Civil Engineering Practices Quality and Legislation

(CSEN 4003)

ALTERNATE DISPUTE RESOLUTION (ADR)

1.0 Introduction

No matter how carefully we draft an agreement to reflect the agreed rights and
obligations, inevitably disputes will arise and contemporary commercial practice
requires the use of resolution processes which avoid costly and unproductive litigation.
Consequently nearly all commercial agreements will contain a dispute resolution clause
which requires the parties to attempt to resolve the dispute before attempting litigation.
These dispute resolution clauses are binding on the parties and the courts will enforce
compliance with such clauses.

Additionally ADR is not only used in the resolution of commercial contracts but is used
to resolve tortious claims, consumer law, workplace injury and family law disputes.

A typical dispute resolution clause will be worded as follows:

“In the event of any dispute arising whatsoever out of the contract then the
parties shall refer the matter for resolution using meditation, expert
determination or arbitration.”

In the clause, the parties will specify a particular method to be used and how the
independent neutral third party such as the mediator or arbitrator will be selected.

Before we consider the application of the various techniques in the resolution of

disputes, it is necessary to put the process in the context of what may be viewed (albeit
erroneously) as a continuum in the resolution of disputes. By continuum we mean a
staged process of negotiation, mediation, arbitration and if resolution is not achieved,
finally litigation. We will see however that the selection of an appropriate dispute
resolution process is not a matter of working through each process, but rather selecting
a process which takes into account the particular issues and the needs and
backgrounds of the parties or in response to an express term of a previous agreement
between the parties.

In this lecture we will briefly discuss the various forms of dispute resolution.

2.0 Origins
It is impossible to define the origins of ADR. My earliest recollection is the biblical
storey regarding the dispute of the parentage of a child when two claimants alleged they

Prof PJ Evans May 9 2017 Page 1

were the mother of a baby. You will recall Solomon, King of Israel (970BC-932BC) in his
wisdom ordered that the child be cut in half with each claimant receiving half each.
Naturally the real mother readily agreed that the other claimant have the child rather
than let it be harmed (1 Kings iii). Even at this stage you will appreciate that the
determination was rather drastic and in no way could be described as consensual.

It is also acknowledged that Australian Aborigines have had effective methods of

dispute resolution dating back over 40,000 years. Their close knit community has
resulted in a notion of community ownership of disputes and they can be regarded as
pioneers of consensual dispute resolution.

Today both the legal and business community have readily adopted a range of dispute
mechanisms rather than resort to lengthy and protracted litigation. This is
acknowledged by the introduction of legislation especially by way of the Commercial
Arbitration Acts and the requirements of our courts and tribunals that parties attempt to
solve disputes before proceeding to a hearing.

In this regard the courts have introduced by way of case management procedures, a
requirement in certain instances that ADR be introduced as part of the litigation process.
This is discussed further below.

3.0 A requirement of contract

In many commercial contracts there will be a term requiring the parties to attempt to
resolve the dispute prior to litigation. Typical examples taken from construction
contracts are as follows:

3.1 Dispute resolution under clause 47 of AS2124-1992

Clause 47 Dispute Resolution provides for the parties to confer to try to settle the
dispute or failing that to explore ADR procedures before formal arbitration or litigation
procedures are commenced. The clause provides for an option with respect to two
procedures.

3.1.1 Clause 47.2 (Alternative 1)

In this option there is a conference (with or without the superintendent) within 14
calendar days of service of the notice of dispute. This conference must be attended by
persons having authority to settle. If it is not settled the parties are required to consider
other methods for resolving the dispute, e.g. expert determination.

If the issue is not settled then a further notice may be served by either party referring
the dispute to arbitration or litigation. If referred to arbitration then the matter will be
determined by a single arbitrator appointed by the person named in Part A of the
Annexure.

3.1.2 Clause 47.2 (Alternative 2)

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Under this second alternative the superintendent is given more prominence. The notice
of dispute is served upon the other party and the superintendent. The superintendent
within 42 days of receipt of the notice of dispute is to give a decision on the dispute.

If either party is dissatisfied with the superintendent’s decision then a compulsory

conference is called (with or without the superintendent) and the procedure as stated in
Alternative 1 is followed.

3.2 Dispute resolution under clause 42 of AS 4000-1997

3.2.1 Clause 42
In the event of a dispute arising within 14 days of receiving the notice of dispute, the
parties are required to confer at least once to resolve the dispute or agree on a method
of doing so. Each party must be represented by a person having authority to agree to
such resolution. The clause also states that all aspects of the conference shall be
privileged.

If that dispute is not settled within 28 days of service of the notice of dispute, that
dispute must be referred to arbitration. If the parties cannot agree on the arbitrator then
the person named in clause 32 of the Annexure shall appoint an arbitrator.

4.0 The Appropriate Resolution Process

From your own life experiences or perhaps previous studies you will be aware that there
are a number of options available for the resolution of disputes between parties. They
are generally described as:

 Bi-lateral Negotiation (the parties in dispute);

 Assisted Negotiation (the parties assisted by lawyers or consultants);
 Mediation;
 Conciliation;
 Expert Determination;
 Commercial Arbitration; and
 Litigation.

As mentioned in the introduction the above list should not be considered as some sort
of “CONTINUUM” where we start with negotiation and work our way down through the
options, until we reach a solution.

In many instances because of the entrenched uncooperative attitudes of the parties,

together with a complete breakdown in the relationship, the most viable option is to
proceed to litigation. However in Western Australia as part of the case management
process the parties will be required to appear before a mediation registrar before
proceeding with a trial.

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4.1 Negotiation and Mediation
Increasingly as either a requirement of contract between the parties or because of the
recognition of the benefits, parties in dispute will attempt to resolve disputes by
negotiation or mediation. The following provides a brief description of the two
processes. Even in mediation there will be a significant component of negotiation.

4.1.1 Negotiation
There are essentially two forms. What we might call bi-lateral negotiation and
supported negotiation. With the usual bi-lateral negotiation the parties approach each
other without any third party assistance and try to seek a mutually acceptable outcome
through discussion. The parties are in control of the process and any rules are perhaps
described more as social (acceptable behaviour) than legal.

With supported negotiation the process is much the same but the parties are assisted
with an advisor. The best result is achieved by using a neutral advisor but this is rare
with most parties employing a partisan expert or lawyer.

Unfortunately the success of this type of negotiation is often directly related to the skills
and attitudes of the advisor.

Bi-lateral negotiation should not be underestimated. It is an important process, which if

conducted constructively, with a sincere desire to reach resolution, can prevent lengthy
and costly subsequent process.

You will find that many “standard” contracts have a clause as a “condition precedent” to
the parties attempting litigation.

4.1.2 Mediation
As with negotiation, there is no one definition of what mediation is. However we all
agree that it is a process where a “neutral” third party (the mediator) assists the parties
reach an agreement that is acceptable to both.

Mediation may be defined generally as follows”

“Mediation is a decision making process in which the parties are assisted by

a neutral third party, the mediator; the mediator’s role is to improve the
process of decision making and to assist the parties to reach an outcome to
which each of them can assent, without having a binding decision making
function”.

A number of ADR texts have reproduced the following definition which has been taken
from Folberg J and Taylor A, Mediation: A Comprehensive Guide to Resolving Conflict
Without Litigation, Jossey Bass, San Francisco, 1984, page 7.

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 “Mediation can be defined as the process by which the participants together
with the assistance of a neutral person or persons, systematically isolate
disputed issues in order to develop options, consider alternatives, and reach
a consensual settlement that will accommodate their needs.”

See also:

“A process in which the parties to a dispute, with the assistance of a dispute

resolution practitioner (the mediator), identify the disputed issues, develop
options, consider alternatives and endeavour to reach an agreement. The
mediator has no advisory or determinative role in regard to the content of the
dispute or the outcome of its resolution, but may advise on or determine the
process of mediation whereby resolution is attempted. Mediation may be
undertaken voluntarily, under a court order, or subject to an existing
contractual agreement. An alternative is ‘a process in which the parties to a
dispute, with the assistance of a dispute resolution practitioner (the mediator)
negotiate in an endeavour to resolve their dispute’.” (Source: NADRAC,
Dispute Resolution Terms 2003).

It is not unusual for the parties to have experts or legal advisors present in the
mediation. The parties must agree to any outcome reached and the mediator is only
concerned with assisting the parties reach settlement.

4.1.3 Do definitions matter?

At the end of the day, perhaps not. All the various definitions used in Australia by
bodies, courts and tribunals discuss this issue and conclude that definitions and
descriptions are:

“simply unable to encompass the flexibility and creativity of mediation

practice and all that is done in its name.”

4.1.4 Rights v Needs Based

We will discuss this in detail later but one of the criticisms levelled at mediation is that it
is not “rights” based but rather “needs” based. By this we mean that often a party may
have a good claim “in law”, but commercial pressures or other circumstances may
prevent them from becoming involved in costly and lengthy litigation.

It should also be noted that even the largest and most complex disputes may be
resolved through mediation. In practice, I have been involved in a claim on behalf of 14
plaintiffs and 6 defendants involving issues of breach of contract, negligence and
breaches of the former Trade Practices Act 1974 (Cth) and also a dispute arising out of
a $290 million construction contract.

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4.2 Conciliation
There is no general agreement between ADR experts as to the difference between
mediation and conciliation. In many instances the terms are used interchangeably.
Many definitions have been suggested for conciliation, but they all have similar essential
features of mediation. For example:

“Conciliation is a process in which a neutral third party conciliator attempts to

bring disputing parties to a resolution of their dispute by agreement between
them. To achieve this, the conciliator may meet and discuss matters with the
parties both independently and jointly and may indicate to the parties the
strengths and weaknesses of their position and may suggest solutions”
(Attorney General of Victoria Working Party, page 5, undated).

Another view is that conciliation is mediation, which occurs as a consequence of some

statutory requirement, e.g. Industrial Relations, Family Law and Anti-Discrimination. In
these types of disputes there is a “compulsory” aspect usually with respect to
attendance.

4.3 Expert Determination or Appraisal

This is a process involves an objective independent expert, impartially considering the
facts and issues, and makes a determination on the issues. The parties prior to jointly
engaging the expert must decide whether they wish the determination to be binding on
the parties. This is usually described as an expert determination. Where the parties
wish the expert to provide an opinion on the subject of the dispute, in order to assist the
parties to explore further options, the process is usually described as an expert
appraisal.

Prior to the expert undertaking the determination/appraisal, the parties agree as to the
procedures to be adopted by the expert. The expert then must follow these procedures.
The details of the procedure are recorded in a simple contract between the parties.

4.4 Commercial Arbitration

The most common ADR process is arbitration. Arbitration procedures are set out in the
Commercial Arbitration Act 2012 (WA) (Act). Each State has its own Act, but the
procedures are essentially “uniform”.

Because its practices essentially mirror those of litigation many ADR proponents do not
consider that if is an appropriate SADR process.

It is an adversarial process where each party, usually with legal representation,

presents its case by way of both oral and documentary evidence to an impartial un-

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biased arbitrator. Witnesses are cross examined and the arbitrator either “according to
law” or on the basis of “general justice and fairness” makes a finding on the issues in
dispute by handing down an award.

Appeals from decisions of arbitrators can only be appealed in very limited

circumstances. The arbitrator’s determination is binding on the parties and if the
unsuccessful party does not abide by the decision, the successful party can have the
award entered as a judgement in the Supreme Court.

The Act also allows for “mediation within arbitration” at the request of the parties (see s
27D). The Act permits the arbitrator to conduct a mediation during an arbitration and if
that fails, resort beck to arbitration. However the provision has been subject to
considerable and valid criticism and any arbitrator who attempted such a procedure
would be readily liable to being removed for what is described as ‘technical misconduct’
arising out of a breach of the rules of natural justice.

4.5 Adjudication

The Construction Contracts Act 2016 (WA) applies to all contracts for construction work
undertaken in Western Australia entered into after 15 December 2016. It amends the
original Act which applied to construction contracts entered into after 1 January 2015.
Construction work includes site preparation, actual construction, repair, renovation and
design, drafting and management.1 Where the contract is silent with respect to terms
regarding payment provisions the Act will imply terms regarding the contractor’s
entitlement to be paid. 2

Not all construction work is included in the Act. Work in discovering or extracting oil or
natural gas is excluded as well as the mining for minerals and the constructing of plant
for the purpose of extracting oil or minerals and wholly artistic work3. There is also
exclusion for watercraft. 4

The provisions relating to the rapid adjudication process reflect a compromise between
expediency on one hand and legal formality on the other. The principal aim of the Act is
to keep the money flowing in the contractual chain by ensuring timely payment for work
completed and avoiding complex protracted litigation.

The process is determined by registered adjudicators with a background in construction

contract management and dispute resolution. The role of the adjudicator is to review
the claim made under the construction contract and the response and, if satisfied that
the claim is justified, make a binding determination on the issues.

1
See ss 4(1), (2).
2
See Division 2-Implied provisions.
3
See s 4(3)
4
See s 4(4).

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4.6 Litigation
Whilst not falling under the terminology of ADR, the civil courts in the final run provide
the ultimate process in dispute resolution. We are all familiar with the process of
litigation. In civil matters the venue will depend upon the amount in dispute. Each court
has an Act which proscribes the relevant amount and the powers of the court. For
example: Magistrates Court Act 2004 (WA), District Court of Western Australia Act 1969
(WA) and Supreme Court Act 1935 (WA).

Each court also has a set of rules.

The relevant amounts are as follows:

 Magistrates Court of WA $75,000.00
 District Court of WA $750,000.00
 Supreme Court of WA $750,000.00+

4.6.1 Magistrates Courts

Whilst the Magistrates Courts exercise criminal jurisdiction predominantly, they also
hear complaints regarding breaches of statutory provisions in some legislation. For
example, Builders Registration Act 1939 (WA), Home Building Contracts Act 1991 (WA)
and particularly relevant to building situations, the Local Government (Miscellaneous
Provisions) Act 1960 (WA). These have now been transferred to the State
Administrative Tribunal (SAT)

4.6.2 The Litigation Process

The process involves a series of procedures, essentially:
 Statement of Claim;
 Defence and Counterclaim;
 Requests for Further and Better Particulars;
 Reply to Statement of Claim;
 Reply to Defence and Counterclaim; and
 Discovery of documents.

The matter is then “entered for trial”.

However before that, there are usually a number of interlocutory hearings before a
Registrar or Master of the Court where the parties appear in response to applications
seeking to strike out claims, seek extensions of time, seek leave to introduce expert
evidence, etc.

Before trial there will be a pre-trial conference in an attempt to settle the matter and if
this fails then a trial date will be listed.

4.6.3 The Trial Process

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The trial is the classic adversarial process where witnesses are called evidence-in-chief
is given, parties are cross-examined and documents are submitted. There a strict
application of the rules of evidence. The process is lengthy, time consuming expensive
and public. There are often delays in the handing down of the judgement.

That is not the end of the matter. Even if you are successful you may still have to spend
considerable time and effort in obtaining the “fruits of your victory.” The successful
party will not recover all of its legal costs. Costs are “taxed” on an appropriate scale
depending on the court of jurisdiction.

4.6.4 Appeals
Appeals may require a “leave to appeal” application and appeals are only generally
permitted if there is an error of law.

4.6.5 How many disputes reach the trial stage?

Courts play a marginal role in resolving disputes and it is estimated that only in about
6% of disputes do the parties proceed to trial (See Dispute Resolution in Australia by
Astor H, and Chinkin C; (Butterworths) 1992 @ page 28). Of the disputes that reach
court, a number are also settled before the end of the trial.

5.0 Specialist Tribunals

There are also specialist tribunal that have been created under statute to assist in the
resolution of disputes. For example the Building Disputes Tribunal, Commercial
Tribunal, Retirement Villages Tribunal, Strata Titles Tribunal. These are usually
established with a Chairman and representatives from the particular industries and a
consumer representative. As mentioned above most of these have now been delegated
to SAT

Evidence is presented under oath but they have considerable discretion in the hearings
and are not generally bound by the rules of evidence.

6.0 Hybrid Processes

Over the years there have been attempts to develop what we might describe as hybrid
processes. These are essentially combinations or modifications to the processes
described above. These include:
 Mini trials;
 Rent a Judge (Judge “Judy”); and
 Boards of Determination.

The use of these techniques is fairly rare but there is nothing, which prevents parties in
a dispute from designing their own resolution process (subject of course to any
contractual requirement).

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Conclusion
For your information shown below are the ADR definitions taken from Appendix B of AS
4608-2004 “Dispute Management Systems”.

The above notes are the lecturer’s teaching notes. They are provided for the
convenience of students but are not meant to replace the students own notes and
reading on the topic.

APPENDIX B (AS 4608-2004)

GLOSSARY OF TERMS

Adjudication
A process in which the parties present arguments and evidence to a dispute resolution
practitioner (the adjudicator) who makes a determination which is enforceable by the
authority of the adjudicator. The most common form of internally enforceable
adjudication is determination by state authorities empowered to enforce decisions by
law (for example, courts, tribunals) within the traditional judicial system. However, there
are also other internally enforceable adjudication processes (for example, internal
disciplinary or grievance processes implemented by employers). (Source: NADRAC,
Dispute Resolution Terms 2003).

Alternative dispute resolution (ADR)

Refers to processes, other than judicial determination, in which an impartial person
assists those in a dispute to resolve the issues between them. ADR is commonly used
as an abbreviation for alternative dispute resolution, but can also be used to mean
assisted or appropriate dispute resolution. Some also use the term ADR to include
approaches that enable parties to prevent or manage their own disputes without outside
assistance. (Source: NADRAC, Dispute Resolution Terms 2003).

Arbitration
A process in which the parties to a dispute present arguments and evidence to a
dispute resolution practitioner (the arbitrator) who makes a determination. (Source:
NADRAC, Dispute Resolution Terms 2003).

Case appraisal
A process in which a dispute resolution practitioner (the case (Advisory) appraiser)
investigates the dispute and provides advice on possible and desirable outcomes and
the means whereby these may be achieved. (Source: NADRAC, Dispute Resolution
Terms 2003).

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Case presentation
A process in which the parties present their evidence and (Advisory) arguments to a
dispute resolution practitioner who provides advice on the facts of the dispute, and, in
some cases, on possible and desirable outcomes and the means whereby these may
be achieved. (Source: NADRAC, Dispute Resolution Terms 2003).

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Conciliation
A process in which the parties to a dispute, with the assistance of a dispute resolution
practitioner (the conciliator), identify the issues in dispute, develop options, consider
alternatives and endeavour to reach an agreement. The conciliator may have an
advisory role on the content of the dispute or the outcome of its resolution, but not a
determinative role. The conciliator may advise on or determine the process of
conciliation whereby resolution is attempted, and may make suggestions for terms of
settlement, give expert advice on likely settlement terms, and may actively encourage
the participants to reach an agreement. NOTE: There are wide variations in meanings
for ‘conciliation’, which may be used to refer to a range of processes used to resolve
complaints and disputes including:
 Informal discussions held between the parties and an external agency in an
endeavour to avoid, resolve or manage a dispute.
 Combined processes in which, for example, an impartial party facilitates
discussion between the parties, provides advice on the substance of the dispute,
makes proposals for settlement or actively contributes to the terms of any
agreement.
(Source: NADRAC, Dispute Resolution Terms 2003).

Dispute counseling
A process in which a dispute resolution practitioner (the dispute counsellor) investigates
the dispute and provides the parties or a party to the dispute with advice on the issues
which should be considered, possible and desirable outcomes and the means whereby
these may be achieved. (Source: NADRAC, Dispute Resolution Terms 2003).

Dispute handling
‘Do-it-yourself’ processes to deal with problems, complaints and conflicts being dealt
with within an organization.

Dispute Management procedure

A clearly defined procedure for managing efforts at dispute resolution.

Dispute Management system

A series of measures implemented within an organization for the purpose for identifying
and managing risks, issues and disputes, including structural, operational and
maintenance elements.

Dispute prevention
Measures used to build and maintain relationships in order to prevent problems and
differences developing into disputes. They include contractual arrangements, cultural
changes, negotiations and partnering arrangements.

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Dispute resolution
A broad range of processes used to resolve disputes. Where they operate outside of
traditional court proceedings, they are often referred to as ‘Alternative Dispute
Resolution’ (ADR).

(Early) Neutral evaluation

A process in which the parties to a dispute present, at an early stage in attempting to
resolve the dispute, arguments and evidence to a dispute resolution practitioner. That
practitioner makes a determination on the key issues in dispute, and most effective
means of resolving the dispute without determining the facts of the dispute. (Source:
NADRAC, Dispute Resolution Terms 2003).

Expert appraisal
A process in which a dispute resolution practitioner, chosen on (Advisory) the basis of
their expert knowledge of the subject matter (the expert appraiser), investigates the
dispute. The appraiser then provides advice on the facts and possible and desirable
outcomes and the means whereby these may be achieved. (Source: NADRAC, Dispute
Resolution Terms 2003).

Expert determination
A process in which the parties to a dispute present arguments and evidence to a
dispute resolution practitioner, who is chosen on the basis of their specialist qualification
or experience in the subject matter of the dispute (the expert) and who makes a
determination. (Source: NADRAC, Dispute Resolution Terms 2003).

Facilitated negotiation
A process in which the parties to a dispute, who have identified the issues to be
negotiated, utilise the assistance of a dispute resolution practitioner (the facilitator), to
negotiate the outcome. The facilitator has no advisory or determinative role on the
content of the matters discussed or the outcome of the process, but may advise on or
determine the process of facilitation. (Source: NADRAC, Dispute Resolution Terms
2003).

Facilitation
A process in which the parties (usually a group), with the assistance of a dispute
resolution practitioner (the facilitator), identify problems to be solved, tasks to be
accomplished or disputed issues to be resolved. Facilitation may conclude there, or it
may continue to assist the parties to develop options, consider alternatives and
endeavour to reach an agreement. The facilitator has no advisory or determinative role
on the content of the matters discussed or the outcome of the process, but may advise
on or determine the process of facilitation. (Source: NADRAC, Dispute Resolution
Terms 2003).

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Fast-track or Expedited arbitration
A process in which the parties to a dispute present, at an early stage in the attempt to
resolve the dispute, arguments and (Determinative) evidence to a neutral third party,
(the arbitrator) who makes a determination on the most important and most immediate
issues in dispute. (Source: NADRAC, A Framework for ADR Standards, April 2001).
Independent fact finding
A process in which the parties to a dispute present arguments and evidence to a neutral
third party (the investigator) who makes a determination as to the facts of the dispute,
but who does not make any finding or recommendations as to outcomes for resolution.
(Source: NADRAC, A Framework for ADR Standards, April 2001).

Indirect negotiation
A process in which the parties to a dispute use representatives (for example, lawyers or
agents) to identify issues to be negotiated, develop options, consider alternatives and
endeavour to negotiate an agreement. The representatives act on behalf of the
participants, and may have authority to reach agreements on their own behalf. In some
cases the process may involve the assistance of a dispute resolution practitioner (the
facilitator) but the facilitator has no advisory or determinative role on the content of the
matters discussed or the outcome of the process, but may advise on or determine the
process of facilitation. (Source: NADRAC, Dispute Resolution Terms 2003).

Investigation
A process in which a dispute resolution practitioner (the investigator) investigates the
dispute and provides advice (but not a determination) on the facts of the dispute.
(Source: NADRAC, Dispute Resolution Terms 2003).

Mediation
A process in which the parties to a dispute, with the assistance of a dispute resolution
practitioner (the mediator), identify the disputed issues, develop options, consider
alternatives and endeavour to reach an agreement. The mediator has no advisory or
determinative role in regard to the content of the dispute or the outcome of its
resolution, but may advise on or determine the process of mediation whereby resolution
is attempted. Mediation may be undertaken voluntarily, under a court order, or subject
to an existing contractual agreement. An alternative is ‘a process in which the parties to
a dispute, with the assistance of a dispute resolution practitioner (the mediator)
negotiate in an endeavour to resolve their dispute’. (Source: NADRAC, Dispute
Resolution Terms 2003).

Mini-trial
A process in which the parties present arguments and evidence to a dispute resolution
practitioner who provides advice as to the facts of the dispute, and advice regarding
possible, probable and desirable outcomes and the means whereby these may be
achieved. (Source: NADRAC, Dispute Resolution Terms 2003).

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Private judging
A process in which the parties to a dispute present arguments and evidence to a
dispute resolution practitioner chosen on the basis of their experience as a member of
the judiciary (the private judge) who makes a determination in accordance with their
opinion as to what decision would be made if the matter was judicially determined.
(Source: NADRAC, Dispute Resolution Terms 2003).

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