Mediation has become a prevalent form of alternative dispute resolution. Many commercial agreements and Courts will require you to go to mediation at some point in an attempt to resolve your dispute.
But for many who have not done it before, the mediation process is something of a mystery.
In this article, we’ll set out some of the typical steps that the mediation process follows. While each case is different, what we describe is a standard path to mediating a commercial dispute.
Mediation in a Nutshell
In case you’re not familiar with the concept, mediation is a form of dispute resolution where an independent facilitator (called a “mediator”) assists the parties to reach a resolution.
The mediator does not decide the case or impose an outcome. In most cases, the mediator will not assert a strong view about a party’s prospects, although they will often point out the weaknesses of your position to try and move you towards a settlement.
Mediation is always “without prejudice”, meaning any concessions you might care to make to try and reach a settlement cannot be used as evidence against you in Court later.
Court Ordered Mediation, or Agreement to Mediate
Something needs to trigger the mediation.
Most often, that is:
- The parties reach a point in the dispute where they agree to mediate; or
- The Court orders the parties to mediate.
Sometimes parties both agree and get a consent order from the Court about when mediation should occur, who should pay for it, and similar procedural steps.
There are three main logistical questions about mediation:
- Who should the mediator be? In commercial disputes, the mediator is usually (but not always) a barrister of appropriate seniority. Generally, one party will propose a mediator or a panel of mediators for the other to consider. The other party will either agree or propose their own. Eventually, everyone usually finds a mediator they can agree on.
- Where should the mediation take place? Often solicitors will have offices that can accommodate an in-person mediation, but most parties normally want “neutral turf”. Most cities in Australia have Bar Association or Law Society rooms that can be used for this purpose, which are relatively inexpensive. Of course, more and more online mediation is becoming well-accepted where in-person is not possible or not desirable for some reason, which avoids the cost of room hire but does introduce some other challenges.
- Who should pay for it? Almost always, the overall costs of the mediator and room hire are split between the parties evenly. If multiple parties are essentially the same (eg a director and a wholly-owned company of the director’s), then they might count as one party for this split.
Preparation and Paperwork
Once the logistics are sorted, there are two main areas of paperwork when preparing for mediation:
- The brief to the mediator; and
- A position paper.
The brief is designed to be a neutral articulation of the relevant facts and issues in dispute. While it is prepared by one party at first, the other party will always get to review the summary and have input into the documents to be provided to the mediator. Occasionally a lawyer will try and be a bit cheeky in their summary of the facts to make their own client look good or you look bad in subtle ways (eg – defining something you said as “the misrepresentation”). It’s your lawyer’s job to fix up that kind of issue in their review.
For documents, it is important to give the mediator the necessary documents to understand the issues, but not so many documents that the process becomes more expensive than necessary (they charge you for reading into the matter).
Usually, that will include each party’s pleadings and the key documents (eg contracts, critical correspondence). It certainly does not need to include the entirety of each party’s disclosure.
The Position Paper
Most mediators will ask for position papers.
Unlike the brief, the position paper is where your lawyer will forcefully advocate for your interests.
This is where you set out your own position on the issues, describe why that position is reasonable, and why the other party’s position is not.
Preparing for the Day with your Lawyers
It’s important to set aside some time to properly prepare with your lawyers.
In particular, you should discuss:
- Any questions about the process on the day;
- The strengths and weaknesses of your position (if you haven’t already);
- What you are thinking in terms of reasonable settlement options;
- Any thoughts “outside the box” you had in terms of settlement options (mediation, unlike Court, can be an opportunity for creative settlements – although in reality they rarely come up);
- The up-side and down-side of:
- Reaching a negotiated outcome; and
- Not reaching a negotiated outcome.
Make sure your lawyers know what you are thinking here – it will directly influence how they conduct themselves on the day.
If your dispute is complex, then prepare for a long day.
Here is the most likely map of the day:
- Pre-meeting with your lawyers;
- Meeting with the mediator alone;
- Joint session with the mediator and all parties;
- Separate rooms (aka “sitting around”);
- Offers, Counter-Offers; and
- Documenting a Deal
This is a good time to tell your lawyers if anything you said before has changed. That said, you’ll have every chance through the day to be talking privately with them, so if you forget something it’s not the end of the world.
Meeting with the Mediator
Some mediators won’t do this, but many like to have an initial discussion to get an understanding of your position, ask some early questions, and generally set the scene.
This is also a tool for the mediator to get a “feel for the room” – figure out who the decision-makers really are, which people are an impediment to settlement, and start developing rapport with the people there.
Most of the time, the mediation proper will kick off with all and sundry in a room together.
The lawyers will each give (mostly pre-prepared) opening statements. Some lawyers take this opportunity to bang the table and thump their chests, and others simply set the scene and explain why their client’s position is right. Some lawyers simply rest on their position papers that have already been delivered. In any case, nothing too surprising is likely to come out in these statements.
Sometimes this is an opportunity for parties to vent a bit about the situation. As legal disputes are often emotionally or commercially taxing, letting everyone simply “get things off their chest” is often cathartic and a good way to help move the matter towards resolution.
Otherwise the mediator might make some initial observations about the process, the plan for the day, and the matter in general. They might ask some questions and try to clarify some issues.
Once the parties or the mediator feel that any utility in the joint session has ended, the parties will then normally retire to different rooms.
Sitting Around While the Mediator Walks Back and Forth
Next comes what is normally the most tedious part of the day – waiting.
The mediator will often now spend time at length with one party or the other, talking through issues and concerns and trying to extract some kind of discussion point or first offer to take the other party.
This can take minutes, or it can take hours.
In fact, it’s fairly common in larger or more contentious matters for zero offers to be exchanged before lunchtime.
This is where the mediator really earns their fee, however. The preparation they have done, the questions they have asked, and the rapport they developed early on all come into play here as they “work” each party towards the potential for a negotiated outcome.
Eventually, the parties will start exchanging offers.
In commercial matters, this is often as simple as “we will pay you $X” or “we will accept $X” – although it can get far more complicated if there are many moving pieces in a dispute.
Again, the mediator will go back and forth here quite a bit, taking instructions and exchanging offers between the parties as they hopefully get closer together in the outcome.
Documenting the Deal
Never depart from a mediation in which you believe a resolution has been reached without getting that deal in writing and signed by the parties. Most likely, both sets of lawyers will have a bare bones document with them in preparation for this, and the mediator might also.
But always be prepared to take the time to fine-tune the deal and ensure there are no ugly surprises tomorrow. Let your lawyers read the paperwork carefully, because being in a rush at this point is a recipe for disaster.
Of course, if you did not reach a resolution, there is nothing to document.
After the Mediation
Just because a deal wasn’t reached at mediation doesn’t mean that a deal cannot be reached afterwards – in fact, they often are.
This is particularly the case where the parties got close but not quite close enough to settle. Faced with the proposition of further litigation, it is often worth re-opening the last offer you made in mediation to see if it might be able to encourage things towards a close.
If you did reach a deal, then it’s important you know what the deal was, what your obligations are and when they have to be met. Your lawyers can help you with this if it’s unclear at all.
In a Nutshell
If mediation is done right, it is a valuable tool in resolving commercial disputes.
Now you understand a bit more about what to expect if you’re headed in that direction, from mediators to process to the involvement you and your lawyers will have on the day.
And if you need help, you know where to find us.