alternative dispute resolutions

7/27/2019 Alternative Dispute Resolutions

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Mediation as a Nothing to Lose Mode for Alternative Mode of Dispute Resolution in Construction Works *

By

Abdul Rani Bin Kamarudin**

Abstract

In any dispute whether it is between entrepreneurs or otherwise,the court would seem to be the final adjudicator as to who is rightand who is in the wrong. In other words, the party at fault will lose,pay damages and cost to the winner. One way or another, the timetaken to know the outcome of the dispute, often than not, is toolong and too slow, and can even be a painful experience even forthe winner. Of late, arbitration has taken quite a dynamic leap as to

how disputing parties resolve their disputes. This could have beendue to the considerable time taken by courts to come to anultimatum on the di sputing parties obligations, or could also be dueto parties unwittingly have arbitration as a standard clause in theircontract in the event of any dispute. 1

For hundreds of years it has been accepted that litigation was theway to solve disputes. Arbitration came along to find an alternative.While arbitration as an alternative dispute resolution has beengaining grounds, and disputing parties select the arbitrator of theirchoice, it is basically no different from a court, as once the partiessubmit to arbitrate their case before an arbitrator (quasi-judicial),their fate is either win or lose, and parties relation may be severedbeyond repair. This process too, has been found to be costly,prolonged and may perhaps only be more appropriate forcommercial disputes. It is still a win-lose situation, not a win-winsituation with the disputing parties having no say as to how theyshould resolve their disputes. In short, litigation in the courts or

1 The traditional method of dispute resolution has clearly failed to dissolve disputesspeedily and this is largely due to backlog of cases. Trial judges are too preoccupiedwith far too many cases and judgments to write. They no longer have the luxury of time to produce well researched and authored judgments. Time has really changed. Thepressure of work and the demand for quicker and speedier justice has created this dilemmaamong trial judges. Clearing the backlog of cases has become the top priority with theresult that judges nowadays tend to give short and over simplistic non speaking judgments.This is something which must be viewed with grave concern. This has to be resolved . (per Balia Yusof Bin Haji Wahi J in Jennifer Anne Harper (mendakwa untuk sendirinya& sebagai wali Estet Bernard Alfred Harper, simati) v Timothy Theseira (unreported,16 December 2008; Rayuan Civil No 12-201-2005), [2008] MLJU 810.


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arbitration proceedings is costly, time-consuming with unpredictableoutcomes and above all, the winner takes all and this, inevitably,has the potential to damage irreparably the relationships betweenthe parties, for example, in matrimonial and labour disputes, amongothers. This paper is on mediation, an effective and affordablecomplement to litigation. Mediation may be opted for in a widerange of subject matters, such as in civil and commercial disputes,matrimonial, personal injury, environmental and labour disputes,among others. It is a nothing to lose alternative dispute resolution,and why disputing parties should resort to it as their first option,and for them to determine for themselves how their disputes shouldbe resolved, particularly so for disputes in construction projectswhere disagreements must be resolved as quickly as possible tomeet the project time line.

Introduction Mediation is completely voluntary, non binding, private andstructured dispute resolution process. 2 The Malaysian MediationCouncil defines mediation as an informal process where parties areencouraged to cooperate in good faith to resolve dispute. A neutralthird party elicits the parties cooperation to discuss their disputeopenly and facilitates their understanding, encourages them to putaside their legal rights for a moment and to focus on theirrelationship, their needs and their objectives. In doing so, theMediator assists parties to find common ground and from there tonegotiate and achieve as mutually satisfactory solution. 3

The Mediator merely helps or facilitates disputing parties tonegotiate for themselves the settlement. It is very important tomaintain status quo of the parties rather than straining it if thematter was litigated. Take for example, the recent controversial

2 See the Keynote Address of Yang Berbahagia Tan Sri Gani Patail, the AttorneyGeneral of Malaysia at the 13th Malaysian Law Conference at the Putra World TradeCentre, Kuala Lumpur, 16th November 2005 . See also the paper MediatingConstruction Disputes by Chong Yee Leong that was presented at the above saidconference as well as the Arbitration Act 2005 and Arbitration: Its Form and Process by A shg ar Ali Ali Mohamed, chapter 2 of a book `Mediation in Malaysia: The Law andPractice by Mohammad Naqib Ishan Jan & A shg ar Ali Ali Mohamed, published byLexisNexis (2010) . See also the Federal Court Practice Direction Note No. 5 of 2010allowing the court to direct parties to undergo mediation at the pre-trial casemanagement stage. 3 From materials provided during the Mediation Skills Training Workshop conductedby the Bar Council Malaysian Mediation Centre at Bayview Hotel, Georgetown heldfrom 30th March to 3rd April 2011.


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issue on the use of the word Allah in the Bahasa Malaysia versionof the Herald publication the Catholic Weekly. This highly sensitivereligious matter should have been settled through mediation or

closed- door dialogues instead of being litigated in the Court. 4

The process is confidential and on without prejudice5

basiswhere any disclosures or admissions by parties shall not leave thefour walls of the mediation venue should the parties failed to reachany settlement. In other words, not only privacy is maintained,admissions and disclosures too, cannot be used by one party againstthe other in the court of law without the latters consent. Thestructured process includes both joint as well as private sessionswith the parties.

It is cost effective, time saving and work towards win-win

solutions. No writ is required but the willingness of the parties to sittogether to talk out their differences with a Mediator, or more if required, between the disputing parties to facilitate the talkingprocess for the parties in a structured and professional manner.Unlike a conciliator, a Mediator does not offer advice, give solution,make recommendation or determine for the parties on how thedisputing parties should resolve their disputes. 6 That is entirely forthe parties to decide. In mediation, the process is flexible andinformal. A Mediator invites the parties to assess their strength andweaknesses and to make them think of questions such as what if and so forth. The approach in mediation not being adversarial allowsparties to talk out their points and concerns and helps to avoiddamage to parties relations which is imprudent for existing or futurebusiness.

Having said the above, reference is made to the application of mediation to resolve unfair dismissal cases which as will be seen,

4 The High Court s decision in Titular Roman Catholic Archbishop of Kuala Lumpur v Menteri Dalam Negeri & Anor [2010] 2 CLJ 208 , allowing the Catholic weekly Herald to use Allah to describe the Christian God had raised tension levels in this country.It had led to attacks on churches, a mosque, a Sikh temple and a Convent school,among others. If not for the government s immediate proactive move to calm downthe situation, it could have led to more serious religious conflict and thus,

jeopardising the harmony and tolerance practised among the multi-racial and multi-religious population in Malaysia.5 Read Without Prejudice Negotiations by Mohd Akram Bin Shair Mohamad, chapter7 of a book `Mediation in Malaysia: The Law and Practice by Mohammad NaqibIshan Jan & Asghar Ali Ali Mohamed, published by LexisNexis (2010). 6 Same as footnote no. 3 - Malaysian Mediation Centre .


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provides for the amicable settlement of the dispute and partiesbeing happy with the outcome reached therein.

In Lam Choon Keng v Danone Malaysia Sdn Bhd, 7 the claimant wasdismissed from employment by the company on 1 June 2007. An

early evaluation of the case was held and for the said purpose, thecase was transferred from Court 19 to Court 25. The case wasmentioned in Court 25 on 9 November 2010. On 10 January 2011,the early evaluation was successful and both the parties informedthe court that they had come to an amicable settlement. The termsof the settlement were as follows: (1) without admission of liability,the company agreed to pay the claimant an ex-gratia payment of RM30,000 as full and final settlement of his case; (2) uponclearance of the said payment to be made through the claimantssolicitor, the claimant would have no further claims whatsoeveragainst the company in respect of his employment; and (3) therewas no EPF or SOCSO payable in respect of the award and theclaimant would be responsible for his own tax, if any. Both partiesconfirmed that that was the full and final settlement of the matter.Accordingly, a consent award was handed down and the courtexpressed its appreciation to both the parties for their efforts incoming to the amicable settlement.

In Wan Hum Pak v Harrisons Trading (Peninsular) Sdn Bhd & Anor, 8 the claimant was dismissed from employment on 31 December2004. On 21 October 2010, with the consent of the parties, the

claimants case was transferred to Court 27 for an early evaluationby the learned Chairman. When the case was called up for mentionon 17 January 2011, the parties informed the court that they hadreached an amicable settlement. Accordingly, the claimantrequested permission of the court to withdraw his claim against thecompany. In view of the settlement, the court granted the requestand the claim was struck- off from the courts list.

In Marilyn Radin Malleh v Redtone Telecommunications Sdn Bhd, 9 the claimant was dismissed from employment on 4 January 2008.The case was transferred from Court 24 for an early evaluation. Theearly evaluation was held on 18 January 2011 and 25 January2011. On 25 January 2011, the court was informed by therepresentatives of the parties that the case was amicably settledbetween the respondent and the claimant. The agreed terms of

7 [2011] 2 LNS 46 (Award No 46 of 2011).8 [2011] 2 LNS 100 (Award No 100 of 2011).9 [2011] 2 LNS 123 (Award No 123 of 2011).


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settlement were recorded by the court as a consent award betweenthe parties. The terms of settlement were that the respondentcompany must pay the claimant a sum of RM25,000 through theclaimants solicitors, Messrs Naraendran & Suria within 14 daysfrom the date of the award as full and final settlement of the case.

In Lee Jah Hui v Terimee Beauty Slimming Academy Sdn Bhd , 10 thedispute between the claimant and the respondent was related tothe dismissal of the claimant from employment on 5 August 2007.The case was transferred from Court 12 to the Industrial Court foran early evaluation. On 11 February 2011, counsel for the claimantand the respondent informed the court that the parties hadamicably settled the dispute. The agreed terms of the settlement,recorded by the court as a consent award, were as follows: (1) therespondent company must pay the claimant on a ex gratia basis thesum of RM6,000 as full and final settlement of the claim and therewould be no other claims by either party against the other; and (2)the payment must be made to the claimant through Messrs TehSoon Kee & Partners within 14 days from the date of the award.

In Muhawad Fattaah Umar Khitab v Enhance View Sdn Bhd , 11 theclaimant alleged that he had been constructively dismissed fromemployment on 7 February 2008. The respondent however, allegedthat the claimant had been guilty of misconduct and indiscipline. On16 April 2010, the case was called up for early evaluation beforethe Assistant Registrar. The parties however, failed to reach an out-of-court settlement. Accordingly, the case was transferred to theIndustrial Court for a full trial. In the midst of the proceedings, theparties requested for another attempt to an out-of-courtsettlement. The court granted the request and guided the partiesthrough the negotiation. After a brief negotiation, the partiesagreed to a final settlement of their differences. Accordingly, aconsent award in the sum of RM12,000 was entered in favour of theclaimant as full and final settlement of the claimants case.

In Christopher Kam v Kenangan Cergas (M) Sdn Bhd, 12 the dispute

between the parties was related to the purported dismissal of theclaimant by the respondent on 30 November 2005. On 17 May2010, in a mention before the Assistant Registrar, the partiesagreed to a final settlement of the case namely, the respondent

10 [2011] 2 LNS 203 (Award No 203 of 2011).11 [2010] 2 LNS 627 (Award No 627 of 2010).12 [2010] 2 LNS 0981 (Award No. 981 of 2010).


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agreed to the payment of RM9,600 to the claimant. Accordingly, aconsent award was entered in the said sum in favour of theclaimant.

Lastly, in Aliadin Abdul Samat v Amsteel Mills Sdn Bhd , 13 the

dispute arose out of the dismissal of the claimant by the respondenton 7 March 2005. On 19 May 2010, in a mention of the case beforethe Assistant Registrar, the parties agreed to a final settlement. Therespondent agreed to pay the claimant a sum of RM2,500 andaccordingly, a consent award of the case was recorded. The saidpayment was made by the respondent without any admission of liability on its part. With the settlement, the claimant withdrew thecase against the respondent with no further claims against them. 14

As from the above cases, it is noted settlement out of courtthrough mediation had been adopted to resolve the dispute betweenthe parties instead of going through a full hearing of the matter anda decision imposed on the parties by the court. Parties should beencouraged to resolve their dispute vide mediation rather thandirecting it to the court for a decision or an award.

The urgency for parties to settle disputes outside court is noless urgent in the construction industry. In the unreported case(June 2010) between International Islamic University Malaysia(Public Works Department) and Mars Trading & Construction (M)Sdn Bhd, the company had defaulted in the construction of a project

in IIUM with 40% left uncompleted. The company requested formutual termination rather than outright termination. If it is outrighttermination, the company had to make good to IIUM any additionalcost including cost overrun to complete the said project as a resultof IIUM having to engage a new contractor. The additional costwould be somewhere in the region of RM12 million or 70% of theoriginal project cost of RM18 million. If the company is terminatedoutright and by not mutual termination, it stands to be blacklistedand would forfeit the estimated payment sum of RM14 million from

13 [2010] 2 LNS 0982 (Award No. 982 of 2010). 14 See also Herwan Jones v Wawasan Aktif Sdn Bhd [2010] 2 LNS 1192 (AwardNo 1192 of 2010); Valerian Punsus Dalus v Kenangan Cergas (M) Sdn Bhd [2010] 2 LNS 1195 (Award No 1195 of 2010); Magala Sabapathy v Graphic PressGroup Sdn Bhd [2010] 2 LNS 1215 (Award No 1215 of 2010); Rohayu Hamzah v

Affin Bank Bhd [2010] 2 LNS 1231 (Award No 1231 of 2010); Chong Choon Koh v CIMB Bank Bhd [2010] 2 LNS 1290 (Award No 1290 of 2010); Ang Oi Leng v CIMBBank Bhd [2010] 2 LNS 1326 (Award No 1326 of 2010; Rahmatullah Zinin v PosMalaysia Bhd [2010] 2 LNS 1363 (Award No 1363 of 2010).


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its other previous contract works with the government. This wouldmean that the company cannot pay its subcontractors and withoutany further projects from the government through the Departmentof Public Works, it too would have no means of ever paying IIUM orthe subcontractors. Based on the advice of the Universitys LegalAdviser, the Ministry through IIUM opted for mutual termination.Hopefully and slowly, IIUM could recover the liquidated damagesfrom the company. Thus by looking at the underlying needs notsticking to rights or positions, parties settle on terms they agreed,and relations are not irreparably damaged for futurecollaborations. 15

In another case between IIUM (Department of Public Works) vNasmie Engineering Sdn Bhd, Nasmie was appointed as consultantto the construction of the Female Students Residential College 7 in

IIUM Gombak campus with the original project cost being RM30million. The main contractor defaulted by completing only 70%(RM21 million) of the construction. When it was retendered, thetendered price was RM23 million or 76 % of the original project costwhich was an additional sum of RM21 million instead of RM7 millionhad the terminated company completed the construction.Department Public Works contended that the consultant companyhad already been paid its consultancy fees for the 70% work doneby the terminated company leaving the remaining consulting fees of RM56,114. Further, since the consultant company had completed its

consultancy during the tenure of the terminated company, it cannotclaim for more than the remaining sum of RM56,114. The consultingcompany argued that it was involved in the tendering work processand was entitled to claim RM264,786 for its consultancy scale of fees as a result of the retendering. The consulting company averredthat work for the retender process was tedious and required it toperform additional services in connection with the resumption of hisprofessional services such as particularize the items of works left tobe done, the drawings and bill of quantities to be varied amongothers. The Department of Public Works was certain that theretendered package did not involve any new design work. Thedispute is currently being arbitrated as it is stipulated in theagreement. 16

Mediators Opening Statement to Disputing Parties

15 The Legal Unit, Office of the Rector, International Islamic University Malaysia.16 Same as footnote 15 .


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On the prescribed day, time and venue, the Mediator eagerlywelcomes both the disputing parties as follows, more or less, andmakes his opening speech

Good morning/ afternoon/ evening. My name is

.................. and you are .................., and I believe youare .............................How would I address each of you? I am pleased that both of you have chosen mediation tocome to an amicable solutions. I am a qualified Mediator registered with the Malaysian Mediation Council established under the patronage of the Malaysian Bar Council. I havecouple of years of experience as a mediator. Allow me toexplain to both of you what is mediation and the role of themediator. Mediation is a wholly voluntary process and noone is under any compulsion to agree to anything. If this

mediation is not bringing both of you anywhere forward,feel free to inform me. We could adjourn or time out to cool things down, and if necessary, to conduct with each of youfor a private session.

Both of you have signed the mediation document where you have agreed to appoint me as a mediator. Let me emphasis that both of you have agreed that thismediation is confidential and conducted on without

prejudice basis. That means any admission or disclosure by one party, the other party cannot use it against him in acourt of law without his consent should this mediation failed in reaching any amicable settlement.

As a mediator, I do not offer advice, solution or recommendation, or decide how both of you are to resolveyour differences. The matter is entirely up to both of you. I listen and facilitate the discussions and to help both of youto generate and explore for a way out.

Both of you have made yourselves free this whole day? And both of you too, have the mandate/ authority to settle? Before we start this mediation, there are ground rules that both of you should first agree upon. Each of you will begiven equal opportunity to make an opening statement tome. When one party is opening his case, I will appreciate if the other would listen and not interrupt him. I would advisethat you jot down the points of objections and raise it whenyour turn comes. Is that agreed? Please do not use


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abusive or offensive language nor there be any need toshout or yell. Is that agreed? It is important too, to put your phone in the silent mode. Good then. Who would liketo start first?

Joint Session/ Private Session

During the joint session, a mediator must look for common ground,need or interest of the parties. The Mediator should not interruptunless to get clarification. When one party is done with his openingcase, the Mediator summarises with words such as if I am correct,your concerns are ......... to indicate that his concerns had beennoted. The same applies to the other party. When both parties aredone with their opening case, the Mediator then summarise to both

the parties the positive achievements or points of agreement, anddetermine the agenda such as friendship , business relations or

good working or good living environment . An agenda with toxicconnotation such as compensation and damages should bereworded or rephrase into something conducive or non-toxic.

The Mediator must always strive to discreetly induce the partiesto move away from their rights or positions and to focus on commoninterest or needs, the underlying issues, and what each party iswilling to give and take. By highlighti ng the parties common

concern, the Mediator is maintaining the momentum that thediscussion is progressing. A Mediator should remain impartial bygiving each party relatively equal time and acknowledgement of concerns such as I understand how frustrating it can be for you , Ican see you feel hurt about it or I understand why you are upsetabout it , thus making the person feel important and empathisingwith him. A Mediator has to generate options for the parties, probetheir matters of concern, recognising their needs, goals, objectivesand do reality testing with the parties with words such as:

- If you were him, how would you react or feel?

- What if..

- Have you consulted with your lawyer?

- What are your chances?

- If you were him, would you accept it?


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The private session with the parties are then followed byanother joint session. There is no rule to say that there cannot bemore than one private session. It all depends on the situation athand. However, after each private session, there must be a jointsession again to recoup the degree of progress by trying to focus ornegotiate on actual needs rather than rights or positions. A Mediatorhas to generate options for the parties to consider by looking attheir actual needs rather than their rights or positions.

The parties may, at the end of the mediation consent to anagreement that is legally or non-legally binding or points of theagreement subject to further documents or confirmation. A Mediatormay write down the terms of the settlement. However, if theirlawyers are present, it is advisable to let their lawyers prepare theagreement. A Mediator should be mindful that he also owes a duty

of care to the disputing parties especially as to how he prepared theagreement and he could be sued for negligence if the agreementwas poorly or badly drafted to the detriment of the parties.

Open Door Concept

A Mediator is trained to be mindful that he should not come to themediation process with the prejudgment that he must succeed inmaking the parties come to a settlement. If everything fails, theMediator is trained to thank the parties for considering mediationand leave the door open for future resolution by saying:

I really believe this can be settled. In everyones best interest we can reach an amicable settlement. Numerous

potential and advantageous options have been identified and some have been agreed upon. You may be better at settling this matter on the terms you know better rather than letting the courts decide for you. I think more timecan be taken in reconsidering the issues not settled. Comeback if any of us have new options. Is that all right? 18

Conclusion

The Federal Court Practice Direction Note No. 5 of 2010acknowledged the benefit of settlement by way of mediation in thatit is accepted by the parties, expeditious and final. In addition, goodrelationships are restored and maintained for future undertakings.

18 Same as footnote no. 3 - Malaysian Mediation Centre.


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There is already an additional move by the government to pass the Construction Industry Payment a nd Adjudication Act to deal withchronic problem of delayed and non-payment in the Malaysianconstruction industry. The proposed act ensures that everyone inthe construction industry pays the appropriate amounts due in atimely manner. The propose Act ensures another fast andeconomical dispute resolution method for the constructionindustry. 19 Disputing parties are now beginning to realize thatmediation, conciliation, arbitration and the proposed adjudicationare alternative modes of dispute resolution other than beingexpeditious and down to earth.

*A paper presented at the Seventh International Conference onMulti-National Joint Venture for Construction Works in the InstituteTechnology of Bandung (ITB), Indonesia, 28th-29th September2011 collectively organised by the Institute Technology of Bandung(ITB), Kyoto University, Japan and International Islamic UniversityMalaysia (Kulliyyah of Architecture and Environmental Design).** Lecturer in Ahmad Ibrahim Kulliyah of Laws, International IslamicUniversity (1992 >); Director of the Legal Unit, Office of the Rector,IIUM (2009 >); LL.B (Hons) IIUM 1988; MCL (IIUM) 1990; PhDin Law (Exeter: UK) 2002; Advocate & Solicitor of Malaya (1991-1992); Peguam Syarie: KL & Negeri Sembilan (1996); Email:[email protected]; The Presenter had completed a 40 hourMediation Skills Training Workshop conducted by the Bar CouncilMalaysian Mediation Centre. This workshop is recognized by the BarCouncil Malaysia to be empanelled as a Mediator on the panel of theBar Council Malaysia Mediation Centre.

19 For further reading please read Construction Industry Payment and AdjudicationAct Reducing Payment-Default and Increasing Dispute Resolution Efficiency inConstruction by Sr Noushad Ali Naseem Ameer Ali, President, The Institution of Surveyors Malaysia & Chair Construction Industry Working Group on Payment(WG10). He can be contacted at email: [email protected] this article may beviewed at http://www.cicqs.com.
https://mail.iium.edu.my/owa/redir.aspx?C=6e39411940164419a371b1e04388694e&URL=mailto%3arani%40iium.edu.myhttps://mail.iium.edu.my/owa/redir.aspx?C=6e39411940164419a371b1e04388694e&URL=mailto%3arani%40iium.edu.my

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