Med-Adjudication - A New Approach to Dispute Resolution

© Daniel Atkinson 2002 27 January 2002  Short version first published in Construction News February 2002

The last two years have seen a rapid increase in the use of Mediation and Adjudication to resolve disputes in construction. The success of both approaches has swept away some of the pre-conceptions about dispute resolution, and has opened the way for a new combined approach Mediation/Adjudication known as Med-Ad. The combined approach allows the parties to explore the possibility of settlement in a constructive manner and for those matters not resolved to obtain a rapid decision by the person already familiar with the project and the issues. It does away with the stop-start approach in some standard forms thereby reducing confrontation.

The success of Mediation shows that it is possible for parties in construction to sit together to resolve their problems in a professional manner. The parties themselves usually need to work together to achieve their common objectives both technically and commercially. The right forum where open dialogue takes place leads to resolution of commercial problems.

The success of Adjudication shows that it is not necessary for extensive and expensive analysis to decide issues and achieve the approximate right answer. The parties usually know the facts and the issues. An experienced professional adjudicator with the authority of the parties can strip away the legal posturing and ascertain the facts and the law. Released from some of the more rigid rules of procedure in arbitration or litigation the Adjudicator can quickly decide the issues for the parties so that they consider there is no need for any further legal process.

On first analysis, it may appear that the two approaches of Mediation and Adjudication cannot be combined in the appointment of one person as Med-Adjudicator. It is certainly the case that if a person appointed as an Adjudicator attempts to act also as Mediator using the traditional approach, that his decision may not be binding due to apparent lack of impartiality. This happened in Glencot Development and Design Co Limited v Ben Barrett & Son (Contractors) Limited (2001). In that case the adjudicator acted as mediator with the agreement of the parties during the adjudication. Eventually he issued his decision and the matter of his impartiality was heard before His Honour Judge Lloyd QC. There was no question of actual bias by the adjudicator. The issue was whether his actions were sufficient to give rise to apparent bias.

It was held that in adjudication whilst it is permissible to make enquiries and receive evidence and submissions from one party alone there is a clear obligation on the adjudicator to give any absent party a complete and accurate account of what has taken place. In this case the adjudicator went to and fro between the parties. He was under no obligation to report what he heard or learnt. The private discussions could have conveyed material or impressions that subsequently influenced his decision. In the adjudication the adjudicator was required to form a view about the credibility of one of the party’s case. This was an area where unconscious or insidious bias may be present. It was held therefore that any fair-minded and informed observer would conclude that the adjudicator’s participation in the lengthy discussions of the mediation process led to a real possibility of the adjudicator being biased. On that basis the adjudicator’s decision was unenforceable for apparent bias.

The difficulties of combining mediation and adjudication can be avoided by an examination of the operation of mediation in construction.

The traditional approach in Mediation is to meet the parties both together and separately. To encourage open dialogue the Mediator is required to keep confident from the other party anything disclosed in the separate meetings unless authorized by the party. This approach provides a psychological release from the need to maintain commercial positions, allows the legal position of the parties to be tested and exploration of possible solutions. Such confidentiality would undermine the need for justice and openness required of adjudication.

In most construction disputes there is seldom a need for extensive confidentiality. The issues in most cases relate to the valuation of parts of the work, the measure of extension of time and disagreements as to the facts and to interpretation of the terms of contracts. What is usually required of the Mediator is not to provide a psychological release, but to provide an environment in which the reality of the situation can be recognized. The professionals representing the parties usually conduct the fact-finding exercise with guidance from the Mediator. The Mediator does not give a view usually, but instead encourages critical valuation. This approach is similar to the inquisitorial approach adopted by an Adjudicator and leads to a natural combination of both methods.

Med-Ad commences with an agreement signed by the parties. A suggested Med-Ad Agreement shows one approach. The essence of any agreement is that at any time any party can refer the dispute to adjudication. The Med-Adjudicator follows the rules of natural justice as they apply to adjudication from the commencement of the process. He is master of the procedure subject to agreed requirements of the parties. The Med-Adjudicator meets with the parties together, but the essence of the procedure is that he meets with the professionals and key witnesses from each side together to discuss particular issues. Unlike a traditional Mediator, the Med-Adjudicator gives preliminary views to the parties on the basis of his meetings with the professionals and witnesses. If the parties settle then this is recorded in a written settlement agreement. If not settled within two weeks, the dispute proceeds to adjudication automatically. The preliminary views of the Med-Adjudicator are not binding on the parties nor on the Med-Adjudicator if the matter proceeds to Adjudication, but the views are recorded in any decision and either confirmed or distinguished in the decision.

A similar approach to that described above was adopted by His Honour Humphrey Lloyd QC acting as a judge (not adjudicator) in the Floods of Queensferry Ltd v Shand Construction Ltd [1999]TCC BLR 319. He suggested to the parties an informal approach to the resolution of some typical issues, which he described then as experimental.

The procedure involved the judge sitting down informally with the quantity surveyors (accompanied by junior counsel only to ensure that the interests of the parties were safeguarded) to discuss their respective positions directly with them. The judge then expressed his provisional views in writing, as a result of which the parties could take stock of his initial reactions and be better informed as to whether they wished to accept those views, although they were not obliged to do so. If they accepted the view then they could apply them to other comparable items in dispute. If not they could decide to have them decided in the ordinary way in the court proceedings. The procedure could be terminated at any time without any adverse reflection or comment by anybody. Judge Lloyd also reserved to himself the right to bring the procedure to an end if it was not likely to work or to achieve the objectives of being cost-effective. He also reserved the right to say that he needed more material or further submissions in open court. The parties agreed the procedure by a written agreement that bound the judge, since it was intended to serve their needs.

The effect of the procedure was to reduce the issues that had to be decided in court.

The Med-Ad approach provides a rapid and cost effective means of dispute resolution in keeping with the modern trend of reducing confrontation and encouraging dialogue.