Dispute Resolution Boards (DRBs)

Dispute Resolution Boards (DRBs) are normally set up at the outset of a contract and remain in place throughout its duration. Comprising one or three members thoroughly acquainted with the contract and its performance, the Dispute Board informally assists the parties, if they so desire, in resolving disagreements arising in the course of the contract and it makes recommendations or decisions regarding disputes referred to it by any of the parties. Dispute Boards, also known variously as Dispute Review Boards, Dispute Avoidance Boards, Dispute Adjudication Boards and Dispute Resolution Boards have become a standard dispute resolution mechanism for contractual disputes arising in the course of mid or long term contracts.

The primary function of a Dispute Board is to assist the parties to avoid disputes if possible by facilitating and improving communication and encouraging the resolution of contentious issues by the parties at the job level before they become disputes, or if not, to assist them to resolve disputes quickly and cost effectively without the need for arbitration or litigation.

The members of a Dispute Board need to be relevantly experienced in the type of project being undertaken and have a thorough knowledge of contractual issues. They need to be respected for their experience and expertise and they must be independent and impartial.

Generally, the Principal and the contractor nominate one member. Notwithstanding their nomination by a party, each member must be independent of both contracting parties. Each party has the right of reasonable objection over the other party’s nominee. The Chair is usually nominated by the party nominees and then ratified by the parties.

The most effective Dispute Boards are formed at the start of the contract and before construction work begins. The primary advantage of a standing Dispute Board, as opposed to a Board appointed as and when disputes arise (i.e. on an ad hoc basis) is that whenever a dispute arises, the members of the Board will have a high degree of knowledge of, and familiarity with, the project, its contractual context, and its progress which enables the Board to assist the parties informally by providing recommendations or, if required, to render a decision within a relatively short period of time.

The parties are free to determine the jurisdiction of the Dispute Board and the rules of procedure it should follow in resolving disputes. Dispute Boards act as experts. Because Dispute Boards are not acting in a judicial capacity but as experts, the Dispute Board can adopt an inquisitorial, investigative approach. Generally Dispute Boards and are nor required to comply with the rules of natural justice and there is no objective standard of fairness that must be complied with.

Depending on the parties’ agreement and the procedural rules adopted, the Dispute Board’s decision may need to be unanimous, or a majority decision may suffice. Also, the Dispute Board’s decision may be either non-binding, or binding and must be complied with unless or until reversed, or modified by agreement of the parties, or by a court or by an arbitral tribunal. The requirement for a decision of the Dispute Board to be complied with in the meantime is the very essence of the value of Dispute Boards – they provide a means of resolving disputes in the first instance to enable the project to continue, even if following later arbitration or litigation, the result may be reversed or modified in some way.

A Dispute Board’s decision is not an arbitral award capable of enforcement, nor does it have the status of a court judgment. Accordingly, a decision is only binding as a matter of contract between the parties and the appropriate method of enforcing a Dispute Board’s decision is by way of an action for breach of contract. In enforcement proceedings, there is very little room for the defaulting party to resist enforcement unless it can establish that the Dispute Board exceeded its jurisdiction, i.e. where the Dispute Board has issued a decision in respect of a matter that was not referred to it, or it has issued a provisional decision where the parties only authorised it to issue a final decision.

Dispute Boards provide an effective alternative way of avoiding, managing and resolving conflict on construction projects. Dispute Boards create a forum in which contractual issues can be addressed before they progress to the stage of actual disputes that require formal resolution. The aim is to ensure that the project proceeds to completion without delay caused by disputes by improving communication between the parties, informally assisting the parties to resolve contentious issues promptly at appropriate job levels and, providing a speedy and relatively inexpensive dispute resolution process by means of an impartial and interim, but binding, determination of the parties’ contractual rights by an independent expert, or experts, pending final resolution of the dispute by agreement, court or an arbitral tribunal.

If you think your project would benefit from the establishment of a Dispute Board, please contact our Registrars to discuss your requirements registrar@buildingdisputestribunal.co.nz or on
(09) 486 7143

 

An Authorised Nominating Authority
under section 65 of the Construction Contracts Act 2002