By Larry Lin
Larry Lin takes a look at what the best options in alternative dispute resolutions and if mediation or adjudication is better, or in some cases both.
Increasingly, when a dispute arises between two contracting parties, they are strongly encouraged to settle the dispute in question through various types of resolution methods available.
Such methods are collectively called alternative dispute resolution (ADR), and include negotiation, mediation or adjudication and should be used before the dispute is escalated into arbitration or litigation.
But at any time, if a party has embarked on one resolution in relation to a specific dispute, can it not also at the same time or later embark on another type of resolution. In other words, can both mediation as well as adjudication be instituted concurrently?
This was what Justice Akenhead was asked, among other issues, to decide upon in a recent case.
The Claimant, Ericsson, was employed as a sub-contractor by the Defendant, Eads, in June 2007. Eads had entered a contract with the Government for the provision of an emergency communications system to the Fire and Rescue Service in England. The whole system was scheduled to be completed well before the London Olympic Games 2012 in order that the system can be tested well in advance as to provide a vote of confidence.
Ericsson was responsible for developing and supplying software and this software was based on a software system owned by Ericsson. This system, to coordinate and manage the response of the emergency services, was defined as a key element in the overall systems.
The initial date for the supply of the software was January 2009 and was subsequently being amended due to delay. There had been several revisions to the date of completion and this was one issue that the court had been asked to decide on. Since the whole system was to be in full operation prior to the Olympic Games, Eads was concerned about the slippage caused by Ericsson and had written to Ericsson expressing the concern. Letters were exchanged between the parties and each alleging the other to be responsible of causing delays.
Then on September 29, 2009, Ericsson advised Eads of referring the dispute to mediation pursuant to Clause 31.3 of the agreement. The issue was whether or not Ericsson was contractually obliged to deliver the software by September 30, 2009. Clause 31.3 states:
"If Ericsson and Eads fail to resolve the dispute through such consultation within ...10 business days, either party may give notice of its intention to proceed to mediation in accordance with the...CEDR Model Mediation Procedure for long-term contracts, or to refer the matter to adjudication."
Two days later, on October 1, 2009, Ericsson wrote to CEDR and requested the appointment of a mediator. On the same day, Eads sent a letter to Ericsson notifying a Material Default had been committed by Ericsson. Simultaneously, Ericsson served a notice of adjudication to Eads on 1 October 2009 too.
Thus the same dispute of delivery date on September 30, 2009 was now being referred to a mediation, as well as adjudication concurrently.
Eads agreed to refer the dispute to mediation but objected to adjudication because it contended that Clause 31.3 provided a choice of either mediation or adjudication and it was not open to Ericsson to pursue adjudication in relation to those two disputes.
Justice Akenhead held that the dispute resolution provisions do not by implication or otherwise suspend a party's rights under the contract to take whatever steps which it is entitled to take. His Honour's view was that "it is open to either party on a given dispute either to mediate or to adjudicate or to do both ... The wording of Clause 31.3 does not prevent or limit a party from going down either route" Ericsson was therefore entitled to pursue remedies in adjudication as well as in mediation.
Larry Lin is a Fellow of the Royal Institution of the Chartered Surveyors with 24 years of experience mainly in civil engineering. He has practiced Quantity Surveying in the Far East and for the last 4 years, in the Middle East and is currently a consultant QS in Jeddah. He also holds a LLM in Construction Law & Arbitration and LLB from UK and Australia. He has completed the academic stage of the Graduate Diploma of Legal Practice with the College of Law, Sydney that will eventually lead to be admitted as a legal practitioner in NSW, Australia.
The opinions expressed in this column are of the author and not of the publisher.