“Dispute” has a broad definition in the Construction Contracts Act 2002 (CCA): “a dispute or difference that arises under a construction contract”.
Disputes are a regular feature in construction that range in value and complexity, from a mis-poured concrete driveway at a family home to unagreed variations in the construction of a multi-storey apartment building.
Delays as a result of unresolved disputes can have significant knock-on effects for a variety of stakeholders as in some situations, parties are able to cease work on a project until a dispute is resolved. Speedy and cost-effective dispute resolution benefits all parties to a dispute.
Dispute resolution processes
The various dispute resolution processes can be divided into two broad categories. The first category contains processes which a party may initiate without consent from the other. The second category contains processes that can only be used if the other party agrees.
Processes that can be initiated without consent from the other party include:
- Court proceedings;
- A claim in the Disputes Tribunal;
- Adjudication under the CCA; and
- Mediation under the Weathertight Homes Resolution Services Act 2006.
Processes that require consent of the other party before they can be initiated include:
- Referring the dispute to the engineer under the contract;
- Expert determination;
- Mediation; and
- Arbitration.
A range of the above processes can be accessed through the Building Disputes Tribunal.
Which dispute resolution process should you use?
The process you choose to resolve your dispute will depend on a range of factors, including:
- The value of the dispute; and
- Whether the contract specifies a process the parties must use. For example, the NZS 3910 contract requires parties to submit disputes to the engineer in the first instance. If the outcome of the engineer’s review is unsatisfactory for either party, the dispute can then be referred to an expert for determination.
Each process has its own individual characteristics and different processes are suitable for resolving different types of disputes.
Court proceedings
Court proceedings (also known as litigation) can be filed in the District Court for disputes up to $350,000.00 in value. The High Court will hear disputes for claims over $350,000.00 in value and matters that are appealed from the District Court. Courts are presided over by judges who release their decisions (known as judgments), which are enforceable. If a party wishes to appeal a decision of the High Court, the Court of Appeal and the Supreme Court are the next steps in the court hierarchy, although appeal grounds are limited. With some exceptions, parties are generally permitted to represent themselves in court proceedings, however, due to the complexity and risk, parties are recommended to consult or engage a lawyer.
Partly due to the sheer volume of matters that are progressing through the Courts at any given time, getting a decision from an application to the District Court or High Court can take years and cost hundreds of thousands of dollars. For these reasons, court proceedings tend to be viewed as a last resort once all other dispute resolution methods have failed.
Disputes Tribunal
The Disputes Tribunal, colloquially referred to as “small claims court”, offers an affordable, relatively informal and versatile dispute resolution process for disputes up to $30,000.00 in value. The Disputes Tribunal does not specialise in construction law, parties cannot be represented by lawyers, and there are no judges: a referee delivers a binding order which is enforceable as a civil debt in the District Court. A key feature of the Disputes Tribunal is that the referee determines the disputes according to the merits and the justice of the case as guided by the law, but is not bound by strict legal rights or obligations, giving it a distinct “fairness” element that is typically absent from other more formal dispute resolution processes.
The Disputes Tribunal offers limited grounds to appeal if a decision does not go your way, either by way of a rehearing or an appeal. Appeals can only be brought if the referee ran the hearing in a way that was unfair. Parties may be represented by lawyers at an appeal which is heard by a District Court judge.
Adjudication
Adjudication is the dispute resolution process prescribed by the CCA. It is intended as a speedy and affordable alternative to litigation, with strict, short timeframes and a binding and enforceable determination delivered by the adjudicator. Speed and certainty of outcome are attractive features of adjudication.
The CCA enables parties to a construction contract to access other dispute resolution processes simultaneously, such as court proceedings or mediation for the same dispute. Parties can be represented by lawyers in adjudication (although it is not compulsory). Adjudicators are often experts in the subject matter which can be beneficial to all parties. Parties typically share the costs of the adjudicator, though the CCA enables an adjudicator to award costs in favour of one party in specific circumstances. We will be publishing a more in-depth article on adjudication later this year.
Arbitration
Arbitration is a process governed by the Arbitration Act 1996 that parties can access by agreement. The arbitration process is more flexible than adjudication; parties can agree on their preferred timetable and process. Arbitration also offers speed when compared to litigation. Parties can bring disputes of any value to arbitration. The arbitrator’s decision is known as an award, and like a judgment or an adjudicator’s determination, it can be enforced as a judgment of the Court.
Parties can be represented by lawyers in arbitration. Like adjudication, arbitration is speedier and more affordable than litigation. However, in some cases can be more expensive that adjudication. Parties typically share the costs of adjudication, though an arbitrator can award costs in favour of one party in specific circumstances.
Mediation
Mediation is a consensual and confidential process. The mediator’s role is to facilitate discussions between the parties and assist them in reaching their own mutually agreeable settlement. The terms of the settlement are recorded in writing and are binding on the parties, who can enforce the settlement by issuing court proceedings.
Parties can be represented by lawyers in mediation. Despite that, mediation is less formal and adversarial than litigation, adjudication, and arbitration, and can offer the additional benefit of preserving relationships between parties in what can be a small industry. Parties typically share the costs of mediation. Please see our website for more information on mediation, click here.
Expert Determination
Expert determination is a simple dispute resolution process in which parties refer the matter to an independent person (an expert in the specific subject matter that is in dispute) to decide. Prior to referring the matter, the parties agree whether they will be bound by the decision. An expert determination is an inexpensive, speedy and effective dispute resolution process that does not have the formality of the other processes described in this article, but still benefits from the input of an external party. Parties typically share the costs of an expert determination.
Negotiation
Negotiation is an affordable first step toward resolution of a dispute that parties can engage in themselves, without the assistance of an external independent facilitator.
As the parties are deciding the outcome of their dispute themselves, a successful negotiation will involve a good-faith approach and parties will likely be required to compromise on their position to reach an agreement. If parties are entrenched in their position and no headway can be made, parties might need to engage with a more structured and formal process, with an external third party.
Engineer under the contract
Certain contracts require parties to refer a dispute to the engineer under the contract as the first step in resolving any dispute. Either party to a contract can request a formal decision regarding a dispute from engineer by giving them written notice. The engineer must then provide a decision within 20 working days (or other timeframe specified under the contract) of receiving the written notice. Usually, the contract makes the engineer’s decision binding unless it is challenged within the timeframe specified in the contract.
Conclusion
Disagreements or differences of opinion can quickly become disputes, which can result in delays, increased costs, and stress for all parties. Early intervention typically reduces cost and stress associated with construction disputes and enables parties to progress the project.
Contact us if a dispute has arisen or you think a dispute may arise in your construction project. Our lawyers at Norling Law can review your dispute and advise which dispute resolution process is suitable and discuss strategies on how to progress your project as part of our no obligation legal consultation. To book a free 30-minute consultation please click this link https://norlinglaw.co.nz/consultation-brent/.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
Anna practices in the area of commercial litigation and has appeared as Counsel in the District Court, High Court and the Court of Appeal, having successes in all Courts. Anna has a special interest in corporate, insolvency and relationship property law.
Wendy has over 20 years’ experience in civil litigation in New Zealand with a main focus on construction, insolvency and debt recovery and security enforcement.