Construction Disputes

Early Consideration Avoids Disappointment Later

In a recent report issued by the States of Jersey estimating the size and performance of Jersey’s economy in 2017, construction recorded the strongest growth among other sectors in 2017. The demand for construction in Jersey is on the increase.

Disputes within the construction industry are frequent. These can include timing, pricing, and work (or more likely defective work) issues. England has a sophisticated system to try and manage construction disputes from developing its own Construction Courts to building-in robust and specific pre-action protocols and legislating for a legal right to have construction disputes adjudicated upon. Subject to the parties agreeing otherwise, a construction dispute in Jersey will be dealt with by the Jersey Courts applying ordinary rules and procedure for general litigation.

In the circumstances and for anyone employing or undertaking construction work in Jersey, neglecting to consider or provide properly as to what may happen if there is a dispute can have serious and costly consequences. The risks are predominately that any construction dispute in Jersey will take longer, be more expensive, and have less certainty than if the same dispute arose in England and / or was made subject to the laws and jurisdiction of England. Jersey does not have specialised Courts to deal with these types of disputes and there are a very limited number of experienced legal practitioners available to deal with them.

For obvious reasons, it can be well understood why parties to a construction contract in Jersey may consider and agree to disputes being resolved by other means and / or in other jurisdictions. There are no shortages of draft construction contract templates and these are often used because there will be relevant standard terms that the parties wish to apply. Naturally, consideration should be given to the entire contract and all clauses, but one that should not be overlooked is how any dispute will be resolved.

In the recent case of ROK Construction Limited v Angel Fish Limited before the Royal Court of Jersey, a locally owned building contractor asked the Court to declare that the construction contract provided for disputes to be dealt with by way of arbitration (a process where an agreed experienced construction professional adjudicates the dispute in a manner similar to court proceedings, but far more streamlined). This involved the Court construing the terms of the construction contract which it did and resolved that because there had been no express indication as to whether the relevant arbitration provision should “apply/do not apply” the contract’s own expressed default position was that the arbitration provisions did not apply. The Court also considered an addendum document but found that it took the matter in no different direction because it did not supersede the express provisions of the contract.

The Court said in no uncertain terms that “[t]he parties needed clearly to elect to refer the matter to arbitration which on the surface of the JCT contract as amended or otherwise by Addendum 1, they have not done”. It is irrelevant whether a party to a construction contract believes that a dispute can and should be settled by alternative means of resolution. Unless the contract makes clear that disputes are to be resolved in a certain way there is a risk that the other party will not agree after the dispute has arisen as to how it should be resolved and the dispute (whether by accident or design) becomes potentially an expensive and disproportionate matter to litigate. This can place the unpaid party at a very significant disadvantage as the Jersey Courts are simply not set up for the rapid and cost effective determinations of these types of disputes. The Jersey Courts do not have any inherent expertise in construction matters so it has to be imported and proven at cost; contrast this with the position of an experienced, specialised arbitrator or similar with a construction background and this could save significant time and/or costs which are important factors, probably for cash flow.

In light of the construction industry growing in Jersey those involved should and hopefully have built in mechanisms into their contracts that provide for an appropriate way to resolve their disputes, failing which the Jersey Courts will likely see an increase in such disputes and may be left wondering whether Jersey needs to review and develop its systems for construction disputes.

We at Sinels have experience in dealing with construction disputes both for employers and contractors including claims before the Royal Court, arbitration, or negotiation. Should you wish to discuss any aspect of construction disputes please contact Steven Chiddicks steven.chiddicks@sinels.com