Originally from World Arbitration and Mediation Review

Enforcing Mediation Settlement Agreements in Australia
by
David Spencer+
Federal Magistrate’s Court
In Morbanc Securities v. McTaggart [2001] FMCA 40, the
applicant, Morbanc Securities, agreed to lend AUD $35,000 to a company
guaranteed by the respondent, McTaggart. The National Australia Bank
was a secured creditor of the company. When the company could not
discharge its debt, the bank called in the loan. Morbanc Securities also
called in its loan. The dispute was mediated. Morbanc Securities agreed
to allow McTaggart to pay back AUD $7,500 over seven installments with
a final payment of AUD $17,500 nine months after the settlement
arrangement. McTaggart sought an order from the court to set aside a
sequestration order because, although he could pay the debt, he had
chosen not to because of a genuine dispute that existed between the
parties. The sequestration order had been issued pursuant to a judiciallyconfirmed
mediated settlement signed by the parties.
In affidavit evidence before the court, the judgment reads, at [17]–
[18], that McTaggart stated:
I believe that mediation was not adequate in
providing a suitable solution to the problem
which existed. However, due to the fact that
my business was collapsing due to worsening
economic conditions and a decrease in the
market share of home loan applications, I was
forced to accept a settlement of the dispute
according to the terms and conditions which
have been drafted so that I could facilitate the
process of the sale of my business.…I was not
legally represented at the mediation or at the
time when the terms of settlement were
prepared and executed. Additionally, the terms
of settlement were prepared by the plaintiff's
solicitors to obviously favor their client’s
position.