Australia: "It’s The Principle …": litigation or alternative dispute resolution

Last Updated: 29 June 2013
Article by Mark Fatharly

The realities of litigation and advantages of alternative dispute resolution

Alarm bells ring for lawyers whenever a prospective client insists on pursuing litigation on principle, notwithstanding extensive warnings about risks and expense of litigation. "But why should they be allowed to get away with it?" they say. "It's the principle of it..."

Realities of Litigation

The reality of litigation is that it is time-consuming, expensive, stressful and has inherent risks associated with it. Strategically it is like a game of chess, except that some people are quite literally betting their house on the outcome.

While a court can and will usually determine the rights of each party, right from wrong, and make findings of fact from the evidence, to achieve that outcome will often take a year or more and then usually have a winner, a loser, and both parties having incurred substantial legal costs. And there may be an appeal or two - and there is nothing more damaging to reputation than airing one's dirty laundry in public.

If a favourable judgment is obtained, the concern then is whether the unsuccessful party can pay the judgment and any costs ordered against them. It may then be necessary to take steps to enforce the judgment. Even if the successful party is granted their costs, typically they will only recover about 2/3rds of those costs and will be out of pocket for the balance. In some cases costs are not recoverable at all.

To pursue that principle, a lawyer might advise from day one that the particular proceedings are likely to cost, say, $60,000, which they will have to pay their lawyers regardless of whether they win. They may then be out of pocket for $20,000 of that even if they win. Worse, they run the risk of not proving their case and potentially paying the other side's costs of say $40,000 plus their own if they lose...drawn out in stressful proceedings sometimes over years with no certainty of success. That's before the further time, expense and uncertainty of appeals if they win.

"But we can't let them get away with it!" "We can't lose!" Usually the only guaranteed outcome from such a client is them being dissatisfied with the outcome, and ultimately their lawyers.

Advantages of Alternative Dispute Resolution (ADR)

Fortunately, there has been a far greater focus in recent years on resolution rather than determination of disputes.

At all stages of litigation through the courts there are forms of conferral between the lawyers and negotiations going on from time to time with a view to resolving the dispute, the carrot being the outcome and the stick being the ongoing proceedings and risk of adverse outcome and adverse costs orders if not accepted.

Within the court processes, there are early requirements for pre-trial conferences or mediation dependent upon the court concerned. Statistically that focus has yielded impressive results in recent years with approximately 97% of matters in the Supreme Court of Western Australia being resolved without the need for trial, with similar statistics in other jurisdictions.

Often overlooked is the need or desire to preserve ongoing relationships between the parties to the dispute, culturally sensitive issues and longer term consequences. Litigation between family members, or between businesses in a trading relationship, can forever destroy relations and cause years of bitterness despite the outcome, and may well damage business reputation. So how important is that principle?

There are various ADR processes outside of the court system which may be better utilised to resolve a dispute. While there are a number of different ADR processes, the more commonly used ones are:

Mediation: An independent, accredited mediator facilitates co-operative discussion between the parties to help them identify and discuss the issues with an aim to them reaching an agreement that they can both accept.

The process is fast, confidential, inexpensive, may increase satisfaction of the outcome, improve rather than destroy relationships and develop solutions that are mutually beneficial. It is not about attributing fault, blame or finding fact, but acknowledging the existence of concerns for which the parties attempt to find solutions. The parties don't need to be represented by lawyers, but may be. Mediation could occur with any type of dispute, whether commercial, family, inheritance or other.

Arbitration: Commercial disputes are often resolved under the Commercial Arbitration Act (WA) or equivalents in other jurisdictions.

The process of arbitration may involve very small to very large value claims which are determined either according to the law or what is fair. The process is similar to a private and confidential court process in which an accredited arbitrator is selected to determine the dispute on the submissions and evidence of the parties, but with the process agreed between the parties as suited to the dispute. Parties to arbitration are usually represented by lawyers. There are 3 grades of accreditation of arbitrator, Grade 1 being the highest.

Adjudication: Construction contract disputes are formally determined by an accredited adjudicator under the Construction Contracts Act 2004 (WA) or equivalents in other jurisdictions. The principles of natural justice are applied, and the procedure may be varied to the size and complexity of the dispute, which can be very cost effective and informal for construction disputes from the smallest to the largest.

Appointment of a mediator, arbitrator or adjudicator can be facilitated through bodies such as the Institute of Arbitrators and Mediators Australia (IAMA), which can nominate a suitably accredited person for the particular dispute. Alternatively, a suitably accredited dispute resolution practitioner may be approached individually to act.

Kott Gunning has a strong focus on ADR with 3 partners with training and qualifications in this area who can use their expertise to advise parties to a dispute or be independently appointed to resolve a particular dispute for which they are suitably accredited.

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.

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Mark Fatharly
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