Category Legal Affairs

Mediation increasingly preferred over litigation

23 April 2014 Yvonne Wakefield, Caveat Legal

Mediation will be introduced as a preferred alternative to litigation in South African Magistrates’ Courts from August 1 this year, when amendments to the rules regulating the conduct of proceedings of South African Magistrates’ Courts come into effect. The revised rules under the Rules Board for Courts of Law Act, which include the addition of a chapter regulating court-annexed mediation, were gazetted last month.

Yvonne Wakefield, founder of Caveat Legal, says the introduction of court-annexed mediation into the South African legal system will hopefully lead to quicker and more cost effective dispute resolution in matters that fall under the jurisdiction of the Magistrates’ Courts.
In terms of the new rules a Magistrate or the parties themselves may refer a dispute for mediation prior to the commencement of litigation or where litigation has already started, but before judgment has been passed and provided all parties agree. The new rules set out the procedures that must be followed once a dispute has been referred to mediation.
Wakefield says the amended rules make mention of two very powerful reasons for encouraging mediation over litigation:
• Mediation helps preserve relationships between litigants or potential litigants, which may become strained or destroyed by the adversarial nature of litigation;
• Mediation facilitates an expeditious and cost-effective resolution of a dispute between litigants or potential litigants.
She says for these reasons mediation is also increasingly becoming a preferred option in complex commercial disputes, workplace disputes and those involving family trusts.
According to Wakefield, notwithstanding the broadened jurisdiction of Magistrates’ Courts as from 1 June this year (regional Magistrates’ Courts will be able to hear matters involving amounts of up to R400 000) most commercial disputes far exceed the jurisdiction limits and are usually resolved in the High Court with litigation costs running into hundreds of thousands, even millions of Rands.
"Given the current economic climate companies are increasingly considering mediation over litigation,” adds Wakefield.
The Centre for Effective Dispute Resolution, a global conflict management and resolution consultancy, defines mediation as "a flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of the resolution”.
Wakefield says the Caveat Legal Commercial Mediation team has found that mediation is most likely to succeed in dispute situations where a valuable and ongoing business relationship is potentially at stake.
"Parties to a dispute generally opt for mediation for three reasons: they want to maintain their business association with each other, they want resolution as quickly as possible, and they want to prevent exorbitant legal fees. Since mediation is not about an adjudicator choosing between a winner and a loser, but rather about the parties resolving a dispute for the benefit of both of them, relationships are far more likely to survive a mediation process than litigation.”
A study released earlier this month by global law firm Eversheds shows a significant increase in the number of large commercial disputes worldwide. The study, titled Companies in Conflict: How Commercial Disputes are Won, was undertaken by Eversheds, together with academics at King’s College London and the University of Surrey.
It reveals that the key motivations for pursuing a commercial dispute are to recover financial loss and to manage reputation.
According to Wakefield, mediation is an effective tool that allows businesses to recover financial losses without incurring legal costs that could outweigh the recovery, while at the same time managing their reputations by controlling which details about the dispute are made public.
Wakefield says one of the benefits of mediation is the fact that the process is conducted confidentially and in private, which is critically important in managing the reputation of the parties involved. "Unlike court proceedings in which all documents are on public record, what is discussed during a mediation process remains private and confidential between the disputing parties”.
"Another benefit is that the process is entirely ‘without prejudice’, meaning that if settlement by mediation is not successful, the representations made during the mediation proceedings cannot be used by either party in subsequent litigation.”
Examples of where mediation can be used effectively to resolve disputes and differences of a commercial nature include the following:
• General commercial disputes with suppliers, customers, clients, partners or competitors;
• Cases where "litigation fatigue” has set in following protracted and unresolved litigation;
• Disputes and disagreements in family businesses;
• The need to clarify, improve, evolve, restructure, end or dissolve a business or business relationship, affiliation or partnership;
• Aiding a business transaction or negotiation that has hit a stumbling block to move forward;
• Resolving interpersonal conflict or performance related issues between employees, executives, business partners, shareholders or directors;
• Inheritance related disputes;
• Disputes affecting body corporates and homeowner associations.

Wakefield points out that trained mediators can act in their primary function (as mediators) or as representatives or negotiators acting for a client in a mediation process.

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