New Zealand Law Society - How to win a mediation in a commercial setting

How to win a mediation in a commercial setting

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Granted, the title is not “PC” as in politically correct. Mediators prefer to talk in terms of win-win or compromises where both parties leave the mediation positively disposed to one another and happy with a compromised outcome.

But in my experience the reality is somewhat different. Disputants, particularly in the commercial setting, want to win. They want to get an outcome and if they do not get the outcome they want after mediation, they will insist upon their day in court.

What does winning mean?

The conventional definition is victory over your opponent and in a commercial paradigm this tends to mean getting paid a sum of money.

There is also more abstract definition of the word “win”. Under this definition winning may be defined as cutting your losses at the earliest possible opportunity because you have a weak case when compared to the superior virtues of the opponent’s case. This is also a win of sorts because you can stem the flow of legal and consultancy expenditure and quickly bandage up the wound so to speak.

Regardless of the semantics or definition of winning, the way to win at mediation can be encapsulated in the following:

  1. Making sure that you have an excellent lawyer or barrister that has an eye for detail and a willingness to be frank and candid. You need someone who has sufficient strength of character to be able to tell you, not what you want to hear, but rather what you need to hear. What you need to hear is the truth – that is, whether you have a strong or weak case: a case that is capable of being won or lost. Furthermore if the case is strong, you are talking about more than a 50/50 proposition, it is all about a very high chance of winning.
  2. Honest and frank advice fashioned by the advocate is critical because you do not want to embark on a lengthy dispute in circumstances where there are considerable risks. Furthermore the advocate must be prepared to negotiate a compromised outcome at the earliest possible juncture if the case is fraught with downsides.
  3. When it comes around to consultants, if you study cases in the area of building disputes, you need a damn good building consultant. Many cases are about building defects and there are those “defects” that are alleged and there are those that are real. Again the litigant needs to know the truth and the truth boils down to two questions. Are there any defects? If the answer is yes, how much does it cost to fix them? The best building consultants can answer these questions honestly and accurately and you need to avoid a building consultant who is inclined to “gild the lily”. Gilding the lily raises hopes that will inevitably be dashed.
  4. If you have a very strong case and a robust legal and consultancy team and the other side is financially sound, then be loath to compromise. There is a place for “gunboat diplomacy”. The side that has the biggest guns and the most effective artillery should hammer that advantage home. Mike Tyson, once his opponent was on the ropes, did not say “let’s have cup of tea or let’s have a break”. He hammered home his advantage and delivered the finishing blow. That’s winning. If money is owed in a prima facie sense and the opponent has the capacity to pay it, then it has to be paid. A litigant should never bid against him or herself and compromise purely to resolve a matter in circumstances where there is a significant “financial hair cut”. All of this, however, is subject to one proviso, the other side must have the capacity to pay, because if it does not, there is no need to throw good money after bad and victory will be pyrrhic and will be associated with significant financial loss.
  5. Nevertheless be open minded, be prepared to listen, and hear the other party’s point of view, in case there is a development by way of the provision of new information that alters the risk matrix. Absent a preparedness to listen, a seminal piece of information may be lost.
  6. Listen to the mediator and allow the mediator to do their job, which is to assist with the facilitation of the resolution of the dispute. But do not permit a mediator to bully you into settling the matter. Many mediators use a stock standard line and it goes something like this “there are no guarantees in a court of law that anyone will win … the legal spend will be huge … the case may run for weeks and so forth”. I never once heard a mediator say “there are cases that are bullet proof where there is no chance of losing”, yet indeed those cases do exist. A good lawyer will know if such a case presents itself.
  7. Do not be intimidated. Some advocates try to bully and filibuster. In doing so they try to undermine the faith you have in your case and the faith that you have in your legal team as they try to capitalise upon the seeds of doubt. Stay strong, stay firm. If you have chosen your team well stay confident and accept their advice.
  8. Understand the ringcraft of mediation negotiations. The first offer is rarely the final offer. The winning of mediation requires patience, fortitude and a preparedness to abort the mediation if a suitable offer is not forthcoming. On this point the biggest weapon is that preparedness to terminate the mediation and the confidence to say “sorry folks, the mediation is over, we have a great case and I look forward to seeing you in court”. This is powerful because the other side, if well advised, will know of the fallibility in their position and the last thing they will want to do is run a case that will be lost.
  9. So you have to stay strong and stay firm in your determination to derive victory but before the mediation begins, the question of what does victory look like needs to be answered. The legal team prior to the mediation should have a defined victory in the financial sense so that the client can provide the relevant instructions and knows what the financial outcome will be.
  10. Be prepared for all types of mediators. You will not necessarily know who the mediator will be. You will not know whether the mediator will be meek and subdued, proactive or reactive. You will not know whether the mediator will engage in histrionics or be apathetic in his or her disposition. A good mediator will be impartial, facilitatory, constructive and non-judgemental but as mediation is an unregulated profession, it can be a bit of a mixed bag unless the parties can nominate and agree upon a mediator who is held in the highest esteem. Just because there is an indifferent mediator does not mean to say that you cannot win as long as the negotiating team keeps its cool and puts its arguments persuasively. Where a mediator is not able to control the dynamic there is a risk that histrionics or ferocious expression will culminate in one of the parties walking out. When this occurs there will be no closure and the negotiation drawbridge will close.

Finally, victory can only be achieved when the deal is done and closure is effected by way of signed up terms of settlement.

The devil is in the detail with respect to terms of settlement and they are an art form in their own right.

Great care must be taken when it comes around to drafting terms of settlement. A good advocate will be pedantic even if this frustrates the opponent because nothing must be left to chance, there can be no ambiguity. Understand that the drafting of terms of settlement can often take many hours but be patient and persevere and only sign the document when your advocates are satisfied that every base is covered.

Kim Lovegrove is a Conjoint Professor of Building Regulation at the University of Newcastle, New South Wales as well as being a Chartered Building Professional, and President Elect of the Northern Chapter of the New Zealand Institute of Building. He is a partner of Trans-Tasman law firm Lovegrove, Smith & Cotton.

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