ADR
CONTENTS
Conciliation
Mediation
Arbitration
ADR in the South Australian Common Law Jurisdictions
Conciliation
Mediation
Arbitration
Mediation and conciliation
Arbitration
Conciliation conferences
Mediation
Arbitration
When is ADR likely to succeed?
What is ADR? Why us it?
The attraction of Alternative Dispute Resolution (normally referred to as ADR) is that it offers faster, more cost effective methods of resolving disputes than the traditional trial-based litigious process.
The formal method of dispute resolution will undoubtedly be necessary in some situations. Even so, persevering with the trial process, from filing the originating process to collecting the final judgment, often results in the legal costs of the litigation exceeding the amount that was the subject of the original dispute. This is partly because the civil system places the importance of procedural fairness and disclosure higher than it does economic efficiency. It is also due to fundamental evidentiary doctrines requiring proof.
Legal costs are more likely to escalate if the case involves complex factual or technical issues, or where there are several parties to the dispute. The amount claimed might be surprisingly small, but the process of proving the claim is remarkably difficult and time consuming, particularly where expert witnesses must be called. If the parties are behaving in a commercially responsible way, a compromise that avoids an expensive adversarial battle is usually within reach.
There are good reasons why an informal approach to dispute resolution is preferable to traditional methods, and they are not only financial. In some cases, particularly commercial ones, the parties enjoy a good working relationship but for a particular legal issue. The confidential nature of ADR can make it a far better option to a very public courtroom dispute, helping preserve the working relationship.
Given that during the last 15 years there has been an increase in large, expensive legal actions, it is hardly surprising that clients are looking for ways of resolving disputes in a faster, more efficient way. Progressive firms recognise this and strive to provide the right support for clients who find themselves in unpalatable legal fixes. Moreover, given the potentially very high costs of litigation in the traditional court systems, the various courts are now also expecting parties to actively consider ADR options at an early time.
At fountain+bönig, with our commitment to clients and our focus on results, finding the most cost-effective method of resolving our clients’ problem is of primary importance. We believe that ADR has a vital role to play when we consider options for our clients.
Types of ADR
There are three primary types of ADR; conciliation, mediation and arbitration. All of them make use of an objective, independent adjudicator.
Conciliation
Out of the three types of ADR, conciliation is generally regarded as the one that places most emphasis on dealing with a dispute by way of recommendation and advice. Strictly speaking, a conciliation conference is not technically an alternative to litigation (as a form of ADR), as it is in many jurisdictions an obligatory step in the litigious process. Conciliation conferences conducted pursuant to section 92 of the Workers Rehabilitation and Compensation Act 1986 (SA) are such an example. They are, however, an opportunity for the parties to put a summary of their respective cases to an objective party and receive assistance in resolving the issues in dispute.
While a conciliator cannot make formal rulings, he or she is able to take an active role in considering and discussing the strengths and weaknesses of each party’s case. Any remarks made or recommendations will not bind the parties, but they do carry a certain weight. The parties will be required to pinpoint what exactly is in dispute, and they will be encouraged to explore all the available settlement options. Parties can adjourn the proceedings at any time to discuss matters in private, or they can adjourn the conference itself to a later date if necessary. Evidence of anything said or done in the course of conciliation proceedings is only admissible in subsequent proceedings with the consent of all parties.
If the matter is not resolved there is no reason why the parties cannot then raise the possibility of mediating the matter.
Mediation
Mediation is one of the most popular alternatives to a formal trial. The process is similar to conciliation. A neutral mediator with the requisite qualifications will assist the parties to explore the issues in the case and the options available to resolve it. The mediator’s principal role is to facilitate discussion; while he or she can make suggestions to the parties, the mediator cannot make a decision. It is for the parties to reach their own decision.
Obviously the beauty of the process is that the rules of evidence do not apply. If the case rests on conversations that are technically hearsay, so be it. As with the conciliation conference, discussions take place “without prejudice” to the parties’ legal rights against each other. There will be no court reporter taking down what is said. If a party says something prejudicial to their case, or later says something inconsistent with their position at the mediation, that cannot be raised during subsequent formal proceedings. Confidentiality is intrinsic to the success of the process.
Like conciliation, mediation is a non-binding form of ADR, however if a settlement is reached, the terms of that settlement will be enforceable.
Mediation is usually an entirely voluntary process. Accordingly, the people who engage in mediation are generally those who want to find a way of resolving the dispute. This is reflected in the high success rate of mediation. The court does, however, have the power to refer a matter to mediation, but will not generally do so in the absence of the parties’ consent.
As mediation is becoming an increasingly popular form of ADR, it is worthwhile commenting on a selection of mediation models.
Professor Boulle in “Mediation, Principles, Process, Practice” (Butterworths, Sydney, 1996) has categorised at least four mediation models. The first is a settlement mediation: this focuses on position-based bargaining and compromise. Position-based negotiations are often characterised by one party initially making a large demand, then the mediation proceeds by way of bluffing, threats, limited disclosure of relevant information, and incremental concessions. The parties begin with relatively polarized positions and slowly inch closer. Such negotiations are typically focused on dollar values and the participants can easily become entrenched. Little progress will be made if a deadlock occurs. This still remains a widely used method of negotiation.
“Interest-based negotiations” focus not only on the participants’ legal positions, but on the needs, goals and expectations of the participants. This type of bargaining enables the parties to generate options, to disclose hidden agendas or underlying concerns, and to cooperate in the process of solving the problem. It encourages input from lay participants and allows them to fully investigate the contentious issues and identify any deficiencies in their respective cases.
Two other models of mediation are “facilitative mediation” (which focuses on reconciling the parties), and “evaluative mediation”, (in which the mediator plays a greater role in giving advice and making recommendations as to the most appropriate way of solving of the problem).
Obviously, in practice, an effective mediator will probably utilize more than one model during the mediation session.*
Arbitration
Arbitration is the form of ADR most similar to the formal litigious process. It normally involves the use of a private court. Any decisions made will be binding on the parties.
Litigants choose arbitration for a variety of reasons. Arbitration is particularly attractive where privacy is a concern. This matter is heard and decisions made quickly and relatively cheaply. Parties can also participate in the selection of the arbitrator who will hear the matter. This is useful where the dispute concerns an issue that must be heard by an individual with expertise in a certain field.
The process of arbitration is regulated by legislation. All parties to the dispute must agree to embark upon the process as they must also agree to be bound by the decision of the arbitrator.
When can ADR be used?
ADR often results in a better outcome for the parties than would be delivered to the by the court system. Where the parties clearly want to end the dispute and find some resolution to their problem, ADR is significantly more timely and cost efficient. As stated above, it is also suitable for those who wish to keep their dispute private; for instance, where the matter involves the disclosure of trade secrets. Further, it will be the preferred form of dispute resolution for those who wish to preserve a business relationship.
These days as the circumstances in which ADR can be called into play are flexible the parties can use it before formal proceedings are issued, they can use it concurrently with formal proceedings or they can adjourn the formal proceedings and refer the matter to the chosen ADR process.
ADR in the South Australian Common Law Jurisdictions
In South Australia civil disputes at common law are dealt with in the Magistrates’ Court, the District Court and the Supreme Court. The Rules of Court applicable in each jurisdiction specifically enable the parties to access various modes of ADR.
Supreme Court
ADR is addressed in Rule 76 of the Supreme Court Rules 1987 and at sections 65 and 66 of the Supreme Court Act 1935. Supreme Court Practice Direction 12 at clause 4 provides that ADR is to be raised at every opportunity “in tandem with the normal caseflow principles, but not as a reason to suspend them”. This can be, for example, at the conciliation conference, the case evaluation conference or, indeed, at trial.
Practice Direction 12 provides a useful summary of the forms of ADR available. At Annexure A, it also provides guidelines for the conduct of the mediation process.
In the Supreme Court Rules 2006, provision for ADR is made in Chapter 10, sections 220 to 222. The Law Society of South Australia’s Rules of Professional Conduct and Practice 2003 state at Rule 12.2 that:
“A practitioner must where appropriate inform the client about the reasonably available alternatives to fully contested adjudication of the case unless the practitioner believes on reasonable grounds that the client already has such an understanding of those alternatives as to permit the client to make decisions about the client’s best interests in relation to the litigation.”
Unlike the Supreme Court Rules 1987 Rule 2.08, the 2006 Rules do not contain an express direction to consider ADR. However Rule 220(1) gives judges the power to appoint a mediator and refer all or part of a matter to mediation without the consent of parties. Direction 9 of the Supreme Court Practice Directions 2006, and Attachment Two of the Rules of Professional Conduct and Practice give detailed guidelines for the conduct of the mediation process.
Conciliation
Changes to the Supreme Court Rules 1987 became effective as of 3 June 2000. They redefined to some extent how this, the first level of ADR, is carried out in the Supreme Court. The conciliation conference is reflected in the new procedure for the conduct of settlement conferences.
Rule 56B.05 specifically states that the settlement conference is the forum for the parties to ascertain whether or not they can reach a settlement, and if not, whether it is appropriate to seek to resolve any of the issues by ADR. It is for this reason that the parties are required to attend settlement conferences in person, and not simply be represented by their legal advisers.
Under the 2006 Rules, aside from exceptions given in Rule 124, a status hearing is scheduled within seven weeks of notification of address for service: Rule 125. During the status hearing it is determined whether a matter should be referred to either an ADR process or a settlement conference.
Mediation
The Supreme Court Act 1935 states that a court constituted of a judge may, with or without the consent of the parties, appoint a mediator and refer a civil proceeding to mediation at section 65(1). A Master or the Registrar of the Supreme Court may do the same with the consent of the parties.
The general procedure to be adopted under the 1987 Rules is contained in Rule 76 and is similar to section 32 of the District Court Act 1991 and section 27 of the Magistrates Court Act 1991, (discussed below).
The 2006 Rules incorporate the powers given to judges and Masters under section 65 of the Supreme Court Act at Rule 220. Procedural guidelines are given in Practice Direction 9, and in Attachment Two of the Rules of Professional Conduct and Practice.
Arbitration
The Supreme Court Act 1935 provides for the appointment of an arbitrator at section 66. The arbitrator will be either a Judge or Master. This is supported by Rule 76 of the Supreme Court Rules 1987.
Under Rule 76.05 of the 1987 Rules, the parties may be required to file and deliver simple statements setting out the issues if formal pleadings have not closed. The Court may make any directions necessary to ensure that the issues for arbitration are ready for disposal in the most expeditious and economic manner appropriate, and this includes directions as to discovery, agreed facts, examination of witnesses etc. The arbitration is to be conducted in accordance, as nearly as possible, with the provisions of the Commercial Arbitration Act 1986.
In the 2006 Rules, arbitration is dealt with in Rules 221 and 222. Rule 222(1) stipulates arbitration is to be conducted as directed by the Court. The Court may direct that arbitration is conducted in accordance with the provisions of the Commercial Arbitration Act, however this is no longer the nominated standard.
District Court
Rule 2.08 of the District Court Rules 1992 requires parties to consider ADR options, including mediation, at the earliest opportunity. The court will then facilitate use of those options where appropriate to aid the early disposal of claims.
Mediation and Conciliation
Section 32 of the District Court Act 1991 deals with mediations and conciliations. The provisions are very similar to those applicable in the Magistrates Court.
The changes to the District Court rules are virtually identical to the amendments made to the Supreme Court Rules. The District Court Rules 2006 no longer contain the express obligation to consider ADR but, this has become the ethical obligation of practitioners under the Rules of Professional Conduct and Practice.
Court directed conciliation, in the guise of a settlement conference, may be ordered at a status hearing: Rule 125. Provision for mediation is made in Rule 220. If agreement is reached it may be condensed into a written memorandum, signed by all parties and filed with the Registry, or the agreement may be entered as a consent order under Rule 227. Proceedings will only be stayed pending a mediation if the justice of the case so requires: Rule 193. In the first instance the agreement is enforceable under contract law, if the agreement is entered as a consent order it has the same force and effect as any judgement of the Court.
Arbitration
Section 33(1) of the District Court Act 1991 gives the court the power to refer an action or any issue arising in an action for trial by an arbitrator.
The remaining provisions of section 33 are virtually identical to those applicable in the Magistrates Court and set out in section 28 of the Magistrates Court Act 1991 (discussed below). Arbitration is also discussed in the District Court Rules 1992 at Rule 49.
The power to conduct arbitration is found in Rules 221 and 222 of the District Court Rules 2006. As in the Supreme Court arbitration is to be conducted as directed by the Court. Rule 222(3) gives the Court power to punish anyone found in contempt of an arbitrator, or one of their orders.
Magistrates Court
Conciliation conferences
Rule 89 of the Magistrates Court Rules 1992 governs conciliation conferences. Rule 89(1)(a) allows the Registrar to serve a notice on a party requiring attendance at a conciliation conference at a date, time, and place specified in the notice.
Rule 89(4) empowers the court to conduct a conciliation conference in such a manner as it thinks fit.
Rule 89(5)(a) obliges not only the court, but also the parties to the conciliation conference, to consider settlement or compromise of the action, simplifying or limiting the issues for trial and any other matter which might facilitate the resolution of the action.
Rule 89(5)(c) essentially provides that a conciliation conference may be adjourned on no more than two occasions and it cannot be adjourned for more than three months.
Rule 89(3) prohibits communication, by either the parties or the conciliator, of any offers or admissions made during the conciliation conference to the magistrate hearing the trial of the action until final judgment is given.
Mediation
Section 27 of the Magistrates Court Act 1991 enables the magistrate to refer an action to mediation by a mediator, with or with the consent of the parties. Alternatively, if the parties consent, any other judicial officer or Registrar may do so.
The mediator, or the Court itself, will endeavour to achieve either a negotiated settlement of the action or resolution of any issues arising in the action.
Evidence arising during the mediation in an attempt to settle the matter will not be admissible in the principal proceedings or related proceedings.
In the event that a settlement is reached as a result of the mediation, the terms of settlement may be embodied in a judgment.
Arbitration
Section 28(1) of the Magistrates Court Act 1991 allows the court to refer an action or any issues arising in an action for trial by an arbitrator. The arbitrator may either be appointed by the parties or by the court. The arbitrator becomes an officer of the court and may exercise any powers of the court delegated to him or her.
Rather than handing down a judgment, the arbitrator may deliver an award. Section 28(4) of the Magistrates Court Act compels the court to adopt the award of the arbitrator on the issues referred unless good reason is shown to the contrary. The costs of the arbitrator will be shared equally by the parties or in proportions as the court may direct. The court may subsequently order that a party be reimbursed for costs by the losing party.
When is ADR likely to succeed?
Our view is that there are not many cases which should run the full distance to hearing, decision (and perhaps appeal). ADR assists clients in achieving a more cost-effective result. As such, the parties achieve a considerable benefit.
There are two basic conditions that need to be satisfied before ADR is likely to succeed. The first is that all parties involved in the dispute should be prepared to participate in the exercise. There is little point going down this path if one or more of the parties is unprepared to participate. The second equally important condition is that the parties must be genuinely committed to the exercise of trying to sensibly resolve the dispute for there to be the best chance of success.
At fountain+ bönig we generally act for insurers. In our experience, the public perception of a “deep pocket syndrome” remains evident in that, where a claimant is aware that the defendant is insured, the quantum of the claim can increase significantly. Our experience has been that our clients are prepared to make offers up to a figure they consider is appropriate. We have been involved in many actions over the years where our clients have successfully defended cases after settlement offers made by our clients were rejected by ambitious claimants. Although most cases settle, some actions have to be defended.
If the parties are prepared to enter into ADR with the appropriate attitude, there is a very good chance that the action will settle. A settlement in such circumstances can normally be regarded as a “win-win” for all parties.
*The summary of the models of mediation is taken from a paper by Mary Walker entitled Productive Mediation Strategies and Negotiation Tactics in Insurance Cases, 16 March 1999, Insurance Law and Litigation Congress.
