Construction disputes: what of mediation?

Whisper it. Mediation is on the rise. This statement has been repeated ad infinitum in these shores over recent years. Although at times it may hitherto have been based more on bluster and ballooning optimism than reality, evidence from a range of settings including in workplace, family, community and commercial disputes speaks of a growing use of mediation in Scotland. The same may now at least cautiously be said of that most litigious of dispute areas, construction.

In this article we offer a snapshot of recent survey research conducted with Scottish contentious construction lawyers and construction industry participants (mainly small contractors and subcontractors) on their attitudes and experiences relative to mediation. The findings discussed below are based on the survey responses of 50 lawyers (representing a response rate of 30%) and 63 contractors and subcontractors (hereinafter "clients"; response rate: 18%) conducted in 2010 and 2011.

Knowledge of mediation

All lawyers who responded to our survey professed awareness of mediation, compared to 80% of the clients. Given the decades of profession of mediation we have seen in Scotland, the lawyer unanimity in terms of knowledge holds few surprises. The fact that one in five clients was still unaware of mediation is perhaps a little alarming. A far greater percentage of those that did not respond to the survey may be unaware of mediation.

Some 82% of lawyers had received training or education in mediation. This represents a significant increase from the 60% recorded in research into Scottish commercial lawyers’ experiences of mediation undertaken around five years ago (B Clark and C Dawson, “ADR and Scottish Commercial Litigators” (2007) 26 CJQ 28). Less than 4% of the commercial lawyers in the 2006 survey reported exposure to mediation in law school. That figure has risen to 20% in the current study, suggesting an increased embedding of mediation in Scottish traditional lawyer education. While the educational picture is thus positive in respect of lawyers, clients generally lacked any training or education in mediation, with only 12% reporting such exposure.

Mediation use

Lawyers were much more likely than clients to have instituted polices on mediation use. Some 66% of lawyers had a firm policy or practice of encouraging use of mediation, as opposed to only 19% of clients. This schism is to be expected perhaps, given that lawyers are repeat players in dispute resolution as opposed to the clients, many of whom will have had much more limited exposure to formal disputing practices generally.

Some 58% of the lawyers had represented parties in mediation (an increase on the 35% of commercial lawyers of five years ago), whereas only 30% of the clients had mediated. From our lawyer survey we tracked 178 mediation cases (there is some double counting in the figures), with a settlement rate of 74%, and a further 9% partially settling. Our survey of clients revealed 37 cases, with a settlement rate of 65%, which rose to 79% when partially settled cases were included.

The most common case types cited were those relating to payment, damages, professional negligence, and changes to work.

Beyond positive settlement rates, equally important is the fact that both lawyers and clients were generally satisfied with their mediation experiences, in terms of such factors as speed, cost, mediator performance and outcomes. Clients and lawyers espoused generally similar reasons for mediating, such as saving costs and time, seeking continuation of business relationships, and procuring creative agreements.

Views on mediation

Our respondents were then asked to comment on a range of matters relative to construction mediation’s development. Some of the key issues are examined here. (Only 40% of the clients felt able to offer comments at this stage, suggesting that sophisticated appreciation of mediation remains low.)

Although the extent that mediation should become entwined with the formal justice business of the civil courts has long been a controversial issue, clients were generally supportive of such measures. For example, 76% agreed that judges should refer more cases to mediation. The same proportion agreed that rendering mediation a mandatory first step in litigation procedures was an attractive proposition. Lawyers trod a little more cautiously on this territory. Nonetheless, 62% were in favour of increased judicial promotion and 54% supported compelling recourse to mediation. Given that previous research into Scottish commercial lawyers found a mere 27% of lawyers supporting mandatory mediation, the tide may be turning within legal circles on this issue.

When and how lawyers ought to be involved in mediation are emotive and divisive issues. While 74% of lawyer respondents suggested that legal practitioners made the best mediators, that view was not at all shared by clients. A mere 4% of clients agreed with this proposition. By contrast, a whopping 88% of clients stated that those with industry experience as construction professionals were superior in the mediation role. The gauntlet has thus been thrown down to lawyers to prove their worth in mediation practice!

The merits of other ways of resolving construction disputes have a clear impact on the prospects of mediation. While there was some agreement between lawyers and clients that the prominent place of adjudication in the construction disputing landscape limited mediation’s scope, a stark divergence between their respective views on the merits of adjudication existed. Some 84% of lawyers agreed that adjudication was a suitable forum for resolving construction disputes, compared with only 25% of clients. The latter view accords with anecdotal concerns espoused over the costs, complexities and quality of decision making in adjudication. Litigation and arbitration were generally pilloried by both lawyers and clients. For arbitration aficionados some solace may be found in the fact that at least these negative results were gleaned before recent reforms kicked in.

Going forward

Taken in whole, the findings paint a positive picture for Scottish construction mediation. Activity is increasing, albeit slowly. Mediating parties typically settle and walk away from their settlement endeavours satisfied by their experiences. Mediation is underused, however. The process may not comport well with the hardnosed, competitive culture of the Scottish construction industry. Our research found broad agreement between lawyers and clients that ignorance and negativity relative to mediation continue to exist throughout the construction sector as a whole. More needs to be done to surmount these attitudinal barriers. 

While lawyers have often been blamed for stifling mediation, less emphasis has perhaps been placed on getting the mediation message out to clients. Particularly when parties are in the midst of a dispute, mediation may not be a particularly compelling option. We know from research, however, that even the most recalcitrant, polarised parties walk away from mediation very glad that they had been persuaded to dip their toes in the process. There is a role for all interested players – mediation providers, lawyers, courts, construction industry participants, professional bodies and the state – to help parties cross the Rubicon and help mediation realise its full potential in Scottish construction dispute resolution.