Mediators should take necessary precautions to protect themselves, as they are putting themselves in a vulnerable position in terms of liability. Mediators need to be qualified and properly trained before they can mediate a legally binding mediation. In mediation, there are a number of situations in which liability could arise. For example, a mediator could be liable for misleading parties about the process and/or process of alternative dispute resolution.
If a mediator inappropriately recommends mediation as a dispute resolution method, those involved can hold the mediator liable. A breach of confidentiality on the mediators behalf could result in liability. These situations can all lead to court proceedings, although this is quite uncommon. Only one case has been recorded in Australia so far.
Three areas exist in which liability can arise for the mediator:
- Liability in Contract
- Liability in Tort
- Liability for Breach of Fiduciary Obligations
Liability in Contract arises if the Mediator breaches contract between themselves and one or both of the parties. This can be in written or verbal contract. There are two forms of breach - failure to perform and anticipatory breach. The latter is harder to prove because the breach has not yet happened. If the breach is proven in can result in damages awarded. The damages awarded are generally compensatory in nature, very rarely pecuniary. Limitations on liability include causation.
Liability in Tort arises if a mediator influences a party in any way (compromising the integrity of the decision), defames a party, breaches confidentiality, or most commonly, is liable in negligence. To be awarded damages, the party must show suffering of actual damage, and must show that the mediator's actions (and not the party's actions) are the actual cause of the damage.
Liability for Breach of Fiduciary Obligations can occur if parties misconceive their relationship with the Mediator for something other than completely neutral. The mediator has the role of remaining neutral at all times, but the parties could misinterpret the relationship to be a fiduciary one.
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