restrictive covenant; mediation; lawyer; barrister; advice

A guide to mediating a restrictive covenant dispute

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At the second return of an application for the modification of a restrictive covenant (usually, the first hearing after notification to beneficiaries), the judge may ask whether you wish to set the matter down for mediation.

If one or both parties agree, the judge may add the following words into the draft orders:

– The proceeding be referred to a mediator to be agreed between the parties or in default of agreement to be appointed by the Court, such mediation is to take place by [date].
– The mediation must be attended by those persons who have the ultimate responsibility for deciding whether to settle the dispute and the terms of any settlement and the lawyers who have ultimate responsibility to advise the parties in relation to the dispute and its settlement.
– Subject to the terms of this order, the solicitor for the plaintiff must, after consultation with all parties, deliver to the mediator a copy of this order and copy of any other relevant information, and take all steps necessary to ensure that the mediation commences as soon as practicable.
– The mediator not later than 3 days after conclusion of the mediation, report back to the Court as to whether the mediation is finished.
– Subject to any further order, the costs of the mediation shall be paid in the first instance by the plaintiff.

For plaintiffs, the benefit of mediating is the prospect of an almost certain outcome in litigation that they are likely to end up financing. It also perhaps comes as the unwelcome news arrives that the case is going to be contested.

For defendants, it may also mean that an acceptable outcome may be achieved, without the expense and inconvenience of having to prepare for a contested hearing.

For both parties, mediation permits creative settlement opportunities that might not be possible in an otherwise binary decision making process. For instance, in Rosenwald v Hogg, Macaulay J observed:

This is a classic example of a case where the parties may well have been able to achieve a ‘compromise’ result, by negotiation and agreement,  which the court simply could not give them.  That opportunity was given to the parties at the commencement of this case when I pointed out the finely balanced difference between them having regard to their respective experts’ opinions.

One example may be the articulation of building envelopes as occurred in this case.

Another example might be the drafting of a side agreement, for instance, in relation to the retention of protection of vegetation during the development process. Bear in mind, however, that side agreements may be personal and of little use if the relevant land is subsequently sold. Covenants, of course, mostly run with the land.

A mediation will usually take only half a day. They normally commence with the mediator explaining that what is said in the mediation is ‘without prejudice’–that is, it cannot be referred to in open Court. And then the parties may take a few minutes each setting out what they hope to achieve from the mediation. The mediator may then take the parties aside to ‘caucus’ or endeavour to ascertain the underlying objectives of importance to each party. Identifying these underlying issues is likely to assist in achieving an outcome that is acceptable for everyone.

The choice of the mediator is important. Someone who has experience in the jurisdiction is more likely to be able to fairly and accurately assess the likely range of outcomes at a contested hearing. Three names include:

A mediator is not there to provide legal advice to act as a party’s advocate. That said, there may be some practical benefit in having a neutral third party explaining the process in objective terms. For unrepresented parties, and for those quite unfamiliar with the process of modifying a restrictive covenant, this may be of particular assistance.

For applicants, it is important to remember that simply because you have a mediated agreement doesn’t mean the Court will necessarily accept that agreement by modifying the covenant in the manner agreed. You may still need to convince a judge that you have established an absence of substantial injury on the totality of beneficiaries, and that there are no other reasons why the judge should exercise his or her residual discretion against the modification proposed. However, a mediated outcome, in most cases, will certainly assist in proving to the Court an absence of substantial injury and one might suggest that it’s still better to fail here, than after the expense of a contested hearing.