Resolving construction disputes using the Building Disputes Tribunal

2 April, 2024 | Nigel Stone

Building disputes can arise in any construction project, from modest homes to significant commercial projects. The building industry is under a great deal of pressure due to uncertain property values, the steadily rising costs of materials, and occasionally the unavailability of previously commonplace products.

When disputes arise, the construction industry benefits from a unique set of dispute resolution procedures set out in the Construction Contracts Act 2002 (“the Act”). Although the Courts still have the authority to determine disputes, the Act makes adjudication the primary method to obtain a remedy in a construction dispute. Alongside other forms of dispute resolution that the parties may agree to follow, this means that construction disputes can be resolved much more quickly than other disputes, where going to Court is the primary way to get an outcome.

One very straightforward option for construction dispute resolution is the Building Disputes Tribunal. The Building Disputes Tribunal is a private body (such as the Arbitrators’ and Mediators’ Institute of New Zealand Inc and the New Zealand Disputes Resolution Centre) which offers dispute resolution services related to construction independent of the Courts. Notably, it serves as an Authorized Nominating Authority for nominating adjudicators under the Act and provides arbitration processes which are enforceable in Court. This means that starting a dispute resolution process is quick and simple to do, and in many cases the steps involved, and the potential costs, are fixed.

The dispute resolution methods offered by the Building Disputes Tribunal are:

Adjudication

Statutory adjudication under the Act is the most commonly used dispute resolution process in New Zealand for resolving building and construction disputes. It offers a fast and relatively straightforward statutory process for settling disputes arising from construction contracts, with most cases resolved within six weeks of initiation. The Act applies to almost all construction contracts in New Zealand, allowing any party with a dispute to refer it to adjudication.

A claimant seeking adjudication can promptly secure a Building Disputes Tribunal adjudicator (a construction law expert who will decide the outcome of the dispute) within 24 hours of applying. The respondent’s agreement is unnecessary, and the outcome is binding on them, even if they do not actively participate.

Because of the condensed process and tight timeframes, it is important that if you are involved in a construction dispute you seek advice early to ensure that your rights and interests are protected at all stages in the process.

Arbitration

Arbitration is a formal dispute resolution process where parties agree to submit disputes to an independent arbitrator. The process is governed by the Arbitration Act 1996 and the Arbitration Amendment Act 2007. An arbitrator’s decision, called an award, is as binding and enforceable as a court judgment.

The Arbitration Act prioritises party autonomy, reduces judicial involvement, and aligns with international laws. It aims for fair resolution through impartial Tribunals, minimising delays and expenses. The Arbitration Amendment Act 2007 improves confidentiality, eliminates certain appeals, and enhances consumer rights.

Mediation

Mediation is a process where a neutral third party, known as a mediator, assists conflicting parties in negotiating a mutually acceptable agreement. It aims to resolve disputes outside the judicial system, promoting reconciliation, settlement, or compromise. Mediation empowers parties to find flexible solutions that do not necessarily adhere to their strict legal rights and obligations. As well as adjudication mentioned above, the Building Disputes Tribunal provides mediation services for building, construction, and infrastructure disputes, both residential and commercial.

‘Arb-Med’

‘Arb-Med’ is a hybrid dispute resolution method that integrates the benefits of arbitration and mediation. It aims to achieve informed, good-faith negotiation and settlement between parties. If mediation is unsuccessful, the formal arbitration process resumes immediately. The ‘Arb-Med Rules’ ensure natural justice and binding decisions.

Expert Determination

Expert Determination is a straightforward approach to binding dispute resolution without the formalities associated with arbitration or litigation. Unlike arbitration, it is not governed by legislation. In this process, parties in a contract voluntarily refer disputes to an independent expert for resolution. It also fosters business relationships, especially when adversarial proceedings might harm them. The process is controlled by the parties, who decide in advance whether to be bound by the expert’s decisions. Expert Determination is commonly used in various industries, including construction, for quick, cost-effective, and confidential resolution of qualitative, quantitative, or specialized technical issues.

Early Neutral Evaluation

In Early Neutral Evaluation, parties voluntarily appoint an independent evaluator to assess the strengths and weaknesses of each side’s case. It is designed for disputes already in litigation or arbitration, provided parties are committed to a cost-effective resolution and participate in good faith. The evaluator provides a non-binding, confidential, and without prejudice viewpoint for settlement discussions. Unlike other forms of alternative dispute resolution, it does not result in a final decision; instead, it encourages negotiations based on a realistic assessment of each party’s position. The evaluator’s assessment serves as a starting point for potential agreements, fostering practical settlement discussions while saving time and money.

Dispute Review Boards

These boards aim to prevent disputes by enhancing communication and encouraging resolution of contentious issues at the job level. If necessary, DRBs assist in resolving disputes efficiently without arbitration or litigation. The fact that they are a standing body means the members of the DRB will already be familiar with the project, the contracts involved and progress in the project to date, enabling timely recommendations or decisions.

Conclusion

The Building Disputes Tribunal is a ‘one stop shop’ for a range of potential ways to resolve a construction dispute quickly. We can advise clients on the pros and cons of the various options, review and prepare claims or defences, and provide representation during the process. While it is not the only organisation that can provide these sorts of dispute resolution procedures, it adds a level of clarity, simplicity, and certainty about expenses that alternatives may not be able to provide.

Curious about the options available to resolve your construction dispute? For expert advice, contact specialist dispute resolution lawyer, Nigel Stone by calling +64 9 837 6839 or email nigel.stone@smithpartners.co.nz