Navigating the Process and Legal Implications of Court-Ordered Mediation
By Alexandra Turner, Senior Associate
In business and private life, conflicts are inevitable. However, lengthy court battles can be costly, time-consuming, and damaging to valuable relationships. Court ordered and administered mediation is a powerful alternative dispute resolution method that offers a more efficient, flexible, and collaborative approach to resolving disagreements.
What is Court Mediation?
Mediation is a voluntary and confidential process where a neutral third party, known as the mediator, facilitates negotiations between disputing parties to reach a mutually acceptable resolution. A Court can order the parties to a matter to attend a compulsory mediation conference. However, the compulsory nature of attendance does not mean that a party is forced to agree to anything – the process remains voluntary and ultimately in the hands of the parties.
The mediator guides the parties towards finding common ground and creative solutions. The mediator does not make any decision on the matter before them or impose a decision on the parties. However, the mediator may employ strategies to help the parties understand the strengths and weaknesses of their case, consider the consequences that might flow if the matter cannot be resolved by agreement, to reframe parties' entrenched positions and mindsets, and often guide creative ideas and options the parties had never thought of before.
If mediation is not successful, the dispute continues through the Court system.
A "Mutually Acceptable Resolution" – Does this Mean Mutual Satisfaction?
Master Sanderson of the Supreme Court of Western Australia noted in the 2023 decision McArthur v Gerhard Janssen as attorney pursuant to section 34 Administration Act for Veronika Logar [2023] WASC 59 –
"A mediation as conducted by registrars of this court is an attempt to settle a matter without the need for a trial. Although the descriptor 'mediation' is used, the process could perhaps be better described as 'aggravated negotiation'. The aim is not necessarily to bring the parties together. The aim is to compromise the action, probably to the mutual dissatisfaction of those involved."
It is this "mutual dissatisfaction" factor which means there is a risk inherent in each mediation that, following the mediation a party might decide they are not happy with an outcome despite having given their assent on the day, and having perhaps signed a heads of agreement or a deed of settlement.
What Happens if I Change My Mind Following Mediation?
The answer to this question will depend upon what happened at the mediation.
If you attend a mediation and the parties discuss their legal positions but do not ultimately reach any agreement, then you can adopt a different position moving forward – you are not bound by anything that was discussed at the mediation conference. Likewise, another party who attended cannot rely on what was said by you during the mediation conference outside of that setting, due to the confidentiality of that conference.
However, if an agreement was reached then that agreement can be relied upon.
In 2024, there was a decision published of Master Russell of the Supreme Court of Western Australia regarding just this situation.
The case PEH v KBRG Australia Pty Ltd & Ors [2024] WASC 253 relates to a dispute between parties relating to share sale and shareholder agreements, and a property development venture for land in Western Australia. The plaintiffs sought summary judgment to enforce a settlement agreement signed in relation to the dispute.
There were proceedings commenced in Singapore relating to those disputes. In November 2022, the parties attended a mediation in the Singapore Mediation Centre of the Supreme Court of Singapore. The plaintiffs, their solicitors, and each of the defendants represented by their solicitors attended a mediation and a Mr Seng Fai Chan, the defendants' Australian lawyer and authorised representative, attended the mediation by video-link. After negotiations and exchange of draft agreements, the parties executed a settlement agreement to settle the proceedings in Singapore. The plaintiffs commenced a proceeding in the Supreme Court of Western Australia claiming payment of $800,000, alleged to be due and payable by the defendants under the Settlement Agreement signed at the mediation in Singapore.
The defendants argued that Mr Chan did not have authority to agree a settlement and executed the settlement agreement on behalf of the defendants at the mediation in Singapore. This was disputed by the plaintiffs, who referred to an Agreement to Mediate entered into between the parties and the mediators on the date of the mediation by which the plaintiffs say Mr Chan was authorised by the defendants to represent them in the mediation and to settle the disputes the subject of the mediation.
The Master noted that a solicitor who appears at a mediation for a party will generally be taken to have authority to settle the dispute being mediated. In this case, the defendants had signed the Agreement to Mediate confirming Mr Chan's authority. The Master further observed that if the defendants held the view that Mr Chan acted beyond his authority, that was a matter between the defendants and Mr Chan and would not affect the plaintiffs and the settlement agreed at the mediation, which the plaintiffs were entitled to enforce.
The Court was apparently unimpressed by the "sweeping statements" of the defendants that the plaintiffs' claim was disputed in circumstances where the defendants did not "condescend to particulars to establish an arguable defence"
The Master made orders for judgment to be entered for the plaintiffs against the defendants in the amount of $800,000 plus interest. The Master noted that there did not appear to her to be any reason why costs should not also follow the event such that the defendants be ordered to pay the plaintiffs' costs of the action.
What Should I Know About Mediation?
Beyond the basics – where the mediation will occur, who can attend, who will mediate and the parameters of the process including confidentiality – if you are preparing for a mediation it is important to think through all the things you need to know before you can reach an agreement.
This will be unique to your case.
It might mean asking your accountant or financial advisor to run some different scenarios. It could mean obtaining sworn valuations of relevant assets. And of course, it is essential that you have already obtained sound legal advice on your claim. The respondents in PEH v KBRG Australia Pty Ltd tried to argue that they had been misled at the mediation by the solicitors for the plaintiff regarding their liability. Don't let this happen to you – you should assume that the other party and their lawyer are going to set out their case assertively, and come to mediation equipped to weigh up those arguments against your own arguments. Having a trusted legal advisor by your side at mediation can make all the difference between on the one hand ensuring you reach an agreement that while mutually dissatisfying is enforceable, workable and final, and the alternative which is either no agreement at all or one which is against your interests and which you later wish you had never signed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
