When does a construction dispute go to court?

The courts have jurisdiction to hear all manner of disputes and may be the parties’ forum of choice for a number of reasons, including the number of parties and nature of the dispute. The District Court is the specified forum for enforcement of CCA adjudication determinations, and the High Court is the specified forum for appeals and jurisdictional disputes from arbitration. 

The courts have procedural rules governed by statutes – the High Court Rules 2016 and the District Court Rules 2014. These set rigid structures and procedures to be followed in all cases.

In addition to dealing with contractual matters between construction parties, the court system has been the base for the last 25 years of building defects – leaky building – litigation. As a result, there is a wealth of precedent and judicial knowledge for dealing with construction disputes.

It is noted the High Court Rules are the subject of a current review, and the comments in this article may need to be considered in the context of new rules in the not-too-distant future.

Pros in the use of court processes for construction disputes:

• The court system allows all matters to be addressed in a single forum with one decision-maker. There are no limits on parties or causes of action.
• Courts have a long history of managing complex building disputes effectively. The system is adept at handling multi-party processes and provides even-handed support for parties that can’t agree on procedural matters.
• Judge and Registrar time is not charged directly. It is captured in the overall hearing costs. Filing fees are limited and low, and daily hearing costs are capped.
• Court rules are easily interpreted and accessible. 
• Alternative Dispute Resolution is actively encouraged by the Court. Many claims are resolved prior to hearing.

Cons in the use of court processes for construction disputes:

• Discovery can be expensive and inefficient. Even with tailoring, electronic discovery in construction claims tends to be voluminous and unwieldy.
• Interlocutory disputes can be expensive and inefficient. These can be many and varied depending on the particular matters at issue but can hinder real progress in claims.
• Expert conferencing can be particularly frustrating. Given the heavy reliance on experts in building claims, it is vital any statements are clear and matters in dispute between experts is refined through conferencing. Conferencing is generally very late in the piece, expensive, poorly managed and often seems to offer only limited benefit.
• Alternative Dispute Resolution is not formally required and there is no clear incentive to mediate or negotiate early on. Experience suggests mediation tends to occur very close to trial and can mean parties have been put to significant expense that proves ultimately unnecessary.

My two cents – what could be improved?

It seems likely that AI will provide at least a partial answer to discovery. As these systems develop, protocols for their use may need to be developed by the Courts. For interlocutory matters, these could be fast tracked.

It may be beneficial for there to be incentives for early mediation or negotiation. Were ADR required before a hearing were allocated, more claims might be resolved sooner. This is a two-edged sword however, as one of the key benefits of mediation is it is voluntary. A careful balance may need to be struck.

As with arbitration, there may well be benefit in a pre-action protocol to force the parties to engage before proceedings get underway. Again, this may help clarify parties' thinking and result in better pleadings.

With expert conferencing, there may need to be greater direct management by the Court, and issues defined with Court approval in advance. If engagement between experts were required earlier in the process, before evidence were finalised, then evidence could be refined to the matters truly in dispute.

Quantum evidence is very complex and expensive, and can be rendered moot by the way a judgment is crafted. If quantum were separated as standard practice in the same nature as costs, it would allow more targeted quantum evidence. It would also encourage settlement, as quantum is generally the point experts agree on most readily.

Concluding Remarks

There are many benefits to using the court system for resolution of construction disputes. However, they can be expensive and unwieldy if not managed well.

As noted, the High Court Rules are due amendment, which may alter the way construction claims can be managed and run to enhance efficacy and efficiency. The degree of improvement with amended rules remains to be seen. It will be very interesting to see how claims develop differently moving forwards – watch this space.

If you have any questions about your dispute options, get in touch with the Dentons Major Projects and Construction team.