Settling a Franchise Dispute through Mediation
The GA Solicitors business disputes team regularly deals with franchise disputes and recommends mediation to try and reach a satisfactory conclusion for both parties.
Here is a brief outline of what happened in this mediation case and the different steps involved.
Please note: To preserve the confidentiality of the mediation process, certain key details, including all party names, have been changed.
Jeff’s company was a franchisee in a franchise based in the north of England, in the field of construction work, specifically operating machinery that dealt with digging on construction sites.
When Jeff bought the franchise, the franchisor, DigCo provided the digger machinery on a lease, as well as the training and tickets necessary for franchisees to operate on-site.
While running the franchise, Jeff became concerned that the types of digging requested were not those covered by his training and ticket. He consulted a former colleague who agreed with his position and then also provided an expert report to Jeff outlining his findings in detail.
When this was put to DigCo, it challenged that the types of digging it required Jeff to do were outside of the training provided and felt that Jeff was qualified to do them. DigCo also obtained an expert report confirming its own position.
The franchise dispute
Jeff concluded that, as he could not know which types of digging he was trained to do on-site, he could not operate the franchise and so it had to be effectively abandoned. DigCo disputed this and argued that the franchise could and should have continued.
Each party accused the other of breaching the terms of their franchise agreement. Both parties concluded that they had a claim in damages against the other as a result. Each party also took the other’s expert report and their expert’s findings to task.
Agreement to mediate
Court proceedings had not yet been issued by either party (known as the “pre-action” stage)in , and both agreed that it was better to enter into a dialogue to try and come to an agreement. Without this, they feared expensive and high-risk court litigation was looming, in which they could be locked for months or even years.
They therefore agreed to take part in mediation, to see if some common ground could be found, and to try and put the dispute behind them at an early stage.
Both parties liked the confidentiality of mediation, as no one would find out what was discussed on the day, including details of their agreement should they choose to settle.
The relatively low cost – certainly in comparison with court proceedings – was also considered a beneficial reason to go through with it. Even if court proceedings had commenced, the chances were it would likely settle through mediation anyway at some point.
They therefore concluded that it was better to go through with mediation now, before incurring a great deal of cost.
The mediation process
Once agreed, CVs of likely mediators were circulated, as well as prospective dates. The mediation, as usual, was to last one day and to be held online, which is increasingly common.
Arrangements for the mediation, including the fee, online links, and information packs were all handled by the Centre for Effective Dispute Resolution (CEDR). Once she had been formally instructed through CEDR, Janet the mediator contacted the parties individually. This was to talk them through the process and what to expect on the day, as well as to test the parties’ connections, to make sure there would be no technical hitches.
The parties were then asked to circulate mediation position statements, setting out their case in brief and their expectations for the day. A mediation bundle with all the key documents was prepared and sent to the mediator alongside the position statements.
With the date set, position statements circulated, and all other arrangements made, there was nothing left other than to turn up on the day.
The mediation started at 10am, initially with the parties attending in the same “room” online and with Janet providing some housekeeping and “rules” for the day. She implored the parties, in particular their legal advisers, to “take off their litigation hats,” to assist everyone in finding a solution, rather than getting bogged down in skirmishes on the legal issues.
Then Jeff, followed by the MD of DigCo, each said their piece about the franchise dispute as they saw it. The legal advisers then each said a short piece about their expectations for the day while doing their best to avoid relitigating the arguments and following Janet’s advice.
The parties then broke off into their separate rooms, where Janet visited each of them. Janet had already read and familiarised herself with the key documents and position statements, so knew what the central issues of the case were. Therefore, she could use this time to get each side of their story and the case as they saw it.
Once she had done this with both sides, the parties’ legal advisers met in a separate room with Janet to discuss the specific legal issues and any litigation risks, if the case were to proceed to a trial before a Judge.
Once back in separate rooms, Janet once again ferried between them to relay points of discussion and summarise where the debate lay. By this time it was after lunch and the parties could feel that the day was already passing more rapidly than expected. That being the case, they then started to focus on any common ground and whether there was any scope for settlement.
Janet once again ferried between the rooms, this time relaying potential settlement offers and canvassing opinions on them. By 5pm it was done – the parties had managed to reach a settlement they were both happy with.
Settlement at the mediation
Despite the parties having agreed to settle, the day does not quite end there. A mediation settlement agreement then needs to be drawn up, containing the settlement terms, so that the parties can then sign it and make the terms contractually binding.
Luckily, the parties’ legal advisers had come to the mediation prepared with draft agreements, so this stage was relatively brief and involved putting the appropriate wording into one of the pre-prepared drafts.
There were several practical considerations to take into account when drafting the settlement terms, including:
- What happens to the digger machinery and what conditions for its return by Jeff.
- Stipulations for exchanges of any sums of money, including deadlines, bank details etc.
- A tight confidentiality clause, so that the confidential conditions that had existed on the day of the mediation continued afterwards and meant the parties could not discuss what had happened, nor terms of settlement.
- Making sure the agreement provided that there could not be any relitigation of the dispute between them and settlement was on a “once and for all” basis, for both claims.
Various versions of the agreement were then circulated, and once a final version was agreed all parties signed it using electronic signature software.
Now that the parties had settled, the only thing left was for Janet to call us back into a room together for the final time. She thanked us all for dealing with the mediation commercially and pragmatically and expressed her gratitude that the parties had managed to resolve on the day. The parties then exchanged their goodbyes and left.
It is very common for parties to a dispute to express relief when it settles, and this mediation was no exception. Jeff in particular felt like a load had been lifted and thanked the mediation process for giving him some control and for saving him from the prospect of being locked in litigation at high cost for a long time, with an uncertain result at the end.
Technological advances (catalysed by the COVID pandemic) have now made it commonplace for mediation to occur online, meaning it can be attended from at home or in the office, without the necessity of costly and aggravating travel and accommodation arrangements to get to the same place.
It is little wonder therefore that more and more parties to disputes are seeing the commercial benefits of using the mediation process first, before even thinking of litigating through the court.
If you are in a franchise dispute or a business dispute and are considering mediation, then please feel free to contact me directly via ieuan.jones@GAsolicitors.com or by calling 01752 203500.
GA Solicitors in Plymouth offers specialist legal advice relating to all types of disputes including professional negligence, landlord and tenant, business disputes and contentious probate (will disputes). You can be assured you are in the best possible hands.
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