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A wrecked yacht is a problem, but bad behaviour ain't one

Collins v State of Queensland [2020] QSC 154

This Supreme Court of Queensland decision highlights the importance of the mediation agreement in not only providing a framework for the mediation, but also in establishing the role and responsibilities of each of the parties involved in the dispute resolution process.

In particular, this decision shines the (navigation) spotlight on the conduct and liability of parties, including in respect of the mediator, participating in a court ordered mediation where the mediator is practising with the benefit of a statutory immunity.[1]

Background to the case

Mr Collins sued the State of Queensland seeking damages of approximately $1.5 million following the loss of his yacht, wrecked on Flat Rock, near Stradbroke Island. Mr Collins brought a claim in negligence and breach of statutory duty, alleging that the State of Queensland failed in its duties to provide a navigation light on Flat Rock and in its attempt to salvage Mr Collins’ yacht.

Following a court order referring the matter to mediation, a mediation took place, with Mr Collins’ preferred candidate appointed as mediator. Mr Collins, self-represented until then, had legal representation at the mediation, as did the State of Queensland.

The mediation resulted in a settlement of the proceeding, recorded in a Deed of Settlement (Deed), which included terms pursuant to which the parties agreed that Mr Collins was to be paid the Settlement Sum, $15,000, within 14 days, and that the parties would sign and subsequently file a Notice of Discontinuance upon payment of the Settlement Sum. The Deed also included a mutual release from all claims relating to the proceeding, which was to be effective from the ‘Effective Time’. However, the term, 'Effective Time' was not defined in the Deed.

The settlement was the result of shuttle negotiations[2] between the disputing parties, during which, according to Mr Collins, the mediator put to him in an aggressive way that he had caused the incident. During the negotiations, there was pressure placed on Mr Collins by the mediator, and by his own legal representatives, to accept the State of Queensland’s settlement offer, which was significantly lower than the settlement amount Mr Collins had in mind. According to Mr Collins’ legal representative, once a settlement was reached, Mr Collins was urged to take time to consider the terms of the Deed, however, Mr Collins declined to do so.

By the end of the mediation, the parties had executed the Deed as well as the Notice of Discontinuance. The Notice of Discontinuance was filed by the State of Queensland a few days prior to Mr Collins receiving the Settlement Sum.

Mr Collins’ application to set aside the settlement

Mr Collins sought to set aside the Deed on the basis that it was void:

  • for lack of certainty because the Deed did not define the term ‘Effective Time’;
  • for breach of an essential term because the State of Queensland filed the Notice of Discontinuance prior to payment of the Settlement Sum; and
  • there were vitiating factors affecting its validity because of improper conduct at the mediation by the mediator, the State of Queensland and Mr Collins’ own legal representatives. Accordingly, Mr Collins’ entry into the Deed was procured by duress, unconscionable conduct and undue influence.

Mr Collins also sought to set aside the Deed on the basis that it was unenforceable, as a matter of public policy because of the improper behaviour of the mediator and Mr Collins' own legal representatives.

Mr Collins’ allegations of improper conduct against the mediator

Mr Collins alleged that the mediator failed to act impartially. According to Mr Collins, the mediator allowed the State of Queensland to adduce evidence improperly, affecting the mediator's perception of the case and resulting in the mediator alleging that Mr Collins was responsible for the incident, without testing the allegation and providing Mr Collins with the opportunity to provide a response.

Mr Collins also alleged that the mediator, along with his own legal representatives, had acted improperly by warning him of his poor prospects and the financial risks of proceeding to trial, in the course of urging him to accept the State of Queensland's settlement offer.

Mr Collins' allegations against the State of Queensland and his legal representatives

Mr Collins alleged that the State of Queensland failed to act in good faith, including during the mediation, in that they did not take part in any joint sessions with Mr Collins, apart from a plenary session at the start, and did not give Mr Collins an opportunity to discuss the core issues in the proceeding. Further, they were aware of Mr Collins' financial and other difficulties, taking advantage of this by influencing the mediator's opinion through the provision of evidence in private sessions.

As against his own legal representatives, Mr Collins alleged that they failed in their advice to him, including by failing to put forward Mr Collins’ proposed settlement and other documents Mr Collins thought relevant during the course of the mediation, and failing to read the contents of the Deed to Mr Collins, or explain the broader implications of its execution.

The court's decision

The Deed was not void for lack of certainty nor was there a breach of an essential term

The court held that on its proper construction, the term ‘Effective Time’ could only rationally be read as being the time at which all of the steps in the Deed had been completed. Accordingly, there was no difficulty in ascertaining the parties intention.

Further, the court found that the express obligation in the Deed to file the Notice of Discontinuance once the Settlement Sum is paid, was not, on its own, an essential term of the Deed. His Honour stated that what was important to the parties was for Mr Collins to do what was necessary on his part for the discontinuance of the action, in exchange for receiving the Settlement Sum. His Honour also noted that the parties agreed at the mediation to sign the Notice of Discontinuance and this was, in effect, an agreed variation to the terms of the Deed. This variation to the Deed also evidenced a mutual perception that the question of timing (as to the filing of the Notice of Discontinuance and the payment of the Settlement Sum) was not material.

Mr Collins was not subject to any special disadvantage, there were no vitiating factors nor was there improper conduct by the parties at the mediation

His Honour found that the terms of the mediation agreement executed between the parties gave the mediator wide latitude as to the conduct of the mediation, including by giving the mediator free rein regarding the number of mediation sessions and the extent to which the mediator could traverse the evidence. His Honour highlighted the distinction between mediation and formal litigation processes, noting "Mr Collins seems to have thought that a mediation should proceed as if it were a Court proceeding, with the evidence fully canvassed, and opportunities to respond to the competing allegations. That was not so".[3]

According to his Honour, Mr Collins failed to demonstrate any conflict of interest on the part of the mediator. The mediator was not dependent on the State of Queensland for work and there was no suggestion that the outcome of the mediation could conceivably affect the mediator’s livelihood. His Honour noted that the mediator was not the State of Queensland's choice and it was only after Mr Collins’ urging that the State of Queensland agreed to the mediator's appointment.

Further, his Honour found that there was no basis for finding that the mediator applied illegitimate pressure on Mr Collins. His Honour noted that even if the mediator was wrong in putting to Mr Collins that he was the cause of the incident, there was no evidence that the mediator made the mistake, other than in good faith. His Honour noted that the mediation agreement allowed the mediator to put to Mr Collins observations about the practicality of proceeding to litigation, including pointing out Mr Collins' poor prospects of success, based on the facts the mediator had available to him, correctly or otherwise.

His Honour also found that there was no evidence that the State of Queensland or Mr Collins' legal representatives acted in bad faith during the mediation. Specifically, his Honour found that there was no evidence that Mr Collins' legal advisers were motivated by anything other than a desire to achieve the best outcome for Mr Collins. His Honour also drew attention to the fact that Mr Collins' legal representatives suggested to Mr Collins that he take the time to consider the Deed, which Mr Collins chose not to do.

Mr Collins' public policy argument also failed

His Honour noted that, even if Mr Collins had been able to prove the alleged conduct "it would be an odd approach to public policy to deprive the party of the benefit of an agreement because of the behaviour of others (including the other partys own legal representatives) with which it had no connection".[4]

Conclusion

Mediation has become a popular form of dispute resolution and this case provides a timely reminder of the pivotal role that the mediation agreement plays in governing that process, which, as his Honour in this case highlights, is quite distinct from traditional court litigation.

[Note: The above material provides a summary only of the subject matter covered, without an assumption of a duty of care by Resolution Institute or Clayton Utz. The material is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Copyright in the material is owned by Clayton Utz.]


[1] In Queensland, this immunity is set out in section 52(1) of the Civil Proceedings Act 2011 (Qld). See https://www.legislation.qld.gov.au/view/pdf/asmade/act-2011-045.


[2] That is, negotiations which occurred with the parties being physically separated and the mediator 'shuttling' back and forth between them.


[3] At paragraph 39.


[4] At paragraph 44.