Alternative Dispute Resolution: Resolving Cost Disputes Without Litigation

Litigation or assessment through the Supreme Courts are the traditional go-to court proceedings for settling cost disputes in Australia. However Alternative Dispute Resolution (ADR) offers several less-judicial approaches, which can be quicker, cheaper and more flexible.

Whilst litigation in the courts continues to be relevant, there has been an accelerating expansion in the use of ADR since the year 2000. The two most common forms of ADR are arbitration and mediation, which we will explore further here in relation to cost disputes.

Cost disputes can arise either between parties of a substantive litigious dispute or between a solicitor and their client over the cost of legal work, litigious or non-litigious. A substantive litigious dispute centres around the proceedings as a whole and does not necessarily include a dispute about the cost of the proceedings.

The use of mediation as an ADR

The use of mediation as an alternative dispute resolution process in a substantive litigious cost dispute has been, and remains, the earliest use of ADR in Australia and England/Wales.

The institutionalisation of mediation, and the evolution of a single integrated dispute resolution system of which mediation is a part, has occurred against a backdrop of a series of interrelated developments in the practice of litigation in the courts.

In litigation, the single integrated dispute resolution system evolved due to three key factors:

  • the penetration of mediation principles and processes into existing or emerging dispute resolution systems in courts or tribunals;
  • the increasing connection between mediation and other dispute resolution systems; and
  • the overriding objective of ensuring the just, quick and cheap resolution of proceedings.

Currently in Australia there is a proliferation of ADR processes in litigation, such as arbitration, conciliation, case appraisal, and settlement conferences that can operate pre and post action, pre and post hearing and pre-appeal.

Within the Australian court system, there are at least four categories of people who are providing mediation services. There are permanent court personnel, such as Federal Court registrars and other staff trained in mediation who undertake the role as part of the overall duties. There are recognised external mediators appointed by either the courts or by the parties, and there are judges or associate judges.

Potential Benefits of Utilising Mediation for Cost Disputes:

  • a mediator can help parties step outside an adversarial framework;
  • a mediator can make potential offers and concessions look more acceptable;
  • a robust and experienced mediator can help to find a way forward even in a intractable dispute;
  • the flexible structure of mediation allows a lawyer and client time to review offers and options in a way that may not be possible in negotiation;
  • mediation achieves good success rates and party satisfaction.

The use of Arbitration for dispute resolution

In arbitration, a third-party decision-maker (arbitrator) steers the process which can help the parties avoid the possibility of not agreeing on a resolution of their dispute. The arbitrator makes a ruling, known as the arbitral award, which is legally binding.

One interesting form of arbitration, the final offer arbitration, also known as a pendulum arbitration, ‘last best offer’ or ‘baseball’ arbitration, is used where two parties cannot reach an agreement so each puts forward a single offer and the arbitrator selects one.

Potential Benefits of Utilising Arbitration for Cost Disputes:

  • the parties can select an arbitrator with appropriate expertise;
  • the process is private;
  • many aspects of the process can be tailored to the needs of a specific dispute;
  • the process can be structured;
  • the process can be cost effective if the dispute is decided on written submissions rather than a hearing.

For More information, refer to sections 2 and 3 of “Alternative Dispute Resolution” in Quick on Costs, published by Thomson Reuters. Quick on Costs is available on the new Westlaw, Westlaw AU, ProView and in Print.

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