Dispute resolution
| Author | Julian Bailey |
| Pages | 1687-1730 |
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CHAPTER 23
DISPUTE RESOLUTION
Introduction 1687
Dispute-resolution agreements 1689
(i) Compulsory or consensual? 1689
(ii) Dispute-resolution agreements in construction and engineering
contracts 1690
(iii) Application of dispute-resolution agreement 1692
(iv) Alternative dispute resolution 1692
(v) Executive negotiation 1693
(vi) Dispute board 1694
(vii) Mediation 1697
(viii) Expert determination 1701
(ix) Contractual adjudication 1712
(x) Breakdown of agreed procedure 1713
Enforceability of ADR agreements 1714
(i) Stay of court proceedings 1714
(ii) Damages 1716
(iii) Ouster of the court ’s jurisdiction 1716
(iv) Statutory adjudication 1719
Settlement of claims and disputes 1719
(i) Settlement agreements – accord and satisfaction 1719
(ii) Cheques 1721
(iii) Payment of lesser sum 1721
(iv) Future claims 1722
(v) Concurrent obligations 1723
(vi) Interpretation 1724
(vii) e rule in Biggin v Permanite 1725
(viii) Costs in legal proceedings 1730
Introduction
23.01 Construction and engineering contracts full at least two broad and overlapping
purposes. e rst is to provide a framework for the supply of goods and services by one
party to another, and for payment to be made for that supply. e second purpose is to
provide a statement of the parties’ respective legal rights and obligations, so that if there
is disagreement between them as to their rights and obligations they may refer to the
contract as a record of what was agreed, and who took responsibility for what. If, after
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having done that, the parties are still unable to agree on whatever matters there are in
dispute, they may seek to have their dispute resolved by an independent person or body.
e contract itself may make provision as to the procedure for resolving disputes. Even
if it does not, the parties may avail themselves of dispute resolution processes that the
law permits irrespective of any agreement of the parties, the foremost of which is dispute
resolution through the courts (ie, litigation).
23.02 Construction and engineering disputes var y innitely in their subject matter,
detail and complexity. e simplest of cases may involve the collection of a debt that
is clearly owed for work performed. Towards the other end of the spectrum are some
of the most factually detailed and legally complicated disputes one may encounter in
commercial law. e potential for lengthy trials and vast legal expense in construction
and engineering disputes is notorious.1 ere are also, in some quarters of the construc-
tion industry, belligerent propensities that have the eect of fomenting conict. One
senior English appellate judge lamented, relatively recently, and with obvious hyperbole,
that “[i]t seems to be the practice in the construction industry to employ consultants
to prepare a claim almost as soon as the ink on the contract is dry”.2 In slightly more
measured tones it has been said that “[e]xperience suggests that construction contracts
almost invariably give rise to disputes in their closing stages, frequently in relation to
snagging”.3 And in Australia reference has been made to “the general inevitability of
building disputes in large projects”,4 with it also being suggested that “it is notorious that
disputes are commonly part and parcel of building contracts”.5 It is, with respect, dicult
to generalise as to the propensity for construction and engineering projects to erupt into
a dispute. A dispute may be the product of a number of factors, including poor contract
drafting,6 the nancial positions of the protagonists in relation to the project, whether
1 See , eg, Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runo Ltd [2005] NSWSC 1167. In McSpedden v
Hartnett (1942) 42 SR (NSW) 116, which concerned an interlocutory application for particulars of a defence in a
nal account dispute, Jordan CJ held (at 117): “It is deplorable that the parties should have been unable to arrive at
a compromise. Anyone familiar with this type of action can foresee that it will almost certainly involve considerable
loss to the ultimately successful party, and perhaps ruinous loss to the loser.” See also at 124, per Halse Rogers J.
2 McAlpine Humberoak Ltd v McDermott International Inc (No 1) (1992) 58 BLR 1 at 24, per Lloyd LJ. See also
Duncan Wallace, Construction Contracts: Principles and Policies in Tort and Contract Vol 2 (Sweet & Maxwell, 1996)
page 504; Bingham, “Keynote address to the 1996 conference – new challenges in construction law” in U and de
Zylva (eds), New Horizons in Construction Law (Construction Law Press, 1998) pages 4–5; Brooker and Lavers,
“e contractor, the sub-contractor, the legal system and the lawyers: construction survey results” in U and de
Zylva (op cit), chapter 21; COD Hyde Ltd v Space Change Management Ltd [2016] EWHC 820 (Ch) at [43], per
Warren J. It has been said that disputing is “endemic” to the construction industry: Flood and Caiger, “Lawyers and
Arbitration: e Juridication of Construction Disputes” (1993) 56 Modern Law Review 412 at 421. For an article
considering “trends” in construction dispute resolution, see Allen, “Global construction disputes 2014: getting the
basics right” (2015) 31 Const LJ 183.
3 Tracs (Engineering) Ltd v Sampson [2001] EWCA Civ 1388 at [48], per Chadwick LJ.
4 Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1308 at [34], per Austin J. Sir Gareld
Barwick, a Chief Justice of the High Court of Australia, once remarked (prior to attaining judicial oce) that “[i]n
a developing country such as this, and with the virile and independent populace which we have, resort to the Courts
for the determination of rights is a matter of course, and not a step only to be taken if completely unavoidable
and in the rarest circumstances. at I think is the general bent of our people”: Barwick, “Courts, Lawyers and the
Attainment of Justice” (1958) 1 Tasmanian University Law Review 1 at 2.
5 Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 at [233], per Kaye JA. See also CPB
Contractors Pty Ltd v Celsus Pty Ltd [2017] FCA 1620 at [3], per Lee J.
6 See , eg, Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [89]–[92], per Bleby J.
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the works were performed smoothly (or problematically),7 whether the cost of the works
has escalated, the nature of the personalities involved in the project on all sides, the terms
on which the parties contracted, and external factors such as changes to laws, or the
actions of a neighbour or a planning authority.8
Dispute-resolution agreements
(i) Compulsory or consensual?
23.03 A party may be brought into a dispute resolution process either compulsorily or
voluntarily. Participation is compulsory in the case of statutory adjudication9 and litiga-
tion,10 where the commencement of an adjudication or court proceedings by one party
against another requires that other party’s involvement in a dispute resolution process to
which he has not necessarily consented.
23.04 Participation is voluntary in other forms of dispute resolution, including most
notably arbitration, where party autonomy reigns.11 Emerging also in recent years as an
alternative to both arbitration and litigation is expert determination, whereby parties
agree to their disputes being resolved by a person who acts as an expert and not as an
arbitrator. Equally as notable are consensual forms of dispute resolution that seek to
achieve a consensual resolution of a dispute, rather than a resolution of a dispute through
7 One recent study in Malaysia found that “poor site management” was a key driver of disputes in that country:
Barough, Shoubi and Preece, “Evaluating the eectiveness of mediation and arbitration processes in resolving
disputes in the Malaysian construction industry” (2013) 29 Const LJ 323.
8 For an interesting empirical study of the causes of construction disputes in Turkey, see Ilter, “Identication of
the relations between dispute factors and dispute categories in construction projects” [2012] International Journal
of Law in the Built Environment 45. See also Hallock and Zack, “What have we learnt from megaprojects?” [2019]
ICLR 208.
9 See Chapter 24. Statutory adjudication is not a consensual procedure because the availability of the procedure is
mandated by statute where parties enter into construction contracts (although it is not mandatory for the parties
to seek to resolve all disputes under the contract by way of adjudication, unless the contract specically provides
that this be done). e fact that statutory adjudication is a procedure the existence of which is mandated by statute
should mean that it is treated dierently to purely consensual forms of dispute resolution, and that public law
rights and remedies are available in relation to any statutory adjudication: see Bailey, “Public Law and Statutory
Adjudication” (2008) 24 Const LJ 461 (and see also Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture
(No 2) [2009] VSC 426; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190 and Northbuild
Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525, which lend support to the notion that
adjudicators’ decisions are amenable to judicial review on public law grounds). It is, however, sometimes said that
statutory adjudication is a creature of contract: see, eg, Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009]
EWHC 1906 (TCC) at [28], per HHJ Stephen Davies. In a sense that is right, as a statutory adjudication cannot
take place unless a construction contract has been entered into, or the parties otherwise agree to submit their dis-
putes to adjudication. But that does not mean that the legal incidents of statutory adjudication are on all fours with
equivalent procedures that take place purely because the parties to a contract have agreed of their own volition that
a particular procedure be used. See also Amec Group Ltd v ames Water Utilities Ltd [2010] EWHC 419 (TCC)
at [22]–[24], per Coulson J. In Scotland, the decisions of adjudicators are amenable to judicial review proceedings:
see, eg, Re Atholl Developments (Slackbuie) Ltd [2010] CSOH 94.
10 See Chapter 26. In Australia, there are various tribunals that have been established to, among other things, decide
building disputes primarily between home owners and builders. ese tribunals were described in Chapter19.
11 See Chapter 25. However, arbitration is not necessarily the most popular form of dispute resolution, certainly
for domestic (as opposed to international) construction and engineering disputes. Nevertheless, it was not very long
ago that arbitration was (and had been for some time) the dominant form of dispute resolution for construction
contracts. As was observed in a detailed 1993 study, “virtually all construction contracts contain arbitration clauses”:
Flood and Caiger, “Lawyers and Arbitration: e Juridication of Construction Disputes” (1993) 56 Modern Law
Review 412 at 412.
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