Participating in a Mediation

Anyone involved in a family business these days will sooner or later find themselves attending mediation. Nearly all disputes nowadays will go through a mediation process of one sort or another, including the following:

• Consumer complaints;
• Landlord/tenant disputes;
• Franchisor/franchisee disputes;
• Disputes with suppliers;
• Disputes with financiers;
• Planning objections;
• Building disputes;
• Disputes between co-owners of a business;
• Disputes between family members over a will or trust.

 
A mediation may occur before proceedings are issued in a Court or Tribunal, either under the terms of a contract, as part of the procedures of a regulator handling a complaint or by agreement between the parties after a dispute has arisen.

Where proceedings have been issued most Courts or Tribunals will require that the parties engage in a mediation prior to the Court or Tribunal hearing the dispute.

Characteristics of mediation

However they arise, mediations are said to have three defining characteristics. Mediations are:

• Voluntary;
• Conducted by an independent third party; and
• Confidential.

 
Each of these characteristics, however, has some qualifications and exceptions.

Although a mediation is said to be voluntary, you can be required to attend one in various ways. A Court, Tribunal or regulator may require that a mediation occur. A contract you have signed may require that disputes be referred to mediation. In those cases you may find it necessary to attend a mediation.

It seems a nonsense to say that something is ‘voluntary’ if you have to do it. Why then are mediations said to be voluntary?

Firstly, because the compulsion usually ends with attendance. Unless you have agreed otherwise you can be required to attend a mediation, but be under no obligation to do or say anything further. You are not obliged to make statements, answer questions or make or respond to offers. There have been mediations where a party turns up, obtains confirmation that they have attended and then turns around and walks out. This is not usually a good idea but it illustrates the voluntary nature of a mediation.

Apart from losing what may be the best opportunity of settling a dispute turning around and walking out can create problems if:

• you have previously agreed to mediate the dispute ‘in good faith’;
• the mediation is conducted by a regulator or Court officers rather than an independent third party; or
• the mediator has reporting obligations beyond whether the mediation was held and whether it has finished.

 
Because mediation is voluntary you can generally end it at any time. The mediator may ask that you not terminate the mediation without first discussing it with her, but whether the mediation continues or not is your decision.

The second way in which mediation is voluntary is that any resolution of a dispute at mediation is subject to your agreement. The mediator can’t impose an outcome upon you. Your advisers cannot make or accept an offer without your instructions. You are the one who decides.

The person conducting the mediation (the mediator) will often be an independent third party who is registered under the National Mediator Accreditation Standards. Sometimes the staff of a regulator or officers of a Court or Tribunal may conduct a mediation.

Whoever conducts the mediation should be independent of the parties and not have an interest in the outcome of the dispute. If you believe that there is some relationship between the mediator and another party then you or your advisers should raise that concern at the earliest opportunity.

Mediators should disclose prior relationships or interests to parties. You might find, for example, that a Court official discloses that his superannuation fund has shares in a Bank which is a party to a proceeding. If that were the fund’s only investment and the dispute was likely to have a substantial impact upon the share price then you might decide to ask for another mediator. If the shares were a minor component of the fund and the dispute would have no effect on the share price then you might decide to continue with that mediator.

The mediator controls the process of the mediation, the parties control the content. The mediator may ask the parties to comply with ‘ground rules’ such as not interrupting, politeness and not leaving without discussing your intention to do so with the mediator.

Mediations are confidential. You cannot discuss the offers or arguments made at mediation with anyone outside the mediation. If a friend or family member accompanies you to the mediation then they will usually be asked to sign a confidentiality agreement to the same effect.

If you believe that another party is breaching the confidentiality of a mediation then you should seek legal advice. The mediator does not have any power to control parties after the mediation.

If the mediation is unsuccessful and a judge or tribunal member has to resolve the dispute then they will not be told anything that occurred at the mediation. This encourages the parties to make concessions or offers for the purpose of the mediation, without affecting the arguments or positions they might adopt in a final hearing.

Within the mediation you will usually have a private discussion with the mediator. In those discussions you may tell the mediator things which you do not want the other party to know. The mediator is under an obligation not to disclose such confidential matters to the other party. Likewise the mediator may have been told matters by the other party which they cannot reveal to you.

The obligations of confidentiality in a mediation are subject to exceptions. A mediator may be required to report admissions of child abuse. A mediator may be obliged to advise other participants of a bomb threat made by a party. These exceptions are, hopefully, unlikely to arise in relation to commercial disputes.

Preparing for mediation

If you have lawyers acting for you then they will prepare your case for mediation. That includes providing relevant documents to the mediator and preparing arguments to be made within the mediation.

Part of a lawyer’s preparation for mediation should include advising you of the costs you have incurred up to mediation and estimating future costs should the matter not settle.

If you do not have lawyers acting for you then you should look at any letters or notices from the mediator or regulator as to steps you should take to prepare for mediation. That will usually include bringing copies of the documents you want to show to the mediator or the other side.

It can be of assistance prior to mediation to write down what you understand the other party’s argument or position to be. That will assist you in identifying the issues in dispute. It may be that at the mediation the other party’s position turns out to be different from what you had understood.

At the mediation you may be asked what you regard as the important issues. It can assist to have thought about that before the mediation and even to make notes of the matters that you think should be discussed.

The role of the mediator

Mediators are not acting as judges; they will not decide your dispute or impose a resolution on the parties. They may, however, recommend an outcome to you or make a comment about the strength or merit of your position.

Mediators are not acting as lawyers; they will not give you legal advice. They may, however, ask your lawyers questions or challenge their assumptions in order to test your position.

Mediators are not investigators. They may ask questions or read documents to understand the dispute, but they are not tasked with finding out the real facts of a dispute or reporting to the parties what they believe actually occurred.

Mediators are listeners and facilitators. They will listen to your side of the story and will try to understand your position. They will assist you to understand the other side’s position. They will discuss various ways to resolve the dispute both in private with you and jointly with the other parties.

Recording a settlement

Often one of the ground rules of a mediation is that nothing is to be regarded as binding on any party until a written agreement is signed. Up until that point either party can withdraw any offers or terminate the mediation without further obligation.

If you have lawyers acting for you then the lawyer will either prepare or check any written settlement agreement.

If neither party has lawyers then the mediator will usually assist the parties in preparing a written document setting out any agreement they have reached.

A settlement agreement usually sets out the things that each party has agreed to do and may include provision for confidentiality, non-disparagement and an agreed public statement about the dispute. It will often contain releases meaning that neither party can sue the other for anything arising out of the dispute.

Regretted settlements

Sometimes a person signs Terms of Settlement but subsequently regrets doing so. They may try to set aside the settlement or sue the mediator or their advisers.

It is very rare for any settlement reached at a mediation to be set aside. One of the few grounds on which that might occur is if the settlement is procured by fraud. The evidentiary requirements to establish fraud are usually not met.

If a settlement is set aside then the dispute is not automatically resolved. A Court or Tribunal may still have to determine the dispute.

A mediator appointed by a Court or Tribunal will usually have an immunity from suit. If so, they cannot be sued in the same way that a judge or magistrate cannot be sued.

A privately appointed mediator usually makes it a condition of their acting as mediator that the parties agree not to sue the mediator. Sometimes such a condition may not be enforceable, particularly if the mediator is a lawyer and their services as a mediator are legal services.

Sometimes people complain that improper pressure was put upon them to settle by their own advisers or the mediator. Clients of lawyers can complain to the Legal Services Commissioner if they believe that to be the case. A lawyer can, however, give robust advice to a client regarding their position and still be acting in the best interests of the client.

There has been only one decided case in Australia about mediator’s liability. In that case the mediator sought to strike out the claim against him before a final hearing and the Court said that the case should go to a final hearing. The matter settled before such final hearing but the Court was not willing to say that the claim against the mediator could never have succeeded: Tapoohi v Lewenberg [2003] VSC 410.

Because it is so difficult to set aside any settlement agreement at mediation it is important to consider all the ramifications before signing one. If there is some element of the agreement on which the parties require further advice, such as tax implications, they can agree to make final agreement subject to their obtaining such specialist advice.

Mediation does not usually result in outcomes that are celebrated by either party. It is designed to find and encourage outcomes with which people are content or can live with. Outcomes imposed by a Court or Tribunal may not have either of those qualities, usually for one party, sometimes for both.

For further information on how Pointon Partners can assist you with mediation matters, please contact Andrew Cox or Brigid O’Dwyer of our office on 03 9614 7707.
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