Eyes on the Prize, Disputes and Maintaining Cashflow

It has been said that all disputes in the construction industry are about time and money. In Quigg Golden's experience, the truth is even simpler. Time in this industry is money. Construction disputes are about cash and cashflow is always vital. The current uncertain climate means that no organisation can afford to be complacent when it comes to securing its income. Good communication between the parties themselves and early action can often avoid disputes arising and ensure cashflow is predictable.

However, disputes will inevitably arise where one party will refuse to pay another because it can not or will not. The first step is to recognise whether there is a debt or a dispute. If the sums have been properly executed and certified, it is likely that a debt has arisen and recovery of that sum is a relatively straightforward process. However, when a client or main contractor raises issues of quality or quantity, a dispute will arise and it will be necessary for the creditor to prove his entitlement to the sums claimed. In representing parties in such situations, Quigg Golden regularly sees the extent to which a debtor will go to confuse an issue in order to avoid making payment. Early clarification is therefore key to the successful resolution of a dispute. Professional advice can help the parties understand the strengths and weaknesses in their case and facilitate early settlement.

Often, parties will only realise the extent of a problem when it comes to drawing up a Final Account. Such an approach leaves the party in a much more difficult position. The best way to avoid a dispute is simply to keep on top of the job as it progresses, and this means constantly ensuring that records are kept in order. Issues flagged early between the Employer, its representative and the Contractor are invariably easier to sort out than those that arise out of an unexpected final account landing on the Employer's doormat.

Irish standard form Contracts as well as the new Public Works Contracts, all provide that the first step in any dispute is Conciliation. Our experience is that Conciliation is appropriate and relatively efficient for most claims. This is a form of mediation which is controlled by a Conciliator. Generally the parties make submissions to the Conciliator, leading to a full day of negotiations. The primary focus is on facilitating an agreement between the parties. The procedure is "without prejudice". This means that parties can introduce any evidence they wish and make offers without prejudicing their subsequent rights at Arbitration or Litigation.

Two factors influence the outcome of Conciliation enormously. The first is the attitude of the parties. It is vital to establish that those in the room have the commitment and authority to settle. The second factor influencing success is simply the quality of the Conciliator. It is always preferable to agree a Concilliator who has a good track record in construction disputes.

Should the conciliation prove unsuccessful, it is up to the Conciliator to produce a recommendation. Either party can reject this recommendation, but on many occasions, it will be accepted. Since the person to whom money is owed will be focussed on getting to that money, conciliation presents a relatively quick and inexpensive means of bringing matters to a head. It may well be preferable to settle for a sum that is less than that sought. Commercial reality often dictates that cash in the bank account is preferable to a long running dispute. As the cliché goes, a bird in the hand is worth two in the bush.

If the recommendation is not accepted, the situation is altogether more difficult. All standard form contracts refer disputes to Arbitration, so it is unlikely that a dispute will end up in the Four Courts. The relative speed, confidentiality and cost efficiency of Arbitration makes the process easier than litigation. Unlike Conciliation, the winner can expect to recover in the region of two thirds of their costs. However, the outlay can be substantial and the possibility of recovering of costs is to be balanced against the gamble of being unsuccessful and having to meet the other side's fees as well as those of the Arbitrator. The level of detail involved is significantly higher and the claimant can expect its senior staff to have to make a significant time commitment.

Cashflow is vital to the construction industry. The industry has tools for resolution of disputes. However, Quigg Golden's experience is that there is not substitution for good communication and early action.

Robert Rooney