Where to go to resolve your Scottish construction dispute

Disputes can arise at any time in any area of life, and construction projects are no exception. If you find yourself in the midst of a construction dispute in Scotland, there are various ways in which you can try to resolve it … but it is important to know the differences between them.

These methods of resolution can broadly be split into alternative dispute resolution (ADR) and litigation in the courts. They are not mutually exclusive though: parties may decide to pause their court case part way through in order to enter into ADR or, vice versa, may decide after an unsuccessful ADR process to commence a court case. 

ADR in Scotland

The main forms of ADR are:

Negotiation

The first port of call for parties trying to resolve a dispute is usually negotiation: informal discussions between parties. Key benefits of negotiation are that it is informal, cost-efficient and allows parties to retain complete control of the conversation and decision-making. As negotiations are usually considered to be the first step in trying to finding a solution to a dispute, both parties can often be amenable to the idea of finding a solution. There is no requirement for an independent third party be involved in the discussions as there is in mediation, arbitration or adjudication. However, as this is a discussion between parties in an attempt to find a solution, the decision which the parties come to is not legally binding unless they enter a formal agreement.

Mediation

Another form of ADR as a process to resolve construction disputes is mediation. Mediation allows the parties to retain control of the decision-making process as the mediator, being a neutral third party, does not impose a decision, but rather facilitates the parties' negotiations to come to an agreement. Mediation can be far more time and cost efficient than litigation. But again, to be legally binding the parties will need to enter into a formal agreement.

Arbitration

As with mediation, arbitration involves an independent third party (arbitrator). However, in contrast to the mediator, the arbitrator has the power to make a legally binding decision, which is called an award. Arbitration is more flexible and generally quicker than litigation but can also be costly. In Scotland, the main appeal of arbitration is that the decisions made by an arbitrator are confidential. Construction contracts often contain a clause that the dispute must be referred to either arbitration or adjudication prior to raising it in the courts and this is something which you should be careful to look out for. 

Adjudication

The Housing Grants, Construction and Regeneration Act 1996 creates a statutory right for parties to a construction contract to settle any disputes which may arise by way of adjudication. Parties are entitled to exercise this statutory right, even if the contract does not contain an express provision allowing adjudication.

Adjudications are supposed to last for 28 days from start to finish (although this time period can be extended slightly and often is). The main appeal of adjudication is the speed in which parties receive a decision as this can be vital to preserving parties' cash flow.

An adjudication decision is binding unless it is overturned by the court.

Litigation in Scotland

In Scotland, court proceedings are separated into civil and criminal. Disputes arising out of construction contracts are heard in the civil courts. The civil courts are separated further into the Sheriff Courts, which are situated across Scotland, and the Court of Session, which sits in Edinburgh. The Court of Session is divided again into the Outer House and the Inner House. The final court of appeal in civil cases is the Supreme Court, which sits in London (but has recently travelled to Scotland).

Sheriff Court

A civil case in Scotland can be brought in the Sheriff Courts either via Simple Procedure or by Ordinary Cause Procedure. Expenses in the Scottish Courts are awarded on a judicial scale.

• Simple Procedure: Simple Procedure is for claims of £5,000 or less, which rules out most construction disputes. The Sheriff's decision is legally binding, with appeals heard in the Sheriff Appeal Court if allowed. Simple Procedure is generally considered less complex than Ordinary Cause due to the nature of the claims.
• Ordinary Cause: Ordinary Cause procedure must be followed for cases which are for a value of £5000 or more. Claims for £100,000 or less must be brought in the Sheriff Courts, but cases over £100,000 may also be brought. Ordinary Cause cases are generally more complex and the procedure is more formal. As with Simple Procedure, the decision made by the Sheriff is legally binding and appeals would made to the Sheriff Appeal Court

Court of Session

As mentioned above, this is divided into the Outer House and the Inner House:

• Outer House: The Outer House of the Court of Session is generally where more complicated and higher value cases commence. Most cases over £100,000 will be brought in the Outer House, and cases for less than that must be brought in the Sheriff Courts. The judges are highly experienced and the courts are better equipped to deal with high value and complex cases.

  There are also various specific courts which sit in the Outer House, like the Lands Tribunal, but the Commercial Court is the most common to construction disputes. There are specific criteria that a case has to meet in order to be heard in the Commercial Court, but generally the disputes must be of a commercial or business related nature. The court procedure for commercial cases is flexible, subject to case management by a commercial Judge which can assist with efficiency and speed to resolution. Parties must engage with the pre-action protocol before raising proceedings in the Commercial Court.

  There has been a rise in construction disputes being raised in the ordinary court, as opposed to the Commercial Court, usually for the purposes of protection against prescription or timebar. 

  Appeals of judgements of the Outer House may be made to the Inner House.

• Inner House: The Inner House of the Court of Session is an appeal court and is separated into two divisions (First and Second Division). Both hold equal authority and autonomy. The Lord President (being the most senior judge in Scotland) heads the First Division and the Lord Justice Clerk (the second most senior judge in Scotland) heads the Second Division. The divisions are a way of managing the large pool of cases for the court to manage. Cases which make it to the Inner House are generally complex and/or high value cases. 

UK Supreme Court (UKSC)

The UKSC is the highest court of appeal for civil cases across the whole of the UK, and for criminal cases for England, Wales and Northern Ireland. If a decision of the Inner House of the Court of Session were to be appealed further, it would be to the UKSC.

In the UK, Womble Bond Dickinson has offices in Scotland and England, with its Construction and Engineering Team working across both. Our Scottish team is experienced in all forms of dispute resolution including negotiation, mediation, arbitration, adjudication and court proceedings both in the Sheriff Courts across Scotland and in the Court of Session and UK Supreme Court. You can find out more about them here.