7 Alternative Dispute Resolution Methods to Consider Before Going to Court

Alternative dispute resolution (ADR) methods can be an effective way to resolve a commercial dispute without requiring formal litigation processes, or in conjunction with litigation to resolve a matter prior to trial. In many instances, the court will order some form of ADR throughout legal proceedings.

Sometimes, the first step in a dispute can be used to bring about a resolution. Sending a final letter of demand or a pre-action claim (as is often required by the South Australian court rules) encourages the other party to engage in discussion about the issues and assess their own risks should the matter proceed to litigation.

If both parties are acting reasonably and commercially, opening up this early line of communication can sometimes cause the dispute to be resolved by settlement – perhaps with a combination of other ADR methods like mediation – prior to the commencement of formal legal proceedings.

Mediation is one of the most common ADR methods. Mediation is a collaborative method of ADR where the parties play an active role in the resolving of the dispute with a mediator acting as a go between. The mediator cannot make binding decisions but will often assist the parties to identify potential risks or weaknesses in their cases in order to help facilitate a settlement.

All discussions during mediation are confidential, and parties should ensure that a written deed is signed by both parties to formalise the agreement. We set out some other key considerations for commercial mediations in our article The Dos and Don’ts of Mediation in Commercial Disputes.

Mediations can be court ordered and conducted by a judge or registrar, or occur (court ordered or not) privately. Private mediation is facilitated by a mutually agreed upon mediator who has expertise in the relevant area of the dispute.

Unlike mediation or negotiation, arbitration results in a binding decision being made by an independent third party, the arbitrator. The arbitrator may guide the parties through pre-arbitration steps such as circulating evidence and submissions, and the arbitration may be more akin to a hearing in structure. There may even be arbitration rules to comply with if the arbitration occurs in a particular jurisdiction. It is, however, still a less formal process than court proceedings, and can be a speedier alternative.

Conciliation is in some ways similar to mediation and arbitration, however:

• the conciliator may take a more active role than a mediator in facilitating communication and proposing solutions between the parties; and
• any decision made by the conciliator will not be binding unless both parties agree.

Conciliation is often used by commissioner bodies (such as the Fair Work Commission) to resolve disputes between parties, and is a less common format for resolving general commercial disputes with parties usually opting for mediation or arbitration.

Expert determination may be used where the dispute relates to a specialist industry or factual circumstances that would benefit from someone with expertise or qualifications in that area being the decision maker.

The exact format of an expert determination will vary, but may involve the parties presenting their arguments and evidence (usually in writing) to an impartial expert who has specialist knowledge and qualifications in the area of the dispute.

Both parties must agree on the expert and agree to accept their determination.

The parties can also engage in informal approaches to resolve their issue, where they discuss the dispute and attempt to resolve it privately through verbal or written negotiation.

This can include having a conversation to try to resolve the issue or meeting informally. The parties may represent themselves or could have lawyers present. It is always wise to discuss your position and strategy with legal advisors before such conversations, even if your representatives don’t attend the meeting. Any agreements reached should be recorded in writing.

If there is a good relationship between the parties, this can be a very cost and time effective way to resolve the dispute whilst giving the parties greater flexibility and control.

Specific industries might have ADR methods available through an ombudsman, or an industry group might have its ADR processes that can be utilised by members.

The parties have the opportunity to bring their dispute to a specialist official who can help in resolving the dispute, for example, the Australian Financial Complaints Authority (AFCA), which handles complaints from consumers and small businesses about financial services, including banking, insurance, investments, and superannuation. These services are often free, or very cheap to access in comparison to the courts.

Prior to considering formal litigation processes, parties should consider whether there is an applicable ombudsman or industry group who can hear the dispute.

Businesses should consider if their dispute can be resolved through ADR before, or as part of, litigation, as it can be a cheaper and faster pathway to resolution.

When contracting with another party, businesses can ensure that a specific ADR method is utilised to attempt to resolve disputes before either party to the contract can commence formal litigation proceedings by including ADR clauses in their contracts.

Careful consideration should be given to which ADR method(s) are used and when, having regard to the particular circumstances.

No matter which method of ADR is used, it’s important to get legal advice at an early stage to help mitigate risks and avoid prejudicing your position.

Co-author

Name: Mia Doherty

Position: Law Clerk

Practice: Disputes

Our dispute resolution team is widely recognised as a leader in resolving disputes, having worked across the full spectrum of commercial disputes in all Australian jurisdictions. We represent and are trusted advisers to many major South Australian businesses who count on us to achieve the best possible outcomes in actual and potential dispute scenarios. Many of our clients are of long standing, because relationships and repeat performance count.

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