This is an edited version of an article that appeared in the October 2012 edition of The Public Sector Informant liftout in the Canberra Times.
In April this year, Norton Rose Australia undertook a survey to identify the current trends in dispute resolution amongst Australian Government agencies. The survey examined the:
- the use of ADR procedures in Australian Government agencies
- the impact of technology on dispute resolution processes, and
- how Australian Government agencies presently respond to disputes.
The survey included responses from large agencies covering a broad section of industries and included personnel currently working in the legal departments. The survey results, alongside the recently introduced pre-litigation requirements highlighted that ADR techniques will play a greater role in either settling or narrowing disputes before resorting to litigation.
How are Government agencies using ADR processes?
The Commonwealth Attorney-General recently launched “Your Guide to Dispute Resolution”, a user-guide focussing on ADR techniques aimed at raising awareness about the variety of dispute resolution processes available.
The concept of ADR encompasses a broad range of methods through which disputes can be resolved without the final determination of a court or tribunal. At one extreme, informal conciliation methods can be deployed while at the more formal end of the ADR spectrum, structured forums such as mediations or arbitrations allow each of the disputing parties the opportunity to air the basis of their dispute and help to narrow the issues.
For Australian Government Agencies, the appropriate use of arbitration, mediation and other forms of ADR can assist in an agency’s compliance with the Legal Services Directions 2005 (the “LSDs”), the Civil Dispute Resolution Act 2011 (Cth) (the “CDR Act”) and new amendments to the Federal Court Rules. The LSDs require Australian Government agencies to act as ‘model litigants’ throughout court-based litigation and ADR, and require agencies to conduct themselves with respect, fairly and to a high professional standard. Compliance with the LSDs, as well as the other legislative requirements, is mandatory.
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Trends show Government agencies remain cautious in their use of ADR
The Norton Rose survey revealed that over the past twelve months just under half (48.1%) of the agencies surveyed had engaged in mediation as a form of ADR, with conciliation and expert determination as the next largest forms of ADR utilised. In contrast, only 3.7% of respondents had employed the use of a Dispute Resolution Board (DRB) established under contract. A DRB is a panel of either one or three independent experts who have been engaged by contracting parties to overview the execution of a project. While DRBs are a relatively new concept, especially for the Australian Government, they have been successful in the private sector and therefore should be increasingly considered as a viable form of ADR..
Despite the benefits of ADR being well known only 37% of agencies surveyed stated that ADR is used regularly as a means of resolving disputes. Over 40% indicated that ADR is occasionally utilised and almost 60% of respondents agreed that over the next 12 months the use of ADR within agencies will stay the same or increase. A quarter of those surveyed indicated that the use of ADR by their agency produced neither positive nor detrimental outcomes for the agency while over half (51.9%) indicated that ADR was positive for the interests of the agency. Despite the comparatively large number of agencies indicating that they utilised ADR occasionally, the number is likely to rise dramatically in the coming years with the mandatory requirement to do so, beyond the LSD requirements.
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Why Australian Government agencies need to be taking ‘genuine steps’ to resolve disputes
On top of the requirement imposed by the LSDs that ADR be considered prior to commencing proceedings, the CDR Act now requires agencies to havetaken ‘genuine steps’ to achieve settlement prior to commencing legal proceedings in the Federal Court or Federal Magistrates Court.
Part 2 of the CDR Act states that parties to a proceeding must file a ‘genuine steps statement’ detailing what steps were or were not taken in an attempt to resolve the dispute before proceedings were instituted. Examples of what may constitute a ‘genuine step’ include:
- notifying the prospective defendant and offering to discuss how resolution of the dispute can be achieved
- responding appropriately to a notification of intention to file proceedings received from another party
- attempting to negotiate with the other party with a view to resolving some or all the issues in dispute, or
- providing documentation to another party to help inform them about the dispute or facilitate a resolution.
The recently amended Federal Court Rules essentially mirror the CDR Act stating that both parties to a dispute must file a ‘genuine steps statement’ indicating that they have attempted to resolve the dispute prior to commencing legal proceedings.
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Illustrating the importance and need to consider the ‘genuine steps’ provisions to resolve a dispute
In Superior IP International v Ahearn Fox Patent and Trade Mark Attorneys, the parties filed close to 450 pages of affidavit material in relation to a relatively minor dispute and had taken no steps to attempt to resolve the issues before the trial. The Judge found that as both parties had failed to file a genuine steps statement (and as their lawyers had failed to inform their clients about this obligation) cost orders would not be made in favour of the successful party, as would be the usual course. Due to the failure to comply with the relevant legalisation, the Judge ordered that the parties’ lawyers provide a copy of the reasons to their clients and advise them to seek independent legal advice on the question of costs of the proceedings and that the two lawyers involved be personally joined as parties to the proceedings for the purpose of determining the question of costs.
Recently, the Judge delivered reasons on the question of costs. Ultimately, the only order for costs was relatively minor however the Judge observed that, if it were not for the fact that both clients had expressly rejected the opportunity to seek to recover their costs against their lawyers, he would have been very likely to issue cost orders against the lawyers in an attempt to deter lawyers from engaging in that type of conduct.
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Australian Government agencies need to consider privilege during dispute resolution
Given the time and cost consequences, litigation is usually the last form of dispute resolution to be used when other attempts to resolve the matter have been unsuccessful or are assessed to be inappropriate. In the event that a dispute is litigated, the issue of privilege may arise around whether or not communications, documents or other materials made or produced during the early stages of dispute resolution can be disclosed in court. Privilege may be inadvertently waived by an agency where it acts in a manner inconsistent with the preservation of confidentiality the privilege is supposed to protect. This is an important issue as disclosures made by an agency during the early dispute resolution processes, including during ADR, may constitute a waiver of privilege and allow potentially damaging documents and communications to be relied on in a litigated matter.
The Norton Rose survey found that almost all surveyed respondents indicated that their agency maintained a record of internal communications with third parties (including other internal sections and external agencies) in both electronic and paper format. However, only half (51.9%) indicated that they always consider legal professional privilege when sending communications to third parties and surprisingly, 22.2% indicated that privilege is seldom considered when sending communications. These results are particularly troubling, as the potential to waive privilege is apparent, especially as ADR processes become more frequently used.
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What can Australian Government agencies can expect?
Anyone who has been involved in civil litigation will know that it can be a lengthy and costly process. In the current climate, the strategic use of ADR can enable the management of disputes to be targeted for costs savings without compromising the results desired. The key to achieving this is the early identification, management and resolution of disputes at pre-courtroom stage.
A source within the legal section of one Australian Government agency stated that ADR is “an essential operating policy of the department”. Yet while over 85% of respondents indicated that the negotiation and inclusion of effective dispute resolution clauses (including ADR processes) in all contracts was a priority for the agency, less than half (48%) agreed that their agency had in place effective measures to identify potential disputes affecting the agency as and when they arise.
The drive by the Commonwealth Attorney-General’s Department to increase the awareness of ADR processes for all types of dispute is part of the overall cultural shift that is occurring amongst agencies. This shift was reflected amongst those surveyed, with a greater emphasis on ADR and dispute management becoming an increasing priority. While court processes are obviously still required in certain circumstances (highlighting the need to be vigilant in document storage processes), agencies can expect to see a greater emphasis on faster and more cost effective means of resolving disputes in the years ahead.
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