While it is satisfying to sue the socks off an opponent, taking a dispute to court is risky business. Costs can easily blow out, reputations and relationships can be damaged along the way and there’s always the chance of losing. These reasons are enough to compel many corporate to bury the hatchet in smaller commercial disputes rather than go in guns blazing.

For dispute resolution teams, this growing wariness has forced them to get innovative. Teams are looking to settle earlier, proceed faster and minimise expenses, all the while ensuring their clients are happy with the outcome.

Conflict avoidance

Gilbert + Tobin partner Crispian Lynch believes corporate clients are now carefully weighing up the business case for litigation – even in cases where they have a strong claim – and finding it wanting.

If a dispute cannot be resolved quickly, clients often question the merit of pursuing litigation that will waste time and money and leave the business exposed to reputational risk, says Mr Lynch.

Even large disputes are increasingly likely to be settled, he says. “We have seen some large disputes, including class actions, which have settled either before proceedings have commenced or very shortly after.”

There are now “fewer but bigger” cases in the commercial litigation sphere because the cost of running small cases is “just prohibitive”, adds Mr Lynch.

“There’s maybe a growing recognition that traditional litigation is usually not the best way to resolve those types of [small] disputes – a cost-benefit analysis on those disputes rarely supports contested litigation through to trial,” he says.

However, a handful of large matters are keeping litigators busy, including class actions, large commercial disputes, commissions of inquiry and regulatory investigations, says Mr Lynch.

Lawyers acting for warring parties in corporate conflicts are increasingly reserving litigation as a last resort. Nowadays, the gloves only come off after all alternative dispute resolution (ADR) methods have been exhausted.

“That continues to be a trend – there is more ADR both by corporates that don’t want to spend the money on litigation but also by the courts who now as a matter of course refer matters to mediation,” says Robert Johnston, a dispute resolution partner at Johnson Winter & Slattery.

“The courts are now far more proactive in utilising ADR and you see a lot of barristers that have become skilled in ADR,” he continues.

ADR is a “bit less regulated” than the court system but allows for “more flair” and more creative settlements, according to Mr Johnston. Whereas litigation can become a public affair, ADR allows companies to settle matters in private, he says.

However, ADR is not always the less risky choice: “If you’ve got a very good claim, you might want the court processes with a judge with strong powers to help your case move along and stop a defendant being very slow,” says Mr Johnston. There are also better rights of appeal through litigation than arbitration, he adds.

The various strengths and weaknesses of ADR and litigation means that they often work well as “complimentary” processes, says Mr Johnston. “There’s a greater trend to use ADR at an earlier stage and keep going back and trying to use ADR,” he says.

Most law firms group ADR and litigation under the same umbrella and try to keep all options open to clients. Sometimes lawyers’ “hands are tied”, such as when claims are not amenable to arbitration or the contract provides that it has to go to arbitration, Mr Johnston continues.

“But certainly you would look at alternatives other than just arbitration or litigation to try to get a quick, early, cheap resolution that is a compromise that your client can live with,” he says.

Examining the bill

Dispute resolution is notoriously unpredictable, which makes it difficult for litigators to implement innovative pricing models, according to Mr Lynch.

“There is more scope for creativity and to costs outside of the litigation space,” he says.

“There’s also a recognition amongst our clients that it is very, very difficult at the beginning of a court process to know what that process might entail and, therefore, give with precision an estimate of what the costs might be,” he continued.

“There are other parties [involved in litigation]. There’s a judge. Unexpected opponents can seek orders that are unexpected. All of those things can result in proceedings taking longer than might have been hoped.”

Mr Johnston recognises that “clients are very cost conscious” but agreed with Mr Lynch’s assessment of the difficulties around alternative billing in litigation. Companies are increasingly seeking to resolve matters using in-house counsel to avoid such costs, he says.

There are other ways that litigators can reduce costs, however. Much of the heavy-lifting in litigation is the preliminary discovery and due diligence, which can be more cost-effective to perform in offshore locations or outsource to “specialist disruptive organisations”, Mr Lynch says.

The push for quicker and cheaper litigation is one of many emerging trends in dispute resolution. The judiciary is playing a part in this change, with “interventionist judges” using their powers to “shut down delaying tactics”, according to Mr Johnston.

New rules introduced into the commercial division of the Supreme Court have given judges greater ability to speed up proceedings, he says.

Courts have an increased capacity to “control litigation”.

“We’ve seen judges be more proactive in fashioning orders that get cases on quickly rather than judges sitting back and letting the parties complicate matters,” says Mr Johnston.

Under the new Supreme Court rules, discovery does not go ahead until the evidence is in, which “fundamentally changes that practice”, says Mr Johnston.

“And in the Federal Court you’ve got to demonstrate the necessity of discovery otherwise you won’t get it whereas it used to just be par for the course,” he says.

Slim briefs

The volume of documents involved in litigation has escalated dramatically in recent years, driving up costs. Law firms have responded with a technological ‘counter-attack’.

“A client used to go through their drawers and give you a box of relevant documents,” says Mr Johnston. “Now you get a thumb drive with two million emails on it.”

The sheer information overload means manual discovery is no longer cost-effective for law firms, he says.

“That’s where the lawyers have to be clever, up-to-date, and use technology to their advantage.”

Programs that use predictive coding are a godsend for litigators as they can churn through millions of files, remove duplicates and select the relevant documents in a matter of hours. Yet it is still a “developing area” for law firms in Australia, Mr Johnston says.

This is a shame because “incredibly bright law graduates have to sit in a room for weeks going through documents instead of bringing their intellectual powers to bear on a smaller number of relevant documents”, he added.

Mr Lynch says Gilbert + Tobin has reduced the paper burden by using iPads as electronic briefs, pleadings or evidence in court.

“So you can turn up to court with the equivalent of several trolleys of documents tucked under your arm,” he says.

As technology and innovative practices help lawyers offer a cost-effective service, corporations are increasingly embracing non-traditional conflict resolution.
While fewer battles are being taken to the courts, the legal showdowns continue in the board rooms and mediation chambers.