At a recent whole day ADR conference I had the chance to listen to Justice Julie Ward of the NSW Supreme Court talk about her views about ADR in the court system.
Before the change of government (Labor hand over to Liberal) the NSW State Government has already enacted Part 2A of the Civil Procedure Act. This State legislation was a close mirror of the Federal Government’s Civil Dispute Resolution Act 2010 that required parties to a dispute to demonstrate that they had taken genuine steps to try and resolve their dispute outside of the court process before they would be allowed full access to the court.
The new Liberal government decided to delay implementation of the new law as they had concerns about its efficacy and wanted to see how the federal law worked for a period before making a final decision about it for NSW.
There is some concern that the new law might spawn pre-litigation skirmishes that some potential litigants may not be able to afford, and hence be denied their constitutional right of access to the courts. There is some anxiety that the mandatory requirement to demonstrate “genuine steps” (or “reasonable steps” in NSW) as a precondition to a right of use of the courts to determine and resolve commercial disputes might lead to more front end litigation as parties fight over the issue of compliance.
Justice Ward referred to Sections 56 -59 of the Civil Procedure Act. These sections already impose duties on lawyers to undertake certain pre-litigation protocols. She asked, “Do we really need more?”
Justice Ward sits on the governments sub-committee that reviews the Courts’ ADR protocols. They actively seek feedback and comments from different stakeholders in the justice system.
One major issue is how to make ADR more accessible to the public.
Mandatory pre-action ADR already exists in the Supreme Court with Family Provision Claims under Chapter 3 of the Succession Act. These are disputes where an “eligible person” in a family applies under Chapter 3 for an order that the Court make provision out of the estate of a deceased person for his or her needs where it is argued that the deceased person failed to make adequate or proper provision for that person is a Will.
The main issue is about timing – when it should take place.
There is a general resistance to any mandatory requirement that it take place PRE-ACTION. So most family provision claims are first filed in Court before any serious attempt is made to resolve such disputes using ADR methods and initiatives.
Justice Ward referred to certain research done in the Equity Division of the Court that she said demonstrated that disputes that were referred “to mediation” later (rather than early) were more likely to settle. Hence, she concluded that any mandatory requirement for pre-action “mediation” was not warranted. In her view the parties to a commercial dispute will not be able to properly identify the issues in the dispute until litigation is commenced and their lawyers help them identify all the critical issues. This can only be done by the lawyers doing their job in reviewing all the relevant evidence and testing its probity and credibility.
This research done in the Equity Division of the Court is likely to lend support to the view held by many litigation lawyers that their clients are not “ripe for settlement” at mediation until they have go to the point of understanding that they might not have as good a case as they originally thought they had, and that they might lose if the matter goes to a final hearing on all the evidence. By this time their client has already incurred considerable legal costs and now realize that they are exposed to paying the other party’s costs as well if they end up being the loser.
This explains why many lawyers like to arrange a mediation just 2 months or so out from the final trial date. At this point each lawyer has their client under maximum pressure concerning prospects of wining or losing and being exposed to a hefty legal costs burden. Lawyers call it “settling in the shadow of litigation”.
Justice Ward also stated the concern that arguments between the parties as whether or not the mandatory requirement of “genuine steps” (or “reasonable steps”) had been complied with by a party could lead to “satellite litigation” on that issue. Front end litigation over compliance raised another risk – whether such litigation could expose parties to having to reveal confidential details from the mediation in order to properly respond to a challenge over genuine steps/reasonable steps compliance. The fear of such breaches of the usual confidentiality attaching to mediation could deter parties from litigating their disputes in jurisdictions that enacted genuine steps type compliance laws at the entrance to the court infrastructure.
Nevertheless, Justice Ward stated her firm view that even though the current law stated in Sections 56-59 of the Civil Procedure Act did not impose any mandatory requirement to show “genuine steps” or “reasonable steps” before being permitted to use the litigation system to resolve the dispute, lawyers acting for the parties who don’t make reasonable efforts to try and resolve the dispute via ADR methods before filing a claim in court should at least exchange correspondence providing reasons for not doing so.
What do you think about this issue?
When is the right time for the parties and their lawyers to make maximum effort and take genuine and reasonable steps to try and manage and resolve most commercial disputes? Before Litigation is commenced, or afterwards?
I have my own strongly held views, based on my own direct experience both as a litigation lawyer and as an ADR expert. I will share my own view in the next post.
Christopher J. Whitelaw
Sydney Barrister, Mediator and Arbitrator.
