If negotiation doesn't work and a problem turns into a dispute, you may decide to get help or take action to resolve it. Help may be either an organisation or a person who is not directly involved in the dispute. Depending on the outcome you want, your options may include:
- ADR (alternative dispute resolution)
- consulting an expert
- sending a letter of demand
- hiring a debt collector
- going to court.
An important thing to remember is to choose a dispute resolution method based on the outcome you want. If you want to preserve your business relationship and secure future work with the hirer, it is worth considering ADR. If you just want to get your money or finish the contract and move on, it may be better to use a debt collection service, a lawyer or, if necessary, take the matter to court. Often ADR is a wise approach because you may find that, in the long term, you will want to do business with that hirer again.
Alternative dispute resolution (ADR)
ADR is a term that describes a range of ways to settle disputes without going to court. It usually involves an impartial person, such as a mediator, who will help you and the hirer to discuss and resolve the issues between you. ADR may help you resolve your dispute before it becomes so big that a court or tribunal becomes involved. ADR can be used before, during and even after a court process. It can also help you and the hirer to maintain a working relationship so you can contract again in the future. Courts and tribunals also provide more formal ADR with qualified practitioners.
In most cases, you and the hirer will be able to bring a support person or an adviser to your ADR session.
The most common types of ADR are:
- mediation: a qualified person designs and manages a fair process and you and the hirer are the experts on the dispute
- conciliation: a qualified person designs and manages a fair process and they, you and the hirer are the experts on the dispute – the conciliator may play an advisory role
- arbitration: a qualified person designs and manages a fair process and the arbitrator is the expert on the dispute – the arbitrator makes a decision (which can be binding) on the information presented by you and the hirer.
ADR is for people who are ready to accept that they have different points of view and that it is worthwhile overcoming their differences so that they can keep their working relationship.
Benefits of ADR
- Can save time and money
- Can be flexible and informal
- Gives you and the hirer more control
- Is confidential
- Lets you and the hirer deal with emotions
- Can narrow the scope of a dispute to the issues that matter to you and the hirer
- Offers broader and more creative solutions
- Helps you and the hirer preserve your business relationship
Mediation is the most common form of ADR. It is a confidential, informal process in which you and the hirer, with the assistance of an independent mediator:
- listen to each other and are heard by each other
- identify the disputed issues
- develop options
- consider alternatives
- aim to reach an agreement if an agreement is appropriate.
It begins with the mediator listening to each person separately to decide whether mediation will be suitable. Throughout the mediation you, the hirer and the mediator continue to check for suitability. During mediation, the aim is for you and the hirer to work together to reach an agreement or a solution to the problem that you can each live with.
A mediator should be nationally accredited. The Mediator Standards Board has a list of the standards of mediation practice on its website. The mediator decides on the mediation process, you and the hirer decide what is discussed. The mediator may not necessarily have any particular experience or expertise in your industry or the specific issues of the dispute.
Franchising disputes and mediation
If you own a franchise you are subject to the Franchising Code of Conduct. The code provides that any party to a franchise agreement may refer their dispute to a mediator of their choice. If the participants cannot agree on a mediator, a mediation adviser will be appointed by the Office of the Franchising Mediation Adviser, which has trained mediators with commercial experience located across Australia.
What happens at mediation?
- Separate sessions – the mediator listens to your point of view without the hirer there. They will also listen to the hirer separately. You can each have a support person with you.
- Introduction – the mediator welcomes the participants, including support people, and explains how the session will be conducted.
- Statements – each party speaks as if they are the first speaker about their understanding of the dispute.
- Issues set out – the mediator then works with the participants to summarise the issues in dispute.
- Discussion – the participants fully discuss the issues and their concerns.
- One-on-one – the participants can each speak with the mediator privately if they choose. This may happen at different stages during the process.
- Negotiation –options and possible options for resolution are discussed.
- Agreement – if the participants reach an agreement they record it in writing. If no agreement is reached at the session and the dispute continues, the mediation will often have made it clear what the issues in dispute are. Further mediation may be necessary or one person may choose to take the matter to arbitration or to court for a binding decision.
Example: using mediation to resolve a dispute
Caryl and Serge are in dispute about the payment of Caryl's invoice. Caryl is an interior designer and independent contractor and Serge is the owner of a boutique hotel. Caryl does not want to damage her working relationship with Serge as there is potential for future work on other hotels Serge owns. Caryl's invoice is greater than the amount she originally quoted. Serge is very happy with the work Caryl has done and would like to hire her again if this dispute can be resolved.
Serge has used mediation before. Caryl is willing to try it, so they agree to attend a mediation session.
At the mediation session both Caryl and Serge have the opportunity to explain their side of the dispute. Caryl explains that the job was much more involved than she had initially thought and that is why the invoice exceeds the quote. Caryl acknowledges that she should have sought approval from Serge before continuing with the work. To ensure that the communication between Caryl and Serge is effective, the mediator has to remind them several times to listen to what the other has to say and stop interrupting each other.
Serge offers to pay Caryl's account if she reduces it by 10 per cent. Caryl agrees, so they make a written record of their agreement. The dispute is resolved and the participants say they hope to work together again soon.
Conciliation is similar to mediation except that the conciliator has an advisory role. The conciliator may be legally qualified or have experience with, or professional or technical qualifications in, the subject area of the dispute. The participants in conciliation will often be accompanied by lawyers or other advisors.
In arbitration, you and the hirer present your arguments and evidence to an arbitrator, who may have a legal background or qualifications or expertise in the subject of your dispute. Arbitration is a more formal type of ADR and the arbitrator's decision can be binding.
Arbitration can be particularly useful where the subject matter of the dispute is highly technical. It can also help when a more formal, court-like procedure with greater confidentiality is required. In such cases, a person with expertise in the subject field may act as arbitrator.
Weighing up the options
When you and the hirer have decided that you would like to try to resolve your dispute using ADR, you will both need to agree which method is most suitable.
- How formal do you want the process to be? Would you be more satisfied by reaching a decision in good faith or by someone else making a binding decision that you each had to follow? What do you want to achieve? Which form of ADR will best help you to achieve it?
- How comfortable are you communicating openly with just the hirer? Would you be able to communicate more openly in a situation managed by an even-handed, independent person?
- Do you need advice, input or expertise from someone else to resolve the dispute? If you do, would you rather have the advice in the ADR session or before and after each session?
- Will you be able to negotiate a resolution or agreement on your own? Or do you need an independent person to facilitate the process or someone to make a determination for you?
- How much time, energy and money are you willing to spend to resolve the dispute?
The costs of ADR vary depending on the circumstances of the dispute. Factors that may influence costs include the experience and expertise of the practitioner; the complexity of your dispute or the subject of the contract; the state or territory you live in; and whether you live in a capital city or a regional area.
The costs of ADR may include:
- practitioner's fees – conciliation may cost more than mediation because the advice provided in a conciliation process may take longer. Arbitration fees are likely to be even higher because an arbitrator will need to spend time going through all the evidence relating to the dispute and consider the decision to be made
- travel expenses (including accommodation and meals) – if you or the practitioner need to travel to the session
- room hire fees – a room may need to be hired for the dispute resolution session. The fee is usually shared between the participants unless otherwise agreed
- other expenses may include long-distance phone calls, video conferencing, postage/freight charges, photocopying and other miscellaneous expenses. These fees are usually shared between the participants unless otherwise agreed.