Mediation of a civil dispute: what it is and how it works
Most civil disputes in New Zealand do not end with a judgment. They end with a settlement, and a good proportion of those settlements are reached at mediation. Clients who are new to litigation often have only a hazy idea of what mediation involves. This note explains what it is, how a typical mediation runs, and why it is so often worth doing.
What mediation is
Mediation is a negotiation conducted with the help of a neutral third person, the mediator. The parties, usually with their lawyers, meet with the mediator for the purpose of trying to resolve the dispute by agreement.
The essential feature is that the mediator does not decide anything. That is the difference between mediation and a court hearing or an arbitration. A judge or arbitrator hears the evidence and imposes an outcome. A mediator has no power to impose anything. The mediator's job is to help the parties reach their own agreement, and if they cannot, the mediation simply ends and the dispute carries on as before.
Because nothing is imposed, the parties keep control of the outcome. A settlement at mediation can include terms that no court could order: an apology, a continuing commercial relationship, a payment structured over time, an agreement about publicity, or a resolution of related grievances that are not strictly part of the proceeding.
When mediation happens
Mediation is voluntary in most civil disputes, although the pressure to attend is real. Many commercial contracts contain a dispute resolution clause that requires the parties to mediate before they can arbitrate or sue. Judges in the High Court and District Court routinely ask at case management conferences whether the parties have attempted mediation, and a party who has refused without good reason can expect that to be noticed when costs are dealt with at the end.
Mediation can take place at any stage. It can happen before a proceeding is filed, which saves the cost of pleadings altogether. More commonly it happens after pleadings have closed and documents have been exchanged, when each side has a reasonably clear view of the other's case. It can also happen late, in the weeks before trial, when the cost and risk of the hearing concentrate everyone's mind. There is no wrong time, but the best time is usually when both parties have enough information to assess their position and neither has yet spent the money that a trial requires.
Choosing a mediator
The parties choose the mediator together. In New Zealand, mediators of civil disputes are typically experienced barristers, retired judges, or accredited mediators drawn from bodies such as the Arbitrators' and Mediators' Institute of New Zealand or the Resolution Institute. The mediator's fee is usually shared equally between the parties.
The choice matters. Some mediators are purely facilitative and will not express a view about the merits. Others are more evaluative and will, if asked, tell a party frankly how its case looks. Which style suits a given dispute is a matter for judgment, and it is one of the things a lawyer should advise on when a mediation is being set up.
Preparation
Before the mediation the parties sign a mediation agreement. It records that the process is confidential, that the mediator is not a decision maker, and how the fee is to be met. Each party usually prepares a short position paper for the mediator setting out the facts, the issues, and what it says the outcome should be. These are exchanged in advance or provided privately to the mediator, depending on what has been agreed.
The most important preparation happens away from the paperwork. A party attending mediation should know what its case is worth if it wins, what it will cost to get there, what the realistic prospects are, and what it can live with. A settlement is a trade of a certain outcome now for an uncertain one later, and the trade can only be assessed if the uncertain outcome has been valued honestly.
Whoever attends must have authority to settle. A mediation that cannot conclude because the real decision maker is not in the room is a wasted day.
The day itself
A civil mediation is usually completed in a day, although complex matters can take longer. The typical structure is as follows.
The mediator opens with a joint session. Each party, or its lawyer, briefly states its position. This is often the first time the parties have heard each other's case put in plain words rather than in pleadings, and it can be surprisingly useful.
The parties then separate into private rooms and the mediator moves between them. This is sometimes called shuttle mediation or caucusing. What a party tells the mediator in private stays private unless the party authorises the mediator to pass it on. The mediator uses these sessions to test each side's assumptions, to identify what each party actually needs as opposed to what it is asking for, and to carry offers backwards and forwards.
Offers usually begin some distance apart and converge over the course of the day. It is common for the real movement to happen late in the afternoon. Patience is part of the process.
If agreement is reached, the terms are written up and signed before anyone leaves. That is important. A settlement that is left to be documented later has a way of unravelling when the parties return to their separate corners. If the dispute is already before a court, the settlement will usually provide for the proceeding to be discontinued, or for consent orders to be made.
Confidentiality
Everything said at a mediation is confidential and without prejudice. The mediation agreement provides for this, and the Evidence Act 2006 gives statutory protection to communications made in the course of an attempt to settle a dispute. A party can therefore make a concession or an offer at mediation without fear that it will be used against it at trial if the mediation fails. Without that protection, candid negotiation would be impossible.
The settlement agreement itself is a contract. If a party fails to honour it, the other party can sue on it, and a court will enforce it in the ordinary way.
Why mediate
The first reason is cost. Litigation in the High Court is expensive, and the cost of a trial is frequently out of proportion to the sum in dispute. A day of mediation costs a fraction of that.
The second reason is risk. Even a strong case can be lost. Witnesses perform badly, documents surface, and judges take a different view of the facts from the one the parties expected. A settlement removes that risk entirely.
The third reason is time. A civil proceeding in the High Court can take well over a year to reach trial, and an appeal adds more. A mediation can be arranged within weeks.
The fourth reason is the one that clients tend to appreciate only afterwards. Litigation is exhausting. It occupies the mind, strains relationships and diverts attention from everything else. A settlement, even one that involves compromise, brings all of that to an end. Very few clients who have settled at mediation regret it. A good many who have gone to trial, including some who won, wish they had settled.
A note of realism
Mediation is not a soft option and it is not a sign of weakness. The strongest party at a mediation is the one that has prepared thoroughly, understands its position, and is willing to walk away if the terms are wrong. Nor does mediation always succeed. Some disputes genuinely need a decision, because the parties disagree about a point of law, or because one side is not negotiating in good faith. Even then, a failed mediation usually narrows the issues and clarifies what the case is really about, which is not nothing.
If you are involved in a civil dispute and mediation has been suggested, or you are wondering whether to suggest it, it is worth taking advice early. The decisions about timing, the choice of mediator and the preparation of the case for the day are where the value is made. SK.