Chapter 3

Mediation: Getting Help Without Giving Away Control

Two businesspeople sit across a table from each other.

They have been arguing for six months.

Both have attorneys. Both believe they are right. Both have spent money. Both are irritated. And both privately suspect that continuing the dispute may cost more than settling it.

There is just one problem.

Neither wants to make the first move.

If one makes an offer, will it look weak?

If one suggests compromise, will the other side demand more?

If they meet again, will they simply repeat the arguments they have already had ten times?

This is precisely where mediation can become valuable.

A mediator changes the conversation.

Not by deciding who is right.

Not by forcing a settlement.

And not by persuading one party to surrender.

The mediator introduces an independent person and a structured process into a negotiation that the parties have been unable to resolve themselves.

That distinction is fundamental.

Mediation is assisted negotiation.

And for many commercial disputes, that assistance can make all the difference.

3.1 What is mediation?

Mediation is a process in which disputing parties attempt to reach an agreement with the assistance of an independent and impartial third person: the mediator.

The mediator facilitates the discussion.

The mediator may help the parties identify issues, clarify misunderstandings, explore interests, test assumptions and generate possible solutions.

But the mediator does not ordinarily impose the outcome.

The parties do.

This is one of mediation’s greatest attractions for businesspeople.

You retain control over whether you settle and on what terms.

Compare that with litigation.

Once a dispute reaches judgment, the decision belongs to the judge.

Compare it with arbitration.

Once the dispute has been submitted for determination, the arbitrator makes the award.

Mediation works differently.

The mediator manages the process.

The parties own the solution.

3.2 What a mediator does — and does not do

There is considerable misunderstanding about the mediator’s role.

A mediator is not a judge.

A mediator is not an arbitrator.

A mediator is not there to declare a winner.

And a mediator should not become one party’s adviser.

A professional mediator instead creates and manages a process in which productive negotiation becomes possible.

That may involve listening, asking questions, summarising, reframing statements, identifying common ground, helping parties distinguish positions from interests, exploring options, conducting private meetings, testing the practicality of proposals, and helping parties move towards an agreement they are willing to accept.

Sometimes the mediator’s most valuable contribution is simply asking the question nobody else has asked.

3.3 Why not simply negotiate without a mediator?

You should, where appropriate.

As we saw in Chapter 2, direct negotiation is often the logical first step.

But sometimes direct negotiation stops working.

Positions become entrenched.

Communication becomes hostile.

Trust disappears.

Every concession is interpreted as weakness.

Every proposal is viewed suspiciously.

The parties may even agree privately that the dispute should settle while remaining unable to agree publicly about how.

A mediator introduces something the direct negotiation lacks:

neutral process management.

That can change the dynamics significantly.

3.4 The mediator’s most important qualities

Technical knowledge can be useful.

But mediation depends heavily upon human skills.

Your original mediation material identifies five particularly valuable characteristics.

Trustworthiness

Parties must have confidence in the mediator and the process.

If they do not trust the mediator to handle discussions appropriately, they are unlikely to speak openly.

Without candid communication, the mediator may never discover what is really preventing settlement.

Approachability

People need to feel that they can communicate with the mediator.

An effective mediator listens carefully, treats participants respectfully and creates an environment in which difficult issues can be discussed.

Dedication

Good mediation requires preparation.

The mediator needs to understand the dispute sufficiently to manage the process effectively.

Turning up, introducing everyone and asking whether anybody has an offer is not professional mediation.

Perceptiveness

Commercial disputes often have layers.

The argument may appear to concern an unpaid invoice.

Underneath it may be dissatisfaction with quality, fear about future performance, damaged trust or concern about reputation.

A perceptive mediator listens for what is not immediately obvious.

Impartiality

This is essential.

The mediator is not there to champion either party.

The mediator must remain sufficiently independent of the outcome to help both parties explore realistic possibilities.

If either side believes the mediator has joined the opposition, the process may quickly lose credibility.

3.5 Confidentiality matters

Businesses are often attracted to mediation because they do not want their commercial disagreements unnecessarily exposed.

Confidentiality can allow parties to discuss settlement possibilities more freely.

Under High Court Rule 41A, mediation proceedings are confidential and inadmissible as evidence, subject to the Rule’s provisions concerning matters that are otherwise discoverable.

The practical principle is important:

Parties need room to explore settlement without assuming that every proposal will later be used against them.

A party may therefore be willing to discuss an outcome in mediation that it would never put into ordinary correspondence.

The precise confidentiality framework should nevertheless be established at the beginning of the process and reflected in the mediation agreement where appropriate.

3.6 The mediator is not your lawyer

This distinction deserves emphasis.

Even where the mediator is legally qualified, the mediator is acting as the mediator, not as your attorney.

Do not assume the mediator is protecting your individual legal interests.

That is not the mediator’s job.

If you require advice about your legal rights, the strength of your case, the consequences of a settlement, tax implications, company-law requirements, or the wording of a settlement agreement, obtain appropriate professional advice.

A mediator assists the negotiation.

Your lawyer advises you.

The two roles can complement each other extremely well.

3.7 When should lawyers attend mediation?

There is no universal answer.

In some commercial mediations, the parties and mediator may be able to work effectively without lawyers physically present throughout.

In others, legal representatives are extremely valuable.

Consider having legal advisers involved where the dispute is legally complex, substantial money is involved, litigation has commenced, the settlement will affect significant contractual rights, the parties need immediate advice during negotiations, or the final settlement requires careful drafting.

Lawyers can add substantial value to mediation when they understand that the objective of the day is problem-solving rather than simply recreating the courtroom in a conference room.

3.8 Preparing for mediation

Good mediation begins before the mediation meeting.

Preparation should include both the legal dispute and the commercial problem.

Ask:

What happened?

What evidence supports our position?

What are our strongest arguments?

What are our weakest arguments?

What do we actually need?

What might the other side need?

What can we offer?

What can we not offer?

What happens if mediation fails?

Who has settlement authority?

What information will the mediator need?

And what information do we need from the other side?

Do not prepare only to prove that you are right.

Prepare to settle intelligently.

3.9 Choose the right mediator

Do not appoint a mediator simply because somebody knows somebody.

Consider the dispute.

A shareholder dispute may require different experience from a construction dispute.

A highly emotional family-business dispute may require particularly strong interpersonal skills.

A complex commercial matter may benefit from a mediator who understands business structures and financial information.

Ask about training, professional accreditation, experience, independence, conflicts of interest, mediation style, fees, availability, and the proposed process.

A mediator does not necessarily need to be an expert in the underlying industry.

But the mediator must be capable of understanding and managing the dispute.

3.10 The mediation agreement

Before substantive mediation begins, parties will commonly enter into an agreement governing the process.

Depending on the circumstances, it may address the mediator’s appointment, confidentiality, fees, venue, online participation, the mediator’s role, authority of representatives, private sessions, termination of the mediation, and the status of any eventual settlement.

Read it.

Mediation may be less formal than litigation, but that does not mean the paperwork should be ignored.

3.11 What actually happens in a mediation?

Every mediator develops an individual style, and every dispute is different.

Nevertheless, your original mediation material identifies six useful stages:

1. introductory remarks;
2. statements by the parties;
3. information gathering;
4. identification of the problems;
5. bargaining and generating options; and
6. reaching agreement.

These stages provide a useful roadmap.

Let us look at what they mean in practice.

3.12 Stage One: The mediator opens the process

The mediator will ordinarily begin by explaining the mediator’s role, the purpose of mediation, confidentiality, how discussions will proceed, whether private meetings may occur, basic behavioural expectations, and the authority of the parties to make their own decisions.

This opening matters.

It establishes the environment.

A commercial mediation should not feel like an ambush.

Everyone should understand the process.

3.13 Stage Two: Each party tells its story

Each side is normally given an opportunity to explain the dispute.

This can be surprisingly powerful.

During months of legal correspondence, parties may never have actually listened to each other without interruption.

The purpose is not necessarily to determine who is telling “the truth”.

The mediator is trying to understand how each party sees the dispute, what matters to them, where the disagreement lies, and what may be driving the conflict.

Parties should use this opportunity wisely.

An opening statement that insults the other side for twenty minutes may feel satisfying.

It rarely improves the prospects of settlement.

Explain the problem.

Explain its impact.

Explain what you need.

3.14 Stage Three: Information gathering

The mediator asks questions.

Some will concern facts.

Others may concern interests, expectations, relationships and possible outcomes.

The mediator may summarise what has been heard.

This allows misunderstandings to be corrected.

It can also reveal something important:

The parties may not actually disagree about everything.

They may agree about 80% of the facts and be fighting over the remaining 20%.

That is useful information.

3.15 Stage Four: Identifying the real issues

A dispute often arrives at mediation wrapped in allegations.

The mediator tries to unpack it.

What needs to be resolved before agreement becomes possible?

Perhaps there are five issues: the amount outstanding, the alleged defects, completion of remedial work, future maintenance, and legal costs.

Once those issues are separated, they can be dealt with individually.

This is considerably more manageable than:

“They breached the contract and we want justice.”

3.16 Stage Five: Generating options

Now the mediation begins moving from the past towards the future.

What could an agreement look like?

Parties may brainstorm possibilities.

The mediator may help them develop alternatives.

This is where mediation can offer something litigation often cannot.

A court is primarily concerned with legal remedies.

Commercial parties can be considerably more creative.

A settlement might include payment over time, replacement goods, remedial work, revised delivery dates, discounts, future contracts, share purchases, management changes, confidentiality provisions, apologies, licensing arrangements, or combinations of several measures.

The possibilities depend upon the dispute.

3.17 Stage Six: Reaching agreement

If the parties reach consensus, the terms need to be recorded carefully.

Do not celebrate so enthusiastically that everybody forgets the details.

Who pays?

How much?

When?

What does the other party do?

When must performance occur?

What happens to existing proceedings?

Who pays costs?

Is the settlement confidential?

What happens if someone defaults?

Does the agreement settle all disputes between the parties or only this one?

Important settlements should be properly documented and, where appropriate, reviewed or drafted by legal professionals.

A vague settlement can become a new dispute.

3.18 What is a caucus?

One of the most useful mediation tools is the private session, commonly called a caucus.

The mediator meets separately with each party.

Why?

Because people sometimes say things privately that they cannot comfortably say across the table.

A director might tell the mediator:

“We cannot afford the amount they are demanding, but we could manage instalments.”

A shareholder might admit:

“I don’t actually want to stay in the company. I just don’t want to be forced out for nothing.”

A supplier might reveal:

“Keeping this customer is more important to us than the disputed invoice.”

This information can help the mediator understand where settlement possibilities may exist.

But confidentiality within caucuses must be handled carefully.

The mediator should make clear what information may and may not be shared with the other side.

3.19 Reality testing

Professional mediators do not merely carry offers from one room to another.

They may also help parties test their assumptions.

Suppose somebody says:

“I will never pay more than R500,000. I would rather spend R2 million fighting this in court.”

A mediator may explore that statement.

How long could litigation take?

What happens if you lose?

What will your legal team cost?

How much management time will be consumed?

What is the impact on your reputation?

How certain are you of your evidence?

What happens if the other side appeals?

The mediator is not telling the party what decision to make.

The mediator is helping the party examine whether its position survives contact with reality.

That is reality testing.

It can be one of the most valuable parts of mediation.

3.20 Mediation is not necessarily about splitting the difference

Suppose one party wants R1 million.

The other offers R500,000.

A simplistic view of mediation says:

“Fine. Settle at R750,000.”

That is not sophisticated mediation.

Perhaps the correct settlement is R600,000 plus future work.

Perhaps it is R850,000 payable over two years.

Perhaps there is no payment but substantial remedial performance.

Perhaps one party purchases shares from another.

Perhaps there is no sensible settlement at all.

The mediator’s task is not to find the mathematical midpoint.

It is to help the parties investigate whether an acceptable agreement exists.

3.21 Mediation does not guarantee settlement

Some mediations fail.

That does not necessarily mean the process was useless.

The parties may narrow the issues.

They may understand the evidence better.

They may identify information that still needs to be exchanged.

They may settle part of the dispute.

They may resume negotiations later.

Or they may conclude that adjudication really is necessary.

Mediation offers an opportunity.

It does not manufacture agreement where none is realistically possible.

3.22 A South African business example

Consider a fictional dispute between Karoo Fresh Produce (Pty) Ltd and Ubuntu Cold Storage (Pty) Ltd.

Karoo Fresh supplies fresh produce to retailers.

Ubuntu provides refrigerated storage.

A refrigeration failure allegedly damages stock worth R1.2 million.

Karoo demands payment.

Ubuntu disputes both liability and the amount claimed.

The parties have worked together for eight years.

Litigation is threatened.

Their positions are straightforward.

Karoo says:

“Pay R1.2 million.”

Ubuntu says:

“We are not liable.”

At mediation, a more complicated picture emerges.

Karoo does not want to lose access to Ubuntu’s conveniently located cold-storage facility.

Ubuntu does not want to lose one of its largest customers.

There is uncertainty about how much stock was actually damaged.

There is also a dispute about whether Karoo complied with agreed storage procedures.

The parties begin exploring options.

An independent expert could assess the loss.

Ubuntu could make a partial payment without admitting liability.

Storage charges could be reduced for an agreed period.

New temperature-monitoring systems could be installed.

The parties could revise operating procedures.

A portion of the dispute could be referred to arbitration if necessary.

Now there are several possible components of a settlement.

A court could eventually decide who was legally liable.

The mediation asks an additional question:

Can these businesses solve the problem and continue making money together?

3.23 Mediation in shareholder and director disputes

Mediation can be particularly valuable where the parties are tied together through a company.

A shareholder dispute may involve control, dividends, director appointments, access to information, valuation, exit arrangements, alleged misconduct, or different visions for the company’s future.

Litigation may determine rights.

But litigation can also leave the parties owning a company together after they have spent months attacking each other.

Mediation may allow the parties to explore restructuring, buy-outs, governance arrangements or agreed exits.

Not every shareholder dispute can be mediated successfully.

But many deserve the attempt.

3.24 Mediation in family businesses

Family businesses present a special challenge.

The parties may have two disputes simultaneously: a business dispute and a family dispute.

The argument about who should become managing director may also involve thirty years of sibling rivalry.

The dispute about dividends may actually concern whether one branch of the family feels excluded.

This does not make the commercial issues unimportant.

It means they exist within a wider relationship.

Mediation’s flexibility can be particularly useful where legal, commercial and personal interests overlap.

3.25 Mediation in construction and contractual disputes

Construction disputes often involve variations, delays, defective work, payment, certification, scope, and technical disagreements.

A mediated solution might combine money, remedial work, revised completion dates and future obligations.

The same principle applies to many commercial contracts.

Where the transaction can still be repaired, mediation may provide more options than simply terminating the relationship and claiming damages.

3.26 Online mediation

Mediation does not always require everyone to sit in the same building.

Online mediation can be effective, particularly where parties are geographically separated, travel costs are significant, the dispute is relatively contained, or scheduling is difficult.

Private virtual rooms can also facilitate caucuses.

But technology does not remove the need for proper process.

Confidentiality, identity, authority, document access and communication arrangements still require attention.

3.27 How long does mediation take?

There is no universal answer.

Some disputes settle within hours.

Others require several sessions.

Complex commercial disputes may involve preparation, document exchange, preliminary discussions and more than one mediation day.

Do not judge the value of mediation solely by speed.

A day spent preparing properly for mediation may save months or years of further conflict.

3.28 What does mediation cost?

Mediators charge for their professional services.

Depending on the mediator and the dispute, fees may include preparation, preliminary meetings, the mediation session, travel, venue costs, and additional sessions.

Under Rule 41A’s framework, unless the parties agree otherwise, the costs of mediation are borne equally.

But do not evaluate mediation fees in isolation.

Compare them with the cost of the dispute continuing.

If a R20,000 mediation creates a realistic opportunity to resolve a dispute likely to consume hundreds of thousands of rand in legal and management costs, the relevant question is not:

“Why does the mediator cost R20,000?”

It is:

“What could failing to resolve this cost us?”

3.29 What if the other side refuses mediation?

Do not assume refusal means the end of the discussion.

Ask why.

Perhaps they misunderstand the process.

Perhaps they believe suggesting mediation signals weakness.

Perhaps they are concerned about cost.

Perhaps they believe settlement negotiations have already failed.

Perhaps their lawyer or insurer needs to approve participation.

And, as discussed in Chapter 1, the procedural position may also depend upon the court and rules applicable to existing litigation.

Where proceedings have commenced, obtain legal advice about the relevant mediation requirements.

3.30 How should you behave in mediation?

Come prepared.

Listen.

Do not interrupt unnecessarily.

Ask questions.

Do not treat every concession as weakness.

Do not expect the mediator to fight your case.

Be realistic about risk.

Be willing to explore possibilities without immediately committing to them.

And bring somebody with authority to make decisions.

Most importantly:

Do not come to mediation merely to prove that the other side is wrong.

If that is your only objective, you may be in the wrong room.

3.31 When should you leave mediation without settling?

Sometimes the correct result is no agreement.

Do not settle simply because you are tired, you feel pressured, everyone wants to go home, you are afraid of disappointing the mediator, or you have spent money on the process.

Pause if you do not understand the proposal.

Obtain advice if necessary.

Compare the settlement with your realistic alternative.

A professional mediator should respect the parties’ decision-making autonomy.

The objective is not a settlement at any price.

It is an informed and acceptable settlement.

3.32 The value of professional mediation

A good mediator brings structure to conflict.

The mediator creates a space in which people can be heard, information can be tested, assumptions can be challenged, interests can be identified, options can be generated, and proposals can be explored.

That sounds simple.

It is not.

Managing conflict professionally requires training, judgement and experience.

When significant commercial interests are at stake, choosing an appropriately trained and accredited mediator should therefore be treated as an important business decision.

Business Owner’s ADR Toolkit

Practical worksheets, checks and exercises for immediate use

Chapter 3: Preparing for Mediation

1. The Mediation Suitability Check

Consider mediation seriously if several of these statements apply:

• ☐ We would benefit from preserving the business relationship.
• ☐ Direct negotiations have stalled.
• ☐ The dispute has become personal or emotional.
• ☐ There are several possible commercial solutions.
• ☐ Confidentiality is important.
• ☐ Litigation costs may become disproportionate.
• ☐ Management time is being consumed by the dispute.
• ☐ Both sides face meaningful risk if the dispute continues.
• ☐ We need help communicating.
• ☐ The dispute contains issues that a court judgment may not completely solve.

The more boxes you tick, the stronger the case for investigating mediation.

2. Your Mediation Preparation Sheet

The dispute is about:

______________________________________

Our legal position, as we understand it:

______________________________________

Our strongest point:

______________________________________

Our weakest point:

______________________________________

What we really need from a settlement:

______________________________________

What we think the other side needs:

______________________________________

Our preferred settlement:

______________________________________

Our minimum acceptable outcome:

______________________________________

Our BATNA if mediation fails:

______________________________________

Who has settlement authority:

______________________________________

3. What Should the Mediator Know?

Prepare a short summary covering:

• the parties;
• their commercial relationship;
• the history of the dispute;
• the principal issues;
• amounts involved;
• negotiations already attempted;
• current litigation or arbitration;
• important documents;
• areas where agreement already exists; and
• what you hope mediation can achieve.

Do not send the mediator a truckload of documents merely because you have them.

Ask what is actually required.

4. Mediator Selection Checklist

Before appointing a mediator, ask:

• ☐ What recognised mediation training do you have?
• ☐ Are you professionally accredited or registered?
• ☐ Do you have relevant commercial experience?
• ☐ Have you mediated disputes of this nature?
• ☐ Do you have any conflict of interest?
• ☐ How do you normally structure the mediation?
• ☐ How are private sessions handled?
• ☐ What are your fees?
• ☐ What preparation do you require?
• ☐ Are you available within the timeframe we need?

Choose the mediator for the dispute.

Not simply the mediator with the nicest website.

5. Questions to Ask Your Lawyer Before Mediation

What are our strongest legal arguments?

What are our weaknesses?

What is our realistic best outcome if we litigate?

What is our realistic worst outcome?

What might litigation cost?

Are there legal issues that cannot safely be compromised?

What authority is needed to settle?

Should you attend the mediation?

Who should draft the settlement agreement?

A useful legal opinion should help you make better settlement decisions.

6. The Settlement Option Generator

Do not arrive with only one possible solution.

Write down at least five.

Option 1

______________________________________

Option 2

______________________________________

Option 3

______________________________________

Option 4

______________________________________

Option 5

______________________________________

Consider money, timing, performance, future work, discounts, share transfers, management changes, confidentiality, payment plans, remedial work, security, or other commercial variables.

Some ideas may be terrible.

That is fine.

Option generation comes before option selection.

7. Mediation Red Flags

Stop and obtain advice if:

• you are being pressured to sign something you do not understand;
• important information has unexpectedly emerged;
• the settlement may have significant tax consequences;
• company approvals may be required;
• the agreement involves shares, property or intellectual property;
• prescription or another legal deadline may be relevant;
• the other party appears to be using mediation purely to delay;
• there is suspected fraud or concealment;
• you believe urgent court protection is required; or
• you are uncertain about the legal consequences of the proposed settlement.

Mediation should facilitate informed decisions, not rushed ones.

8. Questions to Ask Yourself During a Caucus

When meeting privately with the mediator, ask yourself:

What am I not saying in the joint meeting?

Why am I reluctant to say it?

What am I most worried about?

What settlement could I actually live with?

What happens if we leave without agreement?

Am I rejecting this proposal because it is commercially poor or because I am angry?

That last question can be uncomfortable.

It can also be extremely useful.

9. The Settlement Reality Check

Before accepting or rejecting a final proposal, compare:

Settlement

Amount payable/received: R_____________

Time to resolution: ___________________

Commercial relationship afterwards: ___________________

Management time required: ___________________

Certainty of outcome: ___________________

No settlement

Expected legal cost: R_____________

Possible duration: ___________________

Risk of losing: ___________________

Enforcement risk: ___________________

Management time: ___________________

Commercial consequences: ___________________

Then ask:

Which option makes better business sense?

Not which option feels more satisfying.

Which makes better business sense?

10. Mini Case Study Exercise

Return to Karoo Fresh Produce and Ubuntu Cold Storage.

Assume Karoo’s claimed loss is R1.2 million.

Ubuntu believes its maximum legal exposure is R500,000.

Create a possible mediated settlement using at least four different variables.

For example:

Cash payment: R________________

Future storage discount: ________________

New operational procedure: ________________

Independent expert involvement: ________________

Future commercial relationship: ________________

Now compare that package with a simple cash settlement.

Which potentially creates more value?

That is the commercial flexibility mediation can offer.

11. After the Mediation

If agreement is reached:

• ☐ Make sure the terms are accurately recorded.
• ☐ Check who must sign.
• ☐ Confirm payment dates.
• ☐ Record performance obligations.
• ☐ Address existing litigation or arbitration.
• ☐ Deal with costs.
• ☐ Consider confidentiality.
• ☐ Obtain legal review where appropriate.
• ☐ Diary all performance dates.
• ☐ Monitor compliance.

If no agreement is reached:

• ☐ Record what issues were narrowed.
• ☐ Identify information still required.
• ☐ Reassess your BATNA.
• ☐ Obtain further professional advice if necessary.
• ☐ Consider whether negotiations should continue later.
• ☐ Determine the next procedural step.

No settlement does not mean no progress.

12. Chapter 3 Action Exercise

Think of a dispute currently affecting your business—or use a previous dispute.

Imagine that mediation begins tomorrow.

Write down:

The three things I most want the mediator to understand:

• ______________________________________
• ______________________________________
• ______________________________________

Now write:

The three things the other party would probably want the mediator to understand:

1. ______________________________________
2. ______________________________________
3. ______________________________________

Compare the lists.

Are they describing the same dispute?

Often they are not.

That is one reason mediation can be so useful.

Chapter 3 Takeaway

Mediation occupies a valuable space between direct negotiation and adjudication.

You are no longer trying to solve the dispute entirely on your own.

But you have not yet handed the decision to somebody else.

The mediator helps manage the conversation.

You retain control of the outcome.

That makes mediation particularly valuable where commercial relationships, confidentiality, flexibility and creative solutions matter.

But mediation works best when parties prepare properly, understand their alternatives and appoint a competent independent professional.

The objective is not compromise for the sake of compromise.

It is to find out whether there is a solution that makes more sense than continuing the fight.

And if there isn’t?

Sometimes a decision must be made for the parties.

That takes us to the next major ADR mechanism:

Arbitration.