ADR

“ADR” stands for Alternative Dispute Resolution.
An alternative to the legal option of solving your dispute are such forums as Mediation, Arbitration, Conciliation, Negotiation and others. These are areas where YOU use a third party to assist YOU and the”other party” solve your differences.

NADRAC – National Alternative Dispute Resolution Advisory Council recommends that alternative dispute resolution should achieve outcomes that are broadly consistent with public and party interests.
NADRAC – Framework for ADR Standards (2002) – www.nadrac.gov.au

Any form of litiagation or alternate dispute resolution is like life itself with advantages and disadvantages; however, the advantages of avoiding litigation far outweigh the stress, cost, time and trauma of being put through the court system unless litigation is the only way for a particular case to be managed.

Of the forums discussed below, arbitration is the most similar to the legal system, but even that forum can escape with an arbitration agreement which states that the forum should follow the Rules of Fair and Natural Justice as opposed to Common Law.

HOW ADR  FORUMS DIFFER:

            ADVANTAGES           DISADVANTAGES
     
DIRECT DISCUSSIONS BETWEEN THE PARTIES – they negotiate with each otherwithout a professional negotiator.
  • Privacy
  • No or low cost
  • Might serve to strengthen the relationship between the two involved parties
  • might become a win-win scenario

 

  • Non binding resolution
  • No witnesses or third neutral party to facilitate  the negotiation  has a satisfactory outcome.
  • Might actually increase the conflict between the two involved parties and/or even raise other areas of conflict
  • This would result in a win-lose situation.
  • One party might be stronger in either one or more than one area than the other therefore creating a situation on non equal bargaining power- eg one party might have stronger analytical skills and therefore able to identify the root of the conflict where the other party still has no ability to understand the basis for the conflict.
  • Might take longer to resolve the conflict depending on the depth and seriousness of same.
  • An integral part of conflict in the first instance is tension between the parties therefore the platform for the negotiations is hostile and can inhibit clear thinking. 
LITIGATION
  • Binding legal judgement
  • If the balance of power is weighted toward one the disputing parties, then litigation may be the best solution since each party can have equal representation in court (or not!)
  • If one of the parties knows there is a precedent and feels that will be to it’s advantage
  • If one or both of the parties wishes to have precedent set for future reference.
  • publicity in a case where one of the parties wishes exposure of its position
  • If time is “running out” on a claim, and a party wishes to have the time limit extended
  • The dispute becomes public knowledge
  • Costly
  • Stressful
  • Cannot choose the “judge”
  • Rigid Procedure
ARBITRATION
  • Binding resolution by the arbitrator who has the power to judge the dispute and render a legally binding decision -agreement/settlement.
  • An element of privacy is preserved for the disputing parties.
  • Any award made be the arbitrator can only be published if the parties agree.
  • Arbitration is a flexible forum –
  • It can take a short form in which case evidence is written and there is little verbal evidence
  • OR each party may contribute a suggested outcome and then work towards the same. In this situation, there is no need for evidence to be presented.
  • Interactive personally demonstrated tension and hostility between the parties is limited since they are in a semi-formal environment and the arbitrator controls the situation.
  • There is provision under the Commercial Arbitration Act, as long as agreed in writing by both parties, that “the rules of evidence and pleading need not apply.”
  • Involves costs to the disputing parties.
  • If either/both parties disagree with the judgement, they can appeal to the court under a specific section of the Arbitration Act and have the judgement overturned. However their ability to appeal to the court is limited by the court’s powers which are governed by the Commercial Arbitration Act.
  • Since each party can make a case, collect and present evidence, and be cross-examined, there is a possibility that one party might be at a disadvantage apropos his/her ability to do same.
  • A contract between the arbitrator and the disputing parties needs to be drawn and this forms the basis on which judgement can be made; therefore the arbitration outcome may only be as good as the contract if it is not succinct and takes into account all outcomes.
MEDIATION/ CONCILIATION 

 

 

 

 

  • A third, neutral party facilitates an agreement /resolution
  • Privacy for the parties involved in as much as the outcome is not available to the public if held outside of a court environment
  • Because the mediator/conciliator can make suggestions to the outcome, the disputing parties have the opportunity to gain insight, analyze the basis for the dispute and find even ground on which they can settle out of court
  • The mediator/conciliator can make suggestions in the form of an opinion apropos the solution/s or various outcomes to the dispute in case the dispute should go to court
  • The disputing parties will gain an insight into the causes of the dispute and therefore narrowing down expensive litigation costs if the dispute cannot be reconciled and should go to court
  • The difference between a mediator and a mediator/conciliator is that a mediator/conciliator may make suggestions towards a solution to the dispute; however a mediator cannot.
  •  Non binding settlement if there is a resolution to the dispute
  • If the mediation/conciliation is held in a court then the dispute is more public
  • Costly if held in court
  • If held outside the court environment, the parties are subject to the personality, knowledge and limitations of the conciliator, which might not be in either parties favour or create an unequal balance of knowledge and understanding of the situation between the parties.
BINDING EXPERT DETERMINATION
  • A third party who is an expert in the field of the dispute is the person who makes the judgement –this negates the need for further expenses and/or litigation. – The resolution is based on an existing contract between the disputing parties.
  • Privacy for the parties involved
  •  The determination is based on the contracts between the parties, which may not be in the first instance in favour of both or either party.
NON BINDING EXPERT DETERMINATION
  • It might be possible, after an expert has investigated the dispute, for the disputing parties to move toward a resolution and a new contract drawn between them.
  •  If a court has ordered an “expert determination”, then the court is not bound to accept the “expert’s” judgement.
  • There is no binding determination and the parties might still be left in dispute
   
  Some Example Situations:

  • SITUATIONS where one method of DISPUTE RESOLUTION would offer A PARTICULAR BENEFIT  over another.
NEGOTIATION over  LITIGATION
  • Negotiation would be preferable to Litigation in the following situation:-Bill is not happy at work and wishes to leave the company for whom he works, however he is under contract and the contract has 2 months to run. It is both Bill’s and the company’s interest to minimize costs and avoid bad publicity.
   
LITIGATION  over ARBITRATION
  • A first homebuyer, Sally, had had the conveyance done on her purchase by John, a paralegal who was working for a small firm who does conveyances.  John, however, had not completed all the searches on the property and neglected to pass this information onto his boss. Sally settled the property purchase and because the searches were incomplete, had now sustained substantial losses owing to John’s neglect. Sally is fed up with the “so-called” professionals; believes she has a serious chance of winning a lawsuit; and goes to a firm of solicitors who says they will take the case on a contingency basis.  John has been fired and is disputing his dismissal because he says his boss had not trained him in all the correct procedures.
ARBITRATION over LITIGATION
  • Harry, an accountant, has recently sold his practice fees to another accountant, Richard. The contract stated that Harry must not practice in the field of accountancy within twenty kilometres, for three years from the date of exchange of the sale.  Unfortunately, there has been a downturn in the economy and Harry now realizes he needs more income and cannot afford to retire.  He is ethical and does not want to breach the contract.  Harry, after speaking to a friend, discovers that the twenty-kilometre distance clause in the contract might be considered as restriction of trade.  Harry approaches Richard and tells him exactly how he wishes to resume practice in a different area of accounting, but still wishes to work close to home.  He believes this will not have a serious effect on Richard’s income. Richard does not want to stop Harry earning a living but is not sure about the financial ramifications of the new situation.  They are in dispute as to what the final cost might be to Richard. Rather than go to court, and since both accountants are in general agreement with the exception of the financial costs, they agree to go to arbitration.  Both of them wish for the matter to be kept private, to be dealt with quickly and have a legally binding resolution.
MEDIATION over NEGOTIATION 
  • The following is a situation where MEDIATION preferable to direct negotiation with each other. A husband and wife whose circumstances have changed radically are now in a situation where they feel angry and frustrated with each other and their usually good communication skills have been clouded. In the past, they have always managed to solve their problems together without outside assistance, but neither of them can see their way through the current turmoil and a separation is pending.
BINDING EXPERT DETERMINATION overLITIGATION
  • Joe is a director of a mechanical engineering company.  Paul is a senior engineer, under contract to the company, and drafted plans for a new piece of machinery.  Paul’s contract specifically states that he is to design machinery within all the safety guidelines for the industry and keep costs to a minimum.  The prototype of the new piece of machinery has been constructed and the final machinery would cost hundreds of thousands of dollars over budget. Joe felt that if Paul had restricted his design, and not included features, which he, Joe, thought to be unnecessary, then the cost would have been dramatically reduced. Joe believes Paul is in breach of his contract.  Paul disagrees. The main issue is the level of safety of the new machinery.  A binding expert determination was requested since neither the company or Paul wished for bad publicity.
   
NON-BINDING EXPERT DETERMINATION over NEGOTIATION
  • George is a builder and currently working on a multi-story apartment building.  The building contract contains an ambiguous clause relating to rising costs. The owner of the site wants to save money by not paying all the extra costs and George wants to claim all of them. They are both reasonable men and have worked together previously,but are not sure which one of them needs to compromise the most since each can only look at the situation for himself and from his own perspective.  They want to rewrite the ambiguous clause so neither of them loses too much financially. They call in an expert in to make a determination for them which they have agreed will be the basis on which to rewrite the “rising costs” clause.