Construction Law Update

1. Construction Law Update March 6, 2003

2. AGENDA • GOOD MORNING! • ARE YOU ASKING FOR IT? (TEN TIPS FOR INEFFECTIVE CEOs) • CHOOSING A PROCESS • WHEN, HOW, WHAT TO CLAIM • LITIGATION PRIMER

3. Are You Asking For It?

4. Top 10 Tips For Highly Ineffective CEOs

5. Tip # 10 Develop a Culture of Fault (seek out & punish the innocent)

6. Tip # 9 Ignore the Maxim: Think Lots; Say Little; Write Less. (especially in the age of e-mail!)

7. Tip # 8 Be “Penny Wise & Pound Foolish” (don’t train staff; don’t pay to have someone look over the contract documents; wait ‘til its too late)

8. Tip # 7 Put Personalities Ahead of Practicalities (silverbacks in the Ruwensori; “I don’t care what it costs” mentality)

9. (try to be somewhere in between)

10. Tip # 6 Plan to Make Your Money at the Back End, Not the Front (forget the bid, just get the job; make profit on extras)

11. Tip # 5 Draw Lines in the Sand, Early & Often (encourage a culture of confrontation & withdrawal)

12. Tip # 4 Rely on Ambiguity & Assumption (i.e. b.s. baffles brains)

13. Tip # 3 Choose Volume over Quality of Business

14. Tip # 2 Ignore “Credibility” as a Corporate Asset (look ahead, examine industry leaders. What is their chief asset? Capital or Credibility?)

15. Tip # 1 Give all your Profit to Lawyers & Consultants

16. 10. Develop a Culture of Fault (seek out & punish the innocent) 9. Ignore the Maxim: Think Lots; Say Little; Write Less 8. Be “Penny Wise & Pound Foolish” (don’t train staff; don’t pay to have someone look over the documents) 7. Put Personalities Ahead of Practicalities (silverbacks in the Ruwensori; “I don’t care what it costs” mentality) 6. Plan to Make Your Money at the Back End, Not the Front (forget the bid, just get the job; make profit on extras)

17. 5. Draw Lines in the Sand, Early & Often (culture of confrontation & withdrawal) 4. Rely on Ambiguity & Assumption 3. Choose Volume over Quality (TCA program) 2. Ignore “Credibility” as a Corporate Asset (look ahead, pick industry leaders. What is their chief asset? Capital? Credibility?) 1. Give all your Profit to Lawyers & Consultants

18. Keeping Your Options Open

19. Charge of the Light BrigadeA British cavalry charge during the battle of Balaclava (present day Ukraine) in the Crimean War in October, 1854. A misunderstanding led to British cavalry being committed to an attack up a valley strongly held on three sides by Russian troops. Of 673 men, less than 200 returned from the misdirected charge.

20. When to Claim

21. How to Claim

22. What to Claim

23. Early Claims Resolution Strategies

24. Choosing a System

25. Perfect Procedural Fairness (if the process is right, the result doesn’t matter) “Your Case” “Big Picture” Golden Rule: “Do unto others etc.” (individual outcome) (- societal outcome -fair exchange of values -fair balancing of risks) Perfect Outcomes (if the result is right, the process doesn’t matter)

26. Justice Circles Utopian Ideal Perfect Procedural Fairness Trend of Courts (Faith in System) Your Case Big Picture Trend of ADR (Faith in person) Perfect Outcomes Coin Toss / Lottery Divine Justice

27. Choosing AProcess

28. CCDC 40 • CCDC 40 was developed for use with CCDC 2 -1994, Stipulated Price Contract • Provides rules for mediation and arbitration, depending on contract • Mediation: entirely voluntary, no-risk process • Arbitration: most formal ADR procedure, binding outcome

29. Dispute Review Boards • Parties select DRB panelists at outset of contract • More formal than jobsite negotiations, less formal than arbitration • No discoveries, but full documentary backup • DRB first meets after exchange of documents • By the time the claim reaches the DRB, DRB should be partially familiar with the claim • DRB conducts “meetings”, not “hearings” • DRB issues detailed written recommendation for resolution of dispute • Any party dissatisfied with outcome can litigate

30. Mediation • Non-binding method of dispute resolution • Parties select mutually acceptable mediator • Parties voluntarily reach their own mutually acceptable solution or settlement • Dispute is not translated into legal issues • Process is not a litigation look-alike • Mediation is usually conducted without prejudice to the parties’ legal positions • If mediation does not result in a solution, parties are free to commence litigation

31. Arbitration • Binding process of dispute resolution • Parties choose one or more neutral arbitrators (panel) • Evidence is presented to panel • Panel renders award in form of damages or other equitable relief • Limited right to appeal binding and final award • Enforcement mechanisms under provincial Arbitration Acts

32. Pros and Cons

33. Pro Summary in smaller cases Access to expertise on panel It’s all confidential. No-one ever needs to know Con Ends up looking & costing like litigation in bigger cases You end up paying for 3 judges and a courtroom No precedent value – the law stagnates Arbitration

34. Pro It works People go in committed to settlement It is not necessary to do production and discoveries Con It works The built-in assumption, going in, is that there is a not payor, not payee People can lie in mediation and get away with it Mediation

35. Pro Decisive Coerces settlement Adversary system gets to heart of matter Specialty courts shape an industry, take “big picture view” Con Expensive Investment at point of settlement can be high So do other systems, if done right Little or nothing ever goes to trial anyway Litigation

36. Litigation # 2 “He saw a lawyer killing a viper, on a dunghill hard by his own stable. And the Devil smiled, for it put him in mind of Cain and his brother, Abel.” – Coleridge “For, as thou urgest justice, be assured thou shalt have justice, more than thou desirest”. – Merchant of Venice IV, I, 315

37. The Lost Art of Settlement

38. Example: Settling a Lien Claim • Preliminary Points: • It is not necessary to settle every issue to settle the lien issue • Interim or partial settlements are perfectly fine • Issues in rem may be separated from issues in personam

39. Settling a Lien Claim II • Solicitor’s Role: • Bring parties together in such a way that they are likely to reach mutually satisfactory terms • Know the parties, be aware of state of various lien claims, status of pleadings and particulars, status of productions and discoveries

40. Settling a Lien Claim III • Three essential tools for reaching settlement: • Good spreadsheets • Good mathematics • Good communications

41. Settling a Lien Claim VI • For more detail: • D.W. Glaholt, Conduct of a Lien Action (to be published by Carswell later this year)

42. When All Else Fails LITIGATE

43. LitigationPrimer

44. Golden Rules 4. To calculate costs: witness x 2 x 5- 10,000 = trial cost; trial cost x 2 = total cost 3. If it goes to trial, it will cost each side the amount in issue, before you get a judgment 2. Your first loss is your best loss 1. A bad settlement is better than a good lawsuit any day of the week

45. Day # 1 $500,000 Claim Goal: Get to Zero Net Gain -500K (Claim) Net Loss

46. 6-12 Months From Day # 1 A dozen or so letters; two case management conferences; some production; some discoveries Net Gain -650K (- 500K claim -150K accrued costs) Net Loss

47. 12-18 Months From Day # 1 - $250,000 settlement More discoveries; more motions; a successful mediation Net Gain -500K (- 500K claim -250K accrued costs +250K settlement) Net Loss

48. 18-24 Months From Day # 1 - $500,000 Judgment Net Gain -200K Net Loss

49. Loss 18-24 Months From Day # 1 Net Gain Net Loss -1,300K (- 500K claim -500K accrued costs - 300K to successful defendant)

50. Questions?