ACLN - Issue#63
Dispute Resolution
Mediation - Are Negotiations Confidential?
Mediation has been a part of the construction
industry for many years and in effect is where disputing
parties appoint a third party to liaise between them and
try to reach a settlement of the dispute.
It is a method for resolving matters behind closed
doors, provided the terms by which the mediation is held
are clarified beforehand.
Writers on the subject of alternative dispute
resolution, such as Fisher and Dry in "Getting to Yes",
refer to the parties reaching a "win win" situation. This is
based on the solution of the dispute being agreed by the
parties, rather than imposed upon them by another. "Win
win" may not necessarily be the way mediation would be
described by parties who reach agreement at the
conclusion of a mediation. The process can be
confronting. Nevertheless, early settlement (on reasonable
terms) is usually preferable to the alternative of continued
litigation or arbitration.
A key characteristic of mediation is that what is said
at mediation attracts without prejudice privilege. This
means that admissions made in a mediation cannot be used,
without prior consent, as evidence in court against those
who made those admissions. It is essential that
communications between parties engaged in mediation
be privileged to ensure that the parties are able to enter
into frank and creative discussions of the issues in dispute
in an attempt to reach a resolution.
Even so, parties should not be misled. In certain
situations, what is said in mediations can end up being
put before a judge as evidence.
In Wi Green and Co Pty Ltd v Wilden Pty Ltd
unreported, Supreme Court of Western Australia, Parker
J, 24 April 1997), the court was asked to decide whether a
binding settlement agreement had been reached during
the course of a mediation. The court looked at the
negotiations which occurred during the mediation.
The court considered whether:
• an offer had been made;
• that offer was open for acceptance until a
specified date;
• the offer was sufficiently certain to create a
binding agreement upon its acceptance.
The offer was claimed to have been made at the end
of a day of mediation in an "atmosphere of tension and
frustration". The scene is described as one of confusion
with the alleged offer being made while other
conversations were going on.
7
Justice Parker commented:
"In order to fully understand the context of what
was said by senior counsel for the defendant it is
necessary to understand the stage the mediation had
reached when senior counsel was said by his
comment to have agreed that an offer made by the
defendants be left open until 10.00 am Monday 6
May 1996."
What follows in the decision is a detailed description
of the offers and counter-offers made during the course of
the mediation. The reason why such negotiations, which
would usually remain privileged, became required
evidence was to allow the court to determine whether a
binding agreement had been reached.
To protect the parties from their negotiations being
considered in open court (and from the resultant costs),
and to ensure the mediation process is utilised to its full
potential, the terms upon which the mediation is to be
held should be fully agreed beforehand.
Experienced mediators will require the parties to
sign a mediation agreement which establishes the role and
responsibility of all the parties, including the mediator.
An important aspect of the agreement should be a clear
statement of what will constitute a settlement of the
dispute. One option is to provide that no settlement is
reached unless an intended agreement has been converted
to writing and signed by all parties. In this way, interim
negotiations can be entertained in the knowledge that no
binding agreement is reached until the parties are clear
about the terms of that settlement.
If that had been the case in Wi Green, it would be
unlikely that the court would have been required to
determine whether a settlement had been reached.
- Reprinted with permission from Phillips Fox's Focus.