Introduction

ADR in its modern Australian form had its genesis in community justice programmes in the early 1980s, in the reaction against formalized forms of adjudication and in the search for more accessible and responsive forms of dispute resolution.1 In the ensuing two decades ADR was transformed into many varieties and applications in numerous different fields of dispute resolution. By international perspectives Australia can probably be said to have a 'mature' ADR system, as measured by its social acceptance, quantity and quality of practice, skills, accreditation and accountability regimes, and survey studies, reflective practice and literature.

In contemporary Australia ADR is categorized into 'facilitative' processes, such as mediation and conciliation, 'advisory' processes, such as case appraisal and neutral evaluation, and 'determinative' processes such as arbitration and binding expert determination.2 The most prevalent form of ADR is mediation, though in practice there tend to be many different models and styles of this process, for example facilitative mediation and evaluative mediation. In the statutory context extensive use is made of conciliation and, while the boundaries between conciliation and mediation are by no means clear, it is usually said that conciliators have a more 'interventionist' role than mediators, for example in promoting the principles of the statutory scheme in which they operate. Case appraisal and neutral evaluation are used where the intervenor is required to use his or her expertise to guide the parties to a 'reasonable' outcome, but without being able to make a binding determination for them. Arbitration, according to the terms of the commercial arbitration legislation, is still used in some contexts but has tended to be usurped in the last decade by mediation and case appraisal. There are examples of 'hybrid' ADR processes, particularly in statutory contexts where the intervenor might be able to play a mediatory, advisory and determinative function in the same dispute, and a great deal of creative design in industry dispute resolution systems and contractual dispute resolution clauses.

As regards areas of application, ADR in Australia was first used in community and neighbourhood disputes, and there are flourishing community justice programmes in all the States. There is extensive use of ADR in family matters, both within and outside of the Family Court system, much of it subsidized by the federal government. Mediation and conciliation have been used extensively [Page42:] in the family area, and recently arbitration has been introduced for matrimonial property disputes. The building and construction industry has shown a steady swing towards mediation and other forms of ADR and away from arbitration, its traditional non-judicial form of dispute resolution. In a number of government agencies involved with human rights issues, such as anti-discrimination and equal opportunity, conciliation has become the established dispute resolution system. Extensive use is made of mediation and case appraisal in commercial, personal injury and testamentary disputes. Other areas in which ADR is used include planning and environmental disputes, consumer, retail shop leases and residential tenancy disputes, employment and industrial disputes, and within privatized industries through the operation of industry codes of conduct. Such is the extent of the use of ADR in Australia that it can be encountered, on one hand, in high value international trade and business disputes and, and on the other, in school-yard disputes in some primary schools.

As regards the organization of ADR in Australia, this has tended to occur on a decentralized and unregulated basis. Many professional associations, in particular those for lawyers, have ADR schemes which train their members and promote their services. Many government agencies, such as legal aid bodies or building tribunals, and government-funded community organizations, such as Relationships Australia3 which operates throughout the country, have extensive ADR programmes in place. There are several specialist commercial providers of ADR services, most of which operate only in a single city, for example Mediate Today4 and the Australian Commercial Disputes Centre5 in Sydney. Many universities and private consultants provide training services for prospective ADR practitioners though there is as yet no national accrediting body and very little mutual recognition of different qualifications. As with any new occupation there are many ADR practitioners who operate outside any form of professional regulation and discipline and receive referrals on the basis of their reputation and by word of mouth. Some Australian mediators practice internationally within the Asia-Pacific region. There is general receptivity to ADR in trade and commerce with overseas parties and it is now common for ADR clauses to be included in joint venture agreements, stipulating the agency which will provide the dispute resolution service and the rules in terms of which it will be conducted.

In its evolution over two decades Australian ADR has tended to become institutionalized and 'professionalized' and less voluntary, alternative and principled than intended by its founders. One manifestation of these trends is the incorporation of ADR into the formal legal system.

ADR in the Australian legal system

Within the legal domain much of the motivation for ADR in Australia has come from dissatisfaction with the defects of the so-called adversarial system of litigation. Australia inherited the processes and style of the common law courts, including their alleged defects of delay, cost, undue formalism and technicality, narrow range of remedies and other ills laid at their door in many common law jurisdictions. Reforms of civil litigation in Australia have come from two major sources, the development of case management practices and the introduction of ADR processes. These two initiatives have not only coincided in time but they have also complemented each another - case management uses ADR [Page43:] processes extensively and ADR has become a major feature of case management systems.

One of the modern categories of Australian ADR is loosely referred to as 'court-connected ADR'. There are many structural variations within this category but what they have in common is a close integration of ADR into the litigation process. Courts in all jurisdictions can make referral orders to ADR, with or without the consent of the litigants involved. The referral order provides a framework for the ADR process by stipulating time-lines, requirements for exchange of information, costs arrangements and other practical matters. The identity of the mediator is usually settled by the parties and referred to in the order; where there is no agreement the referring judge can select a mediator from the relevant court's panel of ADR practitioners.

As regards the conduct of the relevant ADR process this tends to have only a limited form of regulation through the rules of court.6 In some rules it is an offence to 'impede' a mediation, for example by declining to attend or refusing to participate. However, generally there is little court supervision of the process and even where it continues beyond the stipulated time there will be no interference or sanction provided the parties remain committed to reaching a settlement. The ADR practitioner is required to report back to court but only on the outcome of the process and not on the conduct of the individual parties. Where there is consensus on all issues the parties will often seek a consent order of court in terms of their agreement. Where there is no agreement the matter returns to the court lists to proceed to hearing.

It is this context of the changing contours of civil litigation, a more 'managerial' role for the courts and the connection of ADR to the litigation system, that has provided the need and opportunity for the development of a new jurisprudence appropriate for modern dispute resolution systems. ADR has become less an alternative to litigation, and more a variation within the inclusive litigation process. This has had implications for the nature and scope of ADR as both legislatures and the courts have defined and redefined the scope and parameters of specific processes, such as mediation and case appraisal, and of important features of the ADR processes, such as confidentiality, liability and standards.

The following section of this article deals with the factors which courts will take into consideration in exercising their discretion to refer matters to ADR.

Diagnosing and deciding on mandatory ADR

Between 1994 and 2000 all Australian courts were provided with the authority to refer litigating parties to ADR as part of their case management functions. Generally the courts will make consent referral orders where both litigants agree to ADR, though they retain a discretion not to do so even here (for example for public interest or other policy reasons). Where one or both litigants opposes the making of a referral order, the court is faced with a more significant discretion and has to provide a reasoned decision for its exercise.

The literature on the appropriateness or inappropriateness of different forms of ADR is unscientific and ambivalent.7 Thus it is often suggested that a serious imbalance in bargaining power between the parties is an indicator of the inappropriateness of mediation, despite the fact that other dispute resolution [Page44:] processes may be no more effective in mitigating the power of the stronger and ameliorating the disadvantage of the weaker. In practice, moreover, many mediations are conducted between employers and individual workers, between large and small corporations, and in other situations where there is an 'imbalance' of bargaining power. Likewise some of the early ADR literature suggested that where a dispute had become 'monetized' into a single issue (for example, how many dollars the defendant will pay the plaintiff), the 'facilitative' forms of ADR were inappropriate as they provided less scope for constructive negotiation and creative problem-solving. In practice, however, mediation is used extensively for personal injury disputes in many countries, including Australia, where the only real issue is often how much money the plaintiff will receive. It is probably true to say that whereas the literature calls for a cautionary approach to the use of ADR in a number of circumstances, in dispute resolution practice there is a tendency to be more adventurous in its use.

It is therefore not surprising that courts have been tentative and inconsistent in developing an early jurisprudence on the question of whether ADR is appropriate or inappropriate. This is sometimes referred to as the diagnostic question.8 In this article reference is made to two Australian cases in which courts were faced with the diagnostic question in relation to mediation. Both cases involved defamation claims brought by legal officers and both would have proceeded to jury trials. The cases were brought in different court jurisdictions, namely Queensland and New South Wales; the ADR culture in the former is more 'advanced' than that in the latter, with ADR processes having been accepted some years earlier into the legal culture and the court system. These differences have manifested themselves in other court decisions in the respective States but were to have no significant implications here.

The magistrate and the newspaper proprietor

In the first case, Barrett v. Queensland Newspapers Pty Ltd & Ors [1999] Q.D.C. 150 (19 July 1999), a magistrate sued a newspaper publisher over an article which implied that he treated criminal offenders too lightly and was responsible for a high crime rate in his locality. The defence revolved around fair comment and qualified protection. After the closure of pleadings the defendants applied for a referral order to mediation in terms of the relevant court rules. They justified their claim in terms of the complexity of the dispute, the anticipated 10-day duration of the trial, the expenses of preparing for trial and the fact that mediation could resolve the issue in a single day. The plaintiff opposed the application on the grounds that defamation matters were not suitable for mediation, the defendant was not likely to accept liability, that more than one mediation day would be required to deal with the complexities of the case, that issues of credit would not be resolved at mediation and that the pursuit of exemplary and punitive damages would render mediation problematic.

This is now a common problem facing judges in Australia, namely what factors should they take into account in exercising their discretion in respect of mandatory ADR referrals?

In the absence of any case law9 on this question, the judge in Barrett turned to the relevant legislation which showed a 'predisposition' to ADR, suggesting that the onus might be on the rejecting party to overcome this legislative assumption. The court then referred to two preliminary factors. The first was the extent to which [Page45:] the interests of litigants other than the parties to the dispute could be taken into account in such circumstances. This was a situation in which a circuit court was available for only a limited duration and the trial would dominate one of its sitting periods. Samios D.C.J. regarded this as a relevant consideration - this suggests that judicial services can be rationed by the courts and that there is no automatic entitlement to court time for all litigants. Secondly the court queried the extent to which account could be taken of the prospects of success or failure at mediation, a factor argued by the plaintiff in opposing the application. The judgment held that this might be an inappropriate consideration on the basis that even where one party was strongly opposed to it, mediation might still provide the best opportunity for dispute resolution, better than settlement on the steps of the court. In this line of reasoning the court is suggesting that arguments that mediation will not be successful will not carry much weight on their own.

As regards the factors the court did consider relevant to the exercise of its discretion, the following emerged from the judgment:

? It could not be concluded that a mediation would not be successful.

? The trial could take more than 10 days and detract from court time available to others.

? Three of the four litigants supported a referral to mediation.

? The second defendant agreed to pay the plaintiff's share of the mediator's fee and other mediation costs.10

? The application was made early in the proceedings when substantial costs would be saved by all parties.

? There were risks in litigation, even for the party opposing the referral.

? A skilled mediator might be able to assist the parties, despite the complexity of the case.

In the light of this shopping list of factors, the court made the referral to mandatory mediation.

The lawyer and the book publisher

The first decision may be compared and contrasted with that of the New South Wales Supreme Court in Waterhouse v. Perkins & Ors [2001] N.S.W.S.C. 13 (25 January 2001). This was also a defamation action arising out of the publication of a book entitled The Gambling Man. It was again the defendants who were seeking mediation and the plaintiff, also a legal practitioner, who resisted a compulsory referral order. The defendants had offered to pay for the costs of the mediator and the venue, leaving for the plaintiff only the costs of legal representation for the mediation meeting and the preparation costs. There was again a jury trial and the defendants estimated a hearing time of six weeks.

Part of the plaintiff's resistance in this case centred around the fact that the defendants had nominated the proposed mediator; counsel for the plaintiff suggested that even if the defendants nominated the Archangel Gabriel they would not accept.11 A more important factor on this point, in the plaintiff's submission, was the desire for public vindication through the courts. The judge, however, felt that mediation could itself be a vehicle for public vindication if 'conducted in good faith by all parties'. While this might constitute a degree of wishful thinking, Levine J. did display an appropriate understanding of mediation in noting its [Page46:] capacity to deal with the parties' needs and interests, albeit against a backdrop of their legal rights.

In the Waterhouse case Levine J. also suggested that mediation might serve 'to take the edge off the acrimony' between the parties. While this viewpoint is consistent with ADR theory, mediation practitioners know that there are no guarantees of collaborative, non-adversarial behaviour in the mediation room. There was a further suggestion from the judge that failure to participate in mediation in good faith could result in the party being in contempt of the court's referral order,12 suggesting a form of sanction for inappropriate behaviour by mediating parties.

As regards the factors which Levine J. regarded as relevant in exercising his discretion the following list contains the most important:

? The case had already been running for 10 years and was unlikely to be finalized for another year.

? The hearing would take about six weeks.

? The defendants had concerns about cost escalations.

? The plaintiff was intent on being vindicated and this could be provided in mediation.

? The defendant had offered to pay the costs of the mediation and the plaintiff would incur only his own legal costs.

? The total cost of mediating compared to litigating could not be considered a disproportionate diversion of resources.

? Mediating parties are obliged to act in good faith, therefore the potential outcome should be viewed positively when compared to litigation.

? There was no rational reason for not ordering mediation in the circumstances of the case.

In the light of this list of factors, the New South Wales court also ordered the whole of the matter to compulsory mediation.

Comparison and evaluation

The two cases have many similarities in their approaches to the question of mandatory referrals where one of the parties in litigation objects to the use of ADR. Most of the factors indicated in both of the judgments revolve around cost-benefit considerations for the parties themselves, with some suggestion that the court is able to make a risk assessment for the litigants on these matters. To some extent these factors of preparation costs, legal fees, delays until trial and hearing time can be measured, although it is ironic that courts feel competent in making assessments on them without hearing any of the evidence in the case. Other factors are also of a cost-benefit nature but they relate more to the public interest in the economies of the legal system and the appropriate allocation of scarce judicial resources among all potential litigants. These considerations have important policy dimensions and might be seen as involving a constitutional question on the extent to which litigants have a right to their 'day in court'. Other factors are based on judicial notice of dispute resolution systems; for example, the plaintiff's submitted desire in the second case to be vindicated through the court system is a rather dubious claim in the light of the adverse publicity which defamation trials attract. Here the court asserted, without supporting reasoning, that vindication could equally be obtained through mediation. [Page47:]

However while it is one thing in these cases to list the factors relevant to judicial discretion, the weighting of those factors is another matter. Thus, the denial of court hearing days to other litigants, if heavily weighted, could prevail over any other factor submitted by plaintiffs. The same applies to the attitude of plaintiffs. In both cases the plaintiffs, with the assistance of counsel, provided arguments not only on the unsuitability of their cases for mediation but also on their own unwillingness to mediate. Again such a factor could outweigh all others. The difficulties with both judgments is that they give no indication of which factors are determinative, and should outweigh all others, and which are indicative, and out of the indicative factors which are of major and which are of minor significance. Any developed jurisprudence would have to show more sophistication on the weighting factor.

However, it may be that the diagnostic issue will always be dealt with in a tentative and limited way. Of more significance might be the assumptions, partly inarticulate, in both decisions that most cases should go to ADR. This might be called a policy of presumptive mediation. Thus, in the Queensland case, the judge was not impressed with the argument that there were limited prospects of success at mediation; he preferred the notion that skilled mediators can make negotiations effective even in difficult cases. In the New South Wales case the presumption was almost made inarticulate in the reasoning that 'there is no rational reason for not ordering mediation'. A policy of presumptive mediation, unscientific as it might be, could also be a pragmatic way of dealing with the difficulties inherent in the diagnostic process. Only where there are major reasons why a matter should not go to ADR, for example where there are allegations of fraud or fundamental rights issues are at stake, should there not be a referral, regardless of the existence of other counter-indicative factors such as a litigant's unwillingness.

Parallel developments

There have been similar developments to those referred to above in a number of Australian cases in which dispute resolution clauses have been in issue.13

Typically, contracting parties include a detailed dispute resolution clause in their agreement, often involving a staged sequence of processes (for example, negotiation first, then expert determination, and finally arbitration) which are a condition precedent to the issuing of legal proceedings. Where, at a later stage, there is an alleged breach of contract and proceedings are instituted, the defendant pleads in defence non-compliance, or inadequate compliance, by the plaintiff with the provisions of the dispute resolution clause. Frequently it is the mediation part of the clause which is in contention.

In Australia the courts have laid to rest the spectre of mediation clauses constituting 'agreements to agree' and therefore being void for uncertainty. They have demanded in return sufficient certainty in the clause to avoid its being void for vagueness; the specificity relates to identification of the procedure to be followed and relevant time lines, and it even extends to the responsibility for payment of the mediator's fee. While the courts have generally upheld clauses which satisfy the certainty test, they have given serious consideration to countervailing arguments. These include the 'futility' argument, namely that compelling an unwilling party to mediate could be a costly and futile exercise, and the 'historic intention' argument, namely that parties who made a contractual [Page48:] commitment to negotiate their disputes should not be held to that intention where the circumstances have become hostile and the historic commitment no longer exists. The courts have also had to face the reality that remedies in this situation usually involve only a stay of proceedings, which constitutes only an indirect enforcement of the plaintiff to mediate. They have also been sensitive to the overriding policy of not allowing contracting parties to oust the jurisdiction of the courts.

Nevertheless, Australian courts have shown a similar overall approach in this situation to those reflected in the above cases. That is, they are inclined to uphold the clauses, provided they pass the certainty test, even where the relationship between the contracting parties has soured and one of them is opposed to mediating. In both situations judicial policy in favour of ADR is clear and is likely to be reinforced in future developments.

New Zealand ADR developments

In New Zealand, with its own common law legal system, ADR developments have occurred over approximately the same time period as, and with similar themes to, events in Australia.14 Inevitably there is much cross-fertilization between the countries' legal and dispute resolution systems. In New Zealand there have been particular ADR developments in land rights, employment law, small claims and planning and environmental disputes. Much of this is now regulated by legislation, and court rules allow for referrals to ADR. As in Australia, the main form of ADR is mediation. One of the interesting features of New Zealand ADR is that judges of the District and Family Courts can themselves act as mediators, which is not generally possible in Australia. This raises concerns about perceptions of fairness and natural justice, particularly where the mediating judge presides at the subsequent trial of a matter which did not resolve at mediation. As in Australia there is a jurisprudence developing around court decisions on ADR but it is as yet relatively undeveloped.

Policy issues

In Australia a number of other issues have arisen through the close interaction of ADR and the formal legal system. They include the degree of confidentiality of disclosures made in or documents prepared for ADR; the compellability of a mediator or case appraiser to give evidence in subsequent court proceedings; the nature of a good faith requirement in a negotiation or mediation clause; and the grounds for reviewing a mediated settlement. There have also been extensive recent developments around the issue of standards in ADR,15 but as yet no case of a mediator being sued in negligence or contract.

The developments referred to in this article raise a number of interesting policy questions about modern dispute resolution. These include:

? How should decisions to refer matters to ADR be made in conditions of limited information and with conflicting private and public interests at stake?

? To what extent should judges determine what is in the parties' best interests as regards the different dispute resolution processes available? [Page49:]

? How can quality and standards of ADR be developed and maintained when parties are obliged to participate in the various processes?

? To what extent is the 'judicialization' of ADR leading it to become a rights-based as opposed to an interest-based form of dispute resolution?

? What will be the perceptions and responses of litigants and citizens where the judges become screeners and referrers of cases, often away from the courts themselves?

To what extent can ADR retain its original nature and purposes as it becomes increasingly institutionalized by legislatures and courts?

Conclusion

ADR in Australia is entering a new phase with its increasing formalization and institutionalization within the legal process. On the one hand, these tendencies give it a legitimacy which it previously lacked. On the other, they test many of the normative assumptions on which ADR was originally based. In some respects these developments might be of significance to other developing ADR countries. No doubt developments in other jurisdictions will also inform the ongoing evolution of Australian ADR.

1
Indigenous Australians had their customary forms of dispute resolution with features in common with modern ADR. They are still practised in traditional forums and in statutory-based native title and community justice programmes.

2
This categorization is from the report of the National Alternative Dispute Resolution Advisory Council (NADRAC), Alternative Dispute Resolution Definitions (Canberra, 1997).

3
See web site at: www.relationships.com.au

4
See web site at: www.mediate.com.au

5
See web site at: www.acdc.com.au

6
A good example of the low-level regulation of ADR in a court-connected situation is provided by the Queensland Uniform Civil Procedure Rules of 1999, which were promulgated by the Supreme, District and Magistrates Courts to harmonize practice and procedure in the courts, including on ADR referrals.

7
See, for example, Hilary Astor & Christine Chinkin Dispute Resolution in Australia (Sydney: Butterworths, 1991) at 105-109; Christopher W. Moore, The Mediation Process: Practical Strategies for Resolving Conflict, 2d ed. (San Francisco: Jossey-Bass, 1996) at 333-337; Henry Brown & Arthur Marriott, ADR: Principles and Practice, 2d ed. (London: Sweet and Maxwell, 1999) at 239-241; Miryana Nesic & Laurence Boulle, Mediation: Principles Process Practice, UK edition (London: Butterworths, 2001) at 70-72.

8
See Laurence Boulle, 'Diagnostic Factors in Mandatory ADR Referrals' (2001) 4:3 The ADR Bulletin 31.

9
The empowering legislation also provided no guidance on the diagnostic question. However, it did provide rudimentary guidance on criteria for referral to another ADR process used in Queensland, namely case appraisal - see s. 102 of the Supreme Court of Queensland Act 1991, which provides that for this ADR option judges can take account of whether the costs of litigating the dispute are likely to be disproportionate to the benefit gained and the likelihood of the appraisal producing a compromise or an abandonment of a claim or defence.

10
This is not an unusual arrangement in Australian jurisdictions, where insurer defendants often pay mediation costs for plaintiffs in personal injury matters, though sometimes only if the mediation resolves all issues.

11
The normal Australian practice is for the parties to agree on the identity of the mediator and for the court to endorse the choice. In the rare situation in which the parties cannot agree, the court makes the choice, usually from its panel of mediators. To date archangels have not been nominated under either system.

12
The good faith requirement in negotiation and mediation has become a big issue in Australian court decisions, but is not dealt with in this article.

13
See for example Coal Cliff Collieries Ltd v. Sijehama Pty Ltd (1991) 24 N.S.W.L.R. 1; Hooper Bailie Associated Ltd v. Natcon Group Pty Ltd (1992) 28 N.S.W.L.R. 194; Elizabeth Bay Pty Ltd v. Boral Building Services Pty Ltd (1995) 36 N.S.W.L.R. 709; Aiton Australia Pty Ltd v. Transfield Pty Ltd (1999) N.S.W.S.C. 550; Morrow v. Chinadotcom [2001] N.S.W.C. 209 (28 March 2001).

14
See generally Peter Spiller, Dispute Resolution in New Zealand (Auckland: Oxford University Press, 1999); and Laurence Boulle, Judi Jones & Virginia Goldblatt, Mediation: Principles Process Practice, NZ edition (Wellington: Butterworths, 1998).

15
For example, the National Alternative Dispute Resolution Advisory Council (NADRAC), which is one of the few councils in the world which advises a national government on ADR matters, produced a discussion paper on standards in ADR in 2000 and a report, A Framework for ADR Standards, in 2001. Both documents can be accessed on the NADRAC website: www.nadrac.gov.au