The idea of arguing a client’s case in court is iconic of the legal profession. However, going to court is not always the best way to resolve an issue and there are a range of alternative dispute resolution (ADR) methods available to help resolve matters. The main benefit of ADR is that it tends to offer more privacy and confidentiality than the court process does. Many contracts now feature an ADR clause, and we take a look at five different methods of this below - arbitration, mediation, conciliation, adjudication and MBIE determinations.
Arbitration is where parties to a dispute appoint an independent person (the arbitrator) to make a decision. It is run similarly to the court process, but gives parties a greater degree of control than litigation can - for example on procedural matters such as deadlines for exchanging documents, and when the hearing will take place.
Arbitration aims to achieve a final resolution in a way that preserves relationships between those involved, and it can be significantly more cost-effective than litigation. Parties will often sign an arbitration agreement which ensures that the process is entirely confidential, and agree that the arbitrator’s decision will be binding and final (so long as it is a reasonable decision, it often cannot be appealed).
Commercial disputes are often resolved via arbitration, as it can be very effective when there are multiple parties involved. The biggest hurdle may be having everyone agree to use the arbitration process in the first place.
Outcomes achieved by arbitration include:
- A binding and final decision;
- A practical solution to the dispute; and
- Co-operation between parties and the preservation of relationships.
Mediation is where an independent mediator facilitates a discussion between the parties and helps them to reach a decision themselves. The mediator is not tasked with making any decisions on the issues.
Mediation is a less formal process, and gives the parties a chance to have their say and be ‘heard’. The process aims to preserve existing relationships as much as possible. Mediation is seen as a more flexible process than litigation due to the lack of procedural requirements, and as it is held in private, it can offer a greater degree of privacy.
Both small and large groups can be accommodated by the mediation process. A successful mediation depends on the willingness of everyone involved to listen and co-operate. It is often used in situations where it is beneficial for the parties to make a decision together, such as for family law issues.
Outcomes achieved by mediation include:
- Full representation of everyone’s needs and interests;
- The ability to create a mutually workable solution; and
- The opportunity to directly address conflict with a clear action plan.
Conciliation is similar to mediation, but the conciliator (who is a neutral third-party) takes on a stronger advisory role. At the end of the process, the conciliator will come up with a settlement proposal which is based on the discussions had by the parties. The parties can agree in advance whether this is to be binding or not.
The benefits of flexibility, privacy and preservation of relationships are also captured by conciliation. Co-operation is key to this process. Technical issues are often referred to conciliation, and so it is important that the conciliator has expert knowledge in the specific area of the dispute. Conciliation can sometimes go ahead even if one party is not present.
The benefits of conciliation include:
- Assisted decision-making;
- The input of specialist knowledge; and
- A written settlement proposal resulting from the process.
Adjudication is where evidence is submitted to a third-party adjudicator who will make a decision about a dispute. The decision of an adjudicator is known as an ‘interim’ decision, and will be binding unless it is later replaced by a court judgment.
This process is less focused on the preservation of relationships, and it may not be confidential if parties are compelled to participate (e.g. if they are required by contract to do so). This ADR method also offers the parties considerably less control over the process.
Adjudication is a particularly effective method for resolving construction disputes, and is specifically mentioned in the Construction Contracts Act 2002 [link]. The purpose of that Act is to provide for the speedy resolution of disputes relating to construction contracts, so that payments owing can be made within a reasonable timeframe.
Adjudication provides a quicker and sometimes more straight-forward outcome than litigation, whilst keeping the focus on what the law says.
Outcomes achieved by adjudication include:
- A timely and straight-forward decision; and
- A binding decision which is able to be reviewed.
5. MBIE Determinations
Anyone with an interest in, or dispute with, building work can apply for a determination from the Ministry of Business Innovation and Employment (MBIE). MBIE can decide whether a building complies with the current Building Code, or can confirm/reverse/modify earlier decisions about this. Each decision is confidential and, unlike a court, MBIE is not bound by previous decision or precedent. This means that each decision is quite specific to the particular building works in question.
The determination is legally binding, but it can be appealed to court or be judicially reviewed if a party thinks it was reached unfairly.
Features of an MBIE determination include:
- A binding and case-specific decision; and
- The ability to appeal to court.