Construction Mediation Guide and Protocol

Constructing Excellence South West A Contents

Guide Protocol Toolkit

Page 1 Page 6 Page 8 Page 9 Page 11 Page 13 Page 14 Page 16 Page 17 Introduction Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7 Toolkit to Mediation The Referral Agreement Brief the Setting of Exchange of The Mediation The Documentation The start of the to Mediate Mediator the Procedure Information Meeting Outcome Page 2 process of and Terms Selection of The The documents Communication Final agreement a) Incorporation Mediation – mediation The document the Mediator arrangements, in play and meeting of issues or an Clause An Overview that records the and Mediator process and with the agreed way b) Contract for the Page 3 terms on which familiarisation timetable Mediator forward Appointment Why Mediate? the mediation of a Mediator is conducted Page 4 c) Mediation The Mediation Agreement Process d) Referral Letter e) Settlement Agreement

Construction Mediation Guide

Introduction to Mediation

Mediation is one of the Alternative Dispute Resolution In this context, Constructing Excellence South West, The purpose of this guide processes whereby an independent person assists in collaboration with Mediation for Construction (M4C), the parties to negotiate a settlement of a dispute. The has identified the need to highlight how mediation can is to provide a document Pre-Action Conduct and Protocol, which is published and should be used to resolve disputes and Constructing under the Civil Procedure Rules, requires the parties to Excellence South West supports and encourages the use which explains how to a dispute to consider the use of an Alternative Dispute of mediation as a process of resolving disputes. Resolution process and the Courts have held that a party To promote the greater use of mediation, this Guide has use mediation to resolve to a dispute who unreasonably refuses to mediate, could three sections to it. Firstly, it explains what mediation is be liable to cost sanctions. Moreover, contract publishers and its benefits. Secondly, it provides a set of guidance disputes which relate such as the JCT include provisions within its contracts rules, called the ‘Protocol’ at each stage of the process, which encourage the use of mediation. Recent statistics and thirdly, it provides a number of model documents to construction projects. produced by the Centre for Effective Dispute Resolution and clauses which can be used or adapted for mediation. show that 67% of mediations settle on the day of the mediation and a further 19% settle shortly afterwards. It is hoped that this Guide will be helpful. Mediation is Put another way, 86 out of 100 mediations will result a flexible way to resolve disputes, as such, whilst this in a settlement because of the mediation process. Guide explains the general process of mediation it has to reflect the fact that as every dispute is different, so will each mediation. However, this Guide explains how to use mediation to successfully resolve disputes.

Constructing Excellence South West 1 Guide

Mediation – An Overview

Mediation is a non-adversarial structured process used Mediation is a form of Alternative Dispute Resolution Save for situations where the parties have agreed how to resolve disputes and disagreements using a Mediator (ADR). Whilst adjudication and arbitration are often the costs and expenses of the mediation are to be as a neutral third party to facilitate settlement. referred to as forms of ADR similar to mediation, there are apportioned between them, the Protocol envisages some fundamental differences in the mediation process. that the parties will share the costs and expenses Mediation can be used successfully at any time. of the mediation equally. Mediation is often used before resorting to adversarial Whilst around 86% of cases settle through mediation, methods such as adjudication, arbitration or court if settlement is not achieved the Mediator may proceedings. Mediation can be used once proceedings sometimes be asked by the parties to give a non-binding have commenced. recommendation for settlement. Mediation is designed not only to resolve disputes Mediation is a private process. All information, records, but also to preserve and re-establish relationships. reports or other documents received by a Mediator while serving in that capacity will be confidential and privileged To be successful, there must be a mutual commitment from subsequent production. The parties will maintain by all parties to make the process work. the confidentiality of the mediation and cannot rely upon Unlike a judge, arbitrator, or adjudicator, the Mediator will or introduce as evidence anything said or done at the not impose a decision on the parties but instead will help mediation (other than a final signed agreement settling the parties achieve a mutually agreed settlement. an issue) in any court, arbitration or other proceedings, including adjudication.

2 Construction Mediation Why Mediate?

Mediation is a collaborative method of resolving Less formal – the process is informal and its confidential Parties who are reluctant to mediate will face pressure disputes or differences. By comparison with adjudication, nature usually encourages a more open dialogue. from the Court to do so: arbitration or court proceedings mediation is: Less risky – settlement at mediation has the potential for The Pre-Action Protocol for Construction and Engineering Quick – cases usually settle within 4 weeks of the parties ‘win-win’ outcomes and removes all the risk which would Disputes and the Civil Procedure Rules 1998 (in particular agreeing to mediate. otherwise be had of losing an adjudication, arbitration or the Overriding Objective and the Practice Direction for court proceedings. Pre-Action Conduct), which apply to all construction and Low Cost – given the speed of the process, mediation engineering disputes, provide for mediation at an early is generally more cost effective than the alternatives. Flexible – the parties can reach flexible settlements stage. that are not possible with alternative forms of dispute Collaborative – parties usually agree to mediate resolution. For example, in a construction context, the A refusal to mediate must be supported by very good because they want to preserve or salvage working parties can agree that payment by Party A will be made reasons in order to avoid sanctions, often in costs, which relationships and resolve their disputes or differences in return for completion of work by Party B. the Court is increasingly likely to otherwise impose. before they escalate further. The spirit of mediation aligns with the spirit of collaborative working. Final – a settlement of the dispute reached at mediation is usually full and final.

Constructing Excellence South West 3 The Mediation Process

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7 Referral Agreement to Mediate and Terms Briefing the Mediator Setting of the Procedure Exchange of Information The Mediation Meeting The Outcome

Who is involved • The parties to the dispute • The parties to the dispute • The parties • The parties • The parties • The parties to the dispute • The parties • The administrator • The administrator • The Mediator • The Mediator • The Mediator • The administrator • The Mediator • The Mediator • The Mediator Purpose • Agree to mediate • Identify agreed Mediator • Provide Mediator with enough • Establish the best approach to the mediation and highlight any issues • Identify any additional • To conduct meeting sessions • To record the terms • Initial steps to appoint Mediator • Establish Mediator fees and expenses information to understand the of particular importance documentation that would with the Mediator in private of settlement or • Record terms of appointment of Mediator disputes assist the with the aim of reaching identify any reasons for • Record terms on which mediation will be conducted Mediator or the parties settlement of the dispute settlement not being • Ensure mediation agreement • Set a date for the mediation meeting reached and consider has been completed how to resolve them Responsibility • The parties to the dispute • The parties to the dispute • The parties • The parties • The parties • The administrator • The parties • The administrator • The administrator • The Mediator • The Mediator • The Mediator • The Mediator

Information • Details of the parties to the • Conflict of interest check or any other reason • Documents to assist the • The amount of the dispute • Any documents requested • Position statements • Settlement agreement dispute why the Mediator should not act Mediator to understand by the • Whether there are any time constraints having regard to any live adjudication, • Documents relevant to the • Reasons for not reaching the issues parties subject to any • The amount of the dispute • Dates for mediation arbitration or court proceedings dispute a settlement reasonable objection • Fees and expenses of mediation • Outline of dispute • The stage at which any live project has reached having regard to the interests of the project • Identify any connected parties for the purposes of the conflict • The identity of any third parties who may be contacted by the Mediator check with the agreement of the parties and invited to join the mediation process (in the interests of promoting settlement of all issues) • Disclosure of documents • The need or otherwise for any expert evidence • The proposed date for the Mediation Meeting Time period 7 days 7 days 14 days 7 days 7 days 1 day n/a

4 Construction Mediation The Mediation Process

Constructing Excellence South West 5 Protocol

Stage 1 – The Referral 1.1 1.2 1.3 1.4 The purpose of this stage Mediation can begin in 1.2.1 The contract can If the parties have not The Referral Letter will 1.4.1 the parties; is to identify whether different ways: stipulate that the parties already agreed to mediate contain a request that the 1.4.2 the contract under there is a dispute which will attempt to settle their then one of the parties parties attempt to resolve which the dispute has needs to be resolved in dispute using mediation should contact the other their dispute by mediation arisen; a more formal context (an example of such a parties to the dispute and details of: than ‘without prejudice’ clause is at [Annex A]; or asking them if they are 1.4.3 an outline of the discussions and with the willing to use a mediation dispute and a statement 1.2.2The parties reach assistance of someone process to settle their of the amount (or an agreement to mediate other than the parties dispute. This is known as approximate amount) in after the dispute has arisen involved. ‘the Referral Letter’. dispute; usually at the request of one of the parties; or 1.4.4 details of any connected persons to the 1.2.3 A recommendation dispute (who are not a is made by the Court that party to the dispute). the parties should seek to settle the dispute by mediation.

6 Construction Mediation 1.5 1.6 1.7 A model form of Referral Once the parties have 1.6.1 The selection of a The parties may be assisted with the selection of the Letter is at [Annex D]. agreed to mediate, the Mediator. Mediator by a dedicated mediation service provider parties will need to (Administrator) who will have a thorough understanding 1.6.2 The entering into complete a number of of the mediation process. Dedicated mediation service the Contract for the formalities. These are: providers include: Appointment of the Mediator [Annex B]. Mediation for Centre for Effective 1.6.3 The signing of the Construction Dispute Resolution Mediation Agreement Innovation Centre 70 Fleet Street [Annex C]. Copse Road London Yeovil EC4Y 1EU Somerset T: 020 7536 6000 BA22 8RN E: [email protected] T: 020 3411 4425 E: [email protected]

Constructing Excellence South West 7 Protocol

Stage 2 – Agreement to Mediate and Terms 2.1 2.2 2.3 2.4 2.5 The purpose of this stage Once the parties have A model form Contract The Mediation Agreement 2.4.1 the names of the Once the procedural is to formally appoint a agreed to mediate, the for the Appointment will record the terms on parties; matters have been mediator through the Administrator will provide of the Mediator is at which the parties (and concluded, the 2.4.2 a description of the Administrator. to them the Contract for [Annex B]. The Contract those that are attending) Administrator will liaise dispute being mediated; the Appointment of the sets out the terms of have agreed to mediate. with the parties to set a Mediator (‘the Contract’) business of appointing the A model form of Mediation 2.4.3 provisions relating to timetable for the mediation and the Mediation Mediator. The Contract Agreement is at [Annex C]. confidentiality; and process including fixing Agreement. should be signed by the The Mediation Agreement an agreed date for the 2.4.4 the without prejudice parties before any further should confirm: Mediation Meeting status of the process. steps are taken in the (Stage 6). process. The Contract should confirm the fees and likely expenses of the mediation (and the Mediator) and require the parties to enter into a Mediation Agreement.

8 Construction Mediation Stage 3 – Briefing the Mediator 3.1 3.2 3.3 3.4 3.5 The purpose of this stage The parties will either The parties may decide Mediators come from a The Mediator may 3.5.1 there are more than is to select the Mediator. select the Mediator that the Mediator should variety of professional recommend that they three parties to the dispute; or alternatively the have specific industry backgrounds but a should be assisted by a 3.5.2 there are technical or Administrator may knowledge or experience. Mediator with a good co-mediator. A co-mediator legal matters on which the nominate either a Mediator The parties should agree understanding of the might be needed in Mediator and the parties or several Mediators on the identity of the subject matter of the disputes where: would be assisted by input (usually 3) so that the Mediator so that they have dispute is always to be from a co-mediator who parties can agree who absolute confidence and preferred as the ability has specialist or technical the Mediator will be. trust in the Mediator’s to reality-test the parties’ knowledge. abilities. strengths and weaknesses is essential. To do this effectively, the Mediator should understand the basic legal principles and processes which relate to the mediation.

Constructing Excellence South West 9 Protocol

3.6 3.7 3.8 The Mediator’s neutrality The Mediation Agreement Once the Mediator has and integrity in the should be signed before been selected and the mediation process are key the mediation date. parties have agreed the elements of the mediation. terms of appointment and To ensure impartiality, entered into a Mediation the Mediator has a Agreement, then the responsibility to disclose parties should send the to the parties all actual Mediator a short narrative and potential conflicts of explaining the dispute. interest which the Mediator reasonably knows and which could reasonably be seen as raising a question about the Mediator’s impartiality. Once disclosed by the Mediator, the parties should confirm that they are happy that no conflict of interest exists with the selected Mediator. This should be done before entering into the Mediation Agreement.

10 Construction Mediation Stage 4 – Setting of the Procedure 4.1 4.2 4.3 4.4 4.5 4.6 The purpose of this stage is The advantage of This Protocol assumes In the event that formal Once the parties have The parties and the for the Mediator to outline mediation over other that the Mediator will be proceedings have appointed the Mediator, Mediator will discuss the mediation process prior dispute resolution engaged by the parties commenced, the Protocol the Mediator will contact separately (and in private) to the Mediation Meeting. processes is the flexible at an early stage of the anticipates that the parties the parties so as to allow the best approach to the nature of the process. dispute. An early stage of will appoint a Mediator as the Mediator to ask any mediation and highlight the dispute means (in the soon as possible although questions and get a better any issues of particular context of this Protocol) the Mediator can be understanding of the importance. The Mediator that the parties have appointed at any stage. dispute. will establish at an early reached deadlock on some stage the best approach or all issues in dispute but to the mediation process have not commenced any having regard to: formal dispute resolution procedure such as adjudication, arbitration or court proceedings.

Constructing Excellence South West 11 Protocol

4.7 4.8

4.6.1 the financial amount 4.6.5 the disclosure of The Mediator may suggest The Mediator should keep in dispute; documents; that in the interests of the under review the Planning process there should be Factors and the proposed 4.6.2 whether there are 4.6.6 the need for any an initial meeting between date for the Mediation any time constraints expert evidence; and the parties’ directors or Meeting having regard to having regard to any live 4.6.7 the proposed date owners as this can assist the Planning Factors. In adjudication, arbitration or for the Mediation Meeting. the parties to identify exceptional circumstances court proceedings which the issues in dispute. An the Mediation Meeting are underway; These are called initial meeting may not be could be adjourned and ‘the Planning Factors’. 4.6.3 the project’s current necessary if the Mediator the Mediator will set a stage reached; has been able to deal with revised date with the matters through private Administrator. 4.6.4 the identity of any telephone calls. third parties who may be contacted by the Mediator with the agreement of the parties and invited to join the mediation process (in the interests of promoting settlement of all issues);

12 Construction Mediation Stage 5 – Exchange of Information 5.1 5.2 5.3 5.4 5.5 The purpose of this stage The Mediator will be The Protocol recognises The Mediator will therefore 5.4.1 the Mediator; or The parties should is to for the parties to provided with a written that mediation often takes assist the parties in cooperate with any provide details of the outline of the dispute place before the parties identifying any additional 5.4.2 the parties recommendation made dispute. from the parties together have reached a stage in documentation that would themselves. by the Mediator for with copies of any key formal proceedings where assist: the provision of any documents that may disclosure has taken place. documents. assist the Mediator in The Protocol therefore understanding the matters recognises the benefits in issue, together with any of exchanging sufficient offers of settlement that information about the have already been made. dispute or difference to allow the parties to broadly understand each other’s position and make informed decisions about settlement.

Constructing Excellence South West 13 Protocol

Stage 6 – The Mediation Meeting 6.1 6.2 6.3 6.4 6.5 6.6 The purpose of this stage is The date of the Mediation Arrangements for the The meeting venue The Mediation Meeting The Mediator may be for the parties to attend the Meeting should be set at Mediation Meeting will needs to be suitable for and related mediation provided with a mediation Mediation Meeting. an early stage. usually be determined by conducting the mediation communications are bundle prepared by the the parties in conjunction with adequate facilities to private and held on a parties no later than 7 with the Administrator and hold private meetings. without prejudice basis. days before the Mediation the Mediator. The parties and their Meeting, the contents representatives may attend of which will reflect the the Mediation Meeting. matters discussed during Other persons may attend earlier stages. only with the permission of the parties and with the consent of the Mediator. All participants at the Mediation Meeting will have signed a confidentiality agreement, usually as part of the Mediation Agreement.

14 Construction Mediation 6.7 6.8 6.9 6.10 6 .11 The parties are expected The purpose of the analysis The conduct of the The parties are encouraged If requested by the to provide the Mediator is to help the parties make Mediation Meeting is to prepare a draft parties, the Mediator with their respective private informed decisions about decided by the Mediator. settlement agreement in may make non-binding and confidential risk the possible options The Mediator may hold advance of the Mediation recommendations for assessments in the form that may be discussed joint sessions with the Meeting as the process resolution of the dispute of the party’s and their or offered at mediation. parties at any stage. The of drafting and agreeing or difference. opponent’s best, worst Any analysis should Mediator may also hold the terms of settlement and most likely alternatives identify the legal costs private sessions with can take some time. to a negotiated outcome. to date and the best the parties. All matters In other words, the parties estimate of the legal costs discussed in the sessions are expected to provide to resolution through are private and confidential their respective ‘win’ and proceedings. and held on a without ‘lose’ scenarios which prejudice basis. could be relevant to settling the dispute.

Constructing Excellence South West 15 Protocol

Stage 7 – The Outcome 7.1 7.2 7.3 7.4 The purpose of this stage If a settlement is If the parties have already If the parties do not reach is to record the agreed successfully achieved, the commenced court or an agreed settlement, the settlement. mediation is concluded arbitration proceedings mediation concludes at by the parties recording all then the settlement the end of the Mediation the terms of settlement agreement will state that Meeting. It is best practice for in writing and signing the the parties will stop those the Mediator to encourage agreement (‘Settlement proceedings and this is the parties to identify any Agreement’). An example done with a consent order. reasons why agreement of a Settlement Agreement could not be reached in is at [Annex E]. a single document that would remain confidential to the parties and for the parties to discuss with the Mediator proposals on how any remaining disputes or differences might be resolved without the need for adjudication, arbitration or court proceedings.

16 Construction Mediation Toolkit

Toolkit Documentation

A Incorporation Clause [The Mediation for Construction (M4C) (‘the Nominator’). To initiate the B Contract for the of Innovation Centre, Copse Road, mediation a party must give notice in Appointment If any dispute arises in connection with Yeovil, Somerset BA22 8RN] writing (Referral) to the other party or of a Mediator this [Agreement][Contract], the parties parties to the dispute referring the dispute https://goo.gl/pbN330 agree to enter into mediation to settle such [The Royal Institute of Chartered to mediation. A copy of the Referral a dispute and will do so in accordance Surveyors (RICS) of 12 Great George should be sent to the Nominator. Unless with the Constructing Excellence Guide Street, (Parliament Square), C Mediation Agreement otherwise agreed, the mediation will start to Mediation Protocol (‘the Protocol’). London, SW1P 3AD] https://goo.gl/lY0qiz not later than 28 days after the Referral in Unless otherwise agreed between the [The Centre for Effective Dispute accordance with the Protocol. No party parties shall within 14 days of notice of the Resolution (CEDR) of 70, Fleet Street, may commence any court proceedings or dispute, the mediator will be nominated London, ECEY 1EU] arbitration in relation to any dispute arising by (delete all but one. If no nominator is out of this [Agreement][Contract] until D Referral Letter selected, the nominator shall be Mediation [The Royal Institute of British Architects it has attempted to settle the dispute by https://goo.gl/ICGX54 for Construction): (RIBA) of 66 Portland Place, Marylebone, mediation and either the mediation has London, W1B 1NT] terminated or the other party has failed [name one of the mediation bodies to participate in the mediation, provided listed on the Constructing Excellence that the right to issue proceedings is not E Settlement Agreement South West’s website at prejudiced by a delay.” https://goo.gl/bEBTkN www.constructingexcellencesw.org.uk ]

Constructing Excellence South West 17 This Construction Mediation Guide and Protocol has been produced by Constructing Excellence South West’s drafting team: For more information contact us at: [email protected] www.cesw.org.uk

Alan Tate Chris Hoar Chris Reeves Stephen Homer of Trowers and Hamlins LLP of Michelmores LLP of BPL Solicitors Ltd of Ashfords LLP

The Contract for the All parties must rely This Guide is also supported by: Copyright in all and every part of this publication rests Appointment of a Mediator exclusively upon their own Bevan Brittan LLP with Constructing Excellence South West, Constructing Excellence, Mediation for Construction, Trowers & Hamlins and The Mediation skill and judgement or Blake Morgan LLP LLP, Ashfords LLP and Michelmores LLP (and in the case Agreement have been upon those of their advisers Clarke Willmott LLP of the M4C Publications, M4C) and all rights are reserved. Save by prior consent of the Authors, no part or parts of this supplied courtesy when using this Guide Foot Anstey LLP publication may be reproduced in any form or by any means of Mediation for and neither Constructing Osborne Clarke LLP electronic or mechanical, including photocopying, recording or any information storage or retrieval system now known or Construction (M4C). Excellence South West nor Royds Withy King to be devised. Mediation for Construction Stephens Scown LLP Copyright © Constructing Excellence South West, nor the drafting team Veale Wasbrough Vizards LLP Constructing Excellence, Mediation for Construction, Trowers or their respective firms & Hamlins LLP, Ashfords LLP and Michelmores LLP save for the Contract for the Appointment of a Mediator and The assume any liability to any Mediation Agreement, the copyright in all and every part user or any third party in of those documents rests with Mediation for Construction. connection with such use. All Rights Reserved.

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