The Ins and Outs of Mediation Agreements
Mediation is one of the core tools utilized by Canadian courts to resolve disputes. High profile mediations include those which resolved the dispute over the Ontario Hydro plants and the Pickering Nuclear plant. The Supreme Court of Canada has recommended mediation for complex commercial disputes as far back as 1986. Successful mediation results in an agreement between the parties – known as a Mediation Agreement.
Mediation Agreements serve several purposes. Most importantly, they are a clear explication of the basis of the consensual deal which was negotiated between the parties . They set out the terms which must be met, and create a framework under which the parties can agree and/or swap documents, or otherwise progress towards the lasting resolution of the dispute. A properly drafted Mediation Agreement also binds the parties in the positive sense; that is, by consenting to abide by its terms the parties accede to be bound, just as they are bound by a court order or judgment.
In Ontario, mediation agreements are given the force of a court order under section 58(1)(j) of the Courts of Justice Act. Canadian courts have relied upon this power since Dierckens v. Ogilvy Renault (1998) 40 C.P.C. (4th) 23. Mediation agreements in the area of family law are particularly well established.
Top Reasons for Not Following a Mediation Agreement
Parties may fail to comply with a mediation agreement for several reasons. Occasionally, an agreement is unclear and one party is uncertain about his or her responsibilities under the terms of the agreement. Or, a party may not understand the terms contained within the agreement. However, these issues may be solved through clear communication and clarification. If the concerns are ignored, then non-compliance may result. More frequently, parties fail to comply with the terms of an agreement because of a significant change in circumstances. In such cases, a party will cite the change as the reason for deciding that complying with the mediation agreement is no longer feasible.
Beyond change in circumstance, parties may simply decide that they no longer wish to comply with the terms of an agreement. Non-compliance may occur when one party simply decides that the terms are no longer in his or her best interest. Often, the party may not want to comply because of evolving perceptions of the value of the agreement terms. For example, a person who negotiates a settlement of claims may realize during the process that the items agreed upon are worth less than anticipated. The person may recognize it was not in their best interest to agree to the terms and now refuses to honor this agreement. In the same vein, a person may voluntarily choose not to comply with the terms of a settlement agreement because the person has decided that the value of what was acquired during the negotiation no longer has any value.
Finally, a party may elect not to comply with the terms of an agreement because of issues of control or power. The issue may have nothing to do with the actual terms of the agreement. The person may refuse to comply simply to exert force over the other party.
Risks of Non-Compliance in the Eyes of the Law
Mediators and advocates no doubt are aware of the benefits and advantages of mediation, especially tailored to commercial or workplace disputes where the parties have a continuing relationship. The modern mediation process does not, however, carry the same teeth as the court process in requiring compliance with any agreement reached. For example, each party is not sworn to tell the truth or give evidence under oath. Mediation is strictly confidential. The mediation agreement almost always acknowledges that the mediated outcome is not binding unless it is subsequently settled by the court, and even then it is only binding to the extent that it is enforceable under the controlling law.
So what happens when there is a breach of mediation confidentiality or non-compliance with a mediation agreement? Can the other party take their opponent to court with regard to the breach? Yes, and it probably will. Mediation conduct and agreements may be produced before a court for the purpose of making an equitable claim to set aside a court order that embodies the mediated settlement. Alternatively, where the mediated matter is an arbitral matter or capable of being arbitrated, the aggrieved party may initiate arbitration proceedings seeking to enforce the mediated settlement against the other party.
More often than not, however, the aggrieved party will take the offending party to court in order to get a court ordered remedy. While the mediation agreement may be silent on how enforcement will be achieved, the aggrieved party will rely on the court process already invoked in relation to the underlying claim. A party may apply for a without notice or ex parte injunction to seek to maintain the status quo pending the outcome of proceedings, or to prevent a threatened future breach. That is, orders aimed at preventing the offending party from dishonouring or undermining the meditation process. Remedies including a declaration, damages, and specific performance may also be sought, including compliance with the mediation agreement. Actual and consequential loss may be recovered, as well as rectification, depending on the nature of the mediation agreement (for example, if the mediation agreement is in relation to an asset identified in trust law, the party who breaches the agreement may be ordered to hold the asset on trust). Primarily, damages under section 73 of the Conveyancing Act 1919 may be sought though, as the mediation agreement effecting the disposition of property may be within the ambit of a sale of land.
It should be noted too that section 17 of the Australian Consumer Law has been enacted into section 12GD of the ASIC Act (which applies), or by section 1021 of the Corporations Act in relation to financial products and services. A person or company who intentionally contravenes a complaint provision potentially incurs a criminal and civil penalty. Parties should carefully consider whether their conduct engages this issue. The Office of Fair Trading is also an option for those who consider that the mediation agreement was breached with respect to a consumer agreement.
Take Action if You Don’t Follow a Mediation Agreement
Absent compliance with the mediation agreement, there are options for redress. For starters, under Rule 1:17A-3 and 1:17A-4, a party may file a petition with the Court requesting enforcement of the agreement. There are also compliance provisions in the Uniform Arbitration Act, N.J.S.A. 2A:23B-1, in which a aggrieved party may seek "an order compelling or staying arbitration or the appointment of an arbitrator." Id. One may also seek a contempt finding for non-compliance with the agreement. Conversely, if a party refuses to sign a mediation agreement after the terms are negotiated in mediation , the other party could ask the Court to compel their signature. A good tact will be to use the mediation process and advice of the mediator to fashion an appropriate settlement agreement.
Note that if there is an application for enforcement filed for non-compliance with the agreement, the Court will likely impose sanctions including attorneys’ fees for having to file a contempt motion. Also, note that even if the Court enforces the agreement, it may simply order compliance with the agreement instead of imposing sanctions, or even attorneys’ fees.
How to Prevent Non-Compliance at Mediation
One way to reduce anxiety over possible non-compliance with a mediation agreement is to set clear expectations prior to the mediation. Make sure that everyone understands the likely provisions of a proposed agreement. Where possible, have the parties review a draft agreement in advance so that they know they will be asked to agree to these provisions.
Another helpful technique is to have all attendees review, and sign off on, a flip charted list of anticipated provisions. Hold each attendee to this agreement. This looks a little bit like this: "Based on our discussion this morning, everyone agreed to these major provisions to our mediation agreement: "1. the scope of the agreement 2. the process for disclosure 3. the form of disclosure 4. what happens if there’s a dispute over meaning 5. payment of mediation fees 6. payment of other bills. I went through each of these items, and everyone signed off on the list. Does anyone want to change their answer?" Short of having clear provisions in the written mediation agreement about post-mediation compliance, one mediators technique is to hold a modest threat of cancelling the agreement if the parties don’t comply. Most parties do not want to invest the time and money in an often painful mediation experience without getting some or all of the benefit from it. The problem with this technique, of course, is how to police what happens outside the presence of the mediator. Imposing a trump card where the mediator maintains the power to get compliance after the equalizing process (actual mediation) may be contradictory to the process. What is best is to anticipate what will happen after a solution has been reached so that people can make plans to get compliance, and can expect that their plans will be sufficient, thus avoiding the need for any mediator-based coercion. To assist in making this happen, keep a list of follow up dates when compliance is expected. Date the mediation agreement and write on the bottom. "Today is [date]. If we don’t get compliance on issues A, B, C by [date], we’ll meet again." In my experience, this rarely needs to be used, but it helps parties keep on track, and out of court where possible.
How Lawyers Can Structure Success
Mediation agreements can be binding on the parties, even if they are not reduced to writing and signed by the parties. The mediator can play a neutral role to facilitate compliance with the agreement. This role may not be recognized by the parties.
Lawyers can play a role at any stage of the mediation process. They can assist the parties prior to mediation in determining the issues that can be addressed in the mediation process, deciding on the mediator, focalizing the mediation process, attending the mediation with the client, and assisting with the drafting of the mediated agreement. After the mediation has been conducted, the lenders then have the benefit of an advocates’ role to finalize the settlement terms.
Some mediation agreements may contain a period for review by legal counsel before they are implemented. Morally , the parties should also have the right to change their mind about the settlement or to reconsider the agreement with their lawyer after the mediation is over.
In the event of non-compliance with any terms of the mediation agreement the role of the legal counsel is to remind the party who has not complied in writing of the obligation to comply with the terms of the agreement and to assist the client to obtain compliance.
One form that this can take is to write to the party who has not complied with a mediation agreement reminding them of their obligations to comply. A letter from counsel may encourage the party who has not complied with the mediation agreement to acknowledge his or her obligation to do so and cooperate in obtaining that compliance.
The fact that a lawyer sends a letter to other counsel will often motivate a party to comply with the mediation agreement.
The next step after sending a legal letter which reminds the party of their obligation to comply with the mediation agreement, is a motion to enforce the mediation agreement as an order of the court. In the event the court imposes sanctions to force compliance with the mediation agreement, the cost of that motion may be added to the cost of the enforcement of the mediation agreement.