the comparison between the alternative dispute resolution and the litigation

1. UAD4612- ALTERNATIVE DISPUTE RESOLUTION
(ADR) METHODS AND PROCEDURES
Lecture 2: ADR vs Litigation
Date: 9th June 2022 (Thursday)
Prepared by Mr. HS Wong
© . No part of these lecture notes shall be reproduced or distributed in any manner whatsoever.

3. • 1.0 Litigation : Inefficiency & Backlog of Cases in Courts???
Source: Jabatan Kehakiman Malaysia’s website

4. • 1.0 Litigation : Inefficiency & Backlog of Cases in Courts???
Source: Jabatan Kehakiman Malaysia’s website

5. • 2.0 What is Litigation?
• Banking Litigation, Debt Recovery, Execution & Enforcements Proceedings
• Commercial Litigation
• Construction Disputes & Arbitration
• Disputes Involving Breach Of Contract Or Quasi Contract
• Factoring Disputes
• Foreclosure Proceedings
• Hire Purchase/ Leasing Claims
• Insolvency Advice Pertaining To Liquidation, Winding Up, Bankruptcy, Special Administrator,
Restructuring, Appointment of Receivers & Managers
• Landlord & Tenant Disputes
• Labour Disputes
• Applications Under The Malaysian Companies Act, Financial Services Act & Islamic
Financial Services Act
• Partnership Disputes
• Shareholder Disputes
• Tortious Disputes, Such As Defamation Or Negligence
• Etc…

6. • Alternative Dispute Resolution ("ADR") refers to any means of settling
disputes outside of the courtroom. ADR typically includes early neutral
evaluation, negotiation, conciliation, mediation, and arbitration. As
burgeoning court queues, rising costs of litigation, and time delays continue
to plague litigants, more states have begun experimenting with ADR
programs. Some of these programs are voluntary; others are mandatory.

7. • 2.0 What is Litigation?
Civil/Commercial/
Personal
Criminal 1. Schedule [Paragraph 2a]
of the Mediation Act
2012- NON
APPLICATION
2. Section 4 of the
Arbitration Act 2005

8. • 3.0 ADR vs Litigation
• Alternative Dispute Resolution (“ADR”) refers to any method of resolving
disputes without litigation.
• All ADR methods have common characteristics – i.e., enabling the parties to
find admissible solutions to their conflicts outside of traditional legal / court
proceedings, but are governed by different rules. For instance, in negotiation
there is no third party who intervenes to help the parties reach an
agreement, unlike in mediation and conciliation, where the purpose of the
third party is to promote an amicable agreement between the parties. In
arbitration, the third party (an arbitrator or several arbitrators) will play an
important role as it will render an arbitration award that will be binding on the
parties. In comparison, in conciliation and mediation, the third party does not
impose any binding decision.

9. • 3.0 ADR vs Litigation
• If all the ADR methods are different, they should not be compared and
confronted because in practice, the parties combine the use of these
different ADRs. For instance, the parties may stipulate in their contracts that
in the event of a dispute they will first submit to an attempt at amicable
settlement (conciliation/mediation) and only in the event of failure will they
resort to a judicial method of settlement, which may be arbitration or
recourse to the State justice system. ADRs therefore come into play at
different levels and have a complementary character.
• The main advantages of ADR are rapidity, confidentiality and flexibility.
• Public courts may be asked to review the validity of ADR methods, but they
will rarely overturn ADR decisions and awards if the disputing parties formed
a valid contract to abide by them.

10. • 3.0 ADR vs Litigation
• Mediation has been applauded for its efficiency as compared to the normal
route of litigation or arbitration as it assists parties to resolve their disputes
through the following benefits:
• Neutral mediator – As a neutral third party, a mediator can lead negotiations
and assist parties to communicate constructively and recommend solutions
which would mutually benefit all parties in reaching an amicable settlement;
• Swift resolution of disputes – Disputes can be resolved in a timely manner in
contrast to litigation or arbitration as mediation is flexible and less
procedural. It dispenses the inevitable need to use experts, often from
multiple disciplines in addition to a number of witnesses for court
proceedings;
• Amiable approach – Due to its non-confrontational procedure, disputes are
less likely to affect relationships between parties as resolution of disputes
are mutually agreed upon by parties;

11. • 3.0 ADR vs Litigation
• Flexible solutions – Parties can resolve all outstanding issues once and for
all since settlement agreement can be tailored comprehensively to address
other related or potential issues in the future;
• Confidentiality – Communications during the mediation process are strictly
“without prejudice”, confidential and privileged and cannot be disclosed in
any court or arbitration proceedings
• Misconduct may not remain confidential- Case: Mullins v Legal Services
Commissioner [2006] LPT 12; and
• Economical – Mediation is proven as less costly than litigation or arbitration.

12. • 3.0 ADR vs Litigation
• Rules of Court 2012
• Order 34 rule 2(2) (a) provides that the Court may order or direct the parties
to resort to mediation as a means of settling their dispute during pre-trial
case management. Order 59 rule 8 (c) gives the court discretion to decide
the costs by taking into account the conduct of the parties to settle the
dispute amicably by others by way of mediation.
• Rules for Court Assisted Mediation
• This rule, which was authored by a judicial officer in Sabah, serves as easy
reference for all judicial officers who act as mediators, including those in
Peninsular Malaysia (Ravinthran, 2011). The said rule acts to supplement
the 2016 Practice Direction and the Rules of Court 2012. However, it is not
widely observed in Peninsular Malaysia as in East Malaysia.

13. • 3.1 Reasons for Growth of ADR
• Difficulties ‘accessing justice’ through adversarial litigation and the Litigation
Deterrents (emotional, time and money costs).
• Desirability of addressing broader (non-legal) interests and needs of parties
including the desire to preserve ‘relationships’.
• Parties have increased control.
• Relationships can remain intact.
• Reputations can be protected.
• ADR approaches can be “interest based” rather than “positional” leading to
possible win/win solutions instead of win/lose or lose/lose.

14. • 4.0 Advantages of ADR Over Litigation in Dispute Resolutions
• Determinative / Decisional Process
• Facilitative Process
• Advisory Process
• Comprehensive Control over Process
• Element of Confidentiality
• Saving Time and Money
• Arbitration Expertise
• 'Final' Award
• Providing social values

15. • 4.0 Disadvantages of Litigation
• Lack of confidentiality surrounding proceedings and it is usually open to
public and also media.
• Long lasting trials and appeal processes. There is no doubt that court
proceedings last longer than that of ADR mechanism due to the existence of
wide range of appellate proceedings and high volume docket numbers.
• Excessive cost of pursuing litigation.
• Lack of independent or impartial judiciary and corrupted system.

16. • 4.0 Disadvantages of Litigation
• The litigation steps above are indicative of a complex litigation in a higher
court.
• Litigation process varies significantly depending on the Court, the judge, the
• parties, the nature and complexity of the dispute, the nature and complexity
of the remedy sought, the issues in dispute, whether the dispute is primarily
factual, legal or a mixture.
• Litigation is changing e.g. more on line processes and a move away from
• discovery.

17. • 4.0 Disadvantages of ADR
• ADR: Stumbling Blocks:
• Negotiation: The power balance is tipped and you’re the weaker party.
• Your concerns about maintaining a business relationship exceeds the other
party, who might not be as vested in the process.
• Mediation: You or the other party is entirely focused on power or control.
• The legal rights favour one party and they see no reason to compromise.
• One party wants or requires a public decision that resolves the dispute and
sets a precedent.
• Arbitration: The relationship is damaged beyond repair.
• The credibility of the parties or witnesses is an issue.
• One of the parties is seeking a remedy that can’t be granted by an arbitrator.

18. • 4.0 Disadvantages of ADR
• Not suitable for some cases eg test cases
• Lack of procedural protection [reasons/evidence/appeals]
• Lack of enforceability
• Less access to other side’s information
• May increase cost, if unsuccessful
• May add to delay- be used tactically
• No procedural ‘fairness’.

19. • 5.0 Comparison of forms of ADR and litigation
• Example 1:
• Plaintiff serves offer of compromise on 4/1/2022 for RM1,000,000 plus costs
as agreed or assessed.
• Defendant rejects offer.
• Judgment entered for RM2,000,000 on 22/3/2022
• Issue: What type of cost order will the plaintiff apply for?
• Rationale – offer was better than what offeree was entitled to.
• Offeree (def) should have accepted RM1M offer.
• Incentive to accept reasonable offers.

20. • 5.0 Comparison of forms of ADR and litigation
• Class exercise (group work)

21. • TUTORIAL 2: QUESTIONS
1. ADR is a mechanism that helps parties achieve what they really need.
Explain how this objective is achieved.
2. Discuss in detail the following terms pertaining to ADR and out-of-court
settlement:
(i) Pre Trial Case Management
(ii) Trial by reference (US)
(iii) Pre-litigation settlement
3. Differentiate a “dispute” and a “conflict”. Provide examples to explain their
differences.
… continued

22. • TUTORIAL 2: QUESTIONS
4. What are the necessary characteristics of an effective ADR mechanism?
Can all disputes be settled by way of ADR? How do they differ from the criteria
required in dispute resolution via the ordinary judicial process?