Cost Efficiency of Mediation

Why a successful mediation is cost efficient?

There are a number of reasons. The time to come to a conclusion of a dispute or conflict is far quicker. The likelihood of a party appealing or taking further action after a mediation settlement has been agreed is highly remote. You never have to pay for the privilege of going to court to appear in front of a Judge. The time lawyers spend on your matter is highly reduced. Research & investigative work done in preparing for a mediation is far less intensive than if you have to go to trial. Here at mediate.co.nz our fees for mediation services vary depending on your situation. Best to contact us so we can discuss your situation to see where that fits into our mediation scale of fees. We set aside a certain amount of time each month for community “Pro Bono” work.

Time involved with mediation.

The age old saying of “Time is Money” rings very true. Once a decision is made to mediate a matter the process can be very quick. A mediator could be booked for a date as quick as a week and should not be any longer than a month ahead. Most successful mediations happen within one day mediation. Compare this to how long it takes to get to get in front of a Judge & most civil cases involve a number of appearances before a judge prior to a decision being awarded.

Taking Further Action is less likely with mediation

A risk of any litigation is that the other party may appeal the decision. This again can further fritter away any award given by the Judge by involving more lawyers’ time and additional court costs. In a successful mediation both parties are in agreement with the outcome  of the dispute or conflict so in theory there is nothing to appeal or challenge. The matter is put to bed and the parties can get on with more productive aspects of their life.

Going to Court is an alternative if mediation fails

What is my “Best Alternative To a Negotiated Agreement” (BATNA)? That is if I can’t negotiate a settlement in mediation with the other party that we can both agree to, what is my fallback position? Usually it is either do nothing or head off to court.

How much does it cost to go to court? Of course it depends on the complexity of the matter at hand and who or whom is representing you. Figures bantered round the public arena range from $20,000 to $50,000. Yes, but if I win don’t I get covered for my costs? Well, first of all you have to win. Normally the stronger you think your case is the stronger the other party thinks their case is (otherwise you would not be there in the first place). There is no certainty in going to court. Some lawyers state that they think you have a very good case and the other side does not have a show. Ask that lawyer then to give you a guarantee to that effect. If you win 100% of what you are after (very rare) and get awarded costs as per a court schedule then you will be doing very well to get somewhere near 50% of your actual costs back.

Say your dispute equates to a value of $35,000. Best case scenario is you spend your $20,000 in legal and other fees and 12 to 18 months of your life trying to get it (no one’s time is worth nothing so let’s call it $5,000 worth) and you get awarded your full amount plus $10,000 costs. So that is $35,000 minus $20,000 minus $5,000 plus $10,000 which equals a net result of $15,000 better off than before you instigated the litigation process, that is if the losing party is still around to pay and has not gone into liquidation or the like during the lengthy time it took to get this result. The worst case scenario is you spend your $20,000 in legal and other fees, $5,000 of your own time, you have the Judge decide against you and award to the other side that you pay $10,000 of their costs. So that is $0 minus $20,000 minus $5,000 minus $10,000 which equates to a net cost of $35,000 worse off than before you instigated the litigation process. Added to this is the emotional toll you will suffer having sustained such a loss for no gain.

The Disputes Tribunal has had its limit increased to $15,000 recently. For the above scenario or any figure less, forget the District Court and go straight to the Disputes Tribunal, that is unless you wish to attempt to preserve the relationship between you and the disputing party or you believe that in the right controlled environment you may do better than $15,000 limit of the Disputes Tribunal in mediation.

Lets now say your dispute equates to a value of $100,000. Best case scenario is you spend your $30,000 in legal and other fees and 12 to 18 months of your life trying to get it (no one’s time is worth nothing so let’s call it $5,000 worth) and you get awarded your full amount plus $12,000 costs. So that is $100,000 minus $30,000 minus $5,000 plus $12,000 which equals a net result of $77,000 better off than before you instigated the litigation process, that is if the losing party is still around to pay and has not gone into liquidation or the like during the lengthy time it took to get this result. The worst case scenario is you spend your $30,000 in legal and other fees, $5,000 of your own time, you have the Judge decide against you and award to the other side that you pay $12,000 of their costs. So that is $0 minus $30,000 minus $5,000 minus $12,000 which equates to a net cost of $47,000 worse off than before you instigated the litigation process. Added to this is the emotional toll you will suffer having sustained such a loss for no gain.

In mediation the mediator could get both parties look at this $100,000 dispute pragmatically. The total legal bill for both sides should it not settle at mediation and go to court will be around $60,000. Now, rather than burning this amount in legal and other fees we apply it to the dispute at hand. Our $100,000 dispute is now down to a $40,000 dispute. We are already over half way there. Now the mediator can address the remaining $40,000. This $40,000 becomes the problem the parties need to work together to resolve. The mediator shifts the focus of the parties away from each other to what other ideas can be generated to addresses each parties issues that meets their long term interests. It is incredible what results can come from this.

Lawyers role in mediation

Lawyers are a very important part of our society. It is no easy path in becoming a lawyer. The barriers to entry are quite high. Accordingly their fees reflect this and you generally get what you pay for. If you go to court they are a must as the saying “A man who represents himself has a fool for a client” is so true. Lawyers have an important role in mediation. They are there to advise their client and in conjunction with the other party’s lawyers, to write up the settlement agreement at the conclusion of the successful mediation. However, far less time will be spent overall by your legal representatives in getting to a successful mediation compared to running a full trail via the courts.