Commercial mediation in Australia

There are two types of mediation in Australia: (i) private or (ii) court-annexed. The courts in all Australian jurisdictions have the power to refer parties to mediation, even if no party has consented to mediate, and in some circumstances (which differ as between jurisdictions) there may be an obligation to mediate. Mediations are generally conducted on a “without prejudice” basis, although there are limited exceptions. Mediations are also confidential, although mediators may disclose information in certain circumstances. Delay or failure to mediate, or failure to mediate in good faith, may result in an adverse costs order. Mediation agreements are enforceable under normal contract principles.

What is the status of mediation in this jurisdiction?

In recent years Australia has seen a significant shift toward 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 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.

There is a strong settlement rate for matters referred to mediation. 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. Mediation often assists in narrowing the issues in dispute and can act as a catalyst for subsequent settlement.

Australia became a signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation ("Singapore Convention") on 10 September 2021.

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. 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.

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, regardless of whether the parties consent. There is an increasing trend for this power to be exercised by courts. For example, in the case of Remuneration Planning Corp v Fitton [2001] NSWSC 1208, [3] 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 [2006] NSWSC 1262, [7] (Campbell J); Singh v Singh [2002] NSWSC 852, [3]-[4] (Hamilton J); Higgins v Higgins [2002] NSWSC 455, [5]-[6] (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 being imposed by a court. 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
In addition to “without prejudice” privilege, parties can agree at the outset to keep mediations confidential. This agreement can be expressed either in the original contract between the parties or in the mediation agreement. Model mediation agreements prepared by the Resolution Institute and ACICA (two of the leading Australian ADR institutions) both incorporate strict confidentiality obligations on both parties and the mediator. Legislation in all of Australia’s States and Territories also provides for confidentiality over mediation sessions. However, mediators are permitted to disclose information in certain circumstances – for example, when the parties give consent, if there are reasonable grounds  to believe that the disclosure is necessary to prevent or minimise the danger of injury to a person or damage to property, or if required by law (for example, Civil Procedure Act 2005 (NSW), section 31; Supreme Court Act 1935 (WA), sections 71 and 72; Supreme Court Act 1935 (SA),
sections 65(3) and (6).

How are settlement agreements enforced?

A mediated settlement agreement is a legally binding agreement and is enforceable under the normal rules of contract law. Although there is no requirement at common law that the settlement agreement be written, this is advisable to aid enforcement. Conventionally a deed of settlement will be used. Some jurisdictions require the formalisation of certain types of mediated settlement agreements. For example, in Victoria, mediated settlement agreements in civil matters must be formalised (Legal Profession Act 2004 (Vic), section 4.3.12(1)). Courts may also embody settlement agreements in consent orders. This option can provide as an effective enforcement tool, since a failure to comply with such an order may result in contempt of court.

Is there a system of accreditation and/or regulatory body for mediators?

Mediators may voluntarily apply for accreditation through the non- compulsory National Mediator Accreditation System (“NMAS”), which is the principal source of mediator standards in Australia. The NMAS imposes approval and continuing accreditation requirements, including that the mediator pass a “good character” test, have a relationship with a recognised mediator-accredited body and provide evidence of his or her competence. Courts usually elect to use NMAS mediators. State-based law societies and bar associations also maintain lists of accredited or qualified mediators. The Resolution Institute also offers an alternative accreditation system to NMAS, and the Federal Court offers a separate accreditation scheme that incorporates the NMAS.