Our interest in the construction industry is driven by two factors: the continued importance of the construction industry to the global economy and the prevalence of small claims in construction.
Construction is an industry upon which we all depend. If done properly, we go through our day-to-day lives without giving it much thought. But, when disputes arise that bring portions of that industry to a halt, infrastructure and even the economy are affected. Not all disruptive disputes have to be large. Taking one small link out of the chain makes the whole useless. We will explain below what a small and low-valued dispute is and how online dispute resolution (ODR) can get the construction industry back to work. But for now, here are seven examples of small disputes that can break the chain:
- The construction industry is complex. Disputes can arise when those complexities were not fully examined at the planning stage.
- The industry is fragmented. There is a range of varying approaches that can be employed to purchase construction products and services. Any of these transactions have the potential to become a dispute.
- Contractual relationships can deteriorate. Disputes arise when two or more project stakeholders behave in an opportunistic manner incompatible with the business interests of the other party.
- Construction project stakeholders often have misconceptions about performance.
- Hidden requirements and changes in orders often hinder construction projects.
- Often, construction operations are made up of smaller projects which are also conflict-prone.
- The projects making up construction operations are often hurried so work can proceed to the next level or a project allowing for mistakes and therefore disputes.
- Risks are not adequately identified or allocated, leading to disputes when they emerge.
It is suggested that construction disputes primarily come from a conflict of interests of the disputants, often the project stakeholders. The disputants may begin by referring to contractual provisions which the other party will reject.
It is not unusual for construction industry disputes to be expensive and have far-reaching consequences, not only for the parties involved but also for the economy in general. A dispute can possibly derail construction, and thereby disrupt economic activity. An article by Arcadic (2015) suggests that, globally, the average value of construction disputes in 2014 was approximately £39 million, with each dispute taking an average of 13.2 months to resolve.
For more on ODR in other countries and systems Online Dispute Resolution in the UK, Canada and UAE
What is a Small and Low-valued Dispute
What constitutes a small and low-valued claim varies widely across different legal jurisdictions. In England and Wales, small and low-valued claims are determined as property and monetary claims with a value of less than £25,000. While in the DIFC they are where the amount of the claim or the value of the subject matter of the claim does not exceed AED 50,000.
And in 2009, a European Union-wide small claims procedure focused on improving and simplifying procedures in civil and commercial disputes up to a value of 2,000€.
Although historically, scholars have regarded small and low-valued claims as a distinct area of the civil justice system, there are no special procedures for adjudicating them in England and Wales. The basic characteristics of small and low-valued disputes and claims adjudication are:
- Compared to litigation, proceedings are conducted in a much simpler and more informal format that lay people can readily understand.
- Legal representation during small claims hearings tends to be discouraged or, in fact, prohibited.
- Proceedings are conducted in an inquisitional manner with the adjudicator playing a proactive role in eliciting evidence.
- In most cases, rules of evidence and procedure are designed to enable parties and adjudicators to decide on how to proceed and reach a fair decision.
- Disputants are largely expected to bear their own cost irrespective of the outcome or decision of the proceedings.
While the discourse on small and low-valued claims adjudication and resolution has a long history in England and Wales, special procedures for adjudicating such claims was recently enacted.
After investigations by Lord Woolf, a series of Civil Procedure Rules was published by the UK government. Similar measures have also been adopted in various common law legislative authorities around the world including the Emirate of Dubai, South Africa, and Zimbabwe.
Read about top construction dispute cases in 2018 at Construction case law update – Top 5 construction cases of 2018.
The Construction Industry and Small and Low-Valued Disputes
Due to the limited focus on the making of public policy, we expect the adjudication of small and low-valued project claims and disputes in construction will remain simple, and the adjudication and resolution of disputes will not exceed the value of the claim.
In effect, the underlying philosophy of ‘small and low-valued claims’ is that ordinary citizens should be able to have their disputes settled with minimal or no expense, little time delay, and in a manner that is not procedurally complex or technical.
Our interest in the construction industry is driven by two factors. The first is the continued importance of the construction industry to the global economy. Second, it is reasonable to argue that the prevalence of small claims in construction has ‘rule of law’ and ‘justice’ implications. There are two such possible considerations. The first relates to scenarios where the cost of adjudication and resolution exceeds the value of the claim.
The average costs of small and low-valued project claims and disputes can, on occasion, represent more than the full value of the claim.
This is a theme viewed by Lord Bingham as core to the constitutional principle of the rule of law in that “…means must be provided for resolving without prohibitive cost or inordinate delay, bona fide civil disputes which the parties themselves are unable to resolve.”
For this reason, small and low-valued claims and dispute adjudication are conducted in a less formal legal setting. The second rule-of-law consideration has been highlighted by Vestal (1965) and relates to the need for certainty in the law as it relates to disputes that would otherwise be ongoing and long-drawn-out litigation.
If you are going into a construction claim or dispute, please read our guide on writing notices in Writing a Construction notice of dispute. Free sample letter