A Mediation Settles the Dispute – Or Does It?
BY KYM FRASER, KYLA CAMERON AND JASPER CHOI
“Mediation is meant to be a process to avoid costly court proceedings. But what if the parties don’t agree that they actually resolved their dispute in mediation? A recent case shows the dangers of not putting your agreement in writing or signing it promptly” reads a court review and cautionary tale by Australian law firm Clayton UTZ where they spotlight the risks of failing to document an oral agreement.
Mediation is meant to be a process to avoid costly court proceedings. But what if the parties don’t agree that they actually resolved their dispute in mediation? A recent case shows the dangers of not putting your agreement in writing or signing it promptly (Sully v Englisch  VSCA 184).
A mediation settles the dispute – or does it?
Ms Sully obtained an order in the Victorian Civil and Administrative Tribunal against Mr Englisch for damages for misleading and deceptive conduct. As part of Mr Englisch’s appeal. the parties attended a judicial mediation; a dispute then arose as to whether a binding settlement had been reached at the mediation, with Ms Sully arguing that it had and Mr Englisch that it had not. This ended up in the Victorian Court of Appeal.
The Court of Appeal noted that there was no dispute between the parties over the relevant legal principles, or that the trial judge had correctly articulated them.
These principles (as summarised at first instance and endorsed by the Court of Appeal judgment) are:
“Whether an agreement is reached which is intended to be immediately binding falls to be determined objectively, having regard to the presumed or inferred intention of the parties.”
Objective intention is fact based and determined having regard to all surrounding circumstances.
“The ultimate question to be answered is what each party, by its words or conduct, would have led a reasonable person in the position of the other party to believe”.
The relevant intention or belief is that obtained at the time an alleged agreement was made.
Subjective intention or belief is not determinative but may be relevant.
An oral agreement must be complete, certain and enforceable on its own terms to be immediately binding.
In certain circumstances, regard may be had to subsequent conduct of the parties, including, in the present case, where the parties agreed they would prepare a written document setting out the terms of agreement. In such a case, the Court may consider the three categories of contract set out by the High Court in Masters v Cameron (1954) 91 CLR 353, 360 and a fourth category recognised by Courts subsequently. However, these categories are “taxonomic and should not distract from the fundamental inquiry” as to “whether, in all the circumstances, the parties objectively intended to reach a binding agreement”.
Parties may leave aspects of an agreement to be decided at a later date while agreeing to be immediately bound in respect of other, concluded terms.