Does being a liquidator make it difficult to be a mediator?

Posted on April 06, 2017 by Claire Scaramanga

We ask Jeremy Frost, who is both a liquidator and mediator, what he thinks about these two different roles.

First of all, what is the difference between a mediator and a liquidator, and how does an arbitrator fit in?

Primarily, a mediator helps finalise disputes. He is appointed by both parties and their role is to allow them space to negotiate productively. They will also act as a coach to encourage and assist the parties to find a settlement. It is important to find a mediator who has experience in this type of dispute, as this will help negotiations.

An arbitrator makes a decision based on evidence. Arbitration is often used in commercial contracts such as construction etc. The aim is a swift cost effective decision to allow all parties to move on, usually to ensure the completion of ongoing contracts.

A liquidator can be considered an officer of the court (whereas a mediator or arbitrator are not). A liquidator uses quasi court processes without necessarily having to use the court to determine claims.

The liquidator is appointed by shareholders or creditors of a company, although is independent of both. He has a number of statutory duties and must have regard for all of a company’s stakeholders.

How do liquidators work?

The liquidator is impartial and will consider the interests of the company. Their primary role is to finalise the paperwork associated with the company, allowing it to be struck off. In doing so the liquidator has a number of decision making opportunities to allow for closure in the relationships between parties associated with the company.

Liquidation does not necessarily mean that a company is in financial difficulties. A solvent company with a potential creditor can be put into liquidation. Here, the liquidator’s role would be to review the evidence provided by the creditor, make a decision to resolve the claim, and provide certainty for both parties.

There is a mechanism which allows the liquidator to set a finite date to determine the claim.

If the creditor doesn’t like the determination, he can go to court within 21 days.

So, can a good liquidator also make a good mediator?

Definitely!

In my 20+ years of experience, I have found that the skill sets of a liquidator and a mediator are very similar, particularly when it comes to negotiation as there is an awful lot of negotiation that goes on within liquidation.

A liquidator is negotiating with directors, landlords, debtors and creditors generally. In shareholder disputes he would be using his mediation skills to allow all parties to get to a good outcome. On occasions a liquidator will be an assertive adversary. Equally he can also take a non-adversarial and pragmatic role if circumstances require it.

Negotiation is at the heart of mediation – the mediator creates the environment and space to allow the parties to negotiate.

Having said that, it doesn’t automatically mean that all liquidators are good negotiators – some do prefer to scream, shout, and tick boxes instead!