Tips For First Appearances

Med-Arb – The Next Frontier

Around twenty years ago, private mediation of family law disputes was a relatively new professional service. Today, mediation before litigation is mandatory in parenting disputes and is certainly considered best practice for all family law disputes. Since 2015, arbitration of family law financial disputes has become more widely understood and accepted. Indeed, practitioners have recently been challenged to inform the court as to whether the relevant matter is appropriate for arbitration. A common question I am now receiving, is “Can you then arbitrate this dispute after you have mediated ?”

The answer is “Yes, provided the Med-Arb is approached correctly.” About twelve months ago I wrote an article entitled “Med/ARB – The primary dispute resolution superhighway.” This article expands upon themes explored earlier. The following helps understands the advantages of Med-Arb, the arguments against Med-Arb, and the how to best utilise Med-Arb for your clients.

Med-Arb Is A Consensual Process – It’s For Your Client to Decide

 Mediation-then-Arbitration (referred to as Med-Arb) is a hybrid form of the two alternative dispute resolution methods. It is, however, a fusing of two processes that are at opposing ends of the alternative dispute resolution continuum.[1]

It is highly relevant to point out, and to keep remembering, that like mediation and arbitration, Med-Arb is a consensualprocess and is therefore a client driven process.

Med-Arb involves a mediation followed immediately by an arbitration if the mediation fails to bring about a final resolution. The arbitration can be in relation to all issues or, because of partial resolution at the mediation, only upon those matters outstanding. 

Immediately the advantages of a Med-Arb process are revealed. The usual goals of an ADR process – speed, efficiency, economy and finality – are increased. 

The Parties Are At A Heightened State of Preparedness

The process of mediation usual requires a degree of preparation by the parties that approaches that expected when preparing for a trial, without probably finally sworn trial affidavits. Med-Arb avoids losing that preparation awaiting a trial date – the arbitration starts when all parties are at a heightened state of preparedness. There is no need to update or revalue assets.

But the degree of preparation serves a dual purpose. Because the parties know they will enter an arbitration process immediately upon finality of the mediation, they are caused to be better prepared for the mediation. The higher degree of preparation for a mediation – by both parties – leads to a higher likelihood of a mediated outcome. 

The prospect of an arbitration commencing immediately after the mediation can also operate as motivation for the parties to work harder to move beyond their perceptions of BATNAs and WATNAs to true commercial outcomes knowing that if they do not resolve their dispute, the neutral is ready to make a decision for them. 

Med-Arb Achieves Finality

There is a sense, particularly when the dispute has been in the court system for many months or years, that a party or even both parties, settle out of litigation fatigue. They’ve drawn weary of the ups and downs of litigation, the reactive nature of the dispute, the frustration of waiting for trial dates and have just run out of financial and emotional reserves to press ahead with a costly trial.

Med-Arb potentially avoids “I give up” settlements at a mediation. In some respects, this may also be beneficial for a client who just “wants their day in court”. 

Med-Arb, It’s What The Client Wants

Think about how many mediations you have participated in on behalf of a client. Now think about how many times a mediator has asked a client “What do you think my role is here today / What do you want me to do for you ?” and the response from the client has been “I want you to decide how to divide our property / You’re here to listen to both our sides and then come up with an answer.” Your head tilts back slightly, your eyes look to the roof and you let out a quiet exasperated sigh knowing that you have explained ad nauseum to your client that this is precisely what a mediation is not. 

The question we may ask ourselves is, despite what we define mediation to be, is it really an arbitration the client is seeking? It centres around how much control a client is willing to divest to a third party to determine their outcome. 

Below is an examination of some of the pitfalls or criticisms of a Med-Arb process however where a Med-Arb has resulted in court litigation (to set aside the award), the Courts have upheld the right of parties to reach an agreement about Med-Arb and to uphold such agreement, and resulting award, provided the client has entered into such Med-Arb agreement completely aware of the advantages and disadvantages of such process.

It cannot be stressed enough, dispute resolution, through mediation or arbitration or med-arb, is theclient’sdecision, not their lawyer. The lawyer’s obligation is to advise their client about the various methods of primary dispute resolution – negotiation, conciliation, mediation, med-arb, arbitration – the pros, cons and costs of those in comparison to the alternative, i.e. litigation. The more considered options you provide a client, the greater perceptual contrast you provide them thereby permitting a more informed choice. 

Arguments Against Med-Arb

It is argued that Med-Arb exposes the arbitrator to confidential or privileged information during the mediation – particularly during private sessions – who may determine the arbitration based upon that confidential or privileged information. 

As discussed below, this can be a fundamental problem ifthere is not clear agreement reached before the Med-Arb process commences as to the status of such information. 

Another argument against Med-Arb, and is a corollary to the first argument, is that because the mediator may later be making finding against a party in the arbitration, that party is less willing to be forthcoming about all information to the mediator through fear it may be used against them. One of the important aspects of mediation is that it is often an interest-based rather than an entitlement-based negotiation. Detractors of Med-Arb are concerned that interest-based negotiation may be lost. 

Again, clear agreement about the use of information divulged during the mediation cures the procedural aspect of this dynamic however it may not cure the impact upon the mediation. In this instance it comes down to the particular dispute at hand. Ask yourself and the client, is it likely to be an interest-based negotiation? Will exposing those interests to the Med-Arbitrator affect an award?  For the reasons outlined below, namely an “Award Must Be In Accordance With the Law”, the answer will probably be “No.”

Finally, the most common complaint is that an arbitrator is exposed to offers of settlement. Whilst that is true, offers of settlement in most family law matters usually involve a myriad of concessions throughout the course of a day commencing with concessions about the pool, down to concessions about the cash-superannuation mix in the final agreement. Many of the concessions made are not even known to the mediator as the day often progress with multiple exchanges of incremental offers. As will be seen below, the award must be arrived at in accordance with law requiring findings, usually, upon each of the four well-known steps applicable to the determination of a property settlement. 

Overcoming Those Perceived Disadvantages

Understanding Australian Family Law Arbitration

Overcoming the above perceived disadvantages commences with firstly understanding (and thoroughly explaining to a client) that an award must be delivered in accordance with the law. [2]It is not palm-tree justice. Ordinarily this must require the arbitrator to apply and determine the dispute in accordance with the usual four-step approach to property adjustments. 

Secondly, an arbitrator must make an award that includes a concise statement setting out the reasons for the award and the findings of fact referring to the evidence upon which the findings are based. [3]

Accordingly, relying solely upon communications received during the mediation process itself cannot form, without more, evidence to support a finding. Moreover, an offer or concession made during a mediation cannot derogate from the requirement to make a decision based upon the law. 

Finally, whilst awards are not appealable, they certainly can be reviewed. Apart from those grounds to set aside an award contained in section 13K that are similar to the grounds appearing in s79A of the Family Law Act, but also include bias and procedural unfairness, section 13J permits a judge to review the award “on a question of law”. 

In my view, the most relevant decisions upon what is a question of law in terms of fact finding appears in Child Support Registrar & Crabbe and Anor[4]where the Full Court summarised the following principles from the authorities (at para 54);

  • The question of whether there is evidence to support a finding of fact or an inference drawn from findings of fact is a question of law;
  • The making of a finding of fact or the drawing of an inference in the absence of evidence is an error of law;
  • A wrong finding of fact is not an error of law;
  • A finding of fact based on reasoning that is “demonstrably unsound” or on an “illogical course” or a “faulty process” of reasoning is not an error of law;
  • Judicial review is not to be over-zealous in seeking to find inadequacy of reasoning by an administrative decision maker; the review of the reasons of an administrative decision maker must not be turned into a reconsideration of the merits of the decision;
  • (Family Law Regulation 67P(2)) (by analogy with s 430 of the Migration Act) requires the (Arbitrator) to do no more than set out the findings which it did make on facts which it considered material to the decision which it made.

Otherwise, in terms of what amounts to an error of law, it can be seen that the settled law of House v Ris applicable and the usual grounds of appeal one might see before the Full Court are available to review an award (i.e. adequacy of reasons, wrong principle of law, manifestly unjust outcome).[5]

The final matter to consider is that the Med-Arbitrator is unlikely to be a random appointment but a legal practitioner of such professional skill and integrity that you have personally researched and considered who meets those qualifications expected of arbitrators.[6]

Fully Informed Consent Overcomes Most Pitfalls

A proper Med-Arb process must be established in advance of the initial mediation. It should not be an afterthought during a normal mediation. 

Whilst there appears only to be limited jurisprudence in Australia upon Med-Arb,[7]there has been relatively more in the United States particularly in jurisdictions where there exists no express statute concerning the confidentiality of information in a mediation that becomes an arbitration.  In those cases, the courts have considered carefully whether there has been an express waiver of confidentiality and/or privilege and the timing of such express waiver. [8]

In Bowden[9]the Court held that parties have the right to agree to med-arb provided they willingly do so, and such agreement must meet all of the following tests evident at the outset of the Med-Arb process;

clear evidence that the parties have agreed to engage in a med-arb process

{]evidence that the parties are aware that the mediator will function as an arbitrator if the mediation attempt fails

{C}·      {C}evidence of a written stipulation as to the agreedmethod of submitting their disputed factual issues to an arbitrator if the mediation fails

{C}·      {C}evidence of whether the parties agree to waive the confidentiality requirements imposed by the relevant law

 

My Sample Med-Arb Agreement

 

My Med-Arb Agreement contains the following paragraphs;

 

{C}1.         {C}Before executing this Mediation-then-Arbitration Agreement, the parties appointed the Arbitrator to act as a mediator for some or all of the dispute that falls to be determined in this agreement on the date set out in the Schedule(the mediation process).

{C}2.         {C}The parties acknowledge that before commencing the mediation process they had agreed that the Arbitrator may undertake the role of both Mediator and Arbitrator. 

{C}3.         {C}The parties acknowledge that the Arbitrator has advised them that during the mediation process they and their legal representatives may and most likely will disclose to him, while acting as the Mediator, their respective settlement positions, their theories of the case, the alleged strengths and weaknesses of their respective positions and matters which may not be admissible during the arbitration; and if he is to perform both functions he will, if the case is not settled, read and hear evidence, and will ultimately provide an arbitral award. 

{C}4.         {C}The parties agree that the Arbitrator may undertake the role both of Mediator and Arbitrator, and the parties, by and through their legal representatives forever, waive and relinquish any claim or objection to his service in both capacities. The parties waive any claim they may have of prejudice resulting from Arbitrator undertaking to act in both capacities as a Mediator and as the Arbitrator, and waive any conflict or impropriety in this regard. 

{C}5.         {C}The parties agree that they will not challenge the determination, outcome and decision of the Arbitrator on the basis that they have requested the Arbitrator to act as both the Mediator and Arbitrator in this matter.

{C}6.         {C}The parties acknowledge and agree that ex parte communications with the Arbitrator (private caucus) or a series of private caucuses will occur during the mediation process. 

(Alternative A

Without limiting the operation of Family Law Regulation s67O (Application of Rules of Evidence), the parties agree that the Arbitrator, in evaluating each party’s claim the arbitrator may rely on that evidence received in accordance with Schedule A hereto ANDinformation he deems relevant including information obtained only during a private caucus in making the final award subject to the following conditions;

{C}(a)       {C}Particulars of the communication provided to him during a private caucus are provided to the other party forthwith upon the conclusion of the unsuccessful mediation; and

{C}(b)       {C}That other party has an opportunity to respond to such particulars before the final award if delivered. 

(Alternative B)

Without limiting the operation of Family Law Regulation s67O (Application of Rules of Evidence), the parties agree that the Arbitrator, in evaluating each party’s claim the arbitrator may rely onlyon that evidence received in accordance with Schedule A hereto.

 

Conclusion

 

Med-Arb should be seen as a properly available primary dispute resolution process with there being many suitably and dually qualified mediators and arbitrators able to undertake this process. As the above article points out, to ensure the process achieves a binding outcome;

 

{C}1.    {C}The Med-Arb process must be anticipated and agreed to before the mediation commences.

{C}2.    {C}Parties to a Med-Arb process must give fully informed consent to such a process.

{C}3.    {C}There must be clear agreement about the waiver (or not) of confidential and privileged communications.

 

I conduct Med-Arb processes as part of my OPDR servicewhich is a four stage primary dispute resolution process that I have designed to save the parties time, cost and emotion in arriving at an outcome for their dispute. Telephone or emailme directly to enquire. 

 


[1]Med-Arb (pronounced “meed-arb”) in this article is referring to a process using the same neutral mediator and arbitrator for the one process. It is possible to structure a Med-Arb process with alternate neutrals but in that instance some of the efficiency of true Med-Arb are lost.

[2]Family Law Regulations 67I(1)

[3]Family Law Regulations 67P(2)

[4][2014] FamCAFC 10

[6]Family Law Regulations 67B

[7]See for e.g. Ku-ring-gai Council v Ichor Constructions Pty Ltd [2018] NSWSC 610

[8]See for e.g. Bowden v. Weickert 2003 WL 21419175

[9]Ibid at 6

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