In the construction industry, there is a widespread acceptance and use of alternatives to litigation. The market for legal services in construction disputes is therefore one where solicitors not only operate alongside, but also compete with other regulated professionals and unregulated entities. The construction disputes market therefore provides helpful pointers in relation to how the legal services market might develop following further liberalisation and or growth in the use of alternative forums to resolve disputes.
ROLLING BACK RESERVATIONS The public interest in regulating providers of certain types of legal services imposes partial barriers on competition in the dispute resolution market. The conduct of litigation is a reserved legal activity under the Legal Services Act 2007 (LSA). This means that the issuing, commencement, prosecution and defence of proceedings – and ancillary functions in relation to those proceedings – can only be conducted by authorised or exempt persons under the LSA. The LSA forms part of a continuing general trend towards the liberalisation of the legal services market. This has included the introduction of alternative business structures, which has allowed new types of legal service providers to enter the market and operate within a similar regulatory regime. The dispute resolution market is not, however, limited to the conduct of litigation. Disputes can commonly be resolved in other forums which do not involve reserved legal activities. This is particularly the case in the construction industry where even very high value disputes will often be dealt with through adjudication and arbitration.
CONSTRUCTION DISPUTE FORUMS
The value and complexity of construction projects means that they are prone to giving rise to disputes. This explains why construction contracts are subject to a special legal regime provided under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act). The Construction Act introduced the statutory fast-track dispute resolution process of adjudication for construction contracts. This allows parties to quickly (usually within 28 days) obtain a decision on a dispute that will bind the parties and can be enforced in the Technology and Construction Court (TCC). It is also common for disputes under construction contracts to be finally determined by arbitration rather than litigation. The standard form construction contracts contain arbitration clauses that allow parties to easily choose this option. This will most commonly be the case in international, high value and or highly technical projects.
Where parties adjudicate or arbitrate, the courts are no longer the primary forum for resolving their disputes (at least in the first instance). Instead, the court will have a supporting and or supervisory role. This can also apply to the role of solicitors. As the conduct of adjudications and arbitrations do not involve a reserved legal activity, there are no regulatory restrictions on the parties’ choice of representatives. This has led to the development and growth of construction claims consultants. These will commonly be firms of surveyors or individuals with some form of surveying and or legal background, or training working in unregulated entities. In adjudications and arbitrations, claims consultants can provide technical and expert input to support the work of solicitors as they would in litigation. However, they can also act in place of solicitors as the representative conducting the substantive dispute.
EXPANSION INTO LITIGATION
The growth in the market for construction claims consultants and their role as representatives in disputes has presented challenges; and new practices being established in litigation, whether it is conducted through solicitors or litigants in person instructing counsel on a direct access basis. In the context of adjudication, the courts have accommodated the practice of claims consultant representatives assisting their clients and or their solicitors in subsequent enforcement proceedings. This reflects the fact that the claims consultant will already be familiar with the factual background and dispute between the parties. In Octoesse LLP v Trak Special Projects Ltd  EWHC 3180, the TCC held that a claim consultant’s costs in such circumstances will usually be recoverable as a disbursement where it involves work that would not normally be done by solicitors and where there was no need to rely on the claims consultants. Nonetheless, the courts will not permit the restrictions on the conduct of litigation under the LSA to be circumvented. In Ndole Assets Ltd v Designer M & E Services UK Ltd  EWCA Civ 2865, for example, a claims consultant acted for a litigant in person in a construction case and served a claim form and particulars of claim on its behalf. The Court of Appeal held that the claims consultant had gone beyond merely performing an administrative or mechanical function as an agent for the litigant in person (similar to a process server). By assuming legal responsibility for compliance with the relevant rules, the claims consultant had unlawfully effected service of the claim form. Nonetheless, that service was held to have been valid. Rather than have the client or principal face draconian consequences, it is the person engaged in the unlawful conduct of litigation who would potentially face criminal sanctions. Similarly, claims consultants will need to operate appropriate business models. In Meadowside Building Developments Ltd v 12-18 Hill Street Management Company Ltd  EWHC 2651 (TCC), a claims consultant accepted that it was providing advocacy services, litigation services and or claims management services for the purposes of the Courts and Legal Services Act 1990 (CLSA). The court therefore held that its funding arrangements were, in principle, subject to the Damages-Based Agreement Regulations 2013 and were unenforceable, contrary to public policy, champertous and potentially an abuse of process.
The construction legal services market shows solicitors working in a more liberalised environment where their competitors can operate more flexible business models and practices. Solicitors therefore need to identify and build on their strengths to demonstrate the value that they bring compared to alternative types of representatives. At a general level, this will be based on the status of the solicitor ‘brand’, recognising the value that comes from professional regulation. At an individual level, both firms and solicitors need to identify and respond to the challenges of working alongside or against non-solicitor representatives. In individual cases, solicitors will need to identify the dispute management and legal issues where their input adds real value, and those circumstances where alternative expertise (for example on valuation issues) needs to be sought.
Solicitors will also need to recognise and deal appropriately with other representatives who are not subject to the same regulatory and disciplinary regimes as they are. Ultimately, the construction legal services market shows how a challenging environment can provide solicitors with the opportunity to refine and improve the services they provide....