to significant adverse costs orders, even for a successful party.
• Commercial advantages – mediation often delivers faster, more flexible and cost-effective outcomes than litigation or arbitration.

The courts have repeatedly made clear that mediation is particularly suitable for complex construction disputes, where the cost of proceeding to trial may outweigh the sums in issue.

The Court’s Approach to Mediation
The courts take a robust approach to parties who refuse to mediate. A party who ignores or unreasonably rejects an invitation to mediate runs a real risk of costs sanctions, regardless of the eventual outcome of the case.

Importantly, the courts are unlikely to accept the following as valid reasons for refusing mediation:

• Liability being in dispute
• A wide range of potential outcomes on quantum
• A belief that one party has a strong or “impregnable” case
• Hostility or lack of trust between the parties

Mediation is often most effective precisely where relations are strained and the issues are technically or factually complex.

How the Mediation Process Works
Mediation is a voluntary and confidential process conducted by an independent mediator, who may be a lawyer or a construction professional with relevant expertise.

The process typically involves:

• Exchange of position statements and key documents
• A joint opening session or introductions
• Private meetings between the mediator and each party
• Exploration of settlement options and commercial solutions

Each private discussion with the mediator is confidential. The parties remain in control throughout the process and decide whether and on what terms any settlement is reached.

Mediation is non-binding, but if agreement is reached it is recorded in a written settlement agreement which becomes legally binding once signed.

Confidentiality and Without Prejudice Protection
All communications made for the purpose of mediation are without prejudice and confidential. They cannot be referred to in any subsequent adjudication, arbitration or court proceedings if the mediation does not result in settlement.

This allows parties to speak openly and explore solutions without fear of prejudicing their legal position.

When Should Mediation Take Place?
Mediation can be effective at almost any stage of a dispute, including:

• Before proceedings are issued
• After the parties have completed their statements of case
• After the parties have completed the disclosure process
• After the parties have exchanged lay witness statements
• After the parties have exchanged experts’ reports

Strategic timing is important. Early legal advice can help identify when mediation is most likely to succeed and how best to prepare for it.

Our Experience
Davis Woolfe advises on mediation in a wide range of construction and engineering disputes, including defects claims, delay and disruption, payment disputes, final accounts, termination issues and professional negligence claims.

We regularly act for developers, contractors, subcontractors, employers, consultants and other construction professionals. Our role includes advising on mediation strategy, preparing position papers, managing the mediation process and drafting settlement agreements.

Legal Advice
If you are involved in a construction or engineering dispute, mediation should almost always be considered as part of your dispute resolution strategy.

We offer an initial, no-obligation discussion to explore whether mediation is appropriate for your dispute and how we can assist.