Mediation is an incredibly important tool in resolving legal disputes. For those unfamiliar with the concept, mediation involves an independent person (the mediator) attempting to assist the parties to negotiate a resolution to the matter. That should be compared with the parties and their lawyers merely going back and forth with each other or taking the matter to a trial. The vast majority of mediations are successful.

Having a mediator can give negotiations new energy and direction. It focuses the parties on trying to resolve the matter for good on a specific day, instead of over the course of months or years of negotiation that can seem to be without end. But what a mediator really brings to the table is the fresh and independent voice of someone who has an idea of what each party wants, expects and fears, because as part of the mediation each party will discuss their position with the mediator confidentially. The mediator can then help the parties to better develop their position and the negotiations.

Limitations
“Success” in the context of mediation means that the dispute is resolved. And that generally involves the parties coming to a compromise that is acceptable, but not what they wanted to begin with. Such a resolution means giving up on your best case scenario in order to ensure you don’t end up with your worst case scenario.

There is extra cost. It is often worth it, and I say that even though I know they can be very expensive. In South Australia, a high-end mediator may cost $4,000 to $7,000 for the day. That is at the high-end though, and there are many mediators that are far less (roughly $500 to $3,000 but it varies significantly) and some free community based services. The cost of the mediator is usually shared, but each party will also need to pay for any lawyers they have representing them for the mediation.

More importantly, the cost of mediation is almost always less than the legal costs that would be incurred if the matter did not resolve and less than what the parties might have to pay if they go to trial and lose.

The other main limitation is that the parties ought to be ready for the mediation if it’s going to work well. What do I mean by that? Two things. First, the likelihood of having a successful mediation is much higher if the parties come into it emotionally ready and already wanting to resolve the matter. Otherwise they need to come around to that position on the day.

Secondly, the parties should have realistic expectations of what they can prove and what they might get out of the dispute. To explain that I’ll resort to an example.

A‘s property suffers major damage. A hires B to fix up the property. B is in the process of doing the work but there are delays. A grows impatient and does some of B‘s work for B to speed things along. B doesn’t mind A doing a few things, but A does more than B is comfortable with. The repairs fail catastrophically and the property is effectively destroyed.

A sues B for $400,000, blaming B for the delay and the destruction of the property. B says there was nothing wrong in B‘s work and that the property wasn’t worth that much.

Both parties know that a trial will cost them tens of thousands of dollars and that if they lose they may have to pay much of the other party’s costs, in addition to the risk that B could be out of pocket $400,000 and A could end up with nothing.

At the point of mediation A hasn’t yet been able to show what the property was worth or show that the faulty work was done by B. B believes the work done by B was perfectly ordinary and is set on the view that it must be A‘s fault.

A is willing to compromise a bit due to the risks associated with the trial, but won’t come below $300,000. B is willing to pay a small amount to make it go away, but not nearly enough for A and so the mediation fails.

The parties start to prepare for trial. It is discovered that although A thought the property was worth $400,000, a valuation comes back at $250,000 for the property prior to when the first round of damage occurred. Some of the work that A did turns out to have been illegal for A to do and that other work poorly done by A, but none of that work was the cause of the fault. The fault has now been identified and the parties point the figure at each other for it. Unfortunately for A, A is having a hard time coming up with hard proof that the faulty work was done by B.

Although A might very well still win the trial if the judge believes A over B, A‘s prospects are not looking good. B may be in the superior position but could still lose. By now B has already sunk, say, $40,000 in costs and will incur more at trial.

Negotiations recommence. How those negotiations play out would still be up to A and B and the risks they are willing to take, but you can say with confidence that chances of the matter resolving at the mediation would be much higher if A knew then what is known now, potentially saving the parties tens of thousands in costs.

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