Commercial Mediation: The long-awaited arrival of mainstream mediation

11 June 2015 894
ABC Grocers has an agreement with Joe Fruit for the supply of apples to ABC Grocers for a year. When the first delivery of apples arrives from Joe Fruit, they are over-ripe and cannot be sold. The second and third batches are no better. ABC Grocers refuses to pay Joe Fruit for these deliveries arguing that the quality was unacceptable and that his company had suffered damages from clients wishing to purchase apples which he could not supply because of Joe Fruit’s failure. Joe Fruit insists that ABC Grocers cannot withhold payment and threatens legal action. ABC Grocers does not want a lengthy litigation process and as a well-known community store wishes the dispute to remain out of the eyes of the media. But what solution besides litigation is available to address this dispute?

In short, mediation could present ABC Grocers with a useful alternative to formal litigation for the following reasons:

  Mediation is an informal and voluntary process, which is convened once both parties to the dispute agree that it is the best course of action to resolve the matter amicably.
  The paramount principle of mediation is confidentiality, meaning that the parties and the mediator may not disclose any information that is discussed during the process. In addition, the mediator may not reveal the discussion points raised in private sessions with one party to the other, unless specifically mandated to do so. 
  Mediation is without prejudice, which means that should the mediation fail, whatever offer, admission, or concession that is made during the mediation process may not be used in later court or arbitration proceedings. 
  The parties must have settlement authority to help ensure the success of the mediation. For example, ABC Grocers should authorise their representative with a letter of authority to represent the company at the mediation. This is to avoid situations of concessions being made by a representative that a company may later reject.
  The outcome is self-determined by the parties, which differentiates mediation from litigation or arbitration processes which are determined by a presiding officer.
  Mediation is non-binding, in that it only becomes binding once both parties reach and sign a settlement agreement. 

It should be noted that an essential feature of mediation, different from litigation and arbitration, is that mediation assists parties in resolving their dispute in an expeditious and cost-effective manner, meaning that a matter could potentially be resolved in as little as one day.

Prior to mediation, parties must agree and sign an agreement to mediate. This agreement sets out amongst other things, the when and where mediation shall take place, the mediator’s fees and payment terms as well as allowing parties the opportunity to furnish the mediator with written statements to allow the mediator to gain a better knowledge of the background of the dispute. 

Mediation commences with the mediator confirming the signing of the agreement to mediate and explaining the procedure of the mediation. Thereafter, parties are given the opportunity to make their respective opening statements. This usually takes place in what is known as a joint session. The mediator has the discretion to break the joint session into private or side sessions when he or she deems it fit and where the mediator may speak to each of the parties individually in order to explore the interests of the parties and analyse the dispute in a more meaningful way. Such side sessions are also confidential. However, a party may grant the mediator an express mandate to carry certain information over to the other party. This assists the process to reach an option generating stage where the parties begin to negotiate terms of how their dispute may be resolved. Should this be successful, the mediation shall conclude with the parties finalising a settlement agreement with the help of the mediator.

The purpose of the mediator is to facilitate the mediation. The mediator does not adjudicate, judge, advise or decide the outcome of the mediation. The mediator is an impartial and neutral person to the dispute, whose main duty is to assist both parties to reach the best possible solution to their dispute. In this regard, the mediator explores the issues and options with the parties rather than influence the outcome of the mediation. Ultimately, the mediator controls the process by using his or her experience and discretion to assess when to engage in joint or private sessions with the parties. 

During the course of 2014, new and exciting rules regulating the conduct of proceedings of the Magistrates’ Courts of South Africa were published and which provides for the voluntary submission of civil disputes to mediation in selected courts, referred to as court-annexed mediation. At this stage, however, court-annexed mediation has only been implemented in Gauteng and North West Provinces, but the implementation will circle out to all other Provinces in due course. These rules apply to the voluntary submission to mediation of disputes by parties prior to commencement of litigation as well as after litigation has commenced, but before trial. In addition, a court may, prior to or during a trial but before judgment is handed down, enquire into the possibility of mediation and afford the parties an opportunity to refer the dispute to the clerk or registrar of the court to facilitate mediation.

If mediation is successful, the parties conclude a settlement agreement setting out the terms and conditions of their settlement and to which they must adhere to. If summons was issued prior to the mediation, the parties may agree to have their settlement agreement made an order of court. 

Mediation, although in its infancy in South Africa, has proven internationally to provide a valuable alternative to litigation for parties embroiled in a dispute. In South Africa the option of mediation can only be welcomed, and the inclusion of court-annexed mediation in the rules of court confirms that this form of dispute resolution is here to stay.

Disclaimer: The above article, procedures and commentary are general in nature and may differ from case to case. No reliance should be placed on the procedures described above and legal advice should be obtained before embarking on any process of mediation to determine the appropriateness thereof to the specific dispute in question.