Driven by the Gillard Government's commitment to returning the Federal Budget to surplus in 2012/13, all Government agencies are facing increasing pressure to achieve financial efficiencies. Against that backdrop, how agencies recognise, prioritise, resource and manage disputes, both internal and external, will be critical if agencies are to meet the new efficiency dividend targets. This is even more relevant in an environment where the costs of "mega-litigation" pose an almost insurmountable drain on an agency's budget and resources.
For anyone who has been involved in civil litigation, they will know that it can be a lengthy and costly process. In the current climate, the strategic use of Alternative Dispute Resolution (ADR) can enable the management of disputes to be targeted for cost savings without compromising the results desired. The key to achieving this is the identification, management and resolution of disputes at an early, pre-courtroom stage.
The strategic use of ADR in organisations is equally relevant to both the private and public sectors. However, as the single biggest litigator in the federal civil justice system, the Australian Government is well placed to feel the direct benefits of such strategies. In the context of the Gillard Government's recent increase of the efficiency dividend to 4% in the 2012/13 financial year, Australian Government agencies of all sizes are in a unique position to implement effective systems to assist in meeting efficiency targets and avoiding impact on program budgets.
Early identification of "disputes"
At the outset, it is important to define what is meant by a "dispute". Many see the commencement of court proceedings by a third party as being the first step of a dispute; however, the existence of a dispute can be recognised as soon as one party's intentions or requirements begin to conflict with those of another. Early identification of a dispute by an agency, and "nipping the problem in the bud" early, can result in significant cost savings flowing to the agency involved.
The concept of ADR encompasses a broad range of methods through which disputes can be resolved without the final determination of a court or tribunal. At one extreme, the mere placing of a phone call by the relevant line manager in an agency to a disgruntled party can lead to a potential dispute being extinguished before it evolves into a more conventional complaint. At the more formal end of the ADR spectrum, structured forums such as mediations or arbitrations allow each of the disputing parties the opportunity to air the basis of their dispute and help to narrow the issues. It also enables other non-financial remedies such as apologies to be considered. In many disputes involving an agency and an individual, these non-financial expressions can either resolve a dispute completely, or lead to the parties being more open to an agreed outcome. Other non-financial advantages of using ADR include the preservation and retention of important commercial relationships and a reduction in time spent by management dealing with disputes.
Avoiding the costs of litigation through ADR
In addition to providing opportunities for remedies not available in courts or tribunals, the strategic deployment of ADR can lead to significant cost savings for agencies, for which there are two main drivers. Firstly, the systematic adoption of ADR commonly leads to the permanent resolution of disputes earlier than can be achieved in a court or tribunal. The resulting cost savings are achieved through the reduced involvement of lawyers and other consultants who commonly use time-based methods of calculating fees. By resolving a dispute sooner, especially through use of a systematic tiered-dispute management process, the length and scope of an agency's involvement with its lawyers and expert witnesses can be greatly reduced, leading to the agency ultimately incurring fewer fees.
The second means by which ADR leads to cost savings is through the avoidance of the need for compliance with inherently expensive court and/or tribunal procedure. In any litigated matter, there are steps that each party is required to take to ensure that the dispute is in a position to be decided by a judge, magistrate or tribunal member. Such steps involve the preparation of court documents, the preparation of evidence and importantly, the disclosure of all documents in each party's possession relevant to the dispute, known as "discovery". Each of these steps involves the services of both solicitors and barristers, as well as the time of many within an organisation. The time consuming process of discovery can, in many larger cases, lead to the parties incurring millions of dollars in professional fees to complete the process. Magnifying the inherent costs of litigation is the underlying principle that "costs follow the cause" in litigation, meaning that an unsuccessful party is commonly required to pay the costs of a successful opponent.
Cost savings through effective planning
While the benefits of ADR processes over litigation can almost be considered a given in recent times, empirical data is notoriously difficult to come by. The cost savings that can be achieved through the strategic use of ADR have, however, been illustrated in several recent studies, the most notable of which in the Government context is the UK Department of Justice "Annual Pledge Report for 2008/9", released in March 2010. The report takes its name from the Lord Chancellor's pledge to commit all UK Government departments and agencies to using ADR to resolve disputes where appropriate and provides insight into how ADR is being applied across the UK Government. The report revealed that across all UK Government departments and agencies in the 2008/2009 financial year, ADR had been used in 314 cases with 259 being settled (a success rate of 82%). Critically, the cost savings for the UK taxpayer arising from these settlements was estimated to be £90,200,000.
The Gillard Government is keenly aware of the efficiencies which can be attained through increased use of ADR, with the former Attorney-General the Hon Robert McClelland, leading a whole of Government shift away from litigation and towards actively and effectively engaging with disputes early and in a strategic way. At the centre of the Attorney-General's policy in this area is the foreshadowed requirement for all Australian Government agencies to develop and regularly review "dispute management plans" which will set strategies for agencies to respond to, assess and resolve disputes in a timely and cost effective manner using ADR.
Critical to the successful development and implementation of these plans is an in-depth understanding of the kinds of disputes that commonly affect a particular agency and how they originate. An effective dispute management plan will involve more than just lawyers within an agency, with staff in line areas uniquely placed to identify disputes before they develop into costly battles. To support operational staff in this endeavour, it is important that they receive adequate training to foster awareness of common warning signs and how best to address them. Communication of identified disputes to senior management is also important in order to address each dispute in the most appropriate way and regular monitoring of such reports will be key to ensure potential disputes are identified early. Systematic processes to ask staff whether they are aware of any disputes, or the seeds of dispute, are a useful way of encouraging this form of upward information flow.
As demonstrated in the UK, an increased awareness and use of ADR as a form of dispute management in Australian Government agencies will likely lead to considerable cost savings for individual agencies and the Government as a whole. Through the development and implementation of effective dispute management plans, dispute management is an area which can be targeted for cost savings to assist agencies in meeting the constraints of the increased efficiency dividend. The resulting savings to the Australian taxpayer in addition to the various non-financial benefits of ADR are important reasons why targeted dispute management plans ought to be developed carefully and implemented across agencies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
