With over 70 per cent of survey respondents from New Zealand’s construction industry predicting an increase in the number of disputes in the next two years, insights released today by law firm Russell McVeagh, offer an opportunity to avoid them.
Russell McVeagh’s report, ‘Getting it right from the ground up: A survey on construction disputes and how to avoid them’ confirms that a clear majority of participants believe disputes in the construction sector have been on the increase for the last two years, and Russell McVeagh litigation partner Polly Pope says this comes as little surprise.
“The expected increase in disputes from industry participants comes in a sector already dealing with high profile contractor insolvencies.
“While some causes of a rise in disputes appear to be structural to the industry, for example, skill shortages – others, particularly around relationships, risk allocation and contractual terms are within the parties’ control and would repay a focus at the outset of any project,” she says.
Both principals and contractors identified a lack of understanding of contract obligations as a key cause of disputes, with bespoke contract amendments reportedly not always read and understood by the parties.
Partner and Property and Construction lawyer Ed Crook says the report’s results are consistent with what the firm is seeing in the market.
“Both principals and contractors are placing similar emphasis on the lack of understanding of the contract obligations as a key cause of disputes. Contractors have also identified matters arising from principal supplied information, and poor contract administration as significantly contributing to disputes, whereas principals identified delays by subcontractors and suppliers as a key source of disputes.
“For the resolution of disputes, all industry participants favoured negotiation between the parties over more formal dispute resolution,” says Mr Crook.
“Our findings offer some tips for all construction industry participants to decrease the risk of disputes, and fall into two broad categories: improving the construction contract documentation (including the parties’ understanding of it) and in the longer term, improving industry conditions.
“The current challenges in the industry indicate that there needs to be a rethink on risk allocation, pricing and resourcing across the industry,” he concludes.