For the first time in Australia, the Supreme and County courts will be able to send disputes — even large commercial cases — out of the courtroom and into mediation, in a pilot project to be announced by Attorney-General Rob Hulls in Tuesday's state budget.

The $3.7 million pilot project, based on a Canadian model, will include the appointment of additional judges who will rule on cases that have become intractable. Such mediation happens in lower courts in much less serious cases, but Mr Hulls said Victoria will be the first Australian state to adopt it in higher courts.

Mr Hulls said the model was successful in Canada because the mediation had the imprimatur of a judge.

The project is part of a $17.8 million budget package to better deal with the 3.3 million disputes in Victoria each year. Other measures in the budget include $5.8 million to expand a mediation program in the Magistrates Court and a $6.2 million expansion of alternative dispute resolution in regional Victoria.

"We need to think smart when it comes to attempting to solve disputes, and the courts should be a place of last resort," Mr Hulls told The Sunday Age. He said that the traditional, adversarial court system was winner-takes-all, but research had shown that under mediation disputing parties were more likely to take ownership of the outcome.

Mr Hulls said the expansion of alternative dispute resolution in the lower courts would mean that a broader range of disputes — such as fencing disagreements between neighbours — were more likely to be diverted to mediation.”