Construction Litigation

Litigation entails engaging in or contesting legal action in court to resolve a dispute, where the court has the authority to enforce or determine the rights or obligations of one party.

In the construction industry, litigation is not uncommon due to its adversarial nature and the propensity for disputes to arise. Various environmental and behavioural factors contribute to construction disputes. Projects often involve long-term transactions with high uncertainty and complexity, making it impossible to resolve every detail and foresee every contingency at the outset. Uncertainty, contractual issues, and behaviour are the fundamental factors driving the development of construction disputes.

According to a 2013 NBS survey, the National Construction Contracts and Law Survey, 30% of firms reported involvement in at least one dispute in the previous 12 months.

Advantages:

• Generally considered the highest quality decision-making process
• Judges can enforce compliance with timeframes and impose sanctions for non-compliance
• Judges can issue orders for interim relief to safeguard a party’s position pending final judgement
• Defined rights of appeal in cases of factual or legal errors

Disadvantages:

• Potentially higher costs if the dispute is poorly managed or the opposing party seeks to prolong proceedings, typically lasting between 12 and 18 months
• Longer duration to obtain a judgement
• Proceedings are usually conducted in public
• Judgements are subject to appeal

Alternative dispute resolution

Construction contracts typically include provisions for resolving disputes through agreed procedures such as mediation, adjudication, and arbitration, or a combination thereof. Additionally, the construction industry is governed by statutory schemes that mandate adjudication procedures in the absence of contractual agreements, such as the Housing Grants, Construction, and Regeneration Act 1996 and the Local Democracy, Economic Development, and Construction Act 2009.

Many contracts for large and complex projects now incorporate tiered dispute resolution procedures, requiring parties to negotiate in good faith and establish dispute resolution boards, steering committees, and partnering meetings.

If a contract outlines specific procedures for dispute resolution, parties are generally obligated to adhere to those procedures unless otherwise agreed upon.

While alternative dispute resolution (ADR) procedures are often viewed as a last resort, they may fail in some instances or may be inadequate for certain circumstances, such as cases involving multiple parties or where enforcement of a decision is necessary. In such cases, litigation may become necessary.

Even when litigation proceedings are initiated, parties frequently reach a settlement before trial commences. Failure to engage in discussions before initiating proceedings may lead to penalties imposed by the court. However, if positions become entrenched or parties remain far apart, the case may proceed to court.

Litigation is typically perceived as more costly and time-consuming than other forms of dispute resolution, although this is not always the case, and in certain situations, litigation may be faster than arbitration. Litigation is also seen as more confrontational and likely to result in a binary decision rather than an equitable settlement. Additionally, litigation decisions are public and may impact the reputations of the involved parties.

Process

An action based on a simple contract must be initiated within six years from the date when the cause of action arose. However, for contracts executed under seal, the limitation period extends to 12 years. For further details, refer to the distinction between contracts under seal and contracts under hand.

The commencement of legal proceedings involves the claimant submitting a claim form to the appropriate court, outlining the case against the defendant, and specifying the desired remedy. The claim form is then served on the defendant, who may admit full or partial liability and propose settlement terms, or contest liability and submit a defence.

Subsequently, the court assigns the case to a specific ‘track’ (such as the small claims track, fast track, or multi-track) based on its complexity and magnitude and issues directions to the parties regarding evidence disclosure and other procedural matters.

A trial is conducted, during which the judge evaluates the evidence presented by both parties and determines whether the claimant has substantiated their case. Various remedies are within the court’s purview, with damages payments to compensate the claimant for losses being the most common. The court may also order the defendant to take specific actions or issue an injunction to prevent certain behaviours. In fast-track and multi-track cases, the losing party typically bears a portion of the winning party’s legal costs.

Court judgements are enforceable, but parties may seek permission to appeal the decision if deemed necessary.

Technology and Construction Court

The Technology and Construction Court (TCC) serves as a specialised judicial body, primarily handling disputes related to technology and construction. TCC proceedings adhere to the Civil Procedure Rules (CPR) along with supplementary Practice Directions, which were implemented in 1999 to expedite court processes and diminish expenses.

The TCC Practice Direction outlines various examples of claims suitable for adjudication within the TCC framework (although this list is not exhaustive):

• Building or construction disputes, including matters involving the enforcement of adjudicators’ decisions as per the Housing Grants, Construction and Regeneration Act 1996,.
• Engineering conflicts. Disputes involving engineers, architects, surveyors, accountants, and other specialised advisors concerning their rendered services.
• Contentions involving local authorities concerning their legal obligations regarding land development or building construction.
• Disputes related to the design, provision, and installation of computer systems, software, and associated network infrastructure.
• Quality disputes regarding goods sale or rental, as well as work performed, materials supplied, or services provided.
• Landlord-tenant disputes regarding breaches of repair agreements. Neighbour, landowner, and occupier conflicts involving trespass, nuisance, etc.
• Environmental claims (e.g., pollution cases).
• Incidents arising from fires.
• Cases necessitating complex account reconciliations.
• Challenges against arbitrators’ decisions in construction and engineering disputes, including applications for appeal permission and appeals.

In many instances, a mandatory Pre-Action Protocol is in place. Its objectives include facilitating early and transparent exchange of information regarding potential claims and defences, fostering pre-litigation settlement agreements, and supporting effective litigation management when pre-litigation resolution proves unattainable.