Mediation and resolving business disputes without court

What mediation can and cannot do

Mediation is a structured negotiation assisted by an independent mediator. The mediator helps parties explore a solution but does not decide the dispute or impose a settlement. It may allow commercial outcomes such as a payment timetable or revised working arrangements, but settlement is not guaranteed.

The NSW Small Business Commissioner's guide to resolving business disputes explains the process and how to prepare. Mediation may reduce the time and cost of a dispute, but the likely benefit depends on the issues and the parties' willingness to engage.

Check the contract and any court requirements

Start by reviewing the contract's dispute-resolution clause and getting advice about applicable procedures. Some disputes have statutory mediation requirements, and a court can refer proceedings to mediation.

For court-referred mediation under Part 4 of the NSW Civil Procedure Act 2005, section 26 permits referral with or without the parties' consent. Section 27 requires parties to participate in good faith. Being required to attend does not mean being required to agree to a settlement. See Part 4 of the Act.

Prepare for a useful discussion

Collect the contract, relevant correspondence, invoices and a short chronology. Identify what is agreed, what remains disputed, the outcome you want and the alternatives if no agreement is reached. Obtain advice on the strengths, risks and likely costs of your position.

Confirm who will attend and who has authority to settle. Arrange access to any insurer or other decision-maker whose consent may be needed. Raise interpreter, accessibility or safety needs with the provider beforehand. The mediator is neutral and is not a substitute for your own legal adviser.

Confidentiality has limits

Mediation is generally conducted privately, but confidentiality and the use of material as evidence depend on the applicable law and mediation agreement. Do not assume that everything mentioned or shown becomes immune from later disclosure.

For mediation referred under Part 4 of the NSW Civil Procedure Act, sections 30 and 31 provide evidentiary protections and restrictions on a mediator's disclosure, with exceptions. Section 29 also permits evidence about a settlement when seeking orders giving effect to it. Private mediations outside that Part require separate analysis. Ask your solicitor what protection applies before sharing sensitive material.

Record any settlement carefully

If agreement is reached, record the parties, obligations, payment dates, costs and scope of any releases clearly. Consider what happens if a payment is missed and whether existing proceedings need consent orders or other steps. Obtain advice before agreeing terms: whether an agreement is binding depends on its terms and circumstances, not simply whether a later formal deed is contemplated.

For court-referred mediation under Part 4, section 29 allows the court to make orders giving effect to an agreement. A settlement does not enforce itself; further steps may be needed if a party fails to comply.

Do not let negotiations obscure deadlines

Do not assume that arranging mediation pauses a limitation period, a contractual notice deadline or a court timetable. Ask a solicitor to identify and protect the deadlines that apply. Urgent relief or protective proceedings may be needed while discussions continue.

If mediation does not settle the dispute, it may still narrow the issues. Take advice on the remaining options rather than assuming court action is either inevitable or unnecessary.

This article provides general information about Australian law, with a NSW focus where indicated. It is not legal or tax advice and does not take your circumstances into account. Obtain advice about your own situation before acting.