In Kalagadi Manganese (Pty) Ltd and Others v Industrial Development Corporation of South Africa Ltd and Others (2020/12468) [2021] ZAGPJHC 127 (22 July 2021), the court provides some useful comments on the application of High Court Rule 41A requiring litigants to attempt to mediate their dispute, and the question of bad faith mediation.
This is helpful, considering the embryotic stage of the rule and the paucity of case law or literature on the topic.
Parties may come into mediation with preconceived ideas which may never be shaken. The court said that cannot be equated with bad faith:
“If each party believes that the other cannot be trusted and the mediators cannot overcome that stumbling block then no amount of reassurance or the provision of alternate forms of security for guaranteeing performance is going to change that, whereas appreciating the downside of not finding an alternate solution may”.
The court had to consider the question whether there is a legally enforceable obligation to be receptive to a proposal put, and at least to consider it in good faith; and if so, whether there are any legal consequences if a party does not.
Mediation accepts that parties may come with intractable positions which may be routed in something quite unrelated to the legal or factual issues they have chosen to define or which have arisen in the actual litigation between them.
“The mediation process seeks to help the parties find each other and move away from the cause of the litigation. The process may take quite imaginative forms, may still involve one party outmanoeuvring the other or using its superior bargaining position which in turn results in the other submitting to a poor settlement, albeit preferable to a possible adverse court outcome. The mediator is not there to determine what is fair. The mediator seeks to facilitate a resolution to the dispute between the parties in a non-adversarial and non-judgmental way. A mediation process is not about negotiating the legal position of the parties as set out in court papers. It is about finding a way out of the deadlock by exploring possible solutions which may have no bearing on the actual issues before the court but will bring about their resolution in a non-adversarial way.”
Rule 41A
Superimposed over ordinary voluntary mediation, where a party can withdraw at any stage without potentially attracting any adverse consequences, is the judicially sanctioned High Court Rule 41A procedure obliging the parties to consider a non-adversarial resolution to a dispute which is already before the courts.
The provisions of rule 41A are consistent with the understood purpose of mediation and its general nature and functioning:
Mediation is encouraged as a form of alternate dispute resolution. The sanction for a failed mediation may be an adverse costs order.
Mediation is voluntary and the parties are at liberty to agree on such terms of mediation as they wish. An unwilling party cannot be compelled to mediate. The furthest the court can go is to direct a litigant ‘to consider’ mediation.
If some of the parties agree to mediate, the other parties in the same litigation are not obliged to fall in line. They must simply wait out the period while litigation is stayed until the mediation process is complete.
Except in limited circumstances which may be provided under law, a court cannot be informed of any of the mediation proceedings prior to the final outcome of the litigation. Even if settlement has been reached it is unnecessary for the court to be informed of the terms.
The appointment of a suitably qualified mediator will promote a better outcome.
A form of alternate dispute resolution
A number of decisions in the United States courts confirm that there is such a thing as bad faith mediation. Those are also considered in the high court judgment.
While those judgments are instructive, it is necessary to recognise the distinction between voluntary and coercive mediation.
High Court Rule 41A is constructed on the premise of voluntary mediation with the parties remaining in control of the process and the outcome. Under rule 41A a court is nevertheless expected to enquire into the conduct of the parties during the mediation process when determining an appropriate order for costs. It is inevitable that issues of bad faith mediation will be raised and will have to be considered alongside those issues mentioned in rule 41A(9)(b), which is limited to comparing the outcome of the case with offers and tenders which may have been made during the mediation process.
Bad faith mediation may be divided into conduct by a party which does not take into account a state of mind but only their external acts. That may manifest itself in a failure to attend the mediation, a failure to appoint a person who has sufficient authority to engage in or conclude a successful mediation, or even a failure to prepare at all for a mediation session.
There is also the possibility that the subjective intent of a party may result in that person being found to have mediated in bad faith.
Under rule 41A abusing the mediation process for purposes of delay will result in it being aborted on an application to court.
Rule 41A encourages mediation through a ‘mild-mannered approach’ with only a cost sanction at the end of litigation and an aborting of the process if there is abuse.
The rule does not provide a basis for coercion nor lay down any clearly prescribed requirements.
Rule 41A provides for confidentiality of the mediation process and the documents which came into existence during that process.
Where there are allegations of bad faith mediation and reference to the mediation documents is required to resolve those allegations, a court could have regard to the documents through what is determined a ‘judicial peek’ and afford the parties an opportunity to argue on them but for the purposes of the issue at hand only.
On the facts of the Kalagadi Manganese case, the court was unable to find that there was bad faith mediation and consideration of the documentation was not required.
