Arbitration in Construction Dispute

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Arbitration in Construction Disputes A Procedural and Legal Overview

A Procedural and Legal Overview

BE (Civil) (UNSW), LLB (Hons), MBA, CLP, MIEM, PEng (M) Advocate and Solicitor

A paper based on a lecture delivered on 24 May 2003 in Seremban to The Institution of Engineers, Malaysia (Negri Sembilan Branch)


INTRODUCTION Contrary to popular belief and knowledge, arbitration is not the only means of resolving disputes arising from construction contracts.1 Compared to other means of dispute resolution, arbitration as a means of resolving disputes does however have well-defined and generally well-understood mechanisms: this enables it to gain recognition as occupying its very definite place in the arena of dispute resolution “industry”. Further, even though there is some erosion to arbitration’s monopoly in standard forms of construction contracts as the sole and compulsory means of dispute resolution, it will not be wrong to state that arbitration as a means of resolving construction industry disputes is at the moment relatively well-entrenched. Besides, or because of this, there is also the legislative protection and control for arbitration principally in the form of Arbitration Act 1952 (hereinafter referred to as “the 1952 Act”). That is the reason why apart from arbitration and litigation, the rest of the dispute resolution mechanisms are collectively referred to as Alternative Dispute Resolution (or ADR for short). This paper is a brief overview of the legal and procedural landscape of arbitration from its commencement to its conclusion and thereafter. Being an overview, this paper cannot be treated as an exhaustive treatment of the subject, nor is it an attempt so to do: detailed and authoritative expositions can be found elsewhere.2

See, for an overview of other dispute resolution mechanisms, Oon Chee Kheng, Resolution of Construction Industry Disputes – An Overview being a paper based on a lecture presented to The Institution of Engineers, Malaysia (Negri Sembilan Branch) on 24 May 2003. 2 For example, Sir Michael J Mustill and Stewart C Boyd, The Law and Practice of Commercial Arbitration in England, Second Edition (1989) (hereinafter referred to as “Mustill and Boyd”). Sir Michael J Mustill is later to be Lord Mustill, Lord of Appeal in Ordinary, House of Lords. CK OON & CO. Advocates and Solicitors 1


Arbitration in Construction Disputes A Procedural and Legal Overview


THE NATURE OF ARBITRATION The 1952 Act does not define arbitration. Arbitration as a means of resolving (construction industry) disputes must however be distinguished from other means of dispute resolution. For example, in Sports Maska Inc v. Zittrer,3 the Canadian Supreme Court observed that the courts are not bound by the language used and what is described as an expert determination is in reality an arbitration. Further, arbitration as a means of resolving disputes must also be distinguished from other processes such as valuation or certification. In the case of Ajzner v. Cartonlux Pty Ltd,4 it has been held that a process involving a reference to a person described as an “arbitrator” was not an arbitration but a reference to a valuer to make a determination in accordance with that person’s skill and knowledge. The distinction is important for the following reasons: (a) (b) (c) (d) Arbitration is governed by the 1952 Act, ADRs are not. An arbitrator is immune from legal suits;5 whereas there is potential liability for valuer, certifier and expert. Decisions of an arbitrator, valuer, certifier and expert have different legal effects and consequences. An arbitrator will need to observe strictly the rules of natural justice whereas a valuer, certifier or an expert may not need to.

In Collins v. Collins,6 Romilly MR said, “An arbitration is a reference to the decision of one or more persons, either with or without an umpire, of a particular matter in...
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