Canada: Mediation: A Unique Tool for Resolving Construction Disputes

Last Updated: January 19 2006

By Robert W. Eden, Q.C. and Trish Morrison

Disputes on construction projects are hardly a new phenomenon, although their number and complexity have been increasing dramatically in recent years. This increase has begun to focus attention on alternative methods by which the industry can resolve disputes, as the delays and costs associated with the traditional resort to litigation have become more significant. In recognizing the cost and time commitment involved in litigation, and generally in the arbitration of major disputes, the industry has begun to turn more frequently to mediation as a remedy for resolution of disputes.

Mediation vs. Arbitration

Although they are commonly considered within the package of alternate dispute remedies, there are a number of significant differences between mediation and arbitration that are often misunderstood. Mediation is appropriate when the parties are prepared to compromise and are motivated to reach a timely and mutually satisfactory agreement with the help of a neutral person or where the parties plan to continue their relationship after the dispute has been resolved. Arbitration is more commonly used when feelings are such that the parties have no likelihood of being able to negotiate a settlement or retain a business relationship, and is appropriate if the parties need to reach a final decision.

A) Mediator vs. Arbitrator

In a mediation, the parties allow an outside mediator to assist them in negotiating a resolution. The mediator is a facilitator, rather than a decision maker. A good mediator possesses persuasive skills, as well as a basic knowledge of the subject matter of the dispute. By contrast, an arbitration occurs when parties in a dispute ask an outsider to listen to their facts and arguments and then to decide for them how the dispute must be resolved. An arbitrator should have a good working knowledge of the subject area in dispute.

B) Time Commitment

Mediation sessions are usually concluded within a few days. For more complex cases, mediation briefs are exchanged and given to the mediator in advance of the mediation session. By comparison, an arbitration will often involve considerable time for discovery of documents and limited examinations for discovery. The arbitration hearing usually lasts much longer than a mediation.

C) Cost

Mediation is much more cost effective than either litigation or arbitration. The three main cost components of mediation include internal business costs for preparation and attendance, the cost of lawyers or other advisors to prepare and attend, and the shared cost of the mediator and the session room. The arbitration process is more similar to litigation and often involves a longer process, presentation of evidence, possible discoveries, legal submissions and expert reports. This inevitably leads to significantly higher costs than a mediation.

D) Control

In a mediation, the parties maintain control over how the dispute will be resolved. A mediator has no authority to impose a settlement or to tell the parties how the dispute must be resolved. The parties must agree on the final outcome. In an arbitration, the final outcome is based upon the decision of the arbitrator and the parties do not have to agree with it.

The biggest advantage of mediation over arbitration is that it avoids the adversarial process and, therefore, preserves the business relationship. Mediation allows discussions to take place in a neutral environment, with an objective mediator, and will often accomplish more in a single session than during months of meetings and exchanging correspondence.

Mediation focuses more on the business interests of the parties than on their legal positions. By not dwelling on the different views of how the dispute arose, the parties are able to concentrate on creating a solution to their dispute. The mediator will assist the parties in identifying the strengths and weaknesses of their case and to discover the underlying interest that is at the heart of the dispute.

How to Achieve Successful Mediation

Not every mediation is successful. However, there are a number of factors that increase the possibility of achieving a successful mediation.

  • Ensure that each party is represented by someone having settlement authority, to allow a final settlement to be reached during the session.
  • Plan to spend a concentrated period of time in the mediation and do not plan on conducting other business during or between the mediation sessions.
  • Parties must be prepared to come to the table with an open mind.
  • Parties must have reasonably similar understandings about the issues.
  • Make sure there is sufficient information available - exchange mediation submissions, documents and relevant information.
  • Be prepared to address technical issues in the mediation - have an expert available to discuss any reports with the mediator and other party.
  • Discuss the concept of settlement and possible settlement options before coming to the mediation - think in advance about benefits that might be negotiated in addition to payment of monetary damages.
  • Resist setting a "bottom line" or "top dollar" settlement number until the mediator has had a chance to discuss the case with you.
  • Maintain a flexible attitude about the settlement options you bring with you. Reaching an agreement often means altering settlement proposals, either slightly or more significantly.
  • Determine objective and rationale bases for you settlement proposals.
  • Take into account the future avoided litigation or arbitration costs.
  • Leave open extra time in the event that the mediation sessions are constructive, but more time is needed.

Summary

Provided there is a common motivation to settle the dispute on a reasonable and timely basis, there is very little to lose and everything to gain through the mediation process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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