The lost art of mediation

Sutart_Robertson.jpgBy Stuart Robertson
Partner, Kensington Swan Lawyers

Having done your best to avoid getting into disputes, once they arise this does not automatically mean a drawn out and costly exercise in litigation. Despite the provision for mediation in most standard form construction contracts, the use of mediation is sporadic, often left to the last minute and, when used, is facilitated in a manner which fails to achieve many of the real benefits of mediation.

The New Zealand construction industry was privileged to have during October the time and energy of the leading Australasian expert on mediation, Sir Laurence Street QC. The New Zealand Institute of Building arranged for and sponsored Sir Laurence on a one week national lecture series. In addition, he presented at the Arbitrators and Mediators Institute breakfast and Kensington Swan hosted a workshop session.

There are a wide range of alternatives to traditional, litigious, dispute resolution. In limited overseas jurisdictions (most notably Germany), judges take an inquisitorial approach. However, in Commonwealth jurisdictions, such as New Zealand, judges operate in an adversarial forum and can only make decisions on the material before them. In making those decisions there is invariably a winner and a loser. To rub salt into the wound the loser then usually has to pay the winner’s court costs.

The process of mediation is an empowering experience. The cynics who tell you that mediation is a sign of weakness are often ignorant of the process, conscious of the weaknesses in their own case or are being advised by counsel who do not have their client’s best interests at heart. This is not to say that mediation can be used in every type of dispute, but there would be few examples of disputes that could not be resolved by mediation.

The benefits of mediation include:

  • It is a voluntary and confidential process.
  • Anything prepared for, presented at or discussed in a mediation is without prejudice and cannot be used in any subsequent litigation.
  • Flexibility. The selection of mediator, venue and timing is entirely up to the parties. It can also allow for mediations within mediations, for example defendants coming to agreement on their contributions to any settlement as a separate exercise to negotiating an overall settlement with the plaintiffs.
  • The overwhelming majority of disputes can be resolved in one day.
  • The avoidance of internal and external costs, delay and the uncertainty in the court process (often referred to as ‘litigation risk’).

Even if settlement is not achieved at mediation it is often the case that shortly thereafter matters are resolved or, at worst, the matters in dispute can be substantially reduced, therefore having a significant saving on the length and cost of a formal court hearing.

Importantly, mediation can have a number of long term positive benefits for the ongoing or future relationship of the parties. Skilled mediators are as much focussed on understanding where the parties are coming from and what other interests they have, as they are in identifying the keys issues in dispute. While invariably disputes ultimately result in money or something of monetary value, the solution does not always have to be payment in cash. For example, in the leaking building context there are a number of examples of even small building companies agreeing to repair the plaintiff’s property, with contributions from the defendants.

In civil construction disputes, materials left on site can (because of shortage in supply for a new project) be of more benefit to one party than payment. In a term maintenance contract the provision of new services, as an add-on to the existing contract, could prove more beneficial to all concerned rather than paying a penalty to the principal. None of these issues would be disclosed in court litigation or even in the ‘supermarket’ mediation prominent in New Zealand.

Too often even experienced mediators fail to look at the broader issues before honing in on the disputes. This occurs in both private mediations and in court

settlement conferences. Often private mediators set themselves targets to spend the morning session hearing each party state its case and then identify the key matters in dispute. In the afternoon session they focus almost solely on dollars and move quickly to a ‘horse trading’ forum. Their tactic is then to keep the parties as long as possible until settlement is achieved.

Court assisted resolution comes in the form of judicial settlement conferences. These are convened by the case management judge, in the High Court they are chaired by associate judges. The judges will literally step down from the bench and sit with the parties to facilitate settlement discussions. As the associate judges do not subsequently preside over the substantive court hearing, they can assist the parties in a without prejudice forum. Unfortunately, they too often over look the opportunities available in mediation, being focussed on easing the backlog of cases.

In reflection of that pressure, the Auckland High Court has begun trialling a court referred mediation service. This involves the associate judge assessing each case as to whether mediation is appropriate and at what point in time. The case is referred to a panel of trained mediators who operate outside the court process. Once mediated the parties report back to the court as to whether or not they had resolved their dispute and, if not, whether there is any reduction in the scope of the dispute to go to hearing.

Very rarely do parties avail themselves of the mediation provisions in standard form contracts (NZS3910: 2003, clause 13.4; NZIA 2007, clause 17.3.2). Prior to the introduction of the Construction Contracts Act 2002, parties were faced with the alternatives of mediation and/or arbitration. As arbitration was edging closer and closer to the time and cost with court hearings, mediations were used more often. However, with the introduction of the adjudication process under the CCA, mediations have almost been forgotten.

If there was ever an economic climate to utilise tried and true alternatives to litigation it is now. Mediation empowers the parties to seek a mutually acceptable solution to their dispute. It opens the possibility of finding solutions that are unique, time and cost efficient and bring a close to the dispute process. They leave open the way for a continuing and long term relationship.   

Contractor Vol.33  No.11  December 2009 - January 2010
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