It is a matter of fact that a considerable number of companies are suffering from acute cash flow problems. This is not all down to the poor state of the economy but a large part can be squarely laid at the door of the “I do not want to pay” brigade.
Rod Appleyard
Now it is easy to reach for the solicitor or run off to the small claims courts. The first option only runs up a hugely disproportionate bill and the second option is as reliable as a roulette wheel. So just hang back a second and read on, I might, just might, be able to save you not only money but, in some cases, your company.
In recent months there have been considerable column inches (sorry, centimetres) covered on the matter of alternative dispute resolution and, in particular, mediation and ombudsmen schemes.
Given that there will be the inevitable confusion about how they work and other more legal aspects, I believe it is time to put keyboard to work and prevent any misunderstanding that may arise.
So, let us look at the five routes of ADR (Alternative Dispute Resolution) mechanisms.
Firstly, we have Arbitration which sits just under the courts and is a legal mechanism which can only be appealed through the Court of Appeal. It is long- winded, expensive, (although not as expensive as court) and can become most complex. This is ideal for really big cases which are both complex and multifaceted. There springs to mind at least one case in fenestration history that would have done well to go to arbitration, but became driven by the legal system and ended up in court, much to the cost of the parties. I am sure there are many more up and down the country that I do not know about. I have seen cases where costs of the parties are very much a multiple of the disputed sum, in one case it reached almost a multiple of ten. Who says proportionality is alive and well – I do not think so. Big cases go to arbitration it makes so much sense: unless you want a quick fix then read on.
We then look at my favourite, Adjudication. It is legally binding, the courts almost never overthrow a decision unless it is incorrectly conceived within the law or there is a conflict of interest. You get the answer in 28 days and if a party does not pay or perform within the stated period, usually 7 days, it can be enforced through the courts like any other court decision. The great thing about adjudication is that you get an adjudicator that knows the discipline and not someone who the day before was listening to why the boat that was sold sank two days after the purchase date. Another advantage is that you can ask for costs of, not only, the adjudication but also the costs of getting to the adjudication. Just remember, you do not get if you do not ask.
Costly? Well considering the time allowed, definitely not. Good for small disputes and domestics? Very much so, just make sure that it is in your terms and conditions that in the event of a dispute either party may go to adjudication as described under the JCT Home owners’ and builders’ contract if it is a company against a householder. This mechanism can be used also after the event if both parties agree or, for larger disputes, under the Scheme for Construction Contracts. Adjudication is my favourite route for dispute resolution because you get a fenestration expert looking at fenestration disputes – this just cannot be beat. The adjudicator will be legally trained and recognised by the courts and by his professional body as being competent and fair. I have yet to find anyone, either claimant or respondent, that does not agree that it is an open and fair mechanism that works. Did I say that it was behind closed doors so there is no publicity? It just has to be good for the PR people in the company. I can hear it now ‘Yes, we put this clause in so that if a dispute arises our clients know what to do’, followed closely by ‘It never gets used but we feel that it indicates how fair we are as a company’. Just remember in both levels of adjudication if you do not ask the adjudicator to decide something, he will not even down to who pays the parties costs and interest, it is all down to you, 28 days and it is all over. A very much overlooked and extraordinarily simple means of settling the most smallest of disputes in an economical manner, and as I have said before it is legally binding. A further question that may arise, is that of on what it can be used on. Hob adjudication can only be used on disputes between home owners and builders (contractors). The main adjudication system is mainly geared to construction issues under ‘The Act’ or as I have said ‘The Scheme’. These block the parties ability to litigation if it is in the contract. However, anything can be adjudicated as long as both the parties agree.
Route No. 3 – Expert Determination. This is where you get an expert in the discipline of the dispute, in our case, fenestration and they will listen to each party, read all the documents submitted and make a decision. This is a binding decision and carries the weight of the courts; all done very quietly and without fuss. Has a decision ever been overturned? Not to my knowledge, but then it is without publicity, so I would not know. Enforceable in the courts? Yes. Is it as good as adjudication? As much as it hurts to say, yes, almost. Expert determination has the same privacy surrounding it and, as with adjudication, does no need solicitors representing the parties in small claims, although it helps sometimes.
Mediation. This is the big buzz word at the moment within legal circles. So what do you get? You get anyone from a solicitor to an accountant who runs between the parties and encourages them to make a deal. No one wins and the optimum is that no one loses. Mediation is all about brokering a deal between the two parties and the best bit is that there is a better than even chance that the mediator has not a clue what a spandrel panel is let alone a mullion so this is a very costly exercise, that is, unless the parties fall for the manipulation of the mediator. It will either fail or be a compromise that has cost a considerable amount of money and achieved at eleven o’clock at night through sheer exhaustion and a loss of the will to live.
Is it legally binding? Well, I suppose it is unless one party shouts foul afterwards and will not honour the agreement even if it is in writing. Does it cost much? Well, I have been told recently that a fourteen hour mediation meeting where the parties, through sheer fatigue, reached a settlement and the bill for just the mediator was £2,500.00, plus VAT, of course. Staggering, but true. On that basis, the mediator, being a solicitor, confirmed that he had not a clue what the subject matter was but that did not matter as the parties reached a decision and the £2,500.00, plus VAT, was just for that day not all the other hours that had been clocked up.
Another person round the table openly admitted that he was an accountant and regularly did construction mediations although, apart from watching his extension being built, knew very little about building works. I pointed out that this could be a bit frightening and I was frowned on as being a little sensitive on what cases a person should, or should not, act as a mediator.
I pointed out that surely the parties should have confidence that, not only is the mediator competent, but is also knowledgeable of the terminology of the discipline. You see, the mediator cannot use his expertise to help the matter along, but I believe that he needs to know what the parties are talking about – but apparently not – poor parties, such misguided trust!
The answer came back as, ‘not one bit’. So, next week, I fancy being a mediator on a medical dispute – anyone out there? I know nothing about it but that would apparently not matter. Mediation is an expensive way of, what we call, either ‘doing a deal’ or ‘making a commercial decision’. Go to mediation at your peril. It may work but you will have to compromise, along with paying for the benefit of that compromise. Costs? Well, invariably, you meet your own and half the mediation costs. It is a bit like court system really, where you never fully win or lose, just kind of make the system go round in a jaundiced manner.
An Ombudsman. This is a new kid on the block to the fenestration industry and, to be quite honest, in this case, it is a name only. From what I can gather there is no named ombudsman in our industry, it is done by a group of people. Do they have legal standing? Not to my knowledge, but then I may be wrong. Are they totally independent? Well, if you disregard how the ombudsman is funded then, perhaps, to a blind, deaf man living on Mars, it could be. Is the ombudsman open to anyone or just a select few? From what I can discern, the answer is both no and yes, in that order.
The big question is ‘Does it have legal recognition and legal gravitas?’. Sorry, Mr. Ombudsman, your decisions are neither supported by the courts or, from what I can gather, made by a suitably qualified person. One of the board of directors of the outfit that is operating the scheme, is not sufficient to demonstrate that there is not a conflict of interest. To be quite honest, is this not just another scheme that tries to appear independent but is, in fact, a trade association supported by its members? Now let me think, where have I seen this before?
Well, unfortunately, this article may ruffle a few feathers but then it needs to. We have more than sufficient ADR mechanisms that will do the job, if used correctly. These are supported by legislation and the courts, without pseudo- ombudsmen popping up offering non-legal or unenforceable decisions. Times are hard and work is, to say the least, tight. If you get into a dispute, put your money with either adjudication or expert determination and do not forget to get that clause into your terms – you are then protected against litigation and, like many insurances, it is hoped you will never need it but it is there if you do.
Much ado about nothing? That just depends on your position, does it not?
Rod Appleyard works as a fenestration expert with many years experience in the industry and dispute resolution. He is a Chartered Building Surveyor, Fellow of the Royal Institution of Chartered Surveyors and a Fellow of the Chartered Institute of Arbitrators. He practices as an Adjudicator and Arbitrator along with his work as an independent expert surveyor to the fenestration industry. He can be reached on either 01274 569912 or 07785232934
