This post is written by Benjamin Freedman, an accredited mediator, social worker, and healthcare manager who will finish a Masters in Conflict Management at James Cook University in November 2017. His interests include interprofessional collaboration in healthcare and conflict engagement in complex organisations. This blog entry was originally written as part of the assessment for the Masters subject Foundations of Mediation.
Mediation goes on trial
Given how often mediation and litigation occupy different spaces within the same dispute resolution landscape it is perhaps surprising how rarely the processes or outcomes of mediation have been challenged in court. While there are some plausible reasons for this, it does mean that the Australian cases which do exist afford a valuable opportunity for ADR practitioners to learn about their potential legal liability.
There is thought to be three areas of legal liability relevant to mediators:
- Liability in contract– where a party suffers harm or loss caused by a failure of the mediator to perform in accordance with an Agreement to Mediate
- Liability in tort– where the mediator fails to adequately exercise their specialist skills, causing an actual loss to one or more parties
- Liability in fiduciary duties– where a mediator is in a relationship of trust with a party and acts in a way that is not in that party’s interests.
Tapoohi v Lewenberg
Tapoohi v Lewenberg is widely regarded as the most compelling test of mediator liability in Australia (see also conversations about immunity in family law and admissibility in farm debt contexts). Tapoohi v Lewenberg involved two sisters in a complex dispute about their mother’s deceased estate. The dispute had gone to court, but the parties agreed to attend mediation.
Seven facts you need to know
- Due to the value of the estate, each sister was represented at the mediation by a team of barristers and solicitors.
- The mediator, a QC who specialised in commercial litigation, was not mediating under a court order and there was no formal agreement to mediate (therefore no statutory immunity).
- In position statements, pre-mediation conferences and during the mediation Ms Tapoohi repeatedly stated that any agreement should not be final until professional taxation advice had been sought.
- The mediation took place over a single day and lasted late into the night
- At the end of the evening, the mediator persuaded the parties that an agreement should be drafted and signed that night.
- The mediator dictated the terms of the agreement, which was scribed by a solicitor in the legal party, and this was signed by each sister.
- This included a provision, suggested by the mediator, that shares in the family company would be transferred for a nominal sum of $1, but no provision for taxation advice was included in the agreement.
Subsequent to this mediation, Ms Tapoohi discovered that the value of her position was substantially reduced after capital gains tax. Ms Tapoohi sued her legal team, who spread liability by including the mediator as third party to the claim.
The mediator applied for a summary judgement, hoping that the litigation would be found not to have a reasonable chance of success and therefore he would be excused as a third party. After the summary judgement was in favour of the plaintiff, the matter was settled out of court.
Seven critical learnings for the reflective practitioner
The precedence value of this case is limited as the matter was settled out of court before the full evidence was presented and tested. However, the allegations and arguments during the interlocutory proceedings provide some insight into the legal elements of many ethical dilemmas faced by many contemporary facilitative mediators.
Persuasion versus Coercion
Ms Tapoohi argued that the mediator ‘coerced’ parties to continue the mediation late into the evening, despite the misgivings of the legal representatives, two of whom had already left for the day. It is alleged the mediator recommended extending the session in such a way that Ms Tapoohi’s team felt it was a direction.
ADR practitioners often rely on their mastery of persuasion. While persuasion and coercion are both strategies that aim to influence the actions of another party, ‘coercion’ is to do so by using threats and sanctions where ‘persuasion’ seeks a voluntary and willing change by exploring interests or encouraging parties to evaluate options. The judge did not rule on whether the mediator used coercion, but this case challenges the reflective practitioner to be aware how the use of language, context, non-verbal communication and relationship can ‘frame’ whether a message is received as persuasion or coercion, even when intentions are good.
Influence the process, not the outcome
Ms Tapoohi argued that the mediator unilaterally dictated some of the critical details in the mediated agreement, including the ill-fated provision to transfer shares in the family company for $1.00. Facilitative mediators are process experts, upholding the principle of self-determination, where parties make their own decisions and the mediator does not evaluate or advise on the merits of, or determine the outcome of, disputes. Often when mediation is on the precipice of breaking down because it is perceived by parties as too uncomfortable, risky, or difficult, the mediator has an important role in persuading parties to keep communicating and moving through the stages of process. Yet there is a difference between exerting influence on the process, versus influencing the substantive outcome.
Where the mediator may have reasonably believed it was appropriate to extend the mediation into the evening to maintain the momentum of the process, it was his influence on the substantive outcome which became problematic. This is a dilemma in many mediation contexts; where a ‘small suggestion’ from the mediator may be the difference between an impasse and a mediated agreement.
Ms Tapoohi alleged that the engagement between her and the mediator had characteristics of a fiduciary relationship, and the mediator was in breach of his responsibilities by acting in a way which was contrary to her interests. The mediator unsuccessfully argued that there were no characteristics of a fiduciary relationship with Ms Tapoohi as he was retained to provide a facilitative process, and fiduciary responsibilities towards Ms Tapoohi rested with her legal team.
While the matter of whether mediation has the characteristics of a fiduciary relationship remains, it is worthwhile to consider the imperative of a mediator to act with diligence, even-handedness and trustworthiness. While this is fairly ingrained in practice, there are also potential dilemmas, or tensions, which shape mediator self-interest and pressure to settle when not in the best interests of parties.
Facilitative mediator expertise
In this instance the mediator was a Queens Counsel with a background in commercial litigation. This became important when the judge considered the standard of practice that should have been exercised by the mediator- whether it was that of an expert mediator or an expert commercial litigation barrister. It is common that an accredited mediator will also have a professional background that is relevant to the content of the mediation. While the mediator may delineate in their own mind that they are being retained for mediation and not the skills of their background profession, this should be made explicit to parties who may be less familiar with the process-orientation of a mediator. Regardless, the National Mediation Accreditation Standards advise that ‘mediators should adhere to, and be familiar with, the code of conduct or ethical standards prescribed by the organisation or association with which they have membership’.
Legal exposure in agreement drafting
Ms Tapoohi argued that she had repeatedly asked that any agreement not be made final until professional taxation advice had been sought, and this expert knowledge was not present in the legal team. However, this condition was not included in the signed final agreement which was dictated by the mediator and scribed by one of the solicitors. This raises a question of the standard of care that is required by the mediator when drafting an agreement, and how much of the responsibility for checking its accuracy and completeness sits with the parties as signatories.
Mediation in high-stakes commercial disputes
Facilitative mediation has many advantages over other more formal processes. It can far less costly than litigation, integrative rather than adversarial, there is less of a focus on ‘facts’ or ‘evidence’ and more a focus on interests and agreements, and resolution can occur far quicker. While there is no ‘upper limit’ on the stakes that can be part of a mediated agreement, parties should be made aware that the process and outcomes are often less robust than settlement through courts. It is a challenge for facilitative mediators to identify when the dispute may require a more rigorous enquiry than what is provided by a facilitative process. Even more so, to ensure that parties understand the benefits and limitations of facilitative mediation to optimise informed consent.
Given the likelihood that these and other areas of mediator legal exposure, and questions about immunity will be tested in court in the future, it is important that facilitative mediators consider their obligations of contract, tort and fiduciary relationship during the complexity and dilemmas of everyday practice.
Melinda Shirley and Tina Cockburn discuss whether mediators operating outside statutory immunity will be liable for negligence in the aftermath of Tapoohi v Lewenberg