The Shift to Alternative Dispute Resolution Methods in Australia

This essay discusses the shift from traditional litigation to alternative dispute resolution (ADR) methods in Australian business law. It highlights the inefficiencies of the formal legal system, including high costs, delays, and potential damage to business relationships. The essay emphasizes the advantages of ADR methods such as arbitration, mediation, and expert appraisal, which offer cost-effectiveness, timeliness, and greater participant satisfaction. The analysis includes references to relevant case law and the views of judicial officers, supporting the argument that ADR provides a more efficient and equitable approach to resolving commercial disputes in Australia. The document is available on Desklib, a platform offering a range of study tools and resources for students.

Running head: THE SHIFT TO ALTERNATIVE DISPUTE RESOLUTION METHODS
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The Shift to Alternative Methods of Dispute Resolution
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Author Note:

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Introduction
Legal responsibility in Australia is a shared duty between the state and federal governments.
The structural composition of Australia’s government is divided into three; federal
parliament, state parliaments and local councils or municipalities. States and Territories have
separate jurisdictions within which court systems are developed. The individual state court
systems comprise of magistrate courts, district courts, tribunals and supreme courts which are
considered as the most senior courts in the state level (Low, Hattingh, & Forrester, 2010).
Supreme courts can preside over criminal and civil matter either under original jurisdiction or
in an appellate capacity (Lee & Campbell, 2013). On a federal level, the High Court of
Australia serves as the unifying body on the overall judicial hierarchy system; it holds
appellate jurisdiction for all Australian courts (Loveday, Abraham, & Mckie, 2018).
The hierarchies and systems described above outline the formal legal system available to
businesses and individuals in Australia to solve their disputes. Essentially, litigation serves as
the formal avenue for dispute resolution. The merits of adopting litigation as a dispute
resolution tool are that it is transparent, observable and subject to critique. Parties can easily
access evidence and question arguments to promote fairness. Despite these benefits, the
formal justice system has proven to be expensive and time-consuming. According to Pentony
et al., (2010), “the unsatisfactory aspects of the formal legal system have led to a demand for
other ways of resolving disputes”. The following discourse highlights the shortcomings of the
formal system of dispute resolution in the context of business law and the available
alternatives with the aim of supporting this statement.
The Shift to Alternative Methods of Dispute Resolution
The shift to alternative dispute resolution methods in recent times within the context of
commercial law is largely influenced by the inefficiencies experienced through litigations
(Coves, 2015). Litigants and judicial officers alike have criticised litigation as a time

THE SHIFT TO ALTERNATIVE DISPUTE RESOLUTION METHODS 3
consuming and expensive conflict resolution tool. In the construction industry, for example,
alternative methods have taken precedence over litigation as industry players have found
litigation to be inefficient both financially and in terms of time (Gill, Gray, Skitmore, &
Callaghan , 2015).
Time and cost are not merely considered as inefficiencies in the context of justice for
individual litigants, the burden on court resources translates to a disadvantage for
communities as a whole. As stated by Justice Ronald Sackville, “timeliness and affordability
are essential elements for justice”, in this regard, swift and economic dispute resolution
serves to protect the limited public resources available to operate the justice system (Justice
Sacksville, 2009). This position was reaffirmed by Chief Justice Michael Black who posited
that in addition to delaying justice, the uncertainty associated with delay can lead to
measurable and immeasurable direct and incidental costs for parties within the commercial
context (Chief Justice Black, 2009).
The inefficiencies of the formal legal system have also been documented in case law. In
Ketteman v Hansel Properties Ltd (1987), the presiding Judge challenged an application to
grant a late amendment on a procedural defence citing that in addition to ensuring justice,
courts must be mindful of the risk of increased litigation which inhibits efficiency which is a
necessity in conducting business (Chief Justice Bathurst, 2012). Similarly, in Sali v SPC Ltd
(1993), Brennan, Deane and McHugh JJ held that where a court is presented with the issue of
adjournment, it must weigh the consequence of granting the adjournment against the
available resources and the interests of litigants both in the matter before court and other
matters awaiting a hearing. That is, consider the most efficient approach both to the court, the
litigants and the community as a whole.
More recently, in Aon Risk Services v Australian National University (2009), the court
appreciated the need for efficiency within the commercial context through the observations of

THE SHIFT TO ALTERNATIVE DISPUTE RESOLUTION METHODS 4
Justice Heydon who stated that commerce is dependent on the expedient and justified
circulation of funds. As the judicial system has become a significant pillar in addressing
conflicts arising from this function, the efficiency of the system has direct implications on the
health of the commercial sector. As such, the shortcomings of litigation bear directly on the
prosperity of commercial life. Conclusively, the effectiveness of legal remedies is dependent
on the timeliness with which they are provided.
The formal legal system also presents a risk of discrimination based on financial status. As
aforementioned, the litigation process is costly particularly due to the drawing out of the
process through delays. As such, only the wealthy party in a conflict can afford to adopt
litigation as a conflict resolution method (Kirby, 2009). Additionally, the wealthier party can
afford to contract the best available legal representation which gives them an added
advantage in presenting their case before court. As the litigation process is informed by legal
principles and procedural rules, presentation is essential and as the ability to contract proper
legal representation is highly beneficial.
Litigation can also have adverse effects on the relationship of contracting parties. The
uncertainty and rigid nature of court proceedings and procedures can lead to a break-down of
business relationships. Court proceedings are informed by facts and the principles of law; as
such resolutions can only be arrived at within the confines of the law (NADRAC, 2012).
Effectively, such a solution is likely to benefit one party at the expense of the other. Further,
the drawn-out process of litigation and the accompanying uncertainty can create irreparable
damage for the relationship.
The shortcomings discussed above have driven the shift from litigation to alternative means
of dispute resolution within the commercial sector. Alternative Dispute Resolution in
Australia refers to the resolution of conflicts through processes that encourage parties to
arrive at their own solution with the aid of a neutral facilitating third party (Latimer, 2012).

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They include arbitration, negotiation, mediation and expert appraisal among others with the
most notable alternative forms being arbitration and mediation.
With arbitration, the conflicting parties present their evidence-supported arguments to a
neutral party who determines their case and provides a binding solution (Latimer, 2012). It
allows parties the opportunity to get an enforceable award through a cost-effective, timely
and confidential method. In Australia, individual jurisdictions have developed legislation to
regulate arbitration; currently, states are in the process of adopting the Commercial
Arbitration Bill 2010 which is modelled from the United Nations Commission on
International Trade Law (UNCITRAL) (Latimer, 2012). Additionally, most commercial
contracts incorporate an arbitration clause that requires contracting parties to engage and
arbitrator in civil matters prior to litigation.
Another common alternative to litigation is mediation. Unlike in arbitration where the
decision of the arbitrator is final and binding, the mediator merely aids parties to arrive at
their own solution through negotiation (Latimer, 2012). If the process is unsuccessful, the
parties can adopt another alternative method or proceed to legislation. Courts have registered
support for mediation as a preferred alternative to litigation. Notably, Chief Justice James J
Spigelman recognised that in addition to cost-effectiveness and time-savings, mediation
guarantees satisfaction among the conflicting parties as well as overall fairness (Chief Justice
Bathurst, 2012).
In expert appraisal or determination, the neutral party or practitioner facilitating the process is
selected based on their expertise on the issue at hand. Their role is to provide the parties with
possible outcomes informed by the available facts and evidence and advice on the means of
achieving these outcomes (IAMA, 2015). Other alternative avenues that can be adopted for
dispute resolution include conciliation, facilitation and negotiation.

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Conclusion
As Pentony et al., (2010) states, the shortcomings of litigation as the dominant dispute
resolution system have facilitated a need for alternative methods. These shortcomings,
particularly in the context of commercial life, include costliness, delay, the breakdown of a
relationship and the risk of discrimination to less privileged parties. Litigants and judicial
officers alike are well aware of the inefficiencies of litigation as outlined in the discourse
above. Judges have over the years expressed the need to be mindful of the demerits of
litigation not only to litigants but to the community as a whole. Prolonged litigation promotes
the wastefulness of the scarcely available public resources. It also undermines the prosperity
of commercial life which is adversely affected by the uncertainty perpetuated by delays in
litigation. Based on these reasons, courts have encouraged an adoption of alternative methods
like arbitration, mediation, expert appraisal and negotiation among others which facilitate
expediency and have higher rates of participant satisfaction due to their flexibility.

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References
Chief Justice Bathurst, T. (2012). The Role of Courts in the Changing Dispute Resolution
Landscape. UNSW Journal, 870-888.
Chief Justice Black, M. (2009). The Role of the Judge in Attaching Endemic Delays: Some
Lessons from Fast Track. Journal of Judicial Administration, 88.
Coves, P. (2015, October). Alternative or mainstream? Proctor, p. 43.
Gill, A., Gray, J., Skitmore, M., & Callaghan, S. (2015). Comparison of the effects of
litigation and ADR in South-East Queensland. The International Journal of
Construction Management, 254-263.
IAMA. (2015, January 1). What is ADR? Retrieved from Resolution Institute:
https://www.iama.org.au/what-we-do/what-adr
Justice Sackville, R. (2009). The Future of Case Management in Litigation. Journal of
Judicial Administration, 211-212.
Ketteman v Hansel Properties Ltd, AC 189 (1987).
Kirby, M. (2009). ADR in Australia- Without Fear or Favour. Institute of Arbitrators and
Mediators Australia Annual Conference (pp. 1-24). Melbourne: IAMA.
Latimer, P. (2012). Australian Business Law. Sydney: CCH Australia Ltd.
Lee, H. P., & Campbell, E. (2013). The Australian Judiciary. Melbourne: Cambridge
University Press.
Loveday, C., Abraham, R., & Mckie, S. (2018). Litigation & Dispute Resolution Australia. In
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NADRAC. (2012). Your Guide to Dispute Resolution. Barton: National Alternative Dispute
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Pentony, B., Graw, S., Lennard, J., & Parker, D. (2010). Understanding Business Law.
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