Resolving Disputes without Courts. Measuring the Impact of Civil Pre-action Obligations

Transcription

1 AUSTRALIAN CENTRE FOR COURT AND JUSTICE SYSTEM INNOVATION (ACCJSI) MONASH UNIVERSITY PROFESSOR TANIA SOUR DIN Resolving Disputes without Courts Measuring the Impact of Civil Pre-action Obligations Background Paper, March 2012

2 2 RESOLVING DISPUTES WITHOUT COURTS

3 Contents Executive Summary Introduction... 9 Overarching Aim and Objectives of the Research Project The Research Team Background What Are Pre-action Obligations? Obligations and Scheme Arrangements Recent Changes and Additional Obligations Pre-litigation Approaches Analysis of Literature Introduction Recent Australian Reports Requirements in the Family Dispute Resolution Area System Design Work United Kingdom Approaches: The Jackson Report Conclusions Case Study Information Application of Pre-action Obligations Case Study Approach Introduction Retail Tenancy Unit in NSW Retail Tenancy Scheme within the VSBC Research Approach Concerns, Issues and Next Steps Introduction Contents 3

4 Lawyer and Judicial perspectives Evaluations of Non-Court Dispute Resolution Processes Literature Concerning Evaluation of Mediation Next Steps Contents

5 Figures Figure 1.1: The relationship between the number of disputes and method of resolution Contents 5

6 Abbreviations AAT ABS ADR ADT ALRC ASIC Cth DOJ DSCV FICS ICJ NADRAC NMAS NSWCA NSWLR SPSS SCVCA VCAT VLRC VSBC Administrative Appeals Tribunal Australian Bureau of Statistics Alternative Dispute Resolution Administrative Decisions Tribunal NSW Australian Law Reform Commission Australian Securities and Investments Commission Commonwealth Department of Justice, Victoria Dispute Settlement Centre of Victoria Financial Institute Complaints Service Institute for Civil Justice National Alternative Dispute Resolution Advisory Committee National Mediation Accreditation Standards New South Wales Court of Appeal New South Wales Law Reports Statistical Package for the Social Sciences Supreme Court of Victoria Court of Appeal Victorian Civil and Administrative Tribunal Victorian Law Reform Commission Victorian Small Business Commissioner 6 Contents

7 Executive Summary The aim of the Pre-action Obligations Research Project (this Project) is to assess the use and effectiveness of pre-action schemes and obligations that encourage people to resolve their disputes before filing proceedings with a court or tribunal. This Background Paper provides information about the Research Project and about the common pre-action obligation approaches used in Australia. A Research Report will be published in September 2012 that explores issues relating to pre-action obligations and approaches in more detail and will include some more statistical analysis. There are many different ways in which people can be encouraged or required to attempt to resolve their disputes before entering the litigation system, and this Research Project explores the most common approaches in use within Australia. It also considers issues that have been raised about these types of obligations. Some concerns about pre-action or pre-litigation obligations are that they may increase costs or provide a hurdle and prevent people from accessing the court and tribunal system. On the other hand, pre-action requirements may reduce costs by supporting early and more effective dispute resolution. To examine the use and effectiveness of pre-action obligations, the Research Project explores pre-action protocols and obligations in the context of a literature review, an examination of available statistics, stakeholder input as well as qualitative and quantitative work in two selected schemes where Alternative Dispute Resolution (ADR) processes are used to support earlier pre-filing obligations. The key research questions are whether or not pre-filing processes can be: effective and efficient and produce lasting outcomes? accessible and timely? considered by the parties to be just or fair? efficient in terms of the resources used? improved, extended or supported more effectively? This Background Paper contains Six Chapters: Chapter One: Outlines the research objectives and methodology. Chapter Two: Considers the background to the introduction of pre-litigation or pre-action requirements Chapter Three: Discusses Australian and UK reports regarding issues and approaches relating to pre-action requirements Chapter Four: Explores available statistics and commentary about the two case study areas Chapter Five: Examines evaluations in the ADR area and the primary concerns that have been expressed about these types of requirements. Executive Summary 7

8 The Research Report to be produced in September 2012 will contain specific suggestions and recommendations about pre-action obligations and will draw upon this work. A range of research methodologies is being used to conduct the research. These include: a detailed literature review of issues and past work that has been focused on pre-action obligations and protocols (this Background Paper contains some of the literature review material); a review of available statistics from schemes that exist in the family and business sectors; a quantitative and qualitative analysis of disputes finalised in a NSW scheme and a Victorian scheme directed at Retail Lease Disputes in the pre-action area ( case study analysis ); and direct interviews and focus groups held with stakeholders who include disputants, representatives and those involved in schemes or arrangements that exist outside the case study areas. Your comments about this Research Project and any aspect of this Background Paper are welcome. Making Comments The closing date for comments is 14 June Comments and enquiries may be ed to: Professor Tania Sourdin [email protected] ACCJSI may draw upon, quote from or refer to comments in publications. ACCJSI also accepts submissions and comments made in confidence; please accompany such comments with a clear indication that the contents are intended to be confidential. 8 Executive Summary

9 1 1. Introduction 1.1 The Resolving Disputes without Courts Measuring the Impact of Civil Pre-action Obligations Research Project (the Research Project) explores the application and effectiveness of pre-action obligations that encourage disputants to resolve their disputes before commencing court or tribunal proceedings. This is a Background Paper setting out the research approach, methodology and results of the literature review that has been undertaken so far. A Research Report will be published in September 2012 and will contain a more detailed analysis of issues involved in the use of different types of pre-action obligations. 1.2 This Research Project is being undertaken to assist policy-makers, the courts, service providers, disputants and others to evaluate existing pre-action obligations and processes and to make informed decisions regarding the future implementation of dispute resolution obligations and options. To date, only a limited amount of research into the effectiveness of pre-action protocols and obligations has previously been conducted within Australia and internationally. The Australasian Institute of Judicial Administration (AIJA) has commissioned the Australian Centre for Court and Justice System Innovation (ACCJSI) at Monash University to undertake this project to assist in supporting discussion regarding this important topic and in planning Alternative Dispute Resolution (ADR) 1 and court-related strategies into the future. 1.3 Pre-action obligations have been introduced in a range of jurisdictions within and outside Australia in recent years. These obligations, which arise outside court and tribunal settings, are imposed as a result of agreements to enter into ADR processes, legislative arrangements, regulatory schemes as well as through court or non-court protocols and guidelines. Some pre-action protocols require disputants to engage in ADR or consider using ADR as a precondition to commencing legal proceedings. Others require that would-be litigants take steps or file a statement about what they have done to resolve their dispute if they are 1 Alternative Dispute Resolution is used to describe the processes that may be used within or outside courts and tribunals to resolve or determine disputes where the processes do not involve traditional trial or hearing processes. The term ADR is used also to describe processes that may include conferencing, mediation, evaluation, case appraisal and arbitration. Introduction 9

10 unable to resolve it and then commence court or tribunal proceedings. Most preaction requirements have opt out provisions. For example, certain categories of litigants are not required to comply with some types of pre-action obligations and requirements if there is urgency or violence or the category of cases is exempt for some other reason. 1.4 The reasons for introducing pre-action protocols and obligations include that, by focusing on earlier dispute resolution, time and cost can be saved and a better outcome may be achieved. In this regard, there is a concern that commencing adversarial court proceedings can lead to the destruction of existing business and other relationships, and the polarising of disputant positions can limit the options available to resolve the dispute. 1.5 On the other hand, some commentators consider that pre-action protocols and obligations can limit access to justice, access to the courts and increase time and cost when matters do not resolve or when costs are front loaded. There is also a concern that people may reach a compromise without adequate legal advice or that, because commencing legal proceedings is too expensive or too difficult, they may be unable to exercise their legal rights. These concerns have been explored in Australia in a number of reports (including a Senate Subcommittee Report) and in the United Kingdom in the Jackson Review (discussed in more detail below) and will be considered further in the Research Report of this Project (to be published in September 2012). Overarching Aim and Objectives of the Research Project 1.6 The overarching aim of this Research Project is to assess the use and effectiveness of pre-action obligations by referring to specific examples and by drawing upon a review of available literature. Specific additional objectives of the Project are to: consider the effectiveness of some types of pre-action processes this involves reviewing selected current pre-action approaches and their impact upon the timeliness and cost of dispute resolution; explore how pre-action services that occur as part of a scheme can operate with those that simply impose an obligation (with no scheme of referral); discuss the timeliness of outcomes achieved within the pre-action environment with outcomes achieved through litigation processes (including matters that do not proceed to a hearing but are resolved once legal proceedings are commenced); and, consider the impact of pre-action approaches on matters that might otherwise progress into the litigation system in terms of cost, case activity and complexity. 1.7 These objectives are addressed by using a range of research methodologies that include a detailed literature review, an examination of obligations in a range of jurisdictions as well as a closer in-depth qualitative and quantitative analysis of 10 Introduction

11 matters mediated in two pre-litigation schemes, which enables a case study approach to be taken. The two schemes the subject of this in-depth analysis are the retail lease schemes operating in Victoria and NSW. Each scheme has been operating for a considerable period of time (the NSW scheme has been in place for well over a decade and the Victorian scheme has been operational for nine years). Each scheme also has slightly different operating arrangements (see Chapter 4). This case study work and associated surveying work has already commenced and has been the subject of a University ethics approval process. 1.8 The final Research Report will consider the broader obligations framework as well as information about the disputes mediated in the Victorian and NSW schemes and will explore issues relating to cost, delay and outcomes with direct interviews with stakeholders. As a result of this approach, this Background Paper provides information about the characteristics of different dispute arrangements and explores the issues and concerns about pre-action arrangements that have been raised in the context of recent Commonwealth legislation in this area as well as postponed NSW legislation. These more recent arrangements have not been the subject of a detailed case study analysis for a number of reasons (including the methodological difficulty involved in obtaining a survey sample given their recent introduction). However, views about these schemes will be the subject of stakeholder input through focus group processes and a submissions process. 1.9 The Research Project is intended to provide information about pre-action arrangements in a number of jurisdictions as well as the processes, outcomes and perceptions of those involved in the two selected pre-action schemes. The attitudes and perspectives of various stakeholders are explored in the Research, namely disputants, lawyers and others. In addition, the benefits and challenges associated with these external schemes are compared to the situation where a looser framework of obligations is used. The Research Team 1.10 The researchers involved in this Project are located at the Australian Centre for Court and Justice Innovation (ACCJSI) at Monash University. They include Prof Tania Sourdin, who is the Project Director and primary author 2 as well as researchers who are gathering and collating background material and qualitative and quantitative material Jen Hitchman (senior researcher) and Adrien March (project researcher), Alan Shanks (expert qualitative and quantitative analyst) and Sarah Russell (editor). 2 Parts of this Background Paper draw upon T Sourdin, Alternative Dispute Resolution (2012, 4 th ed, Thomson Reuters) with kind permission. Introduction 11

12 2 Background What Are Pre-action Obligations? 2.1 In this Project, the term pre-action obligations has been interpreted widely and can include requiring or even considering whether to take some action (including preparing a statement) that is directed at exploring dispute resolution or attending a form of Alternative Dispute Resolution (ADR) (whether or not as part of a scheme where the ADR process is arranged) before court or tribunal proceedings are commenced. Pre-action protocols and obligations can include: the need to disclose information or documents in relation to the cause of action; the need to correspond, and potentially meet, with the person or entity involved in the dispute; undertaking, in good faith, some form of alternative dispute resolution (ADR); and conducting genuine and reasonable negotiations with a view to settling without recourse to court proceedings Pre-action obligations exist in the social, community, health, family, business, personal injury and online consumer and business sectors. They have been in existence in Australia for many years. There are considerable differences in the way in which they operate and whether or not they are linked to any systemic arrangements, and if so, how they are so linked. They can incorporate requirements to arbitrate, mediate or use an ADR or EDR (External Dispute Resolution for example, in the Banking and Financial sector) scheme, and they 3 Australian Law Reform Commission, Discovery in Federal Courts (Consultation Paper No 2, November 2010), 160, citing Victorian Law Reform Commission, Civil Justice Review, Report 14 (2008), 109; and M Legg and D Boniface, Pre-action Protocols in Australia (2010) 20 Journal of Judicial Administration 39, Background

13 have recently been the subject of considerable discussion in the Australian legal environment as a result of legislation that has been proposed or enacted that extends the application of protocols and obligations to a broader category of disputes. Obligations and Scheme Arrangements 2.3 By far, the largest pre-litigation scheme that imposes mandatory attendance by disputants in a dispute resolution process in Australia operates in the family dispute area. 4 Initiatives that have been phased in since 2006 (under the Family Law Act 1975 (Cth)) represent a significant change in family law. 5 The explanatory memorandum to the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth) notes that this is a key change to encourage a culture of agreement making and avoidance of an adversarial court system The 2006 amending Act requires compulsory dispute resolution, pursuant to Subdiv E of Div 1 of Pt VII of the Family Law Act. Section 60I provides for compulsory attendance at family dispute resolution in a range of circumstances prior to lodging an application with the court. The requirement for compulsory certificates in respect of family dispute resolution as a prerequisite to the filing of all new parenting matters (subject to certain exceptions, for example, where there is urgency, family violence or the abuse of a child and where delay could have a negative impact) came into force on 1 July Disputants are also advised that: When applying to the court, you will need to provide information to demonstrate that one of the exceptions applies to you In State jurisdictions, there are various ad hoc other requirements that encourage would-be litigants to use courts as a last resort. Many of these requirements have operated for more than a decade. For example, in South Australia, legislation can require parties in civil disputes to notify one another of a claim before the initiating process is filed. 8 Some other jurisdiction-specific State legislation requires mandatory attendance at some form of ADR session as a pre- 4 EDR Schemes deal with large numbers of disputants (it has been estimated that these exceed 250,000 disputes per year): see T Sourdin, Alternative Dispute Resolution 4 th ed, 2012 Thomson Reuters); however, these usually are not mandatory for consumers. 5 See the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth), Revised Explanatory Memorandum (2006) p 1. 6 Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth), Revised Explanatory Memorandum (2006) p See Family Relationships Online, Family Dispute Resolution, available at < (accessed 21 September 2011). 8 See Supreme Court Civil Rules 2006 (SA) r 33, available at (accessed 22 February 2012). Under the rule, parties in most matters are required to serve an unfiled process on another party 90 days before filing in a court. Background 13

14 condition to litigation. 9 The legislation can require different pre-litigation reporting standards and notice periods. 2.6 In addition, many States have legislation in a number of different areas to prevent court proceedings being commenced without mediation or some other form of ADR occurring first. For example, the Farm Debt Mediation Act 1994 (NSW) provides that mediation must occur before a creditor can take possession of property or other action under a farm mortgage. Similarly, according to s 1, the purpose of the Farm Debt Mediation Act 2011 (Vic) is to require a creditor to provide a farmer with the option to mediate before taking possession of property or other enforcement action under a farm mortgage There are many examples of other schemes. The Legal Profession Act 2004 (NSW) specifically provides for disputes between clients and legal practitioners to be referred to mediation; participation by the parties in mediation is not voluntary in relation to some types of cost disputes. 11 The Strata Schemes Management Act 1996 (NSW) provides for the mandatory mediation of strata scheme disputes prior to any application being made to the registrar for an order concerning the dispute Apart from these schemes, an extensive array of dispute resolution schemes exist that are mandatory for members, but not consumers, and apply to disputes in the insurance, banking and other sectors. Membership of such schemes can form part of mandatory licensing requirements, and members are not permitted to litigate without first using the schemes. These dispute resolution schemes have been set up in various industries to provide low-cost (or free), effective and relatively quick means of resolving consumer complaints about products and services. These schemes are often funded by a cooperative of industry members (examples include the Telecommunications Industry Ombudsman (TIO), and the Financial Ombudsman Service (FOS)) and are intended to deal with disputes between business and consumers. 2.9 The Australian and New Zealand Ombudsman Association website lists seven Australian industry-based Ombudsman schemes (energy and water, telecommunications and public transport) and three New Zealand industry-based Ombudsman schemes plus the statutory South Australian WorkCover Scheme, which investigates complaints about the WorkCover Scheme. 13 All of these schemes and those noted above provide dispute resolution services, and 9 For example, Family Law Act 1975 (Cth), s 79(9); Retail Leases Act 1994 (NSW), Pt 8; Farm Debt Mediation Act 1994 (NSW) (accessed 22 February 2012), r See ABC News, Banks Forced to Offer Farm Mediation, available at < 30/banks-forced-to-offer-farm-mediation/ > (accessed 24 September 2011). 11 Legal Profession Act 2004 (NSW), Pt 4.3 (Mediation); and Pt 3.2, Div 8 (Mediation of Costs Disputes) (see s 336) (accessed 22 February 2012). 12 Strata Schemes Management Act 1996 (NSW), s (accessed 22 February 2012). 13 Australia and New Zealand Ombudsman Association Ombudsman Services in Australia & New Zealand 14 Background

15 engagement in the scheme processes can be a pre-condition to commencing litigation (in most cases) Generally, the scope of these pre-litigation schemes (in the insurance, banking, telecommunication and similar sectors) is limited in that they do not deal with internal disputes or disputes with contractors, suppliers or other business entities. In 2008, reforms were introduced that enabled many of these schemes to merge; for example, FICS, BFSO and IOS merged to become the Financial Ombudsman Service (FOS). On 1 January 2009, the Credit Union Dispute Resolution Centre (CUDRC) and the Insurance Brokers Disputes Ltd (IBD) also joined the FOS. The Credit Ombudsman Service Ltd (COSL) also handles complaints about credit unions, building societies, non-bank lenders, mortgage and finance brokers, financial planners, lenders and debt collectors, credit licensees and credit representatives. While there are already common help lines, these processes may mean that it is easier for consumers to access services Dispute resolution for domain name disputes in the e-commerce realm (pursuant to the.au Dispute Resolution Policy, the audrp) is undertaken by.au DomainAdministration Ltd (auda), which is an incorporated membership-based non-profit organisation from the Australian internet community. Complainants are not obliged to use the system and may instead choose to pursue other means of resolving their dispute, such as traditional litigation. The appeal of the audrp is, however, in the fulfilment of its stated aim of providing a cheaper, speedier alternative to litigation for the resolution of disputes between the registrant of a.au domain name and a party with competing rights in the domain name. 14 Matters will be referred to an independent arbitral panel of one or three panel members to determine the complaint. There is no appeals process. Nonetheless, if the unsuccessful party is not satisfied with a decision, they may decide to initiate legal proceedings. Some ADR industry-based schemes face criticism when decisions are made that are binding on industry members but not consumers The industry-based schemes for dispute resolution with specified service providers can change rapidly, and for small business this can be confusing. The schemes have, therefore, attempted in recent years to offer more standardised processes. In 2010, new dispute resolution processes were created by FOS, to better reflect a single standardised procedure (as the FOS now incorporates what were previously a number of agencies) and with a focus on early dispute resolution. 15 Organisations such as the FOS deal with a significant number of disputes each year. For example, 23,790 new disputes were initiated in the reporting period (an increase of 6 per cent on the previous year). 16 The overwhelming majority of the 21,543 disputes resolved in were 14 Australian Domain Name Administrator (auda), au.dispute Resolution Policy (August 2010), available at < (accessed 14 September 2011). 15 Financial Ombudsman Service, Dispute Handling Process in Detail, available at < (accessed 14 September 2011). 16 Financial Ombudsman Service, Annual Review, p 27. Background 15

16 resolved by consent 17 only 12 per cent of matters resulted in a determination by FOS Other schemes exist in the commercial area. Often, disputants can be contractually required to use a form of ADR before being permitted to access the courts. These contractual requirements can specify various forms of dispute resolution. For example, more formal models of dispute resolution may operate in different States and Territories under the Commercial Arbitration Acts 18 and become relevant as a result of contract requirements. Recent Changes and Additional Obligations 2.14 The subject of pre-litigation obligations has received greater interest in recent years as there have been attempts to extend additional obligations to federal and State disputes. Federally, the Civil Dispute Resolution Act 2011 (Cth) (CDRA) is a recent piece of legislation that increases the use of pre-litigation obligations. In terms of pre-litigation requirements, the Act requires that disputants file a genuine steps statement that sets out what attempts have been made to resolve their differences before commencing litigation in respect of a range of civil disputes This legislation was controversial and prompted a Senate Subcommittee Inquiry. 19 The Senate Subcommittee took submissions in 2010 and early 2011 and recommended amendments to the legislation. The content of the submissions made to the Senate Inquiry is discussed in Chapter 3 and Chapter 5 of this Background Paper. In essence, the Inquiry reported that: There was general support in evidence for the intent of the Bill with recognition of the importance of mechanisms, including alternative dispute resolution (ADR), which assist with the resolution of matters before they proceed to court or provide a means to clarify and narrow issues in dispute. Resolving disputes or clarifying issues reduces costs and delays for all parties Despite the legislation, there are concerns about the implementation of the genuine steps requirement. In the recently released Case Management Handbook, 21 the Federal Court of Australia sounds some warnings about the 17 Financial Ombudsman Service, Annual Review, p 70, available at < (accessed 21 February 2012). 18 For example, Commercial Arbitration Act 2010 (NSW) (accessed 22 February 2012). 19 See _dispute_resolution_43/index.htm (accessed 15 March 2012). 20 See _dispute_resolution_43/index.htm (accessed 15 March 2012). 21 The Federal Court of Australia Case Management Handbook [aims] First, to highlight the scope of the case management tools and techniques that are available to the Court and practitioners to assist in ensuring the quick, inexpensive and efficient resolution of proceedings before the Court; and 16 Background

17 proportionality of costs of genuine steps to resolve a dispute under Part 3 of the CDRA. While reiterating the court s broad discretion to order costs with regard to the genuine steps, the Handbook states that 5.19 A party who attempts to take genuine steps still faces the risk that those steps will fall upon deaf ears and/or that the cost of undertaking genuine steps will not be recoverable. This is because an order for costs is usually made on a party-party basis based upon the relevant scale of costs (Schedule 3 of the FCR). Schedule 3 does not contain any scale items for genuine steps undertaken before the commencement of proceedings The CDRA does not ameliorate this position. Some of the genuine steps identified by the CDRA have the potential to be very costly, depending on the nature of the dispute Recent case law at the Federal level dealing with the CDRA requirements suggest that the Federal Court may deal with some of these issues in other ways. One recent Federal Court case suggested that a failure to comply could lead to an adverse costs order and potentially could lead to action against legal representatives. In Superior IP v Ahearn Fox 22 no genuine steps statement was filed by Applicant or Respondent as required by s6 and s7 Civil Dispute Resolution Act 2011 (Cth) (CDRA) and Rules 5.03 and 8.02 of the Federal Court Rules The lawyers had made no efforts to resolve the dispute, no discussion had occurred between lawyers to resolve the dispute (prior to adjournment for that purpose), or to limit client and Court resources being wasted, in accordance with the objects of the CDRA, principles of proportionality and the ethical obligations of lawyers Justice Reeves held that the lawyers management of the dispute was:.the absolute antithesis of the overarching purpose of civil practice and procedure set out in s 37M of the FCA Act, viz the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. It is not overstating the matter to observe that this is the sort of conduct that brings the legal profession into disrepute, that significantly undermines the efficient disposal of civil litigation and that has the potential to erode public confidence in the administration of justice in this country Under s 9 of the Civil Dispute Resolution Act, a lawyer acting for a person who is required to file a genuine steps statement has a duty to advise that person of that requirement and to assist that person to comply with that obligation. In Secondly, and more importantly, to gather and distill the experience of practitioners and judges alike as to the merits and perils of specific techniques in different contexts. : p 6 (13 October 2011), available at (accessed 10 February 2012). 22 Superior IP v Ahearn Fox [2012] FCA 282 (23 March 2012) available at (accessed 27 March 2012) p3 23 Superior IP v Ahearn Fox [2012] FCA 282 (23 March 2012) available at (accessed 27 March 2012) p3 Background 17

18 Superior IP v Ahearn Fox, the total legal and filing fees involved approached twice the amount of the statutory demand in dispute, with affidavit evidence in excess of 400 pages. A usual order for costs for the successful party in the matter was not made and the hearing on the issue of costs adjourned for submissions. Justice Reeves ordered that the lawyers be joined as parties and that the original parties to the proceedings obtain independent legal advice on the issue of costs. In addition, His Honour directed that copy of his reasons be released to the Queensland Law Society, the Bar Association of Queensland and the Legal Services Commission, to take such action as they consider appropriate in relation to the conduct of the two lawyers concerned In New South Wales, attempts have been made to introduce similar requirements to those introduced at the Commonwealth level. These attempts have also been somewhat controversial and have generated significant comment. Legislative amendments made in 2010 were postponed. In announcing this postponement in 2011, the New South Wales Attorney-General noted the following: Part 2A of the Civil Procedure Act 2005 requires parties to take reasonable steps to resolve their dispute by mutual agreement or to more narrowly define the contentious issues before commencing court action. The provisions were passed in late 2010, but would only have applied to matters filed from 1 October the reasonable steps provisions would be postponed by 18 months to enable NSW to monitor the success of similar provisions that commenced in Federal courts on August 1. The NSW Government will ultimately make informed decisions about the future of Part 2A, using all of the available evidence Compliance with pre-trial obligations should reduce, not add to, the cost of resolving disputes. The purpose of this postponement is to ensure this is the case In Victoria, there was also an attempt to introduce a reasonable steps obligation in 2010 as part of a broader scheme of overarching obligations that was intended to bind courts, lawyers and litigants to a more reasonable standard of behaviour. This scheme originally set out more extensive pre-litigation requirements that required prospective litigants to take steps, exchange material and documents, and consider dispute resolution options. Although enacted, the section of the Civil Procedure Act 2010 (Vic) dealing with pre-litigation requirements was repealed in 2011 following a change of government. However, the changes that were made mean that courts can still make rules relating to prelitigation requirements. 24 G. Smith (NSW Attorney-General), NSW Government to Postpone Pre-Litigation Reforms, Media Release (23 August 2011). 18 Background

19 Pre-litigation Approaches RESOLVING DISPUTES WITHOUT COURTS 2.22 This Research Project seeks to consider pre-action obligations and schemes and provide useful comment on the impact of these types of variations as well as the broader operation of these schemes. As noted above, these types of arrangements are not new (some of the arrangements have been in place for two decades or more), and the arrangements have generally not been introduced in Australia as a result of experimentation in overseas jurisdictions. For example, many of the reforms in this area within Australia predated the UK Woolf Reforms (for example, in the retail lease sector) and have become models of reform for overseas jurisdictions However, the newer arrangements under the CDRA or the NSW proposals to create pre action obligations are not coupled with and do not create an infrastructure or strict dispute resolution regime for example, to meet the CDRA requirements a disputant is not required to attend a mediation or ADR service or obtain any certification (this is more commonly the case under many existing prelitigation arrangements) The most recent reforms in the family and federal sector are, however, in response to the articulation at a policy and government level of a wider view of justice and are predicated on the notion that disputants can make their own dispute resolution arrangements to suit their own particular circumstances. This approach assumes that dispute resolution arrangements can exist outside courts, tribunal and schemes. For example, recently, the Commonwealth explored how this broader dispute resolution system (that includes pre-action schemes) works. 25 In deciding to adopt a broader view of justice, a number of theorists were cited and it was noted that: Just as health is not found primarily in hospitals or knowledge in schools, so justice is not primarily to be found in official justicedispensing institutions. Ultimately, access to justice is not just a matter of bringing cases to a font of official justice, but of enhancing the justice quality of the relations and transactions in which people are engaged In the 2009 report of the Access to Justice Taskforce, A Strategic Framework for Access to Justice in the Federal Civil Justice System, the Australian civil and family justice system was mapped as a complex and somewhat winding pathway with few matters progressing to court proceedings. This reality that most disputes are resolved away from the court and tribunal system has also informed recent approaches to pre-action protocols and obligations Figure 1.1 of that Report (below) shows the relationship between the number of disputes and method of resolution employed. Essentially, pre-action 25 See the reports published by the Access to Justice Taskforce, A Strategic Framework for Access to Justice in the Federal Civil Justice System (Attorney-General s Department, Commonwealth of Australia, Canberra, 2009), available at < (accessed 21 August 2011). 26 M Galanter, Justice in Many Rooms in M Cappelletti (ed), Access to Justice and the Welfare State (Sijthoff and Noordhoff, Alphen aan den Rijn, 1981), at Background 19

20 obligations are introduced to support the earlier resolution and management of disputes. Figure 1.1: The relationship between the number of disputes and method of resolution Source: Access to Justice Taskforce, A Strategic Framework for Access to Justice in the Federal Civil Justice System (2009), p The issues that relate to the systemic approach to dispute resolution have been considered in many government reports. However, a specific focus of this Research Project is to explore how effective dispute resolution arrangements can be supported in the pre-litigation area particularly where there may be few guidelines or protocols to support constructive negotiation and dispute resolution engagement in ADR processes. 20 Background

21 3 33 Analysis of Literature Introduction 3.1 Various reports and publications have been reviewed to gather information about the use and effectiveness of pre-action schemes and protocols and to inform the development of this Background Paper. In addition, information regarding ADR standards, criteria and past evaluations has also been reviewed. Relevant sources have included the relevant Retail Tenancy websites and reports (which are discussed further in Chapter 4), as well as international and Australian reports that are concerned more generally with pre-action requirements. 3.2 Much literature in this area is hidden as evaluations that may be useful are not always publicly available and overseas literature may not be readily located. In addition, professional groups that may have views about pre-action schemes may not publish submissions or other material that is relevant to this Research Project. The views that are available from the legal professional area are explored in Chapter 5. Given that this material may not fully represent the available literature, additional relevant material and information is sought and contributions are welcomed to inform the Research Report that is to be published in late September It should also be noted that, despite this Background Paper s focus on pre-action protocols and obligations, it has been necessary to consider, to a limited extent, a wider focus on civil justice reform. For example, many initiatives in the pre-action area have been coupled with civil litigation reform objectives. The reforms can expressly include the introduction of pre-action protocols and judicial case management to lower costs, encourage cooperation between disputants and avoid litigation wherever possible. In the United Kingdom, the impetus for change, as Lord Woolf identified, arises from a number of problems with the civil justice system namely that: [i]t is too expensive in that the costs often exceed the value of the claim; too slow in bringing cases to a conclusion and too unequal: there is a lack of equality between the powerful, wealthy litigant and the under resourced litigant. It is too uncertain: the difficulty of forecasting what litigation will cost and how long it will last induces the fear of the unknown; and it is incomprehensible to many litigants. Above all it is too fragmented in the way it is organised since there is no one with Analysis of Literature 21

22 clear overall responsibility for the administration of civil justice; and too adversarial as cases are run by the parties, not by the courts and the rules of court, all too often, are ignored by the parties and not enforced by the court These concerns are shared by a number of other common law jurisdictions, including Australia, as demonstrated by the substantial work undertaken by law reform bodies, legal think tanks, professional organisations, courts, tribunals, legislatures and governments across the common law legal world. 28 The reports, findings and recommendations that have resulted have given rise to a wealth of new legislation, court rules and standards aimed at ensuring that there is access to justice, as well as the cost-effective and efficient delivery of court administration and the civil justice system more broadly. 3.5 In Australia, significant efforts have been dedicated towards further refining access to justice core principles with a particular emphasis on reducing cost and delay in the legal system and have increasingly been focused on the pre litigation area. 29 These reports are explored further below. In addition there has been considerable discussion in the United Kingdom about whether or not would-be litigants should be required to attempt to resolve their disputes before commencing proceedings. One significant UK report that has considered the subject of pre-action protocols is the widely studied and comprehensive UK Report of Lord Justice Jackson, entitled the Review of Civil Litigation Costs (Jackson Report), 30 published in Recent Australian Reports 3.6 There are many Australian reports that have considered the use and introduction of pre-action obligations and protocols. This work has mostly been directly linked to the introduction of legislation dealing with these issues. For example, the Civil Dispute Resolution Act 2011 (Cth) that essentially requires disputants to file a 27 The Right Honourable the Lord Woolf, Master of the Rolls, Access to Justice: Final Report, para 2 p. 2 (July 1996) HMSO available at (Accessed 22 February 2012). 28 See, for example, pp of the ALRC Report Managing Justice: A Review of the Federal Civil Justice System (ALRC Report No. 89, February 2000), which notes a number of leading overseas reports, particularly in and across Canada and the United States, as well as the Woolf inquiry and subsequent reform papers. 29 See, for example, Commonwealth Attorney-General s Department, A Strategic Framework for Access to Justice in the Federal Civil Justice System: A guide for future action (Access to Justice Taskforce Report, September 2009); National Alternative Dispute Resolution Advisory Council (NADRAC), The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction (Report to the Commonwealth Attorney-General, September 2009); Commonwealth Parliament (The Senate), Legal and Constitutional Affairs References Committee, Access to Justice (December 2009); Victorian Law Reform Commission (VLRC), Civil Justice Review (Report No. 14, May 2008). 30 Lord Justice Jackson, Review of Civil Litigation Costs Final Report (December 2009), available at (accessed 21 September 2011). 22 Analysis of Literature

23 genuine steps statement that sets out what attempts have been made to resolve their differences before commencing litigation in respect of a range of civil disputes was preceded by a number of reports and inquiries. For example, this legislation was specifically considered by the Senate Subcommittee appointed to comment on the draft legislation 31 (see Chapter 2) and was the subject of a number of submissions. 32 The final conclusions of the Senate Subcommittee were that: 3.58 The committee notes that the Civil Dispute Resolution Bill 2010 is part of the government's moves to improve access to justice. It also reflects a cultural shift in how the position of the courts is perceived in the justice system. Through the 'genuine steps' obligation, the Bill aims to support the resolution of certain civil disputes in the Federal Court and the Federal Magistrates Court before litigation is commenced. The committee considers that the introduction of this obligation is an important initiative in ensuring that there is a focus on resolving a matter before costly and time consuming litigation is undertaken. Even when matters are not resolved, there will be a benefit to parties as the issues in dispute will be clarified and narrowed The committee has carefully considered arguments that the Bill introduces mandatory pre-action protocol. The committee is satisfied that this is not the case. Rather, while it is obligatory to provide a genuine steps statement, the Bill provides flexibility to the parties to determine the steps that they wish to take to resolve their dispute and allows for circumstances when genuine steps cannot be undertaken. The Bill provides examples of genuine steps but does not mandate those that should be taken. This is the case with ADR: although witnesses focused on mandatory ADR, the Bill only provides ADR as an example of a genuine step, not a mandated step However, the committee believes that the Bill would benefit from the addition of an inclusive definition of 'genuine' to better reflect the intention of the NADRAC report and to provide guidance to the parties involved See _dispute_resolution_43/index.htm (accessed 15 March 2012). 32 See _dispute_resolution_43/index.htm (accessed 15 March 2012). Submissions were made by Prof Tania Sourdin, the Federal Court of Australia, the Human Rights Law Resource Centre and PILCH Homeless Persons' Legal Clinic, the Castan Centre for Human Rights Law, the National Legal Aid, the Law Council of Australia, the Federation of Community Legal Centres (Vic), the Insolvency Practitioners Association (IPA), the NSW Department of Justice and Attorney General, the National Alternative Dispute Resolution Advisory Council (NADRAC) and the Attorney-General's Department. 33 See _dispute_resolution_43/index.htm (accessed 15 March 2012). Analysis of Literature 23

24 3.7 The requirements in the genuine steps statement are modelled on the recommendations in the National Alternative Dispute Resolution Advisory Council (NADRAC) report, The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction The Commonwealth Act states in s 4: 4 Genuine steps to resolve a dispute (1A) For the purposes of this Act, a person takes genuine steps to resolve a dispute if the steps taken by the person in relation to the dispute constitute a sincere and genuine attempt to resolve the dispute, having regard to the person s circumstances and the nature and circumstances of the dispute. (1) Examples of steps that could be taken by a person as part of taking genuine steps to resolve a dispute with another person, include the following: (a) notifying the other person of the issues that are, or may be, in dispute, and 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 the other person to enable the other person to understand the issues involved and how the dispute might be resolved; (d) considering whether the dispute could be resolved by a process facilitated by another person, including an alternative dispute resolution process; (e) if such a process is agreed to: (i) agreeing on a particular person to facilitate the process; and (ii) attending the process; (f) if such a process is conducted but does not result in resolution of the dispute considering a different process; (g) attempting to negotiate with the other person, with a view to resolving some or all the issues in dispute, or authorising a representative to do so. (2) Subsection (1) does not limit the steps that may constitute taking genuine steps to resolve a dispute. 3.9 In New South Wales and Victoria, attempts that have been made to introduce similar requirements have been linked to law reform and review reports. The legislative attempts have also been somewhat controversial and have generated significant comment (see below). In New South Wales, legislative amendments made in 2010 were postponed. In announcing this postponement in 2011, the New South Wales Attorney-General noted the following: Part 2A of the Civil Procedure Act 2005 requires parties to take reasonable steps to resolve their dispute by mutual agreement or to more narrowly define the 34 National Alternative Dispute Resolution Advisory Council (NADRAC), The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction, Report (prepared for the Attorney-General of the Commonwealth of Australia, September 2009). 24 Analysis of Literature

25 contentious issues before commencing court action. The provisions were passed in late 2010, but would only have applied to matters filed from 1 October the reasonable steps provisions would be postponed by 18 months to enable NSW to monitor the success of similar provisions that commenced in Federal courts on August 1. The NSW Government will ultimately make informed decisions about the future of Part 2A, using all of the available evidence Compliance with pre-trial obligations should reduce, not add to, the cost of resolving disputes. The purpose of this postponement is to ensure this is the case As noted at 2.21, in Victoria, there was also an attempt to introduce a reasonable steps obligation in 2010 as part of a much broader scheme of overarching obligations to bind courts, lawyers and litigants to a more reasonable standard of behaviour. The section of the Civil Procedure Act (2010) (Vic) dealing with pre-litigation requirements was repealed in 2011 following a change of government although the changes that were made mean that courts can still make rules relating to pre-litigation requirements Each of the legislative responses has been in response to a series of reports that have highlighted the utility and benefits of ADR processes in the pre-litigation area. For example, the Victorian proposal emerged after consideration of the Victorian Law Reform Commission (VLRC) report 36 that focused on civil justice reform The VLRC Civil Justice Review Report (2008) (the VLRC Report) provided a comprehensive overview of the litigation system in Victoria and made a series of recommendations. The report considered the aims of the civil justice system and the principles that should guide the rules of civil procedure, summarised factors influencing the justice system and assessed the performance of the civil justice system using empirical data and feedback. It suggested that many litigants in the higher Courts are dissatisfied as a result of delay, inefficiency and disproportionate legal costs. 37 The report made specific recommendations for reform, including increasing the use of alternative dispute resolution. 38 Proposals for the provision of an increased array of ADR processes, more effective industry specific ADR schemes and additional provisions for mandatory referral to ADR were a prominent feature of the Report. 39 The report also suggested that there is a need for ongoing civil justice review as well as other reform proposals The Commonwealth response to these issues was informed by a more specific ADR focus and a consideration of the extensive pre-existing litigation reforms already present at the Commonwealth level (mainly in the family sector). The 35 The Hon Greg Smith (NSW Attorney General), NSW Government to Postpone Pre-Litigation Reforms, Media Release (23 August 2011). 36 Victorian Law Reform Commission (VLRC), Civil Justice Review, Report No 14 (2008). 37 Victorian Law Reform Commission, Civil Justice Review Report (Victorian Law Reform Commission, Melbourne, March 2008), p Victorian Law Reform Commission, Civil Justice Review Report (Victorian Law Reform Commission, Melbourne, March 2008), p Victorian Law Reform Commission, Civil Justice Review Report (Victorian Law Reform Commission, Melbourne, March 2008), p 11. Analysis of Literature 25

26 New South Wales approach considered each of these responses and their approach in supporting pre-action obligations emerged after a detailed discussion and consultation process To some extent, the response in each area has been informed by the work of NADRAC as well as regulatory changes in the ADR sector. 41 NADRAC reports have specifically considered the use of pre-action protocols and have reviewed and considered concerns that, although such protocols would reduce the number of disputes progressing into the litigation system, they could also potentially lead to the front loading of work and legal costs Pre-action obligations were considered, to a limited extent in terms of their use as an alternative to traditional discovery procedures, in the Australian Law Reform Commission (ALRC) Report on Discovery in Federal Courts (November 2010) (Discovery Report). 42 The advantages and disadvantages of pre-action protocols are summarised in the Discovery Report as follows: 5.5 In jurisdictions where they have been implemented, pre-action protocols have been met with some criticism. However, their potential to promote access to justice, efficiency, and promote cultural change has also gained currency. 43 Advantages of pre-action protocols 5.6 In many instances pre-action protocols place obligations on parties to disclose relevant information and documents with the aim of facilitating settlement. Where no settlement is reached, the procedures aim to narrow the issues in dispute between the parties in a manner that expedites the trial process. 44 In principle, this should aid in reducing the need for, and cost of, any subsequent discovery of documents. 5.7 Moreover, the simplification and standardisation of the claims process may offer consistency for litigants, and help to promote a culture of cooperation and settlement of cases at an earlier stage. Paula Gerber and Bevan Mailman note in relation to pre-action protocols in construction disputes that: Pre-action protocols represent a philosophical shift in the way litigation is commenced and conducted... towards a full consideration of alternative means of resolving differences. Pre-action protocols do this 40 NSW Justice and Attorney General, ADR Blueprint Draft Recommendations Report 1: Preaction Protocols & Standards (NSW Justice and Attorney General, Sydney, 2009), available at < pdf/$file/adr_blueprint_draft_recs1_preaction_protocols.pdf> (accessed 21 September 2011). 41 These changes include the adoption of self- and industry-regulated mediation accreditation under the National Mediator Accreditation System (NMAS) that has operated from 1 January Australian Law Reform Commission, Discovery in Federal Courts (Consultation Paper No 2, November 2010) (Discovery Report). 43 See, for example, R Byron, An Update on Dispute Resolution in England and Wales: Evolution or Revolution? (2001) 75 Tulane Law Review 1297, Victorian Law Reform Commission, Civil Justice Review, Report 14 (2008), Analysis of Literature

27 by forcing parties to fully investigate the merits of their claims and defences as a condition precedent to filing a law suit Many pre-action protocols also play an important role in encouraging parties to pursue ADR. Where ADR is successful, it results in cost savings to both individuals, and to the public in terms of reduced burden on the courts. Alternatively, it has been argued that proper preaction protocols should reduce the need for ADR. 46 Disadvantages of pre-action protocols 5.9 A major concern with pre-action protocols relates to front-loading of costs by requiring parties to spend more resources at an early stage of the process. For example, in complex cases where the parties are unlikely to reach early settlement, imposing onerous pre-action requirements may do no more than add to delay and costs for both parties in complying with the pre-action protocols Pre-action protocols also raise a number of access to justice issues, especially for individual litigants. For example, individuals may not necessarily have the monetary resources to comply with relevant protocols, or may be pressured into settlement for fear of having adverse cost orders made against them for non-compliance with the protocols Additionally, pre-action protocols may open up a battlefield for satellite litigation, by way of interlocutory applications as to whether a party has or has not complied with the relevant protocol. 49 This becomes more likely if parties risk adverse cost orders for not complying with the protocol, and has an obvious impact for courts and the judiciary, as well as adding to delay and the cost of litigation Finally, some have argued that pre-action protocols may be challenged on human rights grounds, if their effect is to impede an individual s right of access to the courts There are many other Reports that are relevant to this Research Project. These reports include law reform reports (referred to above) as well as reports directed more at dispute resolution arrangements. One of the most significant reports and studies has been undertaken in the family dispute resolution area. 45 P Gerber and B Mailman, Construction Litigation: Can We Do It Better? (2005) 31 Monash University Law Review 237, Sir Igor Judge, The Woolf Reforms after Nine Years: is Civil Litigation in the High Court Quicker and Cheaper? (Presentation at the Anglo-Australian Lawyers Society), 16 August See M Legg and D Boniface, Pre-action Protocols in Australia (2010) 20 Journal of Judicial Administration 39, See, for example, Victorian Law Reform Commission, Civil Justice Review, Report 14 (2008), where a number of submissions are summarised making this point. 49 M Legg and D Boniface, Pre-action Protocols in Australia (2010) 20 Journal of Judicial Administration 39, 55; National Alternative Dispute Resolution Advisory Council (NADRAC), The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction (Report to the Attorney-General of the Commonwealth of Australia, September 2009) See, for example, National Alternative Dispute Resolution Advisory Council (NADRAC), The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction (Report to the Attorney- General of the Commonwealth of Australia, September 2009) Victorian Law Reform Commission, Civil Justice Review, Report 14 (2008), 161 to 163 available at (accessed 9 March 2012). Analysis of Literature 27

28 Requirements in the Family Dispute Resolution Area 3.17 The initiatives that have been phased in since 2006 (under the Family Law Act 1975 (Cth)) have represented a significant change in family law and have introduced pre action requirements in this sector. 52 The explanatory memorandum to the Family Law Amendment (Shared Parental Responsibility) Act 2006 notes that this is a key change to encourage a culture of agreement making and avoidance of an adversarial court system The 2006 amending Act requires compulsory dispute resolution, pursuant to Subdiv E of Div 1 of Pt VII of the Family Law Act. Section 60I provides for compulsory attendance at family dispute resolution in a range of circumstances, prior to lodging an application with the court. The requirement for compulsory certificates in respect of family dispute resolution as a prerequisite to the filing of all new parenting matters (subject to certain exceptions for example where there is urgency, family violence or the abuse of a child and where delay could have a negative impact) came into force on 1 July Disputants are also advised that: When applying to the court, you will need to provide information to demonstrate that one of the exceptions applies to you An extensive evaluation of the 2006 reforms in the family area 55 found that these reforms had resulted in a significant increase in the use of non-court services, and a decrease in matters filed in the Family Court of Australia and the Federal Magistrates Court. Importantly and unlike the most recent changes in the civil pre-action area, the reforms were accompanied by the establishment of Family Relationship Centres which were designed to provide dispute resolution and other services: The changes to the family relationship services system included the establishment of 65 FRCs throughout Australia (designed to provide a gateway to the system for families needing assistance), funding for new services, and additional funding for existing services The evaluation report found that there was a significant decrease in the work of the Courts: 52 See the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth), Revised Explanatory Memorandum (2006) p Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth), Revised Explanatory Memorandum (2006) p See Family Relationships Online, Family Dispute Resolution, available on < (accessed 21 September 2011). 55 R Kaspiew, M Gray, R Weston, L Moloney, K Hand, L Qu and the Family Law Evaluation Team, Evaluation of the 2006 Family Law Reforms, Summary Report (Australian Institute of Family Studies, December 2009) available on (accessed 21 February 2012). 56 See at para Analysis of Literature

29 While the number of applications for final orders relating to children's matters that were made to the FMC between and increased, this increase was more than offset by the decrease in the total number of such orders that were lodged across the system. Specifically, the overall number of such applications declined by 22% from 18,752 in to 14,549 in (Figure 2). The number of applications to the FCoA declined by 72% from 7,479 to 2,086 over this period and the number to the FMC increased by 17% from 9,405 in to 10,987 in and the number of applications to the FCoWA decreased by 21% from 1,868 to 1, In addition, the Report found that: There was an increase in the number of clients for all [Family Relationship Services Program] services over the period to The number of: [Family Relationship Centre (FRC)] clients increased from about 14,000 to 60,000; [Family Dispute Resolution (FDR) (including Regional Family Dispute Resolution (RFDR) clients] increased from about 14,500 to 22,500; [Children s Contact Services (CCS)] clients increased from about 11,000 to 23,500; [Parenting Orders Program (POP)] clients increased from about 3,000 to 8,000; 57 at para 3.12 Analysis of Literature 29

30 [Specialised Family Violence Services (SFVS)] clients increased from about 3,500 to 7,000; [Men and Family Relationships Services (MFRS)] clients increased from about 24,000 to 28,000; counselling services clients increased from about 63,500 to 101,000; and [Education and Skills Training (EDST)] clients increased from about 32,000 to 49, System Design Work 3.22 Other relevant government reports have considered these issues from a system design perspective. For example, in May 2011, the Commonwealth Government released a consultation paper Resolution of Small Business Disputes Options 59 to seek views on four models of a national scheme to resolve small business disputes, including an option to provide a referral service to tackle some of the confusion and lack of awareness of available schemes. The options paper included a survey of the dispute resolution services open to small businesses in Australia, nationally and on a state-by-state basis. 60 In March 2011, this listed 13 national dispute resolution services (ranging from Court provision to Codes of Conduct) and 34 State- or Territory-based services including Courts and referral organisations The Resolution of Small Business Disputes Options summary report of submissions received (together with some of the original submissions) was published by the government in August The emerging themes pointed to an appreciation of the timely and low cost nature of ADR and a lack of publicity and awareness of the availability of those schemes to intervene before disputes reached a toxic point: It was widely held that small businesses generally have a low awareness and understanding of the range of dispute resolution services that are currently available to assist them. Many were of the view that a national information and referral service could provide a reliable centralised point of information to assist small businesses to navigate the range of initiatives already provided by state and territory governments in a simple and convenient way. The educational element under this option 58 R Kaspiew, M Gray, R Weston, L Moloney, K Hand, L Qu and the Family Law Evaluation Team, Evaluation of the 2006 Family Law Reforms, Summary Report (Australian Institute of Family Studies, December 2009) at [3.2], available on< (accessed 16 September 2011). 59 Options Paper: Resolution of small business (business-to-business) disputes at: (accessed 23 December 2011). 60 Options Paper: Resolution of small business (business-to-business) disputes Appendix 1 at: (accessed 23 December 2011). 30 Analysis of Literature

31 aimed at assisting small businesses in avoiding and better managing disputes before they reach a toxic stage also received strong support Other reports have considered obligations by focusing on specific sectors where disputes arise. For example, in the federal area, there are extensive requirements that have been introduced to support government in dealing with disputes. NADRAC s 2010 guide, Managing Disputes in Federal Government Agencies: Essential Elements of a Dispute Management Plan, 62 aims to help Commonwealth agencies to develop and regularly review dispute management plans, including by ensuring appropriate use of ADR principles and processes. The guide sets out the essential topics and issues that agency-specific plans should address NADRAC has noted that dispute management plans should apply to internal and external disputes, from the point at which conflict first emerges, and can usefully deal with dispute avoidance, management and resolution. The guide is currently being used by a range of government departments and agencies to create plans that will incorporate more extensive use of ADR In launching the guide in 2010, the then Federal Attorney-General noted: Commonwealth agencies are the single biggest litigator in the federal civil justice system. Agencies should therefore be leading the way in a cultural shift away from litigation, towards actively engaging with disputes early, in a strategic way. In doing so, we will build a civil justice system that is practical, cost efficient and timely in resolving disputes. 63 United Kingdom Approaches: The Jackson Report 3.27 The Jackson Report focused on the increasing cost of civil litigation within the United Kingdom, which was found to act as a significant impediment to access to justice. As is made clear in the Jackson Report and discussed in Australian reports 64, the attempt to use pre-action protocols across a range of areas and 61 Resolution of Small Business Disputes Summary Report of Submissions p1 August ions.pdf (accessed 27 December 2011). 62 NADRAC, Managing Disputes in Federal Government Agencies: Essential Elements of a Dispute Management Plan, available on < entplan> (accessed 16 September 2011). 63 Federal Attorney-General The Hon R McLelland, Getting Ready for Dispute Management Plans (speech at National Press Club, 16 February 2010), available on < AGSGovernmentLawGroupseminar> (accessed 16 September 2011). 64 Lord Justice Jackson, Review of Civil Litigation Costs Final Report (December 2009), available at (accessed 21 September 2011). The Australian Law Reform Commission Discovery in Federal Courts reviews the issue of front loading of costs, notably in the UK from paragraph 5.25 in Ch 5 Alternatives to Discovery available at Analysis of Literature 31

32 jurisdictions in England and Wales may have led to the front loading of costs in some areas. Therefore, while these UK protocols may have reduced the time taken to resolve disputes, they may have increased the average cost of settlement in some areas. Lord Justice Jackson found that there was a high degree of unanimity that the specific [pre-action] protocols serve a useful purpose Lord Justice Jackson noted in a summary of the Report that: 6.1 Pre-action protocols There are ten pre-action protocols for specific types of litigation. By-and-large they perform a useful function, by encouraging the early settlement of disputes, which thereby leads (in such cases) to the costs of litigation being avoided. I recommend that these specific protocols be retained, albeit with certain amendments to improve their operation (and to keep pre-action costs proportionate). 6.2 On the other hand, the Practice Direction Pre-Action Conduct, which was introduced in 2009 as a general practice direction for all types of litigation, is unsuitable as it adopts a one size fits all approach, often leading to pre-action costs being incurred unnecessarily (and wastefully). I recommend that substantial parts of this practice direction be repealed. Were this to occur, however, it would not give carte blanche to claimants to whom no specific protocol applied to act unreasonably, e.g. by commencing proceedings with no prior warning to the defendant of the claim or the nature of the claim. Cost sanctions will apply to curb unreasonable behaviour. 6.3 Alternative dispute resolution. Alternative dispute resolution ( ADR ) (particularly mediation) has a vital role to play in reducing the costs of civil disputes, by fomenting the early settlement of cases. ADR is, however, under-used. Its potential benefits are not as widely known as they should be It was also noted that earlier use of ADR in the United Kingdom could decrease pre-action costs. 67 The Jackson report was very much focused on costs not just pre-action protocols. The key findings of the Jackson Report in relation to costs (and making reference to the Chapter headings in the Jackson report) are as follows: 68 - Proportionality - the costs system should be based on legal expenses that reflect the nature/complexity of the case (Chapter 3); 9/5-alternatives-discovery (accessed 9 March 2012) 65 Lord Justice Jackson, Review of Civil Litigation Costs Final Report (December 2009), available at (accessed 21 September 2011). The Right Hon R Jackson LJ, Review of Civil Litigation Costs: Final Report (Ministry of Justice, TSO, 2009) p The Right Hon R Jackson LJ, Review of Civil Litigation Costs: Final Report (Ministry of Justice, TSO, 2009) pxxii. 67 See R Jackson, Review of Civil Litigation Costs: Final Report (Ministry of Justice, TSO, 2009) p xxii. 68 See also the press release of the Judicial Communications Office, Judiciary of England and Wales, entitled Jackson Review calls for a package of reforms to rein in the costs of civil justice (14 January 2010), available at (accessed 19 October 2011). 32 Analysis of Literature

33 - Success fees and after the event insurance premiums should be irrecoverable in no win, no fee cases (CFAs Conditional Fee Agreements), as these are the greatest contributors to disproportionate costs (Chapters 9 & 10); To offset the claimants having to pay for success fees and conditional fee agreements from their damages, general damages awards for personal injuries and other civil wrongs should be increased by 10% (Chapter 10); - Referral fees should be scrapped - these are fees paid by lawyers to organisations that sell damages claims but offer no real value to the litigation process (Chapter 20); - Qualified one way costs shifting - claimants will only make a small contribution to defendant costs if a claim is unsuccessful (as long as they have behaved reasonably), removing the need for after the event insurance (Chapters 9 & 19); - Fixed costs to be set for fast track cases (those with a claim up to 25,000) to provide certainty of legal costs (Chapter 16); - Establishing a Costs Council to review fixed costs and lawyers hourly rates annually, to ensure that they are fair to both lawyers and clients (Chapter 6); - Allowing lawyers to enter into Contingency Fee Agreements, where lawyers are only paid if a claim is successful, normally receiving a percentage of actual damages won (Chapter 12); and - Promotion of before the event legal insurance, encouraging people to take out legal expenses insurance as, for example, a part of household insurance (Chapter 8) The findings and recommendations in relation to costs are important because the Jackson Review suggests that without appropriate cost rules and principles, pre-action protocols may not work as effectively as is possible As identified above, soon after their introduction in England and Wales, the use of pre-action protocols were subject to criticism for front loading the costs for litigation and it was claimed that, in some instances, they led to an increase in the total cost of settlement and litigious actions. It was noted in the Discovery ALRC Report 69 that one comprehensive cross-section and time-series data study concluded that it seems overall case costs have increased substantially over pre costs for cases of comparable value, with the Woolf reforms being one possible explanation for this increase This accords with some views that pre-action protocols in the UK provided quicker, although not necessarily cheaper, justice and sensible, effective case handling. 70 Dingwall and Cloatre 71 noted a further potential issue with the use of 69 P Fenn, N Rickman and D Vancappa, The Unintended Consequences of Reforming Civil Procedure: Evidence from the Woolf Reforms in England and Wales (Paper presented at 26th Annual Conference of European Association of Law and Economics, Roma, Italy), 28, as noted in the ALRC Report on Discovery in Federal Courts (Consultation Paper, 15 November 2010): Chapter 5 Alternatives to Discovery. 70 R Byron, An Update on Dispute Resolution in England and Wales: Evolution or Revolution? (2001) 75 Tulane Law Review 1297, 1312, cited in ALRC Report, at [11.29]. Analysis of Literature 33

34 pre-action protocols, namely that by encouraging parties to resolve their disputes out of court, the creation of precedent and case law may be undermined by insufficient litigation, which may create difficulties in settlement negotiation, due to a lack of precedent to define bargaining power (which necessarily operates in the shadow of the law ). This echoes concerns expressed more than two decades ago by a very small number of theorists who considered that the settlement of disputes and the use of dispute resolution processes other than court-based trial could weaken the foundations of judicial and social systems In February 2012, the UK Government responded to the March 2011 Consultation paper on civil justice. 73 The response notes that the aim of the civil justice reform in England and Wales is that: the system helps people to resolve their problems quickly, efficiently and cost-effectively a system that prevents the unnecessary escalation of disputes before cases reach the court room; where courts offer quicker and more efficient services where they are needed; where judgments can be enforced fairly; and where costs are borne in a fair way. 74 The Government s concern was that: too often disputes get bogged down in the legal system that could have been resolved outside it. Once in the system, cases are resolved too late, too expensively, with complex procedures and an adversarial climate imposing costs that sometimes dwarf the value of the contested claim In February 2012, the UK Government indicated that it would extend and further support pre-action protocols in the family law area. 76 The key recommendations in the 2012 Report have included the expansion of ADR and other pre-action protocols: 71 R Dingwall and E Cloatre (2006) Vanishing Trials?: An English Perspective Journal of Dispute Resolution Owen Fiss (1984) Against Settlement, 93 Yale Law Review UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A Consultation Paper on reforming civil justice in England and Wales, March 2011 available at (accessed 12 February 2012). 74 Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) p3 available at (accessed 12 February 2012). See also (accessed 15 March 2012). 75 Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) p3 available at (accessed 12 February 2012). 76 See Ministry of Justice, The Government Response to the Family Justice Review: A system with children and families at its heart, available at (accessed 15 March 2012). 34 Analysis of Literature

35 An automatic referral scheme to mediation for those claims under GBP5,000 (this scheme to be evaluated before expansion to a proposed new financial limit of the Small Claims Track (currently GBP5,000)). This is not mandatory mediation but a requirement to engage with a small claims mediator; 77 (There was a strong view from the judiciary that a scheme ought to be provided via a scheme from current Court Mediation services); An existing telephone mediation has been evaluated with a high customer satisfaction rating; Higher value claims are not being automatically referred to ADR but action on promoting knowledge of ADR is planned; No mandatory pre action directions or mediation information sessions are being introduced (which had been proposed for those civil cases between the Small Claims track ( 5,000) and a 100,000 claims level) allowing parties themselves directly to be given information about the mediation process and its benefits from a mediator ; 78 given a lack of appetite and support for these; An extension to the April 2010 Pre Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents; 79 Planned similar pre action protocols for employers and public liability claims following stakeholder consultation; 80 Similar protocols for low value clinical negligence claims may follow evaluation of a pilot scheme with the National Health Service Litigation Authority and Department of Health; Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) p 4, available at (accessed 12 February 2012). 78 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales (para 164) p 49, available at (accessed 12 February 2012). 79 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para 44) p 14, available at (accessed 12 February 2012). 80 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para 16) p 10, available at (accessed 12 February 2012). Analysis of Literature 35

36 Mandatory pre action directions for money claims under GBP100,000 remain under consideration following assessment of current protocols effectiveness (though compulsion is dismissed for the existing protocols for rent arrears and mortgage proceedings requiring ADR); A majority of respondents supported this and the Government s view in its consultation document was that the impact would be fewer claims progressing to Court; The extension of the fixed recoverable costs system proposed by Lord Jackson; 82 Increased consideration of on paper and by telephone Court hearings; 83 Consultation is planned about the domestic implementation of the EU Mediation Directive; 84 Ensuring the robust accreditation of mediators. 85 Conclusions 3.34 The more recent reports from the UK suggest that pre-action protocols and requirements continue to be supported at the government and policy-making level, however they are often coupled with additional requirements relating to 81 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para 66 to 68) p 19, available at (accessed 12 February 2012). 82 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para20) p 11, available at (accessed 12 February 2012). 83 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para26) p 12, available at (accessed 12 February 2012). 84 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para27) p 12, available at (accessed 12 February 2012). 85 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para28) p 12, available at (accessed 12 February 2012). 36 Analysis of Literature

37 costs and sanctions. It would also seem that the extension of protocols beyond low value claims will continue to be the subject of evaluation and somewhat cautious expansion. The continuing concern that pre-action requirements could equate to a one size fits all approach is also being recognised by either establishing specific protocols in particular areas or adopting the approach of applying general principles and giving examples (as in the CDRA 86 ). 86 See _dispute_resolution_43/index.htm (accessed 15 March 2012). Analysis of Literature 37

38 4 Case Study Information Application of Pre-action Obligations Case Study Approach Introduction 4.1 The application of pre-action obligations can be far-reaching. As stated above, they can apply in social, community, health, family, business, personal injury and online sectors. To explore how these schemes work and their impact on litigation, disputants and others, this Research Project is considering a range of schemes and arrangements and is conducting a detailed analysis of two schemes that operate in the retail lease sector in New South Wales and Victoria. The retail lease schemes have been chosen as specific case studies in this Project for a number of reasons, including: The schemes have been in operation for a number of years and are well developed. They have statistical material that can be used for comparison purposes and well-developed protocols and obligations. Considering schemes, rather than self-referral dispute resolution options, has provided the researchers with file-based material and a pool of accessible survey recipients. The researchers can focus on business disputes an area where front end cost loading appears to be more likely (according to UK Reports see below). The schemes have some differences that are worthwhile exploring in the pre-litigation or pre-action environment the New South Wales scheme imposes a good faith obligation on the participants with a mediator certification and the mandatoriness of each scheme differs. Each scheme and the legislation supporting each scheme suggests that mediation is a prerequisite to commencing court proceedings, but some court cases (discussed below) have interpreted the requirements in a less comprehensive way. The basic scheme requirements are set out below. 38 Case Study Information

39 4.2 In NSW, sections 65 and 68 of the Retail Leases Act 1994 (NSW) require that parties to a tenancy dispute apply to the Retail Tenancy Unit of NSW Fair Trading for mediation before proceedings can commence in the Administrative Decisions Tribunal Under the legislation, court proceedings are not normally commenced until a certificate has been provided by the Registrar of the Retail Tenancy Disputes unit or a court has satisfied itself that the dispute is unlikely to be resolved by mediation. 88 However, Justice Price in Fordham Laboratories Pty Limited v Sor & Anor 89 noted that [t]he requirement to mediate is not a condition precedent to the commencement of proceedings, but the court may not proceed to hear and determine the dispute unless satisfied that mediation under Part 8 is unlikely to resolve the dispute. 90 The participants are required to participate in good faith in the mediation and a certificate is issued to this effect. 4.4 The mediation referred to in the Act includes not only formal mediation, for which there are application fees and ongoing costs, but also preliminary assistance in dispute resolution such as the giving of advice 91 for which there is no charge. This assistance is: designed to ensure that the parties are fully aware of their rights and obligations and that there is full and open communication between the parties concerning the dispute In Victoria, the retail lease scheme in its current form was set up nearly a decade after the NSW scheme. A pre-action requirement of alternative dispute resolution for retail tenancy disputes was introduced by section 87 of the Retail Leases Act 2003 (Vic). Issuing proceedings in the Victorian Civil and Administrative Tribunal (VCAT) requires that the Office of the Victorian Small Business Commissioner (VSBC) certify in writing that: mediation or another appropriate form of alternative dispute resolution under this Part has failed, or is unlikely, to resolve it The Victorian scheme that operates under the Retail Leases Act 2003 (Vic) does not impose the same type of framework as the NSW one in that: If a respondent (or an applicant) declines to participate in mediation, the Small Business Commissioner may issue a certificate 87 Retail Leases Act 1994 (NSW), sections 65 and 68 (as amended by the Retail Leases Amendment Act 1998 (NSW) No 169). 88 Retail Leases Act 1994 (NSW), s 68(2). 89 [2011] NSWSC Fordham Laboratories Pty Limited v Sor & Anor [2011] NSWSC 706 at para Retail Leases Act 1994 (NSW), sections 66 and 67 (as amended by the Retail Leases Amendment Act 1998 (NSW) No 169). 92 Retail Leases Act 1994 (NSW), section 67 (as amended by the Retail Leases Amendment Act 1998 No 169) (accessed 22 February, 2012). 93 Retail Leases Act 2003 (Vic), section EED9C7CA A3571/2F472D206F890AB7CA2578F50076BBAB/$FILE/03-4aa015%20authorised.pdf (accessed 22 February 2012). Concerns, Issues and Next Steps 39

40 under section 87(1) of the Act to the effect that mediation is unlikely to resolve this dispute. The applicant (or respondent) may then present the certificate to the Victorian Civil and Administrative Tribunal (VCAT). It is important to note, however, that section 92(2) of the Act gives VCAT the power to order any party that refuses to take part in a mediation to pay the costs of the other party In effect, cost penalties can apply for those who do not use the pre-litigation mediation scheme, although mediation is not mandatory in the Victorian retail lease scheme. 4.8 The researchers have considered a number of reports that are specifically relevant to the case study areas but which also comment on some overarching issues. For example, Productivity Commission Reports have considered issues relating to timeliness and cost when evaluating the schemes. 95 In addition, Annual Reports in respect of each case study area NSW 96 and Victoria 97 have been examined as well as evaluation reports. The Annual Reports provide information in summary form and also explore the other operations of each unit. This information will be supplemented by the file review process that is being undertaken, the disputant surveys and focus groups which are ensuring that a more comprehensive qualitative and quantitative analysis can take place. Retail Tenancy Unit in NSW 4.9 In NSW, the Retail Tenancy Unit (RTU) that supports pre-action dispute resolution and mediation in the retail tenancy area has been in existence since It has been located within three Government Departments. It was recently incorporated into the NSW Small Business Commissioner s Office that was created in 2011, having previously run within the NSW Department of State and Regional Development and moving from to Fair Trading NSW. The RTU provides advice and informal and formal mediation services to retailers, landlords, real estate agents, solicitors and industry advisors with a 94 See Office of the Victorian Small Business Commissioner, Dispute Resolution, available on < (accessed 26 September 2011). 95 The Market for Retail Tenancy Leases in Australia Inquiry Productivity Commission Inquiry Report No. 43, 31 March 2008, published 27 August 2008 p209 at data/assets/pdf_file/0009/82746/retail-tenancy-market.pdf (accessed 27 December 2011). 96 Fair Trading NSW Annual Report p 25 at _1011.pdf (accessed 22 February 2012). 97 Annual Report of the Victorian Small Business Commissioner 2010/11 p 21 at (accessed 7 February 2012). 40 Case Study Information

41 dispute relating to retail leases or bonds. 98 The New South Wales Government set up the RTU in 1994 to provide: a timely and cost effective information and alternative dispute resolution service for parties involved in retail leases. Mediations are conducted by a panel of independent professional mediators with retail lease experience and/or Retail Tenancy Unit staff Because the Unit has moved within government departments, there is limited material available concerning its operations. From the publicly available Annual Reports, the NSW RTU has dealt with more than 4000 mediations since 2004, and more than 80 per cent of disputes are resolved in mediation. Currently, information about the RTU and its role over a somewhat limited period remains available on the Fair Trading website This information does however indicate high rates of settlement at mediation in what is essentially a mandatory pre-action scheme (a recent case discussed at 4.3 has made it clear that the Court still retains jurisdiction in this area to determine whether mediation is unlikely to resolve the dispute prior to this decision in 2011 it was assumed that mediation was essentially a precondition to commencing court proceedings). The Centre has a limited staffing and the staff deal with enquiries and also conduct informal mediation. Formal mediation involves the referral of matters to experienced external mediators. Those in dispute share the costs of the external mediation and must sign a mediation agreement and comply with good faith requirements when mediating. NSW Retail Tenancy Unit matters Enquiries received Mediations Formal Mediation Informal Mediation Mediation resolution rate % 81% 98 Fair Trading NSW Annual Report p25 available at _1011.pdf (accessed 7 February 2012). 99 About the Retail Tenancy Unit at (accessed 7 February 2012). 100 Fair Trading NSW (accessed 7 February 2012). Concerns, Issues and Next Steps 41

42 Retail Tenancy Scheme within the VSBC 4.12 In May 2003, the Office of the Victorian Small Business Commissioner (VSBC) was established under the Small Business Commissioner Act 2003 (Vic) to promote greater fairness in business through its four main functions: information and education, review of government practices, investigation of small business complaints and dispute resolution. 101 Under the 2003 Act, among the functions of the office under section 5 are the provision of information: S5(b) - to promote informed decision-making by small businesses in order to minimise disputes with other businesses; and S5(c) - to receive and investigate complaints by small businesses regarding unfair market practices and mediate between the parties involved in the complaint The VSBC mediates matters under the Retail Tenancy Act 2003 (Vic), the Small Business Commissioner Act 2003 (Vic), the Owners Drivers and Forestry Contractors Act 2005 (Vic), and in December 2011, the Office of the Small Business Commissioner began to provide the mediation scheme set out under the Farm Debt Mediation Act 2011 (Vic). The 2011 Annual Report suggests that approximately 75 per cent of the VSBC s dispute resolution activities usually come from the Retail Tenancy sector,102 and that in 2011, the figure was around 70 per cent From 1 May 2003 until 31 December 2010, more than 8000 small business matters have been referred to the VSBC, and it has maintained a dispute resolution rate of more than 80 per cent Office of the Victorian Small Business Commissioner (accessed 7 February 2012). 102 Annual Report of the Victorian Small Business Commissioner 2010/11 at p 5 (accessed 7 February 2012). 103 Annual Report of the Victorian Small Business Commissioner 2010/11 p11 at (accessed 7 February 2012). 104 Office of the Victorian Small Business Commissioner (accessed 7 February 2012). 42 Case Study Information

43 VICTORIAN RETAIL TENANCY MATTERS DISPUTE RESOLUTION Dispute resolution rate 105 Total completed disputes Agreement reached Settled prior to mediation Successful mediation No agreement No mediation Unsuccess -ful mediation Successful outcome Settled prior to mediation Successful mediation Unsuccess -ful outcome No mediation No agreement Total % 27.3 % 25.0 % 44.7% 47.7 % 27.3 % 20.5 % 71.0% 79.0% 77.8% 74.3% 75.4% 72.5% 71.5% 64.8% 72.1 % 26.3% 28.5% 28.9% 25.7% 35.5% 33.5% 34.1% 35.2% 32.3 % 50.5% 48.9% 48.6% 40.0% 39.0% 37.3% 29.6% 39.8 % 47.7% 29.0% 22.2% 25.7% 24.6% 27.5% 28.5% 35.2% 27.9 % 12.5% 9.8% 10.4% 13.6% 15.1% 18.0% 17.6% 27.1% 17.4 % 16.5% 11.2% 11.9% 12.1% 9.5% 9.5% 10.9% 8.1% 10.5 % 105 Annual Report of the Victorian Small Business Commissioner 2010/11 p33 at (accessed 7 February 2012). Concerns, Issues and Next Steps 43

44 Victorian Retail Tenancy Matters Total disputes completed through mediation Agreement reached at mediation Unsuccess -ful mediation Total disputes completed through mediation , , % 100% 100% 100% 100% 100% 100% 100% 100% 100% Successful mediation Unsuccess -ful mediation 55.0 % 45.0 % 73.0 % 27.0 % 81.8 % 18.2 % 80.5 % 19.5 % 80.1 % 19.9 % 80.8 % 19.2 % 80.5 % 19.5 % 77.4 % 22.6 % 78.6 % 21.4 % 79.2 % 20.8 % *May - June The VSBC provides preliminary assistance and support to help disputants resolve their own disputes. The table above shows a row Settled prior to mediation that demonstrates that this preliminary assistance may play an important role in the resolution of disputes. Preliminary assistance can include: - initial telephone contact with parties to work out a solution; - providing information to the parties regarding their responsibilities; and - discussions with the parties to possibly resolve the dispute without formal mediation The 2011 VSBC Annual Report notes that preliminary assistance was identified (in KPMG s major evaluation of the activities of the Office during the previous four years) as a: huge, but to date largely overlooked, benefit of real value. 107 The VSBC also deals with telephone enquiries and helps callers understand their rights and obligations under retail tenancy legislation and assists in avoiding many disputes VSBC Annual Report available at p15 (accessed 7 February 2012). 107 Annual Report of the Victorian Small Business Commissioner 2010/11 at p 17 (accessed 7 February 2012). 44 Case Study Information

45 4.17 The VSBC has a website that sets out more information about its role and functions under the Small Business Commissioner Act 2003 (Vic) 109 and a brochure Speaking Up For Small Business 110 that sets out the ways in which the VSBC aims to assist small businesses. Also available are Annual Reports since the Office s creation in and a Guide to Mediation with the VSBC Additionally, the 2011 VSBC Annual Report includes a client satisfaction survey across its mediation services which sets out that client satisfaction rates with the mediation/facilitation service are at 92.8 per cent. Interestingly, the parties themselves appear more satisfied than their representatives within that survey. Overall, how satisfied are you with the mediation/facilitation services provided by the Office of the Victorian Small Business Commissioner? Mediation Role Applicant Applicant s Representative % Satisfaction with the mediation/ facilitation service Respondent Respondent s Representative VSBC Annual Reports show surveys of perceived time and money saved within their mediation (which as noted above includes mediation in schemes other than the Retail Tenancy scheme). 113 Clients views on time and money saved using the VSBC mediation service /11 Responses Yes No Not Sure No response Saved time? % 72.3% 14.8% 12.8% 108 VSBC Annual Report p 19 at Office of the Victorian Small Business Commissioner (a) (accessed 21 February 2012). 110 Office of the Victorian Small Business Commissioner (b) at (accessed 21 February 2012). 111 Office of the Victorian Small Business Commissioner (c) at (accessed 21 February 2012). 112 Office of the Victorian Small Business Commissioner (d) (accessed 21 February 2012). 113 Annual Report of the Victorian Small Business Commissioner 2010/11 at p 31 (accessed 7 February 2012). Concerns, Issues and Next Steps 45

46 2010/11 Responses Yes No Not Sure No response Saved money? % 64.4% 16.8% 18.8% 4.19 The retail tenancy dispute resolution schemes in NSW and Victoria have operated and evolved over a period of years to include both schemes of preliminary assistance to prospective litigants and formal mediation as part of a pre-action obligation. Reports about the schemes operations and activity indicate high levels of client satisfaction and timeand cost-saving impacts. However, a critical question in this research is whether the schemes prompted early resolution and whether or not resolution would have taken place in any event. Research Approach 4.20 The retail tenancy dispute resolution area can provide a clear example of how civil pre-action procedures, allied with scheme-based ADR mechanisms, are used and how they operate. By considering the impact of the pre-action protocols through a literature review, participant surveys of those in dispute and of professionals involved in the area, the Research Project hopes to assess what the impacts are and what may be useful in a defined pre-action protocol scheme The retail tenancy scheme information provides information about some, but not all, relevant research questions. Information about what takes place outside the schemes must also be considered that is, what happens in those matters that are not resolved in the schemes. In addition, the characteristics and operation of other schemes within Australia and internationally are being considered. The retail case study information supports some, but not all, of the core objectives of the study, which are to: 46 Case Study Information Evaluate and consider the effectiveness of a class of preaction processes This involves reviewing selected current pre-action approaches and their impact upon the timeliness and cost of dispute resolution. The case study information assists to meet this objective, which will also be met through broader focus group information and literature review mechanisms. Benchmark pre-action services that occur as part of a scheme with those that simply impose an obligation (with no scheme of referral). The case study information provides a benchmark point. To determine the broader impact, statistics in other jurisdictions and views about other schemes will be considered.

47 Compare the timeliness of outcomes achieved within the preaction environment with outcomes achieved through litigation processes (including matters that do not proceed to a hearing but are resolved once legal proceedings are commenced). Information about court and tribunal statistics on timeliness will be considered. Assess the impact of pre-action approaches on matters that progress into the litigation system in terms of cost, case activity and complexity. Focus group and case study information will assist to address this objective At present, file information is being gathered and surveying has commenced in the case study area, which will supplement the statistical reporting referred to above. Focus groups will follow this process to provide additional qualitative information as will a deeper consideration of matters that have progressed into the litigation schemes and the overarching issues relating to pre-action requirements in other jurisdictions. The next steps to be undertaken in the project are discussed at the end of the next Chapter. Concerns, Issues and Next Steps 47

48 5 Concerns, Issues and Next Steps Introduction 5.1 This Chapter considers broad overarching research in this area as well as some of the specific concerns that have been raised about pre-action requirements by lawyers and the judiciary. While some of these concerns have been explored in earlier Chapters in the context of government, law reform and policy reports, some other concerns have been raised by the legal profession and the judiciary and require specific attention and discussion. 5.2 This Chapter also considers the next steps in the Research Project and is intended to encourage and invite further input from those interested in this area and discussion to ensure that the project is informed by the wide range of views in this area. Lawyer and Judicial perspectives 5.3 Apart from government and law reform reports, the topic of pre-litigation protocols has been the subject of much commentary within the community, with different views being expressed by different commentators. Some commentators consider that pre-action obligations will increase legal costs, 114 while others consider that they will lead to forced settlements and a 114 See R Ackland, Mediation more pork for lawyers Sydney Morning Herald, 5 August 2011, available at (accessed 14 March 2012). 48 Case Study Information

49 reduction in lawyer involvement in dispute resolution. There is however little research to support either point. The concerns vary, however some lawyers and judges remain opposed to pre-litigation obligations. 5.4 Pre-litigation protocols are designed to prevent the worst excesses of adversarialism. As the 2011 UK Report in relation to civil justice reforms noted: Despite significant improvements following the Access to Justice reforms, it remains the case that there are too many claims being brought in to the legal system inappropriately. Once in the system they are being resolved too late, too expensively, with business in particular exposed to high and disproportionate costs. 115 In the same report, it was noted that: Late settlement is something on which Lord Justice Jackson commented on in his Review of Civil Litigation Costs 1 : A number of cases, which ought to settle early, in fact settle late in the day. Occasionally these cases go to trial. The cause of such futile litigation is (a) the failure by one or both parties to get to grips with the issues in good time or (b) the failure of the parties to have any effective dialogue. 116 and that the criticism of the Woolf reforms included: the lack of sanctions on those who failed to act reasonably in their pre-action negotiations The UK material suggests that much of the criticism in respect of pre-action obligations is related to the failure of lawyers and disputants to act reasonably or proportionately. Pre-action schemes that impose obligations to act in good faith or create a scheme structure may support more reasonable behavior; this issue will be the subject of exploration in the final Research Report. In contrast to this view, some lawyers consider that pre-action protocols are undesirable for other reasons. 5.6 For example, Australian lawyers Kambar and Walsh from Maurice Blackman recently set out their concerns about pre-litigation obligations. In their view, these obligations could mean that: 115 Ministry of Justice, UK, Solving disputes in the county courts: creating a simpler, quicker and more proportionate system - a consultation on reforming civil justice in England and Wales Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty March 2011 at p 4, available at (accessed 15 March 2012). 116 Ministry of Justice, UK, Solving disputes in the county courts: creating a simpler, quicker and more proportionate system - a consultation on reforming civil justice in England and Wales Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty March 2011 at p 9, available at (accessed 15 March 2012). 117 Ministry of Justice, UK, Solving disputes in the county courts: creating a simpler, quicker and more proportionate system - a consultation on reforming civil justice in England and Wales Presented to Parliament by the Lord Chancellor and Secretary of State for Justice by Command of Her Majesty March 2011 at p 19, available at (accessed 15 March 2012). Concerns, Issues and Next Steps 49

50 parties bear their own costs of pre-litigation steps 118 it can be difficult to recover costs for complying with the process 119 the costs of disputes may be increased and further delays created Kambar and Walsh suggest that the recent Australian civil pre-action requirements require only reasonable or genuine attempts at settlement and are concerned by the lack of structured timescales that they argue may lead to delay, adding the time for pre-action steps to the current delay created in issuing proceedings. They point to the Victorian repeal of legislation as demonstrating the: impracticality of formalizing informal early dispute resolution processes that are already widespread in the legal community In a similar vein, some commentators consider that pre-action requirements may be impractical or may not work or increase disputant time and cost if lawyers do not engage with them appropriately. For example, the Chief Justice of NSW recently noted that: The mistakes that are made in referring the wrong cases to alternative dispute resolution or entering alternative dispute resolution at the wrong time are largely a product of this being a relatively new form of dispute resolution and one that was not taught to the vast majority of practitioners as a major part of their legal education His Honour equates the genuine steps requirements with mandatory mediation and states that: I have serious reservations about any legislation requiring parties to take genuine steps to resolve a dispute before commencing litigation, as they are required to do under the Commonwealth s Civil Dispute Resolution Act 2011 before commencing proceedings At the most basic level, I do not believe that such legislation is necessary. Given the expansion of alternative dispute resolution services, and the extent to which parties and lawyers now consider alternative dispute resolution methods as their primary means of dispute resolution, I think it is 118 R Kambar and G Walsh, A Critical Evaluation of the Pre-Litigation Protocols p43 PRECEDENT; (106) September / October 2011: 42-45, available at (accessed 10 February 2012). 119 R Kambar and G Walsh, A Critical Evaluation of the Pre-Litigation Protocols p44 PRECEDENT; (106) September / October 2011: 42-45, available at (accessed 10 February 2012). 120 R Kambar and G Walsh, A Critical Evaluation of the Pre-Litigation Protocols P44 PRECEDENT; (106) September / October 2011: 42-45, available at (accessed 10 February 2012). 121 R Kambar and G Walsh, A Critical Evaluation of the Pre-Litigation Protocols P44 PRECEDENT; (106) September / October 2011: 42-45, available at (accessed 10 February 2012). 122 Justice Tom Bathurst, Dispute Resolution: repertoire or revolution, Address to UNSW 40 years Dispute Resolution Forum, 1 December 2011 at p 8, available at urst pdf 50 Case Study Information

51 difficult to accept that parties would not be aware of ADR or would be discouraged from using it were it to remain optional. More fundamentally, I believe that forcing parties to alternative dispute resolution will undermine the justice system s goals of justice and fairness. In more complex cases, it is not unusual for parties to lack a clear understanding of the strength and merits of both their own case and the opponent s case. In circumstances where parties do not yet possess sufficient information to make a rational determination about whether to compromise proceedings, compulsory mediation is likely to either fail or to produce results that do not accurately reflect the legal position of the parties. Moreover, compulsory pre-trial mediation may paradoxically result in the courts being burdened by satellite litigation in which the court investigates what occurred or should have occurred during mediation before being able to determine the merits of each party s case In the UK, the various views aout pre-action requirements have been expressed and summarised in The Government Response to the County Court Reform Proposal released in February 2012 (referred to previously in Chapter 3). In that report, it is clear that lawyers and non-lawyers hold different views about the efficacy of pre-action protocols. In the report, it was noted that: Q16: Do you agree that mandatory pre-action directions should be developed? If not, please explain why. This question was answered by 211 respondents, 129 (61%) of whom were in favour of the proposal, whilst 82 (39%) were against it. In favour of mandatory pre-action directions All insurers and the majority of mediation providers supported mandatory pre-action directions. The common view expressed by insurers was that mandatory pre-action directions would reduce legal costs, particularly if the directions were underpinned by a fixed costs regime. Many also suggested that mandatory directions would promote effective case management, discourage non-meritorious cases and provide an early focus on the issues between the parties. However, whilst being in favour in principle, some were concerned about the level of detail required to ensure all eventualities were accounted for and that this may be counter-productive. There were also concerns about compliance, with many insurers keen to see robust sanctions for those who fail to comply. 42% of the 112 legal representatives that responded were also in favour of this proposal. Many showed support for the current suite of preaction protocols and considered that they could be strengthened to ensure compliance. A common reason for support amongst all 123 Justice Tom Bathurst, Dispute Resolution: repertoire or revolution, Address to UNSW 40 years Dispute Resolution Forum, 1 December 2011 at p 8, available at urst pdf Concerns, Issues and Next Steps 51

52 categories of respondent was that mandatory pre-action directions would encourage early settlement. Whilst almost all mediators who responded were in favour of the proposal, most included caveats, such as ensuring that the pre-action directions do not render the process disproportionate and that access to justice remains a right, not a privilege. One mediator suggested a pilot at a number of courts in order to test the benefits of such a prescribed process before it is rolled out more widely In contrast in the UK the views of those opposed to the extension of pre-action protocols (which differ in many ways from the CDRA arrangements as they include specific requirements) were summarised in the Government Response Report as follows: Against mandatory pre-action directions Respondents who were against the introduction of mandatory pre-action directions included all of the judiciary and the majority of the legal profession. In addition, 5 out of the 7 financial institutions who responded were against the proposal. Their concern was that for money claims, admission of liability is often not the issue; it is the debtor s ability or willingness to pay. Therefore court action is usually used as a means of enforcing the debt. One respondent pointed out that where the debt is regulated by the Consumer Credit Act, there is a standard pre-action process which companies must follow. A common view amongst all those against the proposal is that mandatory pre-action directions would place undue burdens on parties, particularly claimants, and this would introduce delay and increase upfront costs. Many were concerned that enforced mediation/adr, particularly in debt cases where the debtor refused to pay, was inappropriate. Many respondents, including members of the judiciary, were of the view that the existing pre-action protocols go far enough, but recognised that these could be strengthened, particularly around sanctions for noncompliance. The judiciary in particular said that cases should be managed by the court, with tailored case-specific directions and referral by a judge to mediation/adr only where appropriate. 125 These views suggest a concern relating to the application of protocols to debt recovery cases and also the view of the surveyed judiciary that courts need to supervise dispute resolution arrangements. 124 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para28) para 86 88, available at (accessed 12 February 2012). 125 UK Ministry of Justice Solving disputes in the county courts: creating a simpler, quicker and more proportionate system: A consultation paper on reforming civil justice in England and Wales The Government Response (February 2012) (para28) p 12, available at (accessed 12 February 2012). 52 Case Study Information

53 5.11 The Australian Senate Subcommittee Report 126 summarised many of these views (after considering the submissions) and it seems that the concerns can be grouped into four areas: 1. That pre-action requirements could increase the time and cost involved in dispute resolution particularly if lawyers behave inappropriately and such costs may not be recoverable. 2. Satellite litigation may result from the obligations as they are interpreted by courts. 3. The role of the courts may be adversely impacted or disputants may resolve matters that should be litigated or may resolve matters without the benefit of information. This is sometimes linked to the view that courts should play a central role in dispute resolution and in supervising dispute resolution. 4. Lawyers and clients are already aware of ADR and use it before commencing litigation so there is no need to introduce additional requirements or obligations In contrast to these views (where concerns have been expressed about the extensive nature of pre-litigation obligations), other commentators suggest that they do not go far enough. These commentators suggest that pre-litigation mediation, not just protocols or obligations, should be mandatory in a wider class of disputes in order to: remove the ability to go straight to litigation force parties to sit down together in a mediation context and confront their case, their witnesses, their lawyers and their claims at a stage in the dispute where strong business decisions can be made Within Australia, access to fair, cost-effective, early dispute resolution is an essential element of many government strategies 128 and how best to foster this and support effective dispute resolution is an ongoing area of policy development and reform. The next section of this paper considers the research relating to mandatory and non-mandatory ADR schemes as distinct from pre-litigation obligations and requirements. 126 See _dispute_resolution_43/index.htm (accessed 15 March 2012). 127 Michael Redfern, The Elephant in the Room Should Pre-Litigation Mediation Be Mandatory? (8 September 2011) p 15, available at (accessed 21 February 2012). 128 Department of Justice, New Directions for the Victorian Justice System : Attorney General s Justice Statement May 2004 (Department of Justice, Melbourne, 2004) p 13. The Attorney-General s Justice Statement 2 was published in October This set out that a series of initiatives would focus on expanding Appropriate Dispute Resolution (ADR) in Victoria so the community, business and industry have better options for resolving disputes quickly and cheaply : Department of Justice Roadmap of Reform for Victoria's Justice System (14 Oct 2008), available at +roadmap+of+reform+for+victorias+justice+system+(news) (accessed 21 February 2012). Concerns, Issues and Next Steps 53

54 5.14 In this Research Project, further information, evidence, comments, submissions or information to support any of these perspectives is sought from members of the profession, the judiciary and others. Evaluations of Non-Court Dispute Resolution Processes 5.15 Several publications 129 reviewing the use and effectiveness of ADR were consulted in this Research Project, as were previous studies and reports 130 evaluating ADR processes. Of particular relevance to the present research were four Department of Justice reports, completed in 2007 and 2008, and focused on various industries and areas where ADR is used The Alternative Dispute Resolution in Victoria - Community Survey 2007 Report 131 was commissioned by the Department of Justice. This project sought to survey the community, measuring the attitudes towards and experiences of Alternative Dispute Resolution schemes operating throughout Victoria. The report featured a questionnaire and involved 502 telephone interviews, focusing on those aged 18 years and over. The survey was designed to be representative of adult Victorian populations. The report 132 surveyed Victoria s small business community, measuring attitudes towards and experiences of ADR in Victoria. Using a weighting method, results were obtained from a survey of 500 small business owners and operators (fewer than 20 employees). Surveys were designed to be representative of the small business populations of Victoria Key findings of the survey were: National Alternative Dispute Resolution Advisory Council (NADRAC), Court Referral to ADR: Criteria and Research (Attorney-General s Department, Canberra, 2003), available at altoadrcriteriaandresearch (accessed 21 February 2012); Australian Law Reform Commission, Managing Justice A Review of the Federal Civil Justice System (Australian Law Reform Commission, NSW, 2000); T Sourdin, Alternative Dispute Resolution (4th Ed, Thomson Reuters, NSW, 2012). 130 NL Hollett, MS Herrman, DG Eaker and J Gale, Assessment of Mediation Outcomes: The Development and Validation of an Evaluative Technique (2002) Justice System Journal; N Paulsen, D Rooney and P Ashworth, An Evaluation of the Primary Dispute Resolution Services of the Federal Magistrates Court (unpublished paper, 2004); T Sourdin, Dispute Resolution Processes for Credit Consumers (La Trobe University, Melbourne, 2007); T Sourdin and J Elix, Review of the Financial Industry Complaints Scheme What Are The Issues? (La Trobe University, Melbourne, 2002); T Sourdin and T Matruglio, Evaluating Mediation New South Wales Settlement Scheme 2002 (La Trobe University and the Law Society of New South Wales, Melbourne, 2004). 131 Department of Justice, Alternative Dispute Resolution in Victoria - Community Survey 2007 Report (Department of Justice Date of Publication, Copyright: State of Victoria, Melbourne, 2007). See to request a copy (accessed 21 February 2012). 132 Ipsos Australia Pty Ltd, Alternative Dispute Resolution in Victoria - Small Business Survey 2007 Report (Department of Justice, Copyright of State Government of Victoria, Melbourne, 2007): see to request a copy (accessed 21 February 2012). 133 Ipsos Australia Pty Ltd, Alternative Dispute Resolution in Victoria - Small Business Survey 2007 Report (Department of Justice, Copyright of State Government of Victoria, Melbourne, 2007) p iii. See 54 Case Study Information

55 That over one third of Victorian small businesses had experienced at least one dispute during the 12 months leading up to May 2007, with 637,000 disputes reported overall; That the largest proportion of disputes (15 per cent) were in relation to debts or late payment of bills by consumers; That over two thirds (69 per cent) of all disputes involving small businesses were resolved without the involvement of a third party; and That it cost small businesses about $1.8 million in time and expenses, to resolve disputes The Alternative Dispute Resolution in Victoria - Supplier Survey Report 134 was based on a survey inviting feedback from selected industry and government providers of Alternative Dispute Resolution services. The survey responses provided insight into how Alternative Dispute Resolution schemes operate in Victoria. Schemes based in both private and public sectors, throughout a range of industries, were assessed. The processes ranged along the spectrum from mediation through to arbitration The Alternative Dispute Resolution in Victoria - Supply Side Research Report 135 explored the organisation of the supply of ADR services in Victoria. This qualitative and quantitative research was obtained following reviews of existing organisational material as well as interviews with stakeholders, such as courts and tribunals, industry ombudsmen, academics and government agencies. The report addressed questions regarding types of ADR processes provided in Victoria, how those services are funded and identified a number of issues for consideration by the Victorian Government. Those issues are important as one of the questions in this Project is how those accessing ADR can be supported particularly if there is no scheme to support a pre action requirement. The Report suggested that a relatively healthy pre-action environment exists (at least in Victoria) although more education of gatekeepers might be required. Literature Concerning Evaluation of Mediation Evaluation of pre-action processes, obligations and schemes is related to the issue of comparing the cost and benefits of these processes with those of traditional litigation. In any comparison with the cost of those cases that go request a copy (accessed 21 February 2012). 134 Department of Justice, Alternative Dispute Resolution in Victoria - Supplier Survey Report (Department of Justice, Copyright: State of Victoria, Melbourne, 2007). 135 Department of Justice, Alternative Dispute Resolution in Victoria - Supply Side Research Report (Chris Field Consulting Pty Ltd, Melbourne, 2007). 136 Parts of this discussion are drawn from T Sourdin, Alternative Dispute Resolution (4thEd, Thomson Reuters, NSW, 2012). Concerns, Issues and Next Steps 55

56 to trial, results will often be flawed because many civil cases are settled out of court through negotiation In addition, some of the possible benefits of pre-action obligations are difficult to measure. The increased use of pre-action processes may, for example, lead to a decrease in litigious or adversarial behavior, 138 foster better relationships between parties to disputes or result in higher levels of compliance with outcomes. Some recent evaluations have compared different mediation and litigation processes; however, even where large-scale research has been undertaken, it may not be comparable (often because of definitional issues it can be hard to determine what processes are used) Despite this difficulty in providing cost to benefit analysis, there have been numerous attempts in the past decade to evaluate mediation and other ADR processes. These attempts have at times been made in the context of a broader inquiry into justice (as with the ALRC Report) or case management (see the RAND Report 140 discussion below) or in response to specific ADR initiatives Other Australian empirical studies have focused on specific industries, cultural groups and demographic areas. These evaluative studies vary in terms of their objectives and are often not comparable because of different contexts. For instance, there have been evaluative studies addressing ADR in the financial industry, 141 for credit consumers 142 and within small business 137 For discussion of the methodological difficulties in evaluating ADR programs, see T Matruglio, Researching Alternative Dispute Resolution (Justice Research Centre, Sydney, 1992); S Caspi, Mediation in the Supreme Court Problems with the Spring Offensive Report (1994) 5(4) Australian Dispute Resolution Journal 4; S Keilitz (ed), National Symposium on Court Connected Dispute Resolution Research A Report on Current Research Findings Implications for Courts and Research Needs (State Justice Institute, USA, 1994); see also National Alternative Dispute Resolution Advisory Committee (NADRAC) Research Forum Findings 2007 and 2010 at ationaladrresearchforum (accessed 21 February 2012). 138 It has been suggested that those exposed to cooperative dispute resolution processes develop more constructive communication patterns and less obstructive behaviour: P Wanger, The Political and Economic Roots of the Adversary System of Justice and Alternative Dispute Resolution (1994) 9(2) The Ohio State Journal on Dispute Resolution, p See T Sourdin and T Matruglio, Evaluating Mediation The NSW Settlement Scheme (La Trobe University and the Law Society of New South Wales, Melbourne, 2004); J Elix and T Sourdin, Review of the Financial Industry Complaints Scheme What Are the Issues? (La Trobe University, Melbourne 2002), available at (accessed 23 July 2008). See also R Kiser, M Asher and B McShane, Let s not make a deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations (2008) 5(3) Journal of Empirical Legal Studies, pp J Kakalik, M Oshiro, D McCaffrey, M Vaiana, N Pace, T Dunworth and L Hill, An Evaluation of Mediation and Early Neutral Evaluation under the Civil Justice Reform Act (RAND, Santa Monica, California, 1996). 141 J Elix and T Sourdin, Review of the Financial Industry Complaints Service 2002 Final Report (Community Solutions, La Trobe University and University of Western Sydney, 2002). P Khoury, D Russell and F Guthrie, Independent Review. Banking and Financial Services Ombudsman (The Navigator Company Pty Ltd, Victoria, November 2004), available at SO+Review+2004.pdf (accessed 21 February 2012). 142 T Sourdin, Dispute Resolution Processes for Credit Consumers (La Trobe University, Melbourne, 2007). 56 Case Study Information

57 settings. 143 Court-connected ADR evaluation projects 144 often will include an analysis of aspects of ADR relating to the system of litigation, 145 civil justice 146 and case management. 147 There are also more general evaluations of ADR processes such as arbitration and conciliation and the pre-trial aspects associated with these, 148 as well as discussion of developments in ADR by comparison of programs over time. 149 Further analysis of ADR in relation to market forces affecting its use and effectiveness has been conducted over the past few years, 150 much of which has fed into research about the quality of ADR services Marsden Jacob Associates, Survey of Small Business Attitudes and Experience in Disputes and their Resolution (Attorney-General s Department (Cth), Canberra, 1999). 144 S Davidson, Court-Annexed Arbitration in the Sydney District Court: An Evaluation of the Effectiveness of Court-Annexed Arbitration in the Disposal of Cases in the Sydney Registry (Civil) of the District Court of New South Wales (1995) 6 Australian Dispute Resolution Journal at 195; R Ingleby, In the Ball Park: Alternative Dispute Resolution and the Courts (Australian Institute of Judicial Administration, Melbourne, 1991); F Kingham, Evaluating Quality in Court Annexed Mediation (Deputy President, Land and Resources Tribunal, Queensland, September 2002); K Mack, Court Referral to ADR: Criteria and Research (Australian Institute of Judicial Administration Incorporated and the National Dispute Resolution Advisory Council (NADRAC), Attorney-General's Department, Canberra, 2003). See also T Sourdin and N Balvin, Interim Evaluation of Dispute Settlement Centre of Victoria Projects: The Neighbourhood Justice Project. The Corio/Norlane Community Mediation Project (The University of Queensland, June 2008). 145 Australian Law Reform Commission, Review of the Adversarial System of Litigation. ADR - Its Role in Federal Dispute Resolution (Issues Paper 25 Australian Law Reform Commission (ALRC), Sydney, June 1998). 146 District Court Civil Jurisdiction Steering Committee, Civil Claims in the District Court of South Australia: A Review of Court Management Processes and Practices (Courts Administration Authority, Adelaide, September 1997); *T Matruglio, Researching Alternative Dispute Resolution (Civil Justice Research Centre and Law Foundation of New South Wales, Sydney, August 1992). 147 Law Institute of Victoria, Mediation in the Spring Offensive 1992: An Initiative of the Supreme Court of Victoria. (Law Institute of Victoria, Melbourne, February 1993); *Magistrates Court (Civil) General Jurisdiction Steering Committee, General Civil Claims in South Australia: A Review of Court Management Processes and Practices (Courts Administration Authority, Adelaide, September 1997). 148 M Delaney and T Wright, Plaintiffs Satisfaction with Dispute Resolution Processes: Trial, Arbitration, Pre-trial Conference and Mediation (Justice Research Centre and Law Foundation of New South Wales, Sydney, January 1997). 149 M Dewdney, B Sordo and C Chinkin, Contemporary Developments in Mediation within the Legal System and Evaluation of the Settlement Week Program (Law Society of New South Wales, Sydney, April 1994); National Alternative Dispute Resolution Advisory Council (NADRAC), ADR Research: A Resource Paper (Attorney-General s Department, Canberra, March 2004); National Alternative Dispute Resolution Advisory Council (NADRAC), ADR Statistics: Published Statistics on Alternative Dispute Resolution in Australia (Attorney-General s Department, Canberra, 2003); National Alternative Dispute Resolution Advisory Council (NADRAC), ADR Research: Background Paper for Research Round Table (Attorney-General s Department, Canberra, December 2002); National Alternative Dispute Resolution Advisory Council (NADRAC), Online ADR (Background Paper, Attorney-General s Department, Canberra, January 2001); T Sourdin and T Matruglio, Evaluating Mediation New South Wales Settlement Scheme 2002 (La Trobe University and University of Western Sydney, 2004). See (accessed 21 February 2012). 150 I McEwin, Cost of Legal Services and Litigation Access to Legal Services: The Role of Market Forces (Senate Standing Committee on Legal and Constitutional Affairs, Canberra, February 1992) Background Paper; Senate Standing Committee on Legal and Constitutional Affairs, Cost of Legal Services and Litigation Access to Legal Services: The Role of Market Forces (Canberra, February 1992) Background Paper. 151 T Sourdin and N Harding, A Review of Manly Council's Development Application (DA) Process. (La Trobe University and Nina Harding Mediation Services, 2006), available at Concerns, Issues and Next Steps 57

58 5.24 Specific areas of law that utilise ADR are also addressed in these projects. Areas such as family law 152 are often candidates for ADR evaluation, as are cases that deal with children and custodial issues. 153 Mediation and conferencing in relation to violence, 154 juvenile offenders 155 and restorative justice programs 156 also feature in evaluative studies. Many of these programs %20Processes.pdf (accessed 21 February 2012). 152 S Bordow and J Gibson, Evaluation of the Family Court Mediation Service, Research Report 12 (Family Court Research and Evaluation Unit, Sydney, March 1994); D Muller and Associates and Relationships Australia, Use of, and Attitude to, Mediation Services among Divorcing and Separating Couples Report (Commonwealth Department of Family and Community Services, Canberra, 1998); *Family Court of Western Australia, Family Court of Western Australia Mediation Service Evaluation (The Court, Perth, August 1996); Attorney-General s Department, Family Services Branch, Evaluation of the Marriage and Relationship Counselling Sub-Program (Legal Aid and Family Services, August 1996); Family Court of Australia, Self-Represented Litigants: A Challenge, Project Report (Family Court of Australia, December 2000); J Fisher and M Blondel, Couples Mediation: A Forum and A Framework (New South Wales Marriage Guidance, NSW, 1993); L Moloney, A Love and T Fisher, Managing Differences: Federallyfunded Family Mediation in Sydney: Outcomes, Costs and Client Satisfaction (Legal Aid and Family Services, Attorney-General s Department (Cth), Canberra, July 1996); N Mushin, Court-annexed Mediation in the Family Court of Australia: The Experience of Working with Cultural Diversity in D Bagshaw (Ed), Mediation and Cultural Diversity (Second International Mediation Conference Proceedings, South Australia Group for Mediation Studies, University of South Australia, Adelaide, 1996). 153 Commonwealth Department of Family and Community Services, Through a Child s Eyes: Child Inclusive Practice in Family Relationship Services (Commonwealth Department of Family and Community Services, Canberra, 2001); Commonwealth Department of Family and Community Services, Family and Child Mediation Survey Final Report (Commonwealth Department of Family and Community Services, Canberra, March 1998); *A Love, L Moloney and T Fisher, Federally-funded Family Mediation in Melbourne. Outcomes, Costs and Client Satisfaction (Legal Aid and Family Services, Attorney-General s Department (Cth), Canberra, January 1995); J Peirce, Mediators, Children s Access Services, Violence and Abuse in: D Bagshaw (Ed), Mediation and Cultural Diversity (Second International Mediation Conference Proceedings, South Australia Group for Mediation Studies, University of South Australia, Adelaide, 1996). 154 K Young, Research/Evaluation of Family Mediation Practice and the Issue of Violence: Final Report (Legal Aid and Family Services (Cth), Attorney-General s Department, Canberra, July 1996). 155 K Dalyet al, Research on Conferencing, Technical Report No 1: Project Overview and Research Instruments (South Australian Juvenile Justice, South Australia, 1998); K Daly K et al, Research on Conferencing, Technical Report No 2: Research Instruments in Year 2 and Background Notes (South Australian Juvenile Justice, South Australia, 2001); K Daly, South Australia Juvenile Justice and Criminal Justice (SAJJ-CJ) Technical Report No 3: Archival Study of Sexual Offence Cases Disposed of in Youth Court and by Conference and Formal Caution (School of Criminology and Criminal Justice, Griffith University, QLD, 2003); K Daly, Sexual Offence Cases Finalised in Court, by Conference, and by Formal Caution in South Australia for Young Offenders, , Final Report (School of Criminology and Criminal Justice, Griffith University, QLD, August 2003); J People and L Trimboli, An Evaluation of the NSW Community Conferencing for Young Adults Pilot Program (NSW Bureau of Crime Statistic and Research, Attorney General s Department, Sydney, 2007). 156 H Hayes and K Daly, Conferencing and Reoffending in Queensland(School of Criminology and Criminal Justice, Griffith University, QLD, 2004); L Sherman, H Strang and D Woods, Recidivism Patterns in the Canberra Reintegrative Shaming Experiments (RISE) (Centre for Restorative Justice, Australian National University, Canberra, 2000); L Sherman and H Strang, Restorative Justice: What We Know and How We Know It, Jerry Lee Program on Randomized Controlled Trials in Restorative Justice (Working Paper, University of Pennsylvania, USA, Lee Center of Criminology and Centre for Restorative Justice, Australian National University, Canberra, 2004); H Strang, Restorative Justice Programs in Australia: A Report to the Criminology Research Council (Australian National University, Canberra, 2001), see (accessed 21 February 2012); H Strang, G Barnes, J Braithwaite and L Sherman, Experiments in Restorative Policing: A Progress Report on the Canberra Reintegrative Shaming Experiments (RISE) (Law Program, Research School of Social Sciences, Australian National University, Canberra, 1999) at 58 Case Study Information

59 have been associated with Community Justice Centres. 157 Evaluations of these initiatives display varying methods and results in relation to research methodologies and outcomes. ADR evaluation research has also focused on Native Title disputes and Aboriginal and Torres Strait Islander issues. 158 Many of these studies are reports on pilots, providing qualitative and/or quantitative feedback about the effectiveness of the resolution process from the perspective of the parties and other stakeholders. Some studies regarding Indigenous issues have a particular focus on family law Restorative Justice initiatives and peer mediation in schools 160 have also been evaluated, and studies have involved questionnaires for school children and their parents, while decisions regarding Legal Aid funding 161 have been based on predominantly qualitative research conducted in this area over the past few years. Finally, WorkCover disputes have also been the focus of ADR evaluation, with an emphasis on the types of processes used and the effectiveness perceived by those involved In addition, research and monitoring data is increasingly being produced by performance measurement technology that is in place within some pre-action schemes in the health care area and in the personal injury area (extensive arrangements exist in the workers compensation and motor vehicle accident area in a number of States). These systems can now help to (accessed 21 February 2012). 157 C Bourne, Mediation and Community Justice Centres: An Empirical Study, Research Report 12 (NSW Law Reform Commission, October, NSW, 2004); J Schwartzkoff and J Morgan, Community Justice Centres. A Report on the New South Wales Pilot Project (Law Foundation of New South Wales, Sydney, 1982). 158 T Bauman and R Williams, The Business of Process Research Issues in Managing Indigenous Decision- Making and Disputes in Land (Research Discussion Paper No. 13, AIATSIS, Canberra, 2004); The Indigenous Facilitation and Mediation Project (IFaMP) Community Mediation Centres - Native Title Representative Bodies Forum (Summary of Proceedings and Outcomes, Australian Institute of Aboriginal and Torres Strait Islander studies, Native Title Research Unit, Canberra, 0ct 2004). See also National Alternative Dispute Resolution Advisory Committee (NADRAC), Indigenous Dispute Resolution and Conflict Management (Attorney-General s Department, Canberra, January 2006) at DisputeResolutionandConflictManagement (accessed 21 February 2012). 159 C Cunneen, J Luff, K Menzies and N Ralph, Indigenous Family Mediation: The New South Wales ATSIFAM Program (2005) AILR 1. See: (accessed 23 July 2008); National Alternative Dispute Resolution Advisory Council (NADRAC), Indigenous Dispute Resolution and Conflict Management (Attorney-General s Department, Canberra, January 2006) at DisputeResolutionandConflictManagement (accessed 21 February 2012). 160 S Grose and W Alford, The Dispute Resolution Project: Peer Mediation in Schools in Bagshaw D (Ed), Mediation and Cultural Diversity (Second International Mediation Conference Proceedings, South Australia Group for Mediation Studies, University of South Australia, Adelaide, 1996). 161 Rush Social Research and John Walker Consulting Services, Legal assistance needs phase I: estimation of a basic needs-based planning mode (Legal Aid and Family Services Division, Australian Government Attorney-General s Department, Canberra, 1996). 162 See for example, T Beed, The Role of Conciliation (Civil Justice Research Centre and Law Foundation of New South Wales, Sydney, November 1990). There are many more recent evaluations in NSW and Victoria. Concerns, Issues and Next Steps 59

60 indicate where and how intervention and finalisation may occur. Refinements in these areas will hopefully enable a clearer analysis of mediation and ADR referral processes in the future Some overseas large-scale empirical evaluations have shown significant benefits in using ADR once court proceedings have commenced and it seems clear that even with extensive pre-action schemes there will always be some matters that do not settle. For example, an Ontario study, which analysed more than 3000 cases in Ontario, found that there were positive impacts upon the pace, costs and outcomes of litigation when ADR processes were used. 163 Within the United States of America, there are many reports that have analysed ADR use, and many have found significant benefits although some have focused only on small non-comparable samples and tend to be focused on matters where litigation has already commenced. 164 However, many evaluation reports both within Australia and overseas remain unreported as part of internal court or tribunal circumstances or are not comparable in the Australian setting, 165 and this problem can be magnified in the pre-litigation area where annual and other reports and reviews may not be available ADR processes can reduce costs and be less expensive than litigated options if the dispute is resolved. The benefits increase where disputes are likely to consume proportionally large amounts of time in a hearing. Where agreement is not reached and the matter is then litigated, costs can be inflated as additional preparation and conferencing time can be expended. However, mediation and other forms of ADR may narrow the issues in dispute, reduce the need for interlocutory hearings or pre-trial processes and contribute to a shorter hearing It has been suggested that, when disputes are not subject to an early ADR process, they may take longer to resolve when a process is eventually commenced. 166 Despite this, the evaluation of the NSW Settlement Scheme suggested that ADR processes, such as mediation, could provide great benefits even in older, more complex cases where significant legal costs had been expended. In this regard, the Evaluation of the NSW Settlement Scheme noted that even if a mediation was not attended, a mediation scheme may 163 R Hann and C Baar, Evaluation of the Ontario Mandatory Mediation Program (Queens Printer, Ontario, 2001) p See Resolution Systems Institute, Bibliographic Summary of Cost, Pace and Satisfaction Studies of Court Related Mediation Programs (2nd Ed, 2007). 165 T Sourdin, Alternative Dispute Resolution (4 th Ed, Thomson Reuters, NSW, 2012) at Appendix G; see, for example, N Paulsen, D Rooney and P Ashworth, An Evaluation of the Primary Dispute Resolution Services of the Federal Magistrates Court (Communication Partners, July 2004). 166 US Office of Personnel Management, Alternative Dispute Resolution: A Resource Guide, Section 1: Alternative Dispute Resolution Techniques and Agency Practices. (US Office of Personnel Management, Washington, DC). See (accessed 21 February 2012). 60 Case Study Information

61 still have a catalytic effect, as parties in many disputes (went on) to resolve their disputes without attending a mediation conference Many mediation processes have been evaluated in a court-connected context, and for this reason some studies can provide a comparative reference point. It is considered that some of the specific advantages of mediation over litigation are speed, convenience, informality, cost saving, greater control of the process, confidentiality, preservation of ongoing relationships and compliance with outcomes. In comparable studies these features are sometimes examined. The degree to which processes meet objectives and the degree of priority given to objectives varies according to the areas where mediation is used The ALRC Report, Managing Justice A Review of the Federal Civil Justice System, 168 highlighted the need for ongoing empirical evaluation research in the general civil justice area. As noted in its executive summary: The commission acknowledges the importance of ADR as a tool in resolving cases quickly, less expensively and to the satisfaction of parties. However, the commission also cautions against uncritical acceptance of ADR as a panacea for all ills of litigation, much in the same way that tribunals were intended to provide the solution to litigation problems in the 1970s. The commission makes some targeted recommendations aimed at ensuring that the benefits of ADR are realised but it is not taken to substitute for appropriate adjudication The ALRC research in the Family Court, AAT and Federal Court areas concentrated on timing, case management and costs. The focus on mediation only formed a small part of the research. This is partly because the amount of mediation practised in each of those jurisdictions was at that time relatively small. Also, the primary focus of the ALRC was judicial adjudication, case disposal and the quality of outcomes, rather than other key issues that are also of relevance to ADR practitioners, theorists and policy-makers (for example, findings as to satisfaction and compliance with outcomes). Despite not being the primary research focus, some findings, particularly in the family law area, are of interest. In this regard, the ALRC noted: On the Commission s analysis, consensual resolution was more likely to be achieved if both parties were represented. Lawyer-led negotiation appeared a significant factor encouraging settlement. Parties made repeated attempts at settlement at all stages of the process, including before filing their applications. Settlements were often achieved later in the process. As stated in Chapter 5, unrepresented parties were more likely to withdraw, cease defending or have their cases determined following a hearing. They were much less successful in brokering a consent outcome. Unrepresented parties most frequently nominated to 167 T Sourdin and T Matruglio, Evaluating Mediation New South Wales Settlement Scheme (La Trobe University and the Law Society of New South Wales, Melbourne, 2004) p Law Reform Commission, Managing Justice A Review of the Federal Civil Justice System. (Australian Law Reform Commission, NSW, 2000). 169 Law Reform Commission, Managing Justice A Review of the Federal Civil Justice System. (Australian Law Reform Commission, NSW, 2000) p 14. Concerns, Issues and Next Steps 61

62 the Commission frustration with the process as the important reason they withdrew or settled their cases The conclusions of the ALRC in the family context are of interest to ADR and legal practitioners as they suggest that in many circumstances lawyers are aiding the negotiation process in somewhat unexpected ways. This conclusion is at odds with suggestions that lawyers can hinder negotiations and may suggest that often pre-action schemes can succeed if lawyers support them. This raises issues about whether pre-action requirements will work better if there are additional obligations placed on lawyers to behave in particular ways for example, to negotiate in good faith Clearly, some of the concerns expressed by the legal profession and in the UK Reports about pre-action requirements are that some lawyers or disputants may act inappropriately or inflate costs. It is partly for this reason that the Senate Subcommittee considered the wording of the pre-action requirements carefully (in particular, whether or not they should import a reasonable, genuine or sincere standard of conduct). It is also for this reason that good faith is required of participants in the pre-action NSW retail lease (more or less) mandatory mediation case study scheme Another question therefore in this research is whether or not additional conduct requirements can help support pre-action obligations. In this regard, good faith now features as the most widely used standard of conduct prescribed by federal and State/Territory legislation for those involved in ADR processes. However, as noted in NADRAC s 2009 report The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction, while several federal and State laws impose good faith obligations on participants in ADR processes, there is limited legislative guidance on the meaning of the phrase in the ADR context. 171 Clearly, however, a critical issue in any analysis of good faith is how it can be determined that someone has acted in bad faith in ADR processes that are intended to be confidential and where evidence of what has transpired in an ADR process would not otherwise be admissible in court proceedings. These issues of confidentiality, admissibility and practitioner obligations are also closely related to this topic and require separate consideration Australian Law Reform Commission, Managing Justice A Review of the Federal Civil Justice System. (Australian Law Reform Commission, NSW, 2000) p NADRAC, The Resolve to Resolve Embracing ADR to Improve Access to Justice in the Federal Jurisdiction Report (prepared for the Attorney-General of the Commonwealth of Australia, September 2009) pp See Chapter 12, T Sourdin, Alternative Dispute Resolution, 4 th ed (2012, Thomson Reuters, Sydney) which explores the impact of changing obligations on confidentiality. 62 Case Study Information

63 Next Steps 5.39 Your comments about any aspect of this research are invited. The next steps in the Research Project include: Adding to the literature review. We are currently surveying other jurisdictions Canada, the United States and Europe. We welcome comments and additions that will help to inform this review. Regular meetings of the Project Advisory Committee to support the development of the research Project. Inviting comments from interested people as well as experts in this area (April, June and August 2012). Undertaking file surveys in the Retail Lease areas in NSW and Victoria (February / March / April 2012). Undertaking telephone surveys of Retail Lease mediation participants (March /April / May 2012). Facilitating focus groups of Retail Lease mediation participants (April / May / June 2012). Facilitating focus groups of lawyers involved in Retail Lease mediation (June / July 2012). Facilitating focus groups and exploring perceptions of lawyers and experts in the broader dispute resolution arenas (June/July 2012) Analysing and cleaning data and considering additional and descriptive material (August 2012) Writing up the Final Research Report due for publication at the end of September Concerns, Issues and Next Steps 63