Stay on the right side of the line in mediations

23 September, 2016

Tactics are an essential part of mediations as practitioners seek to reach an outcome favourable to their clients. However, there are legal and ethical limits to how far practitioners can go in settlement negotiations. Practitioners in mediations should be mindful of the provisions of Part 2.3 of the Civil Procedure Act 2010 (Vic) and section 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cwlth), known as The Australian Consumer Law.

Legal Services Commissioner v Mullins [2006] LPT 012 concerned disciplinary proceedings in Queensland against a barrister who had acted on his client’s motor vehicle compensation claim. In pursuing the claim, the client’s solicitor provided a report on his future needs to the defendant’s insurer. This was based on a medical report that the client’s life expectancy was that of a normal 48 year old, reduced by 20% because of his injuries.

Less than three weeks before the scheduled mediation the client discovered he had cancer and was to receive chemotherapy treatment. The barrister initially thought these facts needed to be disclosed to the insurer before the mediation and the mediation was likely to be adjourned. The client instructed his lawyers not to reveal these facts unless he was legally obliged to do so and he wanted the mediation to proceed. After further consideration the barrister came to the view they were not obliged to disclose the illness at the mediation so long as they did not make positive assertions to mislead the insurer and its lawyers about the client’s life expectancy.

The mediation conference proceeded with no mention of the client’s cancer. The barrister’s outline of argument referred to the damages reports served earlier that assumed a normal life expectancy less 20%. The claim was settled at the mediation.

The Legal Practice Tribunal subsequently found the barrister guilty of professional misconduct. Before the Tribunal, his counsel argued the negotiations were commercial and there was a tacit assumption the parties would rely exclusively on their own information when deciding whether to settle. However, the Tribunal found the barrister intentionally deceived the insurer and its lawyers about the accuracy of the assumption regarding the client’s life expectancy.

The instructing solicitor, who relied on the barrister’s advice, was also found guilty of professional misconduct in Legal Services Commissioner v Garrett [2009] LPT 12.

Victorian practitioners need to be aware that if these facts were transposed to a mediation subject to the Civil Procedure Act, the relevant practitioners would be at risk of breaching their overarching obligations, particularly the obligations to act honestly at all times and not to engage in misleading and deceptive conduct. The conduct could also amount to a contravention of section 18 of the Australian Consumer Law.

The client’s lawyers should have sought his instructions to disclose the new facts relevant to the assumption about life expectancy. If the client had refused to agree to such disclosure, his lawyers would have been obliged to cease acting.