The Formal Legal System in Australia

Legal responsibility in Australia is a shared duty between the state and federal governments. The structural composition of Australia’s government is divided into three; federal parliament, state parliaments and local councils or municipalities. States and Territories have separate jurisdictions within which court systems are developed. The individual state court systems comprise of magistrate courts, district courts, tribunals and supreme courts which are considered as the most senior courts in the state level (Low, Hattingh, & Forrester, 2010). Supreme courts can preside over criminal and civil matter either under original jurisdiction or in an appellate capacity (Lee & Campbell, 2013).  On a federal level, the High Court of Australia serves as the unifying body on the overall judicial hierarchy system; it holds appellate jurisdiction for all Australian courts (Loveday, Abraham, & Mckie, 2018).  

The hierarchies and systems described above outline the formal legal system available to businesses and individuals in Australia to solve their disputes. Essentially, litigation serves as the formal avenue for dispute resolution. The merits of adopting litigation as a dispute resolution tool are that it is transparent, observable and subject to critique. Parties can easily access evidence and question arguments to promote fairness. Despite these benefits, the formal justice system has proven to be expensive and time-consuming. According to Pentony et al., (2010), “the unsatisfactory aspects of the formal legal system have led to a demand for other ways of resolving disputes”. The following discourse highlights the shortcomings of the formal system of dispute resolution in the context of business law and the available alternatives with the aim of supporting this statement.

The shift to alternative dispute resolution methods in recent times within the context of commercial law is largely influenced by the inefficiencies experienced through litigations (Coves, 2015). Litigants and judicial officers alike have criticised litigation as a time consuming and expensive conflict resolution tool. In the construction industry, for example, alternative methods have taken precedence over litigation as industry players have found litigation to be inefficient both financially and in terms of time (Gill, Gray, Skitmore, & Callaghan , 2015).

Time and cost are not merely considered as inefficiencies in the context of justice for individual litigants, the burden on court resources translates to a disadvantage for communities as a whole. As stated by Justice Ronald Sackville, “timeliness and affordability are essential elements for justice”, in this regard, swift and economic dispute resolution serves to protect the limited public resources available to operate the justice system (Justice Sacksville, 2009). This position was reaffirmed by Chief Justice Michael Black who posited that in addition to delaying justice, the uncertainty associated with delay can lead to measurable and immeasurable direct and incidental costs for parties within the commercial context (Chief Justice Black, 2009).  

Shortcomings of the Formal Legal System

The inefficiencies of the formal legal system have also been documented in case law. In Ketteman v Hansel Properties Ltd (1987), the presiding Judge challenged an application to grant a late amendment on a procedural defence citing that in addition to ensuring justice, courts must be mindful of the risk of increased litigation which inhibits efficiency which is a necessity in conducting business (Chief Justice Bathurst, 2012). Similarly, in Sali v SPC Ltd (1993), Brennan, Deane and McHugh JJ held that where a court is presented with the issue of adjournment, it must weigh the consequence of granting the adjournment against the available resources and the interests of litigants both in the matter before court and other matters awaiting a hearing. That is, consider the most efficient approach both to the court, the litigants and the community as a whole.

More recently, in Aon Risk Services v Australian National University (2009), the court appreciated the need for efficiency within the commercial context through the observations of Justice Heydon who stated that commerce is dependent on the expedient and justified circulation of funds. As the judicial system has become a significant pillar in addressing conflicts arising from this function, the efficiency of the system has direct implications on the health of the commercial sector. As such, the shortcomings of litigation bear directly on the prosperity of commercial life. Conclusively, the effectiveness of legal remedies is dependent on the timeliness with which they are provided.

The formal legal system also presents a risk of discrimination based on financial status. As aforementioned, the litigation process is costly particularly due to the drawing out of the process through delays. As such, only the wealthy party in a conflict can afford to adopt litigation as a conflict resolution method (Kirby, 2009). Additionally, the wealthier party can afford to contract the best available legal representation which gives them an added advantage in presenting their case before court. As the litigation process is informed by legal principles and procedural rules, presentation is essential and as the ability to contract proper legal representation is highly beneficial.

Litigation can also have adverse effects on the relationship of contracting parties. The uncertainty and rigid nature of court proceedings and procedures can lead to a break-down of business relationships. Court proceedings are informed by facts and the principles of law; as such resolutions can only be arrived at within the confines of the law (NADRAC, 2012). Effectively, such a solution is likely to benefit one party at the expense of the other. Further, the drawn-out process of litigation and the accompanying uncertainty can create irreparable damage for the relationship.

Alternative Methods of Dispute Resolution

The shortcomings discussed above have driven the shift from litigation to alternative means of dispute resolution within the commercial sector. Alternative Dispute Resolution in Australia refers to the resolution of conflicts through processes that encourage parties to arrive at their own solution with the aid of a neutral facilitating third party (Latimer, 2012). They include arbitration, negotiation, mediation and expert appraisal among others with the most notable alternative forms being arbitration and mediation.

With arbitration, the conflicting parties present their evidence-supported arguments to a neutral party who determines their case and provides a binding solution (Latimer, 2012). It allows parties the opportunity to get an enforceable award through a cost-effective, timely and confidential method. In Australia, individual jurisdictions have developed legislation to regulate arbitration; currently, states are in the process of adopting the Commercial Arbitration Bill 2010 which is modelled from the United Nations Commission on International Trade Law (UNCITRAL) (Latimer, 2012). Additionally, most commercial contracts incorporate an arbitration clause that requires contracting parties to engage and arbitrator in civil matters prior to litigation.

Another common alternative to litigation is mediation. Unlike in arbitration where the decision of the arbitrator is final and binding, the mediator merely aids parties to arrive at their own solution through negotiation (Latimer, 2012). If the process is unsuccessful, the parties can adopt another alternative method or proceed to legislation. Courts have registered support for mediation as a preferred alternative to litigation. Notably, Chief Justice James J Spigelman recognised that in addition to cost-effectiveness and time-savings, mediation guarantees satisfaction among the conflicting parties as well as overall fairness (Chief Justice Bathurst, 2012).

In expert appraisal or determination, the neutral party or practitioner facilitating the process is selected based on their expertise on the issue at hand. Their role is to provide the parties with possible outcomes informed by the available facts and evidence and advice on the means of achieving these outcomes (IAMA, 2015). Other alternative avenues that can be adopted for dispute resolution include conciliation, facilitation and negotiation.

Conclusion

As Pentony et al., (2010) states, the shortcomings of litigation as the dominant dispute resolution system have facilitated a need for alternative methods. These shortcomings, particularly in the context of commercial life, include costliness, delay, the breakdown of a relationship and the risk of discrimination to less privileged parties. Litigants and judicial officers alike are well aware of the inefficiencies of litigation as outlined in the discourse above. Judges have over the years expressed the need to be mindful of the demerits of litigation not only to litigants but to the community as a whole. Prolonged litigation promotes the wastefulness of the scarcely available public resources. It also undermines the prosperity of commercial life which is adversely affected by the uncertainty perpetuated by delays in litigation. Based on these reasons, courts have encouraged an adoption of alternative methods like arbitration, mediation, expert appraisal and negotiation among others which facilitate expediency and have higher rates of participant satisfaction due to their flexibility.

References

Chief Justice Bathurst, T. (2012). The Role of Courts in the Changing Dispute Resolution Landscape. UNSW Journal, 870-888.

Chief Justice Black, M. (2009). The Role of the Judge in Attaching Endemic Delays: Some Lessons from Fast Track. Journal of Judicial Administration, 88.

Coves, P. (2015, October). Alternative or mainstream? Proctor, p. 43.

Gill, A., Gray, J., Skitmore, M., & Callaghan, S. (2015). Comparison of the effects of litigation and ADR in South-East Queensland. The International Journal of Construction Management, 254-263.

IAMA. (2015, January 1). What is ADR? Retrieved from Resolution Institute: https://www.iama.org.au/what-we-do/what-adr

Justice Sackville, R. (2009). The Future of Case Management in Litigation. Journal of Judicial Administration, 211-212.

Ketteman v Hansel Properties Ltd, AC 189 (1987).

Kirby, M. (2009). ADR in Australia- Without Fear or Favour. Institute of Arbitrators and Mediators Australia Annual Conference (pp. 1-24). Melbourne: IAMA.

Latimer, P. (2012). Australian Business Law. Sydney: CCH Australia Ltd.

Lee, H. P., & Campbell, E. (2013). The Australian Judiciary. Melbourne: Cambridge University Press.

Loveday, C., Abraham, R., & Mckie, S. (2018). Litigation & Dispute Resolution Australia. In M. Madden, Litigation & Dispute Resolution. Global Legal Group.

Low, J., Hattingh, L., & Forrester, K. (2010). Australian Pharmacy Law and Practice. Sydney: Elsevier.

NADRAC. (2012). Your Guide to Dispute Resolution. Barton: National Alternative Dispute Resolution Advicory Council.

Pentony, B., Graw, S., Lennard, J., & Parker, D. (2010). Understanding Business Law. LexisNexis Butterworths.