Collaboration: a central factor in many property construction projects. But what price collaboration, when a project’s smooth running threatens to hit the buffers?
Picture the scene
It is two months out from the projected practical completion of a landmark shopping centre: relatively late in the day, to discover (but discovered it is) that the underground carpark leaks. Of particular concern is pooling on the pedestrian pathway leading to the lifts and stairs. It quickly becomes clear that the cost of correcting the cause of the leak (the “corrective works“) would be exorbitant, involving significant works to the structure to, first of all, find the source of the leak and, then, to undertake remedial works to prevent leaking into the basement. There is also a timing consideration: carrying out the corrective works would likely jeopardise the scheduled opening of the shopping centre, planned to catch Black Friday sales income.
The developer, contractor, designer and anchor tenant (a supermarket) meet on site to set out their respective stated positions. The developer says it’s really very simple: the contractor and designer must, between them (in which proportions, he doesn’t care), carry the can both for the cost of the corrective works and any consequential losses. The anchor tenant’s stated position is that opening in good time for the Black Friday sales is (and has always been understood to be) a deal breaker: if the carpark problem jeopardises that timeline, it will (i) refuse to pay rent and (ii) sue the whole lot of you for loss of profits. The contractor and designer proclaim their own respective innocence, and blame each other.
What to do? Parking the dispute doesn’t seem feasible, in the circumstances. Even if one or more parties is willing to fund the carrying out of the corrective works (with ultimate responsibility to be determined afterwards), the shopping centre will likely miss the scheduled opening. On the other hand, the pooling presents a safety risk which, unless dealt with, will impede the building’s sign off.
On the face of it, the parties are faced with an unappetising Hobson’s choice*.
But what if the parties’ stated positions don’t paint the full picture? Each party has withheld information from the others, concerned that to do otherwise might weaken their respective hand in circumstances shaping up to go legal. The developer, for example, still rates the contractor and designer as a team, and would be prepared to work with them both again, if – but only if – they step up to the plate and adopt a constructive approach to sorting this problem out. Ironically, the contractor and designer each privately want to do just that. The anchor tenant is privately more than a mite concerned that it doesn’t have executed collateral warranties from either the contractor or designer.
There is, therefore, a considerable mismatch between the parties’ stated and privately held positions.
Mediation will lend itself well to bridging the gap between that mismatch, and, in the process, finding a solution to the conundrum facing the parties. It will have several advantages, in the given scenario: