Insurance · 9 April 2018

Alternative dispute resolution: The two outcomes of mediation

Mediation is a form of alternative dispute resolution (ADR).

Concluding his three-part alternative dispute resolution series, Grid Law founder David Walker looks at the two possible outcomes of a mediation.

Whenever I start legal action on behalf of a client, I am always fully prepared to go to court. I will not let a client start something that we are not willing to see all the way through to the end.

However, in my experience, the more prepared you are to go to court and argue your case in front of a judge, the less likely it will happen. This is because there are so many opportunities and tactics you can use to reach a settlement before you get to court. One extremely effective tactic is mediation, a form of alternative dispute resolution (ADR).

In the first article in this series, I explained how ADR can be used to help settle disputes out of court. Last week, I explained what happens at a typical mediation meeting.

There are two possible outcomes to mediation – either you reach a settlement of your dispute, or you do not. In this article, I want to take a closer at what you should do in both scenarios.

Let’s start with the positive – you reach a settlement of your dispute.

This is the outcome that everyone is trying to achieve. When you finally settle your dispute, especially if it is been ongoing for a long time, there is a huge sense of relief. The pressure is off but you can’t relax and celebrate just yet.

The first thing you have to do is document the settlement. You need to do this straight away because mediation is not legally binding.

Mediation is not like the courts which have the power to give an enforceable judgement. The only way to make a mediation settlement legally binding is to record it in a contract, a settlement agreement. Then, if one party doesn’t fulfil their part of the bargain, the other can sue for breach of contract.

Entering into settlement agreement straight away also prevents either party from changing their mind about the terms of the settlement and whilst it’s being documented, any misunderstandings can be clarified immediately.

As with all contracts, when preparing the settlement agreement, the terms need to be clear and specific.

Most settlements will involve one party making a payment to the other. So, in the contract you need to say how much has to be paid and when. If the payment is to be made in instalments, the dates should be clear.

You should also include the consequences of any payment being made late. For example, do you charge interest? If so, how much? If payment is being made in instalments, do the remaining payments become immediately due so you can sue for the full balance outstanding?

Depending on the circumstances of the dispute, there may be other settlement terms too. For example, is there stock or equipment to be returned? If there is, is it to be made available for collection or is it to be delivered back to the owner? If so, at whose cost and when? Is the condition of the stock or equipment being guaranteed? What happens if it has been damaged during storage?

As you can see, both parties should be absolutely clear about what is expected of them so that this dispute is settled once and for all. The last thing anyone wants is to think they have reached a settlement only for a new dispute to arise because the terms of settlement haven’t been fully thought through.

If the mediation has settled a dispute where court proceedings are ongoing, the court needs to be informed. The legal action can then be discontinued or put on hold until all the terms of the settlement have been fulfilled.

If the mediation hasn’t been successful, don’t worry. It is not the end of the world.

Discussions and negotiations regarding a possible settlement can still continue and you may wish to try a further mediation closer to trial.

Again, if the mediation was carried out to try to settle ongoing court proceedings, the court needs to know. Often, the timetable of events to progress a case to trial will have been put on hold while the parties try to reach a settlement. The court will therefore need to know that the process should be restarted.

Sometimes, a mediation is partially successful. Some of the issues in dispute may be resolved, but not all of them.

If this happens, the mediation will still have been a useful exercise because the court proceedings should now be simpler. There should be less evidence to prepare and exchange and the trial should be shorter, all of which will save costs.

Another benefit of mediation, even if it doesn’t resolve the dispute, is that you will have learnt a great deal. For example, you will know what’s motivating the other party and what their concerns are. You can then address these, for example by focusing your evidence on particular issues.

However, you must remember that mediation is a confidential process and held on a without prejudice basis. This means you can’t use information disclosed at the mediation in the ongoing proceedings.

So, whether it’s successful or not, mediation is a very useful exercise to go through when you’re involved in any form of dispute.

To finish this ADR series, I want to leave you with three tips to get the best out of a mediation:

  1. Both parties need to enter into it with a genuine intention to reach a settlement. If they don’t, it can be a waste of time, effort and money;
  2. You need to thoroughly prepare for the mediation. This may involve exchanging evidence that will aid discussions and help prove your case;
  3. Timing is important. From experience, I find that mediation works best after court proceedings have been started. This adds a sense of urgency and importance to the discussions and encourages the parties to reach a settlement.

If you have any questions about mediation or how to settle business disputes, please feel free to email me at editors@businessadvice.co.uk and I’ll happily answer them for you.

Alternative dispute resolution: What happens at a mediation?

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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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