Module 8
Commercial Dispute Resolution
Winter 2014
©MNoonan2009
This presentation and Copyright therein is the
property of Maureen Noonan and is prepared
for the benefit of students enrolled in the
Commercial Transactions course conducted by
the Law Extension Committee and is available
for their individual study. Any other use or
reproduction, including reproduction by those
students for sale without consent is prohibited.
©MNoonan2009
Is this topic examinable?
Yes, either
--by a short direct question on this topic in Q6 of
the exam. The appropriate answer would be
descriptive.
Or
--as one part of a problem question. e.g. if this
matter were referred for mediation, what would
be the process and likely outcome of mediation?
Or
--as the whole subject of a problem question
©MNoonan2009
Disputes
Valuable things at risk, such as:
• Time
• Money for expenses incurred trying to resolve
dispute, lost earnings
• Business relationship and future earnings
• Loss of market to competition
• Loss of reputation
• Freedom if a criminal offence and dispute is with
authorities/society.
• Political issues between states and countries
©MNoonan2009
Methods of dispute resolution
Prevent the dispute by risk management
Avoid some disputes by drafting contracts well
Negotiation
Capitulation
Mediation and conciliation
Expert determination
Arbitration
Litigation
Other: e.g. Toss a coin, force etc
©MNoonan2009
Methods of dispute resolution
Policy and community attitudes to cost
demand change, repositioning of
profession
Resolution preferred over determination
Courts overworked and congested
Opportunities to use diverse skills instead of
purely “legal” skills
Important to choose most appropriate
method for particular issue/dispute
©MNoonan2009
Dispute Resolution Clauses
in Contracts
Usually drafted by lawyers, but not always-sometimes by
clients.
Make sure clause is well drafted and not merely “an
agreement to agree”….in this respect see WTE Cogeneration and Visy Energy Pty Limited v. RCR Energy Pty
Limited & Anor [2013]VSC 314…where Vickery J found a
clause requiring senior executives to meet “to attempt to
resolve the dispute or to agree on methods of doing so”
amounted to an “agreement to agree”, and therefore
unenforceable.
Make sure provisions cover relevant time and for example,
do not require the appointment of an architect, whose
contract finishes when the job is finished.
Role of the lawyer
• Risk management especially in larger
companies.
• Advising clients of alternatives for resolution and
during processes.
• Establish dispute resolution function for an
organisation.
• As a professional mediator, arbitrator.
• Management of international arbitrations for
exporters/importers/multinationals.
• Role in international organisations.
• Often a compulsory first step to litigation
©MNoonan2009
Resolving Disputes
1. Understand the Dispute- go beyond the surface,
isolate issues, appreciate $value and consequences
2. Appreciate desired outcomes for each
party-check for mutual interests, effects outside subject of dispute.
3. Understand the options for Resolution
4. Select appropriate dispute resolution
method(s)
5. Preparation
6. Process-conduct of method
7. Document and implement resolution
Role of Risk Management
Identify legal risk
Apply
Management
Technique
Monitor risk
Identify Appropriate
Management Technique
for each risk
and plan
for overall management
©MNoonan2009
Legal role in Risk Management
• Objective is to avoid dispute or minimise
damage resulting from a dispute
• Must understand business
• Conduct due diligence to ascertain main areas
where dispute/legal liability likely to arise
• Appreciate bargaining position and
opportunities/limitations
• Appreciate legal position as part of
understanding bargaining position and advising
on likely outcomes of various alternatives.
©MNoonan2009
Likely areas of dispute
Product or service
Price
Delivery
Changes in physical environment
Changes in economic environment
Changes in legal environment
Business or financial failure of one party
Causes outside the control of a party
Some Exporter Legal Risks
Customer does not pay-unpaid seller
Unable to recover /enforce rights in foreign country
Product liability-wrong item, quality, quantity,
unsafe, late, incomplete
Unable to produce/acquire-breach contract
Loss in transit-who bears loss?
Competition cheaper-buyer defaults so they can
take advantage of cheaper opportunity
©MNoonan2009
Some importer legal risks
Goods or services inappropriate, not what was
ordered-claim for compensation available?
Supply does not meet local standards/laws
Crime –bribing foreign officials
Tax, customs issues
Unfamiliar with particular free trade treaty
provisions
Unable to enforce rights /recover money in a
foreign country
Unable to sell items purchased
Vulnerability to local customers for problems
©MNoonan2009
Some manufacturing risks
Raw material problems
Machinery
Finance
Delivery
Quality/quantity issues
Damage to others
Failure to sell products
Title issues
©MNoonan2009
Alternative dispute Resolution (ADR)
Defined by ADRA (Australian Dispute Resolution
Association Inc.) as:
Dispute resolution by processes which encourage
disputants to reach their own solution and in
which the primary role of the third party neutral is
to facilitate the disputants to do so.
Generally includes negotiation, independent expert
appraisal and mediation, but not arbitration;
which is an adjudicative process where the
parties agree that the decision of the third party
is binding.
©MNoonan2009
ADR
Old story to illustrate:
2 people argue over an orange. One wants
the juice and the other the peel. If they go
to court, only one party can “win” and get
the orange, but if ADR used, tailored “winwin” solution possible.
Problems with court litigation
• Cost
• The time it takes
• Exposure of confidential information or
embarrassing deficiencies for an organisation.
• Result may be of little use to either party
• Expertise may be required to understand e.g. IT
performance, functionality, system defects,
project management issues
• Loss of important, even dependent relationships
The courts and ADR- resources.
Protracted disputes tie up a lot of time and resources. In
State of Tasmania v. Leighton Contractors Pty Ltd (20044 decisions), Tasmania sued Leighton under a liquidated
damages clause for delay in a contract for a road. L
claimed the delay was due to them insisting on a
significant change, not in the contract. Longest civil trial
in Tasmania with 3 years of preparation, armies of
lawyers and 6 months preparation time. L won, but Tas
appealed everything and no decision on quantum. New
CJ made it clear he could not let litigants tie up the
judicial resources of Tasmania and insisted on further
mediation (despite the fact that 2 previous mediations
had failed). It worked and most issues settled or agreed
and final point of appeal was heard in one day.
Court litigation now
Emphasis on resolution of dispute, rather
than winning or losing, right or wrong.
ADR a precondition to commencing litigation
Lawyer therefore needs skills to advise
clients on alternatives, participate, discuss,
recommend.
Can be consequences if they do not…in
costs orders
Compromise
Even where ADR methods not used, the Uniform Civil Liability
Rules and Calderbank (Calderbank v. Calderbank 1976 Fam 93) letters
encourage compromise.
If a party makes an offer within the UCPR regime and the
other party does not accept, they can have a presumptive
entitlement to an indemnity costs order from the day after the
making of the offer. Offer must be in writing and be an offer to
compromise the proceedings in whole or in part on specified
terms and comply with other requirements set out in UCPR.
It is therefore important for all lawyers to have sufficient
knowledge to advise clients on the state of dispute resolution
in the law, and preferably to have an understanding of
compromise, negotiation skills, & ADR methods and
limitations to assist clients further.
Commonwealth
• Cth Civil Dispute Resolution Act…received assent April
2011.
• Purpose is to seek to resolve disputes at the most
appropriate level-earliest opportunity and where
possible, outside the courts and the stressful, expensive
and adversarial culture of litigation.
• An applicant, when filing a Federal Court (& Fed
Magistrate) matter will also have to file a statement
outlining the “genuine steps” they have taken to attempt
to resolve the dispute.
• See Second Reading Speech of Robert McClelland 16
June 2010, House of Representatives Federal
Parliament and Bill itself.
Civil Dispute Resolution Act 2011
April 2011
Section 3.
The object of this Act is to ensure
that, as far as possible, people take
genuine steps to resolve disputes
before certain civil proceedings are
instituted.
Civil Dispute Resolution Act (Cth)
What are “genuine steps”? Examples s.4
a) Notifying the other person of the issues…offering to
discuss them, with a view to resolving the dispute.
b) Responding appropriately to any such notification.
c) Providing relevant information and documents to enable
the other person to understand the issues involved and
how the dispute might be resolved.
d) Considering whether process facilitated by another
person could help, including ADR.
e) If such process agreed, agreeing on person and
attending
f) If process conducted but unsuccessful, considering a
different method.
g) Attempting to negotiate.
Superior IP International Pty Ltd v. Ahearn Fox Patent and
Trade Mark Attorneys [2012] FCA 282
First substantive consideration of the “genuine steps”
requirement.
In this case, FC took non compliance with CDRA into
account when exercising existing case management
powers and in exercising discretion as to costs.
Justice Reeves set aside a statutory demand because
there was a genuine dispute in relation to most of it and
the remaining debt fell below the statutory minimum.
Judge so appalled by failures of lawyers that he joined
them as parties to the proceedings on the question of
costs and a copy of his reasons were given to clients
and to Queensland Law Society, Bar Association of Qld
and the Legal Services Commission.
.
Failures in Superior IP case
Judge adjourned
– To allow parties an opportunity to resolve dispute (consistent with Civil
Dispute Resolution Act)
– Directed party lawyers to notify clients how much it would cost in legal
fees…more than twice the claim!
– Drew Part VB of Federal Court of Australia Act and duties to conduct
litigation having regard to the overarching purpose of “the just
resolution of disputes according to law and as quickly inexpensively
and efficiently as possible”
To no avail.
There were over 400 pages of affidavit material, largely irrelevant to
existence or not of a genuine dispute about the debt and a lot of time
was taken up in objecting to that material….
This “reflected a complete lack of appreciation by the 2 lawyers ..as to
what it was they had to direct their minds to…”
NSW
Note that implementation of Pt 2A NSW Civil
Procedure Act delayed, then repealed.
AG said no reliable statistical data yet to
inform on likely efficacy because Cth
provisions only new. Want any reforms to
improve rather than hinder resolving civil
disputes in a just, quick and cheap way.
Still sensible to take reasonable steps to
resolve dispute or narrow issues.
Pt 2A NSW Civil Procedure Act
s.56
• Overriding purpose of just, quick and cheap resolution
of real issues in dispute or proceedings.
• Court must seek to give effect to overriding purpose.
• A party to civil proceedings is under a duty to assist the
court to further the overriding purpose
• Party to civil dispute (one that may lead to civil
proceedings) or civil proceedings is under a duty to take
reasonable steps to resolve or narrow the issues in
dispute in a way consistent with overriding purpose.
• Persons must not cause a party to be put in breach of
a duty…solicitors, barristers, any person with relevant
interest (gives assistance or exercises direct or indirect
control or influence over the conduct of proceedings or a
party).
NSW Civil Procedure Act
s.18J
Duty of legal practitioners to:
Inform client about pre litigation
requirements to dispute including need to
file a dispute resolution statement
Advise client about alternatives, including
ADR
Sanction can be costs order against them if
they do not comply.
ADRA
www.adra.net.au
Formed 1987 with objectives:
• To promote and encourage ADR in Australia
• To encourage exchange of ideas and information re ADR
• Providing and supporting education, research
• Printing, publishing and circulating ADR info
• Enhancing professional skills of ADR practitioners
• Represent ADRA members
• Cooperate with others to achieve objectives
©MNoonan2009
Early dispute Resolution (EDR)
Reference: Law Society Task Force Report on
Early Dispute Resolution and Law Society
Dispute Resolution Committee.
EDR is concept and process of intervention in the
formal dispute process to resolve that dispute
early, effectively and legitimately
To enable EDR, need for changes in attitude by
profession, clients, the litigation process and an
increase in ADR initiatives
Complexity and inefficiency of legal system in part
due to Commonwealth/State division
©MNoonan2009
Institutionalised EDR / ADR
The Administrative Decisions Tribunal NSW (ADT)
See Judge Kevin O’Connor AM, President ADT, address to ADRA Conference 2007 on ADRA website: Institutionalised
Dispute Resolution
ADT deals with state tax appeals, FOI merit reviews, professional discipline of legal profession and others, retail leases.
Chapter 6 of Administrative Decisions Tribunal Act 1997 empowers Tribunal to
engage in 2 forms of ADR-mediation and neutral evaluation and Tribunal can
determine its own procedures. It can engage assessors, conduct preliminary
conferences and can dispense with hearing and determine matter on the
papers.
Mediation means a structured negotiation process in which mediator as neutral
and independent party assists parties to achieve their own resolution. It is
voluntary and mediators are encouraged to adopt uniform practice.
Neutral evaluation means a process in which neutral evaluator seeks to
identify and reduce the issues of fact and law in dispute. The role includes
assessing relative strengths and weaknesses of each party’s case and offering
an opinion as to the likely outcome of proceedings.
Assessors can be very helpful where special knowledge or experience is
required e.g. veterinary surgical techniques
Not always appropriate? e.g. occupational licensing, professional discipline
and tax appeals. Once a public decision has been made e.g. to suspend a
licence Judge O’Connor is of the view the process should remain public and
open.
©MNoonan2009
Industry based dispute resolution
Financial Services Ombudsman
Telecommunications Industry
Ombudsman
Energy and Water Ombudsman NSW
Superannuation Complaints Ltd
Law Society of NSW
Arts Law facilities for members
©MNoonan2009
International commercial
dispute Mediation
• WIPO-World Intellectual Property
Organisation-www.wipo.int
• See Mediation Case Examples
Domestic ADR
The Australian Commercial Dispute Centre Ltd
formed in 1986 by AG and Sir Laurence Street.
Established to introduce and encourage non
adversarial dispute resolution into Australia.
Works with ACICA and 2003 Memorandum of
Understanding means ACICA focuses on
international disputes and ACDC on domestic
disputes and mediation.
Compulsory mediation has been introduced into
many disputes in the regular court system.
©MNoonan2009
Negotiation
Win/win mentality means both parties must
come out of the negotiation with an
improvement in their situation. Skill lies in
formulating such an outcome by finding
common ground.
Win/loss means that one side is better off
and one worse off with little or no common
ground. This might lead to loss of
relationship, or retaliation later, or an
outcome which suits neither.
©MNoonan2009
Win/win examples
Deliver later at higher price…buyer gets
timing required and vendor is
compensated for storage/delay of receipt
Pay earlier at cheaper price
Long term contract in return for fixed price
Return unsold items in return for prime
display position
©MNoonan2009
Negotiation Strategy
Are you clear about what your clients wish to
achieve?
What are the strengths/weaknesses of legal
position?
Is it just really all about money?
Distinguish “interests” from legal “rights”.
Is other side a reasonable person?
Who is best person to deliver position?
Who is best person to sell outcome?
How well prepared are you?
The Negotiation process
• Prepare-Formulate desired outcome, research
possible solutions
• Choose diplomatic/respectful language
• Refrain from adversarial, bullying language.
• Consider position of the other side and any
cultural issues relevant such as importance of
saving face
• Avoid insults, name calling, emotional abuse
• Meet personally on “without prejudice” basis-at
lower level first / higher level first, neutral ground
• Exchange of emails, telephone, correspondence
©MNoonan2009
Capitulation
Sometimes there is no better alternative
e.g. in the wrong
No gain/point in spending time/money
No chance of success
Better use for resources
Best to preserve relationship for now and do
something about it later.
©MNoonan2009
Mediation
A third party facilitates resolution of a
dispute by the parties.
Third party does not decide. Parties do.
Compulsory mediation
For NSW family provision claims -under the
Succession Act
Generally-s.26 NSW Civil Procedure Act
2005….court may order mediation with or
without consent of parties.
In view of potential consequences re costs,
best practice to use as a pre trial
procedure.
Mediation
• Parties appoint a person who assists them
to reach a negotiated resolution-in other
words, it is guided negotiation.
• Often a person with skills to work out
win/win solution to particular issue
• Puts someone in between warring parties
and can dilute poisonous atmosphere to
enable productive consideration of issues
• Not binding on parties unless reflected in a
formal settlement agreement
©MNoonan2009
Benefits of Mediation
• Parties determine outcome, not third party
• Parties do not have to decide who is right
and who is wrong/who wins who loses.
• Can be quick
• Confidential rather than a public process
• Informal, flexible, can bend to needs
• Can preserve relationships
• Cn be less expensive and uncertain with
much less disruption than litigation.
Mediation-is it appropriate? Not always
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Does client want to resolve the matter?
Intellectual mental or emotional capacity to pursue an agreement?
Does client want to create a legal precedent?
Does client have capacity and willingness to pay legal costs of litigation?
Does client suspect other party is hiding information, lying or otherwise acting in bad
faith?
Does client trust that other party would comply with settlement?
Is there a fear of violence or intimidation?
Is there any scope for compromise? Is client prepared to make concessions?
Is there information that one party could provide to improve understanding?
Could some aspects be resolved now?
Do parties share interests?
Is mediator likely to enhance negotiations? Have the parties tried themselves?
Does the client want to participate directly?
Has communication been a source of conflict?
Any non-legal interests of client?
Is a quick resolution in client’s interests? Does either party have an interest in delay?
Is continuation of dispute affecting commercial or reputational interests?
Would an apology help?
Is privacy / confidentiality important?
Factors against mediation
• Need to have a legal precedent
• Strong likelihood of success of motion for
dismissal or summary judgement
• Need for immediate equitable relief..e.g.
injunction, anton pillar order
• Unwillingness of client to mediate
Mediation approaches
Facilitative
Evaluative
• Explore party interests,
concerns, motivations
and goals
• Find common ground
• Identify possible
solutions
• Market those
opportunities to parties
• Identify strength and
weaknesses of each
position
• Give opinion on same
• Challenge predictions on
outcome
• Initiate settlement
proposals
Mediation Agreement
• Confidentiality
• Payment of the mediator
• Exclusion of liability and indemnity
Compulsory mediation
See NSW Civil Procedure Act 2005 Part 4
and Uniform Civil Procedure Rules 2005
Parties must participate in “good faith” s. 27
Court can refer without consent. S.26
Note cost consideration: Court annexed
mediation-no charge for mediator or room.
Private-have to find and pay for both.
Mediation Schemes
Great variety, many courts, tribunals.
Law Society Mediation Program. See
Mediation and Evaluation Information Kit
(2007) on website….mediators are
qualified solicitors who meet stringent
selection criteria and undergo advanced
mediation training.
Australian Mediation
Association…www.ama.asn.au
Mediator Selection
What style of mediation?
Sole mediator? More than one?
Court connected mediator or private?
Level of influence of mediator? Settlement,
Facilitative or Transformative model?
Expert advisory panel?
Wise counsel model?
Tradition based model?
With or without caucuses?
Qualities in a Mediator
Open minded
Persistent
Good listening skills
Sense of humour
Honesty, integrity
Patience
Flexible
Creative
Able to work with highly
charged emotions
Qualified….-in what?
Respected
Perceptive
Attentive to detail
Respectful
Friendly
Intelligent
Even tempered
Organised
Articulate
Gender and race
Most suitable type of mediator
Various types of person suitable….
Non legal trusted Individual with experience
Legal training?-Solicitor, barrister, former
judge
Specialist skills relevant to dispute?family/relationships, psychologist,
engineer, building/construction, franchise,
accounting, IP, Biotech, Mining, trade,
banking.
Preparing a client for mediation
• Lack of preparation can be fatal
• Know facts, both supportive and not
• Be well versed in relevant law, including
recent cases
• Describe mediation process and
bargaining strategy
• Ask client to consider best (BATNA) and
worst (WATNA) outcomes and evaluate
whether settlement feasible
Stages of Mediation
Opening statements-problem, facts and issues 30
minutes….
Identification of issues and setting agenda
Preparation and study of mediation position papers
Exploration and discussion of issues
Private sessions (and discussion with lawyer?)
Generation of options or offers
Evalutation of options or offers
Negotiations
Finalising agreement (assisted by lawyer?)
The private sessions
• Usually mediator conducts separate sessions with each
party to ascertain points at issue and respective
positions
• Mediator reflects on those sessions and formulates
possible solutions
• Mediator explains likely outcomes if dispute continues (if
adequate skills to do latter) to both parties separately
• Mediator presents possible solutions at joint session.
(Sometimes further separate sessions beforehand).
Usually, these are calculated to encourage movement on
positions.
• If settlement reached, mediator formulates basic
agreement terms for lawyer to translate into agreement
or, if a lawyer, drafts settlement agreement.
©MNoonan2009
Sample Impasse breakers
• When opposition digs in, usually a good idea of ITS
BATNA. Challenge assumptions of it
• Focus on opponents WATNA
• Change groupings for discussion
• Focus on future and future relationships
• Review cost/risk/benefit analysis
• Consider “double blind” proposal. Mediator confidentially
presents $ to each side for acceptance or rejection.
Unless both accept, neither knows whether the other
side has accepted or not.
• Take a break for an hour, day, week
• Move to arbitration
Mediation and Confidentiality
Is there an Agreement covering
confidentiality?
Who is bound? Parties, mediator, lawyers,
others.
What Information is covered?-admissions,
offers, facts, documents, notes,
agreements
Limits of confidentiality, enforcing
confidentiality-Use of information for other
purposes including legal proceedings.
Role of Lawyer in Mediation
• Research problem and issues, obtain information,
assemble and prepare,
• Advise client on requirement, process and costs.
• May or may not be present.
• May speak for client or coach client as to opening
statement, participation, process.
• May ask questions on behalf of client
• May generate options.
• May advise in relation to offers
• May negotiate on behalf of client
• May assist with documentation of settlement
• Extent may depend on whether client can afford it
Professional responsibility
of a lawyer involved in mediation
Legal Services Commissioner v. Mullins [2006] QLPT 12
Barrister guilty of professional misconduct at a
mediation in connection with negotiations for
compromise of an insurance claim…knowingly
misled insurer and lawyers about life expectancy
of client.
Approved in Legal Services Commissioner v. Voll
[2008] QCA 293.”
Probity is essential to utility of mediation.
International Mediation Institute
Not for profit organisation which seeks to
devise global standards for mediation and
other collaborative methods of dispute
resolution.
See http:imimediation.org
IMI Survey Jan-March 2013
Survey of in house dispute resolution
Counsel in US & Europe
Attitudes and approaches to mediation and
arbitration.
Criteria for selecting a Mediator
Experience as a mediator
Experience as a lawyer
Expertise in core issue of case
Evidence that competency independently assessed
Mediators ranking in league tables
Independently verified feedback
Recommendation of law firm/adviser
Mediator’s personality, attitude
Past experience with mediator
Mediator subscribes to Code of Conduct
Gender of mediator
Culture of mediator
99%
56%
85%
83%
38%
88%
78%
93%
97%
77%
4%
38%
Criteria for selecting an Arbitrator
Experience as an arbitrator
95%
Experience as a lawyer
89%
Experience in sector to which case relates 96%
Evidence competency independently assessed 84%
Arbitrator’s ranking in league tables 38%
Independently verified feedback from users 87%
Anonymous user quotes on website
15%
Recommendation of law firm/adviser 83%
Arbitrator’s personality and attitude 85%
Past experience with particular arbitrator 91%
Arbitrator subscribes to Code of Conduct 72%
Role of Mediator
Mediator should not be purely facilitative but
adopt a proactive idea generating role,
including proposing solutions and settlement
options
IMI Survey-77% agreed
Ouside lawyers are often an impediment to
mediation
IMI Survey-47% agreed
Training for lawyers
Expectation that arbitration and litigation
counsel be trained in mediation advocacy
skills
IMI Survey-80% said yes.
WIPO Patent Mediation
Technology consulting company (T) holding patents on 3 continents disclosed a
patented invention to a major manufacturer (M) in the course of a consulting
contract. When M started selling products which T alleged included the patented
invention, T threatened to sue in all jurisdictions where patents registered.
The parties started negotiating a license agreement with the help of external
experts but failed to agree on the royalty.
T & M submitted their dispute to mediation under the WIPO Rules. The WIPO
Arbitration and Mediation Center suggested potential mediators with specific
expertise in patents and the relevant technology. They chose one of those
mediators who conducted a 2 day meeting in which the parties reached a
settlement that covered both the royalty issue and included agreement on future
consulting contracts.
The mediation thus converted a hostile situation into one which both avoided
expensive and prolonged litigation and suited the business interests of both
parties….i.e. profitable use of the technology.
Students interested in more detail, should see www. wipo.int
Expert Determination
• Sometimes resolution of a single issue at base
of dispute can resolve dispute
• Does dispute involve a technical issue? e.g.
standards, compliance, quality specification,
existence of a substance or state of affairs, a
legal/accounting/scientific opinion on a particular
matter, quantification of loss or difference.
• Parties nominate an expert or panel to give
opinion on that single matter
• Can agree on “papers only” or independent
tests, as appropriate.
©MNoonan2009
Expert determination and IT
Examples:
Agreed a measurement system, which as contract
goes on, no longer exists, works or suits and
real time processing becomes impossible.
Expert could identify problems and an
appropriate replacement.
If problem extends beyond expertise of expert,
mediation may be better with limited expert
determination on technical issues only.
Expert determination in court system
Judges may refer questions to assessors or
special referees.
For example, in a building dispute, questions
for the architect or engineer.
Family court-family report after interviews of
family members
©MNoonan2009
Example: expert and action
Janet, a 23 year old recent IT graduate at her first job could
not please her employer. When something went wrong, she
was the first one blamed, even if the problem had nothing to
do with her. One week after being fired, she was charged with
criminal offences alleging she destroyed the computer system
resulting in total destruction of system and data.
Janet immediately hired a forensic computer expert to
examine the computers after filing motions to get access. That
expert determined that the backup system had never been
properly installed and had failed to operate long before Janet
worked there, that the data allegedly destroyed was still there
on the hard drives, and that someone had tampered with the
computers after Janet had left. The expert report persuaded
the prosecution that there was no case to answer, and the
charges were dismissed.
Case notes courtesy of bostonlawcollaborative.com
ARBITRATION
• Parties agree to resolve disputes by
arbitration in accordance with nominated
Rules.
• Parties appoint Arbitrator or panel
• Arbitration conducted
• Decision made by Arbitrator
• Binding on the parties
©MNoonan2009
Arbitration process
•
•
•
•
•
•
•
•
Can be similar to a court process
Can be informal
Can be remote
Can be on “papers” only, i.e. written materials and no
oral hearing
Parties can choose an arbitrator with expertise in their
business
Usual to choose 1 or 3 arbitrators so no deadlock
possible
Usually confidential, so limited precedent bank to consult
/ research.
Important elements are a process, rules defining how
that works, and a timetable to keep it moving along.
©MNoonan2009
Framework for Domestic Arbitration
States have Commercial Arbitration Acts-largely
uniform and regulate domestic arbitrations
Supreme Court has power of overall supervision.
Public policy prevents parties from agreeing to
oust jurisdiction courts. Scott v Avery clauses
seek to get around that by making arbitration a
condition precedent to legal proceedings. So,
not ousting, just delaying or not primary method.
However, Commercial Arbitration legislation
prohibits any clause trying to make it a condition
precedent.
©MNoonan2009
Powers of the Court
Under s. 53 Commercial Arbitration Act 1984
(NSW) and Supreme Court Rules court
has power to refer a matter to arbitration
on application of a party or its own motion.
©MNoonan2009
Domestic Arbitration
Subject to legislation and court review on
points of law or manifest errors of fact.
This can result in dispute ending up in
court anyway, with even more time and
cost than if one had gone there straight
away.
Consider appropriateness and type of
arbitration.
Qantas Airways Ltd v. Dillingham Corporation
(1985) 4 NSWLR113,122
Construction of Qantas Centre. Q brought legal proceedings
against D claiming that because D found the building
contract onerous, it was attempting to force Q to renegotiate
by wrongful means such as delay, inducing labour unrest,
conspiracy to hinder work and fraudulently misrepresenting
that design problems made work impracticable. D applied
for a court order to send it for arbitration by an architect and
a builder or by an arbitrator mutually appointed as set out in
the Scott v. Avery clause in the contract.
The court agreed with D and stayed proceedings effectively
giving effect to arbitration clause and noted that “It is now
more fully appreciated than used to be the case that
arbitration is an important and useful tool in dispute
resolution. The former judicial hostility to arbitration needs to
be discarded and a hospitable climate for arbitral resolution
of disputes created”
©MNoonan2009
Advantages of arbitration
•
•
•
•
•
Neutrality
Flexibility
Efficiency
Confidentiality
Enforceability
©MNoonan2009
Arbitration Clause
ACICA recommends:
“Any dispute, controversy or claim arising out of,
relating to or in connection with this contract,
including any question regarding its existence,
validity or termination, shall be resolved by
arbitration in accordance with the ACICA
arbitration rules. The seat of arbitration shall be
(location). The language of the arbitration shall be
(language). The number of arbitrators shall be
(1,3 or Article 8 of rules).”
Note also need for choice of law clause.
©MNoonan2009
Arbitration Rules
Arbitrations are conducted in accordance
with rules chosen.
See for example ACICA Arbitration rules at
www.acica.org.au. Selections follow.
Procedural as with civil/criminal procedure
court system rules.
For other rules, see appropriate organisation
©MNoonan2009
Attitude of our courts
Mainly support
Care must be taken when drafting to avoid
multi-party, multi-contract and multi-venue
disputes.
If arbitration clause too narrow, it may limit
range of disputes that can be settled by
arbitration
©MNoonan2009
Advising clients
• Choices-litigation, arbitration (if
agreement), mediation, other.
• Pros and cons of each, estimates of cost
and time
• Opinion as to which method most
appropriate
• Preparation
What method is appropriate?
Would client prefer negotiated settlement or to go to Court?
Is it important to preserve business relationship?
Is any criminal matter involved?
Does client need a binding legal interpretation of an important
contract clause? Set a precedent?
Does contract require a particular method?
Legal issue to be decided, or practical commercial issue?
Is cost an important/critical matter?
What are the relevance and consequences of time, and
timing?
Is confidentiality important?
Is there an industry body which offers cost effective methods?
References
• Hardy and Rundle, Mediation for Lawyers,
CCH 2010 (Checklists used in these
notes), Law Society NSW mediation kit.
• Mediation Today Pty Ltd. 6 Steps to
Successful Resolution. Available at
www.mediate.com.au