The Scene
We had been invited to attend a meeting at one of the prestigious law firm’s offices in the city. The magnificent views allowed us to see the full panorama of Brisbane and you could just about make out the law firm Partners’ boats luxuriating on the river below.
We were advising on time and cost for a small dispute that had arisen between a utility company and the principle contractor. It seemed apparent from the background reading that the contractor had not covered themselves in glory. It was also evident that the parties had become emotionally attached to their conflicting positions.
The value of the dispute was relatively small and some of the main points of difference, at least at first glance, appeared to be marginal – in that they could be determined either way.
The Partner advising the utility company was a senior and well respected litigator. A learned and experienced campaigner – when he spoke the room listened.
After the initial pleasantries of the meeting concluded the Partner presented his recommendation, “we have considered all the alternatives” he said “and we recommend litigation”.
I couldn’t quite believe what I had just heard. Factoring in the cost of legal recovery, expert services and business disruption the recommendation was litigation – really?
It reminded me of the Blackadder sketch where the great Dr. Hoffmann, owner of the largest leech farm in Europe, strongly recommended [in chorus] ‘a course of leeches’.
Now to be clear, I’m not comparing CBD lawyers to leeches. However, on this occasion the advice did seem a little self-serving. So why would you recommend litigation?
The Studies
A 2006 U.S. construction industry study collected the transactional cost of disputes from 46 completed construction projects which amounted to US $2billion of total project costs. The study found that the direct cost of running a dispute equated to 15% of the settlement/award amounts, 6% of the original claims and almost 2% of the entire contract amount. The above figures are dragged down by resolution via executive negotiation which accounts for roughly 70% of resolutions.
A 2006 Australian survey engaging 190 industry respondents found that only 33% of respondents were happy with dispute resolution procedures in terms of time, 39% in terms of cost, 22% in terms of process and 42% in terms of outcome – indicating that there is widespread industry dissatisfaction in dispute resolution processes and outcomes.
The Outcome
In short, the construction industry doesn’t want another course of leeches. That’s why Lewis Woolcott always looks for commercial solutions that avoid disputes. In our experience, discussing the issues in a non-combative way, with realistic expectations informed by reliable data, usually results in the best and most satisfactory outcomes.
Regarding the above matter, the Contractor issued a BIFA claim and received a mid-point determination, much to the shock and annoyance of the CBD firm. Both parties walked away, no doubt adding their voice to the dissatisfaction surveys.