Commercial mediation in Australia
What is the status of mediation in this jurisdiction?
In recent years Australia has seen a significant cultural shift in favour of alternative dispute resolution (“ADR”), including mediation. This has been supported, or in some respects led, by legislative reforms. In all Australian jurisdictions (both State and Federal) courts now have the power to refer parties to mediation, including in some jurisdictions to “private” and “court-annexed” mediation. Some jurisdictions even require parties to attempt to resolve their disputes through ADR, including mediation, prior to instituting court proceedings. These requirements are outlined in more detail below.
Statistics show that there is a strong settlement rate for matters referred to mediation. For example, in the 2018-2019 financial year, 72% of matters were resolved prior to trial by court-referred mediation in the Federal Circuit Court of Australia (Federal Court of Australia, Annual Report 2018–2019 (2019), 200). Even if a matter does not settle at mediation, it is common for a settlement to be reached post-mediation before the matter proceeds to trial. The mediation often assists in narrowing the issues in dispute between the parties and can act as a catalyst for subsequent settlement.
As at the date of publication of this chapter, Australia is not a signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation ("Singapore Convention"), which was opened for signature on 7 August 2019.
How is a mediation conducted?
Mediation is a structured process guided by an independent person who assists the parties to identify the issues in dispute and attempt to reach a resolution. It is generally a confidential and without prejudice process. For private mediation, the mediator is usually selected by agreement between the parties but may be appointed by the court or an independent body where the parties cannot agree on an appointment. For court-annexed mediation, the mediator is usually a court registrar or master. While there is no mandated structure for a mediation, common practice is for a mediation to incorporate private sessions between each party and the mediator, as well as sessions with both parties.
Private mediation is generally conducted by former judicial officers, senior lawyers or other professionals with particular expertise in the subject matter of the relevant dispute. It is common practice for parties to exchange position papers prior to the mediation. These aim to outline the key issues in dispute and afford each party the opportunity to state its position on those issues. The mediator is not usually asked to provide an opinion on the merits of the claim.
Mediation is often conducted in accordance with the mediation rules of a number of institutions both inside and outside of Australia. For example, the Australian Centre for International Commercial Arbitration ("ACICA") offers mediation rules dated 17 July 2007. These rules are currently in the process of being revised to reflect current best practice in mediation.
Does the court have powers to support a mediation?
As stated above, in all Australian jurisdictions, courts have the power to refer the parties to mediation, both with or without the consent of the parties. There is an increasing trend for this power to be exercised by courts. For example, in the case of Remuneration Planning Corp v Fitton  NSWSC 1208,  Hamilton J, a judge of the New South Wales Supreme Court has noted that “this is an area in which the received wisdom has ... changed radically” and, since the power to order mediation was conferred upon the Court, “there have been a number of instances in which mediations have succeeded, which have been ordered over opposition, or consented to by the parties only where it is plain that the Court will order the mediation in the absence of consent” (See, for example: Lidoframe Pty Ltd (as Trustee for Logan Cypress & Framing Trust) v New South Wales  NSWSC 1262,  (Campbell J); Singh v Singh  NSWSC 852, - (Hamilton J); Higgins v Higgins  NSWSC 455, - (Austin J).
In addition to the power to refer parties to mediation, courts may also make orders that control the way in which the mediation is conducted. In specific contexts, such as native title claims, wide powers are conferred on the court to give directions in relation to the mediation and, as part of the mediation, the mediator may refer questions of fact or law to the court for determination.
Does failure to mediate attract adverse cost consequences?
A delay or failure in agreeing to mediate, or a failure to mediate in good faith, can result in an adverse costs order. As outlined above, at the Federal level, there is legislation requiring parties to file a “genuine steps” statement prior to commencing proceedings. Whether a party filed a genuine steps statement when required and whether genuine steps were actually taken may be relevant in awarding costs. Additionally, as outlined below, courts may consider information and communications disclosed in mediations for the purpose of determining liability for costs.
At a State level, a failure or lack of willingness to mediate can be taken into account in making costs orders. In New South Wales, the court is specifically empowered to take any failure to comply with the requirement to resolve the dispute by agreement (which can include using mediation) into account when determining costs in the proceedings generally.
Are mediations confidential?
Mediations in Australia are generally conducted on a “without prejudice” basis. Consequently, information and communications disclosed during the course of a mediation are privileged and not admissible in court proceedings. The privilege can be waived where both parties consent. There are also some limited exceptions to “without prejudice” privilege. Information or communications disclosed during the course of a mediation may be adduced as evidence inter alia:
- to show that a settlement agreement was actually reached or to establish the terms of that agreement;
- to contradict or qualify evidence likely to mislead the court;
- or to determine liability for costs.