Chapter 15
Getting help to fix the problem — someone else decides
If you can’t settle your dispute by discussion with your counterparty without the aid of a mediator or envoy, you may need the help of a person specifically appointed to decide the rights and wrongs of a dispute.
What you need to decide before you decide!
Escalating a dispute to the level where a third person or party is going to be determining who is right and wrong is a serious step.
By asking a person to make a decision as to who is right and wrong takes a lot of the control of the process out of the hands of the parties to the dispute.
Because it will involve assertions as to your legal position, it would generally be necessary to involve lawyers at this stage if you have not already done so. This has obvious cost consequences.
There is also a significant ‘hidden cost’ in retaining lawyers. That cost is lost management and other business time where your employees or members of staff are instructing the lawyers as to the issues in the dispute, the relevant facts and on strategic steps throughout it, and not working in your business.
You should think about the following before escalating a dispute to the level of a judge or someone else deciding it:
- How much is at stake in damages?
- How important to you commercially is getting your remedy?
- What will be the commercial and reputation implications of commencing the proceedings?
- Can you afford to lose this considering money and other commercial reasons? This is particularly important if you are suing a direct competitor and a victory for them in the case will give them a perception of market advantage.
- What are our prospects of succeeding?
- How much is it going to cost?
- How much time will it take from us doing our business?
- Is the door still open to an informal or mediated negotiation?
There are many parties who have commenced court or other proceedings in a fit of passion that they have been wronged and have then quickly lost the taste for the fight given the factors set out above.
Declining to commence court or other proceedings is not a statement of weakness or indecisiveness. On the other hand it can be the wisest decision you make depending on how these variables mesh with each other.
When a dispute escalates to what are essentially litigated proceedings, there are generally three venues in which it may be fought:
- in court (through court proceedings)
- at arbitration
- in a tribunal.
In different states of Australia there are a range of different courts, tribunals and legal requirements as to arbitration.
I will not pretend to summarise or set out the differences in each state. They are subtle and complex.
This is a matter that would need to be specifically addressed by you depending on where your dispute is to be held.
In Australia there is a complex and interlocking web of courts.
There are courts at both federal/national and state levels. In general terms there are three levels of courts in the states:
1 The Supreme Court in each state that generally has an unlimited power to hear most sorts of disputes.
2 The District or County courts that hear disputes to a set amount of the claim (generally at about $100 000 and above to about $750 000).
3 The Local or Magistrates courts that hear small disputes involving claims of less than $50 000 to $100 000.
In the federal system there are also broadly three levels of court:
1 The High Court — this court hears appeals from decisions of the courts of appeal and the supreme courts of each state and on certain constitutional and other specified legal issues.
2 The Federal Court — this is a court that hears a range of cases arising generally from legislation made by Commonwealth Parliament but also involving other areas of law.
3 The Federal Magistrates Court — again, this court tends to hear cases involving specific legislation enacted by Federal Parliament.
There is a degree of crossover or overlap in the responsibilities of each court. A party often has a degree of choice to decide which court it will start the proceedings in.
Each of the people determining disputes in any of the courts set out above has what are broadly called judicial powers. However, they are generally called judges only in the two highest courts in the hierarchy (for example, the Supreme Court and District Court). Generally speaking the person who sits on the bench in the Local or Magistrates Court is called a magistrate.
Judges and magistrates are invested by law with very broad powers as to determining disputes between the parties.
Importantly, bear in mind that under the Australian system judges and magistrates have either no or limited inquisitorial powers. That means they cannot undertake enquiries of their own as to the rights and wrongs of the dispute in determining it. They are essentially bound by what the two parties deliver to them as to the facts and the legal consequences of those facts. While they may ask questions of the witnesses and the legal representatives of the parties themselves, the court does not of itself and of its own volition issue subpoenas and call witnesses.
If there are any deficiencies in a case brought by one party or the other as to the evidence or legal analysis, that remains the problem for that party. The court is not empowered to call the witnesses it thinks would have helped that party’s case or cover evidentiary deficiencies in that way.
Judges and magistrates apply the law in the context of the facts of the particular case. They must essentially undertake four steps in deciding who wins and loses:
1 Establish what the legal issues are. Is it a case of a breach of contract or some other claim and therefore what are the legal tests and principles to be applied?
2 Establish what the evidence says. In the context of the legal principles and tests to be applied, what did the parties do as revealed by the evidence.
3 As a result of identifying the legal principles and tests and deciding on balance what has more likely than not happened in the relationship between the parties, establish whether the conduct of one party or the other gives rise to legal rights.
4 Decide the consequences of the conduct — an award of damages or some other remedy or order.
It is important to remember that the law generally confers a wide range of discretion on judges in making decisions.
It is not a once-size-fits-all approach. It is an inherently human system. The way a party presents its case, the way in which it analyses its legal position, the evidence it tenders, and its willingness to be reasonable in the context of the dispute are all matters that will affect a judge’s discretion.
It has been my impression that you will stand a much better chance of having a full and complete hearing, and possibly winning the case, if you appear to be reasonable, sensible and commercial in the hearing of the dispute. Parties that take an overly literal approach to procedure and an excessively formalistic approach can sometimes add to the time taken and cost incurred in the determination of the dispute and on this basis be perceived by the court to be less than cooperative in the just, quick and cheap resolution of the dispute.
The courts are generally circumscribed by the rules of evidence. Those rules regulate the way in which evidence can be presented to the court and they are quite restrictive in what they allow a witness to say. The rules also require a high degree of formality in the way in which the evidence is presented and the court case is conducted.
It is important you obtain information from your lawyers as to those rules. Often parties to proceedings are surprised and aggrieved by the way in which the rules of evidence may apply to preclude them from presenting evidence that they see as being important and conclusive in the case.
Parties are often unhappy about the hearsay rule which essentially means that a person can only give evidence as to their direct experience.
Example
SMS has sued Text as a result of allegations that Text is trying to keep SMS out of the market for phone communications in breach of the Trade Practices Act. SMS alleges Text is colluding with some large overseas telecommunication interests to drop the price of the service so as to drive SMS out of business and thereby ensuring Text has a much greater market share.
The managing director for SMS tells his lawyers that he heard from another colleague in the industry that there was a midnight meeting between Text and representatives of the overseas telecommunications providers for the purposes of identifying the floor price for the product in Australia with the intent to drive SMS out of business.
The managing director wants to put that in her witness statement. The lawyers tell her she cannot on the basis it is hearsay. It does not prove the meeting took place. It is something she has been told about. She does not have any direct experience of it.
At best the evidence could prove that she had a conversation with her colleague and informant about this issue; however, this does not go very far and is not very helpful in the case. The fact she wants to prove is that Text and the overseas telecommunication providers got together to commercially disadvantage her company. Without proving that fact, her case is at risk. Proving that she had a conversation with an informant doesn’t help in establishing that essential fact.
It is regularly a source of frustration of the parties to litigation that they cannot, in their view, fully and clearly present their case.
It is important to bear in mind that court proceedings are limited in what they allow you to say and do. The rules of evidence may inhibit you from presenting your case as fully and completely as you may hope.
The key is to have direct proof of what you are asserting to the fullest extent possible. That is, in the case of SMS and Text, if possible obtain the evidence of someone who was at the meeting in which the anticompetitive conduct was proposed. If you can’t do this, to the best of your ability obtain an objective record such as minutes of the meeting, notes or a later email that appear to confirm what was discussed and agreed. Anything less than this would give you great difficulty in successfully bringing the case. The repeating of rumours, innuendo or scuttlebutt will not be satisfactory as evidence to prove your case. If this is the best evidence you have then you must obtain precise legal advice and closely consider the utility of bringing the proceedings on a limited foundation like this.
This is a process generally arising out of an agreement entered into between the parties at an earlier time to have an arbitrator rather than a court determine the dispute.
An arbitrator is someone either appointed by the contract itself to determine matters in dispute or is someone who is later agreed by the parties if they remain in deadlock as to their conduct and alleged breach.
Arbitrations are generally used in specific kinds of business activities such as construction and engineering. Often judges do not have the qualifications and professional expertise to determine whether a construction contract has been fully and adequately performed. They are, understandably, heavily reliant on expert evidence. They need the experts to tell them whether there has been a breach of the contract or otherwise. In some contracts this is hard to discern without knowing construction techniques. This is generally hard. One expert will say there was no breach and the other will say there is. The judge, by virtue of qualifications and experience, is not necessarily in a position to be able to discern between two credible, competent and otherwise genuine experts giving evidence.
That is not to suggest that the experts are merely acting as advocates for their client’s case. They both may genuinely and honestly hold strongly the views they are giving to the court. This puts the court in an extremely difficult position and gives rise to a great deal of uncertainty for the parties. Over time parties have decided that they would take more control over the determination process and have sought to appoint experts, who are generally lawyers also, in a particular field of endeavour to decide the rights and wrongs of the dispute.
Also, an arbitration is the more informal process. Depending on what the parties agree, it may or may not be subject to the rules of evidence.
In each state there are relevant statutes broadly controlling the manner and style in which commercial arbitration proceedings must be undertaken. It is important that you obtain advice on the steps that need to be undertaken in each state prior to firstly deciding on arbitration in your agreement and then undertaking the process itself.
An arbitration does not have the degree of formality of a court. It is generally undertaken in a room in which the parties sit around a table together.
There is not a judge’s bench as such and all parties, including lawyers, dress informally and not in barrister’s robes.
The other perceived benefit of arbitration is that it can be quicker and cheaper. In a sense all that needs to be organised is the arbitrator’s free time to hear the dispute, consider the issues and hand down a decision. This contrasts with a court where there are literally thousands of cases in the queue to be heard. The parties may be otherwise ready to have their dispute heard yet given the busyness of the court a significant period of time may pass from the time in which they are ready until the actual hearing date. An arbitration can generally truncate this time as long as the arbitrator is available when the parties are.
In the past 25 years or so there has been a strong trend in many states of Australia for tribunals or newly created dispute determination bodies to have a much greater role in determining disputes between parties to contracts, leases and in other contexts.
A tribunal is a body generally created by the Parliament of a state or the Commonwealth for a particular purpose. For example, a national tribunal, the Administrative Appeals tribunal, was expressly set up to give people an avenue to complain about decisions bureaucratically made by the relevant arms of the Commonwealth government.
Tribunals have very broad rules of operation. They may or may not be staffed by lawyers. They are generally not circumscribed by the rules of evidence. They are expressly constructed so as to allow non-lawyers to appear at what is hoped is not a significant disadvantage. They are, in broad terms, an attempt to make justice more accessible by allowing those without legal representation to advance their positions more easily and efficiently. While it is possible for a person who is not a lawyer to appear in court in their own case, it is practically more difficult for this to successfully occur. In my experience judges have been extremely accommodating of non-lawyers before them in court but the rules of evidence and the general formality of court proceedings, and an ordinary member of the community’s unfamiliarity with these processes, makes it difficult for them to properly advance their position to the fullest extent possible.