Reflections on Cladding Mediations

As a mediator working in the construction professional indemnity field, I’ve seen multi-party mediations involving cladding defects become a staple of the landscape.

These cases usually revolve around large-scale remediation schemes, where a single claimant, often a developer or building owner, pursues claims running into millions against a range of professionals: contractors, architects, fire engineers, façade designers, and cladding subcontractors.

Each party typically had a different role in the project, whether in the design, specification or installation of the cladding. And, inevitably, when liability comes into focus, fingers start pointing in every direction except their own.

These mediations represent a perfect storm of complexity. We’re dealing with numerous parties, overlapping allegations, insurance complications, quantum challenges and disputes about who should pay what. Impasse is never far away. In this article, I want to share some thoughts on how parties and their representatives might approach these cases more effectively and how mediators like me can help keep the show on the road.

For any mediation preparation is key, but in these cases, it is paramount because there’s often too much to cover in a one day session. but on the other (and with good reason) parties are sceptical about two day mediations.  How can you square this circle?  

One way is for the parties to agree to a greater amount of preparatory work prior to the mediation. For example, a lot of time can be saved on the day of the mediation where I have had substantive discussions in advance with the lawyers and decision makers that I would otherwise have as part of the mediation meeting.  This allows everyone to “hit the road running”.  

The discussions with the Claimants could be focussed around quantum and what their strategy would be if, as is commonly the case, there was one defendant who was for whatever reason out of step with the others - exploring what the reasons might be for this and looking to see if they could be sorted in advance.  

The discussions with the Defendants could be on allocation, since this is a typical sticking point.  There may also be discussions around the impact of any insurance coverage issues affecting one or more of the parties. The Defendants will wish to give their views on quantum and so it may be sensible to have the conversation with them before speaking with the Claimants, so those points can be factored in with them.

I suggest having those discussions say two weeks before the mediation meeting.  That intervening time gap allows parties to work on any stumbling points, refine and obtain stakeholder approval to their mediation strategies.  That is an earlier engagement for the parties (preferably including the decision makers) with the mediator than perhaps is the norm, but when many millions of pounds are at stake, they may consider that to be a worthwhile time investment.

In my experience, the biggest sticking point in the cladding disputes is rarely on liability or even where the realistic value of the claim lies, but instead it is the allocation between the defendants These internal disputes over contribution often become emotionally charged (understandably) but that can cause the defendants to lose sight of the benefits of settlement, which could outweigh the fractional differences in their views over allocation.  

The participants will want to tread carefully here. Whilst it is important each puts their position forward firmly, in my experience it is not helpful if that results in a sense that a group is “ganging up” against any one party.  That will end up alienating the very people that are needed to make progress.  While no one wants to move on offers if they feel others are not moving in step or proportionately, conditional offers between defendants can stall the process if it results in one party feeling they are being singled out or held to ransom. 

Where the parties get stuck at a certain allocation the mediator will ask them to consider the financial impact of sticking to that principle if it means losing the opportunity to achieve an otherwise favourable global settlement - would they likely end up paying more by continuing with the litigation and being faced that contribution to a higher award of damages plus costs?  That is an example of where “principles can be costly”, or where seeking a “perfect result” is the enemy of the good.  

Flexibility is vital. Given their sophistication, and the preparatory work mentioned above, each party should have a clear sense of their best-case, worst-case, and reasonable compromises - albeit layered with an own party bias meaning that each is possibly on the optimistic side. Although it is easier said than done, each party should consider making offers reflective of a reasonable outcome for them, independent of what the others are doing. Ideally those offers should strip out that common bias (which is where the mediator stress testing is useful) and also taking into account the risk of a really bad outcome if no settlement is achieved.  

But what happens if some of the parties have done that and they still are unable to reach a global settlement because there is a sense that one party is out of step with the others?  That may be the time for one or more of the defendants to explore the possibility of unilateral settlements.  Whilst that will not create finality (as contribution claims will proceed), I have seen this used effectively, ultimately leading to a global settlement, as long as those unilateral negotiations do not alienate or threaten others and take place in tandem with continued global negotiations.

Insurance can drive or derail these mediations. Some parties have full cover; others may be limited by exclusions or face non-disclosure defences.  The presence or absence of insurance has a huge bearing on both the capacity and willingness of defendants to settle.

Insurance positions should be clarified well before the mediation - nobody likes surprises.  Typically the defendants will be jointly and severally liable to the claimant for the whole or the bulk of the claim, and so if one defendant has no insurance cover (and no other substantial assets), the others may wish to consider whether that shortfall should be made up between them. There is sometimes some scepticism about whether there is in fact a genuine insurance (or parent guarantee) issue creating a genuine shortfall.  This is something that should be fleshed out and examined in advance of the mediation, if possible and this is a good example where early engagement with the mediator can be useful.   The sooner everyone knows about any impediments the better they can prepare their mediation strategies and obtain the necessary authorities.   

In high stakes construction mediations, the mediator's role is more than simply ferrying offers between rooms. I’m there to bring structure, maintain pace, and help everyone stay strategically focussed, even when tensions rise or energy flags.

The parties expect the mediator to fairly and even handedly stress test each party’s assumptions. And when an impasse threatens, the parties are encouraged to look for ways around it.  Given the sophistication of the participants, this is often achieved by encouraging them, including the decision makers, to speak with each other in a safe environment. These sessions can unlock positions that remain rigid in private rooms.  Whilst the participants can be sceptical when I suggest this, there is a magic that happens when people get into a room and have a constructive discussion.

Above all, I encourage the parties to embrace a mindset that aims for a workable solution rather than a perfect one. If everyone insists on perfection, then because everyone’s idea of perfection will be different, the inevitable result would be walking away from a workable solution with nothing but substantial future costs and continued uncertainty.  In other words, "don’t let perfection be the enemy of the good”. 

Simon Goldring

June 2025