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Smoother sailing with ADR

Feature Articles

Cite as: March 2011 85(3) LIJ, p.36

Lawyers and parties are strongly encouraged to make use of the wider options for appropriate dispute resolution introduced by the Civil Procedure Act 2010 in an effort to avoid the expense, delay and complexity of litigation.

By Mary-Anne MacCallum and Richard Vinciullo

The phrase “alternative dispute resolution” is somewhat misleading. In many cases, alternative dispute resolution is not “alternative” to other forms of dispute resolution such as litigation, but the first port of call for persons in dispute. It is very popular in Victoria. For example, a 2007 survey of selected industry and government alternative dispute resolution providers showed that in 2005-06, 16 of these agencies handled over one million inquiries and complaints.1 For this reason, the Civil Procedure Act 2010 (CPA) has adopted the phrase “appropriate dispute resolution” (ADR).

The CPA was implemented in response to the longstanding concern of government and the community about the cost, delay and complexity of litigation. Its genesis was the Victorian Law Reform Commission’s (VLRC) Civil Justice Review: Report (the report), which was published in May 2008. The report made a comprehensive set of recommendations to address these issues, and increase access to justice. Many of the recommendations related to ADR, in recognition that ADR results in better outcomes for parties and preserves relationships.

The CPA implements a large number of the VLRC’s recommendations. It promotes a cultural shift away from adversarial litigation before the courts and towards cooperative negotiation between lawyers and parties. It aims to achieve this goal by facilitating better communication and information exchange between litigants, improving standards of conduct of the participants during litigation, strengthening and clarifying the courts’ powers to pro-actively case manage proceedings and by further enhancing the courts’ existing ADR powers.

This article discusses the particular provisions of the CPA that enhance ADR and how they will impact on litigation practice, including the new definition of ADR, the overarching purpose, the overarching obligations, the case management provisions and the ADR provisions.

Definition of ADR

The CPA includes a broad and inclusive definition of “appropriate dispute resolution”. Sections 80, 83 and 88 insert the definition into the Supreme Court Act 1986, County Court Act 1958 and Magistrates’ Court Act 1989.

The definition of ADR captures any process participated in by litigants for the purpose of negotiating a settlement or narrowing issues in dispute. The use of the word “process” is intended to capture more than just the conference stage of ADR. ADR should not be regarded solely as a hurdle to be jumped along the path to an inevitable trial. Under the new regime, active participation in dispute resolution processes, which include genuine negotiation, are encouraged at all stages of a proceeding.

The definition of ADR expressly includes mediation, early neutral evaluation, judicial resolution conferences, settlement conferences, court references to a special referee, expert determination, conciliation and arbitration.

Overarching purpose

The CPA provides that its overarching purpose, and the overarching purpose of the rules of court, is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (s7). The explanatory memorandum states that the overarching purpose will be a foundational guide to the courts when exercising their civil jurisdiction.2 The overarching purpose may be achieved by court determination, agreement between the parties, or by any ADR process agreed to by the parties or ordered by the court (s7(2)).

The courts will be required to give effect to the overarching purpose when exercising or interpreting powers (s8). A court may have regard to the extent to which the parties have used reasonable endeavours to resolve the dispute by agreement or to limit the issues in dispute (s9(2)(b)). In furthering the overarching purpose, a court must have regard to the public interest in the early settlement of disputes by agreement between parties (s9(1)(b)). The overarching purpose may thus embolden the courts to refer more proceedings to ADR.

Overarching obligations

Section 10 of the CPA imposes overarching obligations on the participants in litigation, including solicitors, parties, insurers, litigation funders and, where relevant, expert witnesses. The obligations are statutory conduct obligations, which apply from the onset of a proceeding. They include a paramount duty to further the administration of justice (s16).3 These obligations apply to all aspects of a civil proceeding, including during any ADR process (s11).

The overarching obligations require parties and their lawyers to use reasonable endeavours to achieve early resolution of cases by agreement, including through ADR (s22) or to narrow the issues in dispute (s23), except where it is not in the interests of justice to do so or judicial determination is genuinely required.4 An unreasonable refusal to participate in ADR is likely to breach these obligations.

Another obligation states that a person must not take any step in a proceeding unless the person reasonably believes that the step is necessary to facilitate the resolution or determination of the dispute (s19). Participants in litigation are also obliged to cooperate with the parties and the court in the conduct of the proceeding (s20).

The overarching obligations are enforceable by sanctions, including adverse costs orders (Part 2.4). Parties will be required to certify in their pleadings that they have read and understood the obligations (s41) and failure to do so will be sanctionable by the courts (s46). Lawyers will also be required to certify that allegations, denials and non-admissions have a proper basis in fact and law (s42).

Each of these provisions is designed to focus attention on the real issues in dispute, and to avoid wastage of the parties’ and the courts’ resources. They will encourage parties to undertake ADR where appropriate during a proceeding.

Case management provisions

During litigation, the CPA encourages the courts to actively case manage in a manner that will promote the overarching purpose (Part 4.2). The orders made to promote the overarching purpose might include an order that parties attend ADR (ss7(2)(c), 9(2)(b) and 48(2)(c)).

The CPA provides that, for the purpose of ensuring that a civil proceeding is managed and conducted in accordance with the overarching purpose, the court may give any direction or make any order it considers appropriate (s47(1)). The intention is to encourage active case management. The CPA provides that a court may actively case manage by, among other things, encouraging the parties to:

  • cooperate with each other in the conduct of the civil proceedings;
  • settle the whole or part of the civil proceedings; or
  • use ADR (s47(3)(d)).

The CPA provides that a court may make any order or give any direction it considers appropriate to further the overarching purpose in relation to pre-trial procedures, including the use of ADR to assist in the conduct and resolution of all or part of the civil proceeding (s48(2)(c)).

The CPA states further that the court may order the attendance of parties and legal practitioners at a case management conference with a judicial officer to consider the most cost-effective and efficient means of bringing the civil proceeding to trial and conducting the proceeding (s48(2)(d)).

These provisions encourage practitioners to use ADR, whether it is court-referred, undertaken privately or simply in the form of genuine discussions. Such ADR need not resolve the entire case. It may resolve even interlocutory matters, such as requests for documents by subpoena or disputes about the limits of discovery.

ADR provisions

The VLRC report found that mediation is the most popular form of ADR used in the civil justice system. Despite the Victorian courts’ commitment to ADR, the VLRC stated that there are opportunities for its more varied and frequent use. It recommended that a wider range of options be made available to the courts to effectively manage the diverse range of disputes they are called on to resolve.5

The CPA enacts the VLRC’s recommendation that the courts be empowered to order parties to participate in a wider range of ADR options. To assist the parties in seeking to resolve or settle the proceeding, it provides that a court may make an order referring a civil proceeding, or part of a civil proceeding, to ADR. The broad definition of ADR outlined above expands the types of ADR available to the courts.

The ADR process ordered by the court must be non-binding unless the parties consent to attend binding ADR.6 Non-binding ADR includes negotiation-focused processes such as mediation, which do not determine any rights of a party without agreement. Reference to a special referee is an example of ADR which may be indirectly binding.7

The courts are already empowered under their rules and legislation to make orders of this kind, but the purpose of the provisions and the extensive definition of ADR in the CPA is to encourage the courts to make more use of the variety of ADR processes that are available to litigants for resolving their disputes.

The ADR provisions in Chapter 5 of the CPA complement recent legislation in respect of judicial resolution conferences.8 The CPA provides for the inadmissibility of anything said or done in judicial resolution conferences,9 and the immunity of judicial officers in relation to such conferences.10 The Evidence Act 2008 (Vic) provides for the inadmissibility of settlement discussions that take place in the context of other forms of ADR.11

The powers of a court to refer matters to ADR under the CPA are in addition to, and do not derogate from, other such powers under the courts’ governing legislation.12

Pre-litigation requirements

The CPA also introduces mandatory pre-litigation requirements, which would apply before court proceedings are initiated. The Baillieu government announced in its election policy that it would amend the CPA to ensure that pre-litigation requirements are not required where they are inappropriate or would be unfair to a disadvantaged litigant.*

Conclusion

This is a great time of innovation and opportunity in dispute resolution practice. The CPA is expected to stimulate engagement with ADR processes by parties and practitioners. During litigation, the overarching obligation on parties and lawyers to use reasonable endeavours to resolve disputes (s22) will encourage the use of ADR. The courts will also be encouraged to refer parties to a greater range of ADR processes, by the overarching purpose and the case management and ADR provisions.

Ultimately, these reforms aim to increase the use of ADR and, in turn, reduce delay and the cost and complexity of litigation. It is hoped that they will be fully embraced by litigants, lawyers and the courts to achieve the cultural change envisioned in the CPA.



MARY-ANNE MACCALLUM is the manager of, and RICHARD VINCIULLO is a legal policy officer with, the Department of Justice’s Civil Law Reform Project. Unless >otherwise indicated, references in the text to sections and parts of an Act refer to the Civil Procedure Act 2010.

*Editor’s note: On 10 February, the Government introduced a Bill to repeal Chapter 3 of the CPA in respect of mandatory pre-litigation requirements consistent with its pre-election policy. If passed, the Bill will remove the general obligation on practitioners in respect of pre- litigation requirements which was to apply to proceedings commenced after 1 July 2011. Practitioners should monitor the LIJ, Friday Facts and Hansard for further developments.

1. Department of Justice, Alternative Dispute Resolution Supplier Survey 2006 Report, May 2007.

2. Explanatory memorandum to the Civil Procedure Bill 2010, p5.

3. See ss17-26 of the CPA for the other overarching obligations.

4. For example, it may not be in the interests of justice to attempt to resolve a proceeding for the enforcement of a civil penalty – see explanatory memorandum to the Civil Procedure Bill 2010, p10.

5. Explanatory memorandum to the Civil Procedure Bill 2010, p25.

6. CPA, s66(2). This section enacted the VLRC’s recommendation 23.

7. See explanatory memorandum to the Civil Procedure Bill 2010, p26.

8. Courts Legislation Amendment (Judicial Resolution Conference) Act 2009.

9. Unless the court otherwise orders, having regard to the interests of justice and fairness: s67. This provision is a re-enactment of provisions originally enacted in the Supreme, County and Magistrates’ Court Acts.

10. CPA, s68. This provision is a re-enactment of provisions originally enacted in the Supreme, County and Magistrates’ Court Acts.

11. Evidence Act 2008, s131. Note however that s131(2)(h) of the Evidence Act allows the courts to admit evidence of otherwise inadmissible settlement discussions for the purpose of determining liability for costs. Case law is likely to emerge on whether this provision allows the courts to admit evidence of things said or done in a private ADR process in determining liability for costs for a breach of the pre-litigation requirements or overarching obligations. However, the case law suggests that things said or done in court-ordered mediations will remain inadmissible, despite s131(h): see Forsyth v Sinclair (No 2) [2010] VSCA 195; Rajski & Anor v Tectran Corporation Pty Ltd & Ors [2003] NSWSC 476; Tony Azzi (Automobiles) Pty Ltd and Ors v Volvo Car Australia Pty Ltd (2007) 71 NSWLR 140; Pinot Nominees Pty Ltd v Commissioner of Taxation [2009] FCA 1508.

12. CPA, s69. Sections 24A and 27A of the Supreme Court Act 1986, ss47B and 48C of the County Court Act 1958 and ss108 and 108A of the Magistrates’ Court Act 1989 all provide further guidance in relation to the courts’ ADR reference powers.

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