Traps for parties participating in mediation

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By Callum Jubb, Associate

Fiona & John Sinclair Pty Ltd v Burns Bay Services Pty Ltd [2023] NSWSC 789 (7 July 2023)

The matter involved a mediation held between parties concerning two related proceedings heard in the Equity Division of the Supreme Court of New South Wales.

Facts

In attendance at the mediation were Mr Balanian, Mr Ellison, Mrs Sinclair, Ms Richards and Mr Wakeford. Ms Richards purporting to be the executor of Mr Sinclair’s Estate [Para 65] while Mr Balanian and Mr Ellison were directors for the respective defendants.

The mediation was held without the presence of the parties’ lawyers at the request of all parties and despite the mediator asking again at the mediation if the parties wished for their solicitors to be present [Para 63].

Proceeding with the mediation, the mediator held joint sessions with the parties, interspaced with private sessions with both parties [Para 68-72]. After a period of back and forth offers a final figure and payment plan was agreed between the parties [Para 72]. The parties then proceeded to prepare a document recording the settlement (referred to as the Deed). The mediator had internet issues making it difficult to access documents needed to prepare a deed and so suggested that this be left to another day. However, the parties insisted that they wanted to sign the document today [Para 74 – 76]. Both parties agreed to the inclusion of a term stating the Deed was “in full and final settlement” [Para 76]

After reviewing the Deed with the mediator, the parties confirmed they understood the terms and were informed by the mediator that the Deed would be binding [Para 76-79]. The mediator also again confirmed that the parties were OK to sign without lawyers precent [Para 76]. While the mediator did not advise the parties, they were entering the Deeds personal and on behalf of the companies, they did confirm that they understood their roll as directors and Ms Richards as an executor and trustee of the estate [Para 80].

Issues

The Plaintiff argued that the Deed is not binding as it was not intended to be binding unless and until it was executed as a formal document, as a deed or as a contract, which has not occurred as it has not been executed by the individual parties [Para 9].

Decision

The Deed was held to be valid, and the Plaintiff’s application dismissed.

Rationale

The legal principles applied when assessing whether an agreement is binding were not in dispute. The key element is whether the objective intention disclosed by the language employed by the parties, considering the surrounding circumstances, demonstrates an intention to be bound.

While the Deed did not comply with the execution requirements of s39 of the Conveyancing Act 1919 (NSW) the evidence of what occurred at the mediation objectively indicates that the parties intend to be bound by the terms of the Deed. The parties signed the Deed having been informed it was in full and final settlement and confirmed they did not wish to delay in signing.

Conclusion

The case highlights an important issue for mediators when drafting deeds during a mediation and means that parties need to be aware that a deed or agreement signed at the conclusion of a mediation is likely to be held as binding unless there are sufficient circumstances demonstrating to the contrary.

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