Mediation in Law

 In Commercial mediation

The law has moved on substantially since the landmark decision in Halsey –v Milton Keynes General NHS Trust and Steel –v- Joy & Halliday [2004] EWCA (Civ) 576 .

The Court of Appeal decision was somewhat oddly given after consultation with the Law Society, the Civil Mediation Council, ADR Group and CEDR. The Court focused upon the vexed question of whether a Court has jurisdiction to be able to force the parties to mediate and, perhaps more importantly, whether one party’s refusal to mediate will result in sanctions being imposed in relation to costs.

The Court rejected the suggestion that it can or should require parties to mediate against their will.  However a checklist was provided for Judges to consider whether a costs sanction is appropriate to punish a party unwilling to mediate. The checklist is as follows: –

The nature of the dispute

Some cases are not appropriate for mediation e.g. those where a principle of law needs to be established, for example for a precedent.

The merits of the case

Where a party considers their case is certain to succeed at trial they may be justified in refusing mediation (how many lawyers will feel confident and refuse mediation on this basis alone?)

Attempts to settle by other methods

Whilst it was accepted that offers and counteroffers may be relevant to costs it was also stated that mediation can often succeed were previous attempts to settle have failed. This therefore might not be one of the critical factors in the checklist.

Where the costs of mediation would be disproportionately high

This will be only relevant to the smaller cases.

Delay

The timing of an offer to mediate may be relevant to whether or not refusal is reasonable – e.g. where mediation would have the effect of delaying the trial.

Where the mediation has a reasonable prospect of success

The burden is firmly now placed upon the now unsuccessful party in the litigation to show that there was a reasonable prospect of mediation succeeding.  This might not be too difficult – having regard to the very high percentage of cases that settle at mediation.

The degree of encouragement provided by the Court

It was clear that ignoring offers to mediate would be a brave step for any solicitor in the future!

Ten years (or so) later….

Speaking at the 2015 Civil Mediation Conference the President of the Supreme Court, Lord Neuberger said: “Mediation is particularly attractive at the present time when litigation is becoming ever more expensive and time-consuming, when the law is getting increasingly complex, when legal aid is ever more attenuated, and when court fees are being increased markedly. As a result of this almost perfect storm of financial difficulties, we are at risk of depriving most ordinary people of access to justice… . It is absolutely fundamental that all citizens are able to establish their rights and defend themselves.”He recommended that mediation clauses be included in ordinary contracts, as well as extending mediation to possession claims based on nuisance and minor clinical negligence claims. There is ‘a lot to be said’ for making such changes, he concluded.  These indicators – coming as they do from the very top – are a sign of the unstoppable mediation tide.

Court fees very substantially increased in March 2015.  In some cases by over 600%.   Take this scenario: solicitors are instructed by a new client to sue on a disputed debt for £205,000.  The claim is strong but the financial liquidity of the proposed Defendant is not.  The client wants a judgement and charge over the Defendant’s property.  It will now cost £10,000 to issue this claim – with the Claimant knowing that he/she/it is unlikely to ever recover that issue fee (leaving aside the solicitors costs).    The fee increases have therefore made litigation an unpalatable option.

But if financial efficacy is not a driver to mediation, costs sanctions at the end of litigation should be.  And in 2015 they have been given new teeth.  The Courts and the Civil Procedure Rules (CPR) now require legal representatives and their clients to consider mediation – and indeed warn of sanctions to be suffered by those who do not comply.

Judges have a wide discretion on costs – including the power to penalise parties who do not attempt mediation.  CPR 44.2(4) sets out the factors the court will have regard to when deciding costs – including the parties’ conduct in any dispute.  One thing is for certain: ignoring an offer to mediate is unreasonable conduct which will be punished in costs – PGF II SA v OMFS Co 1Ltd [2014] WLR 1386.Dismissing an appeal against a costs sanction imposed against a party which had ignored mediation Lord Justice Briggs said:“the time has now come for this court firmly to endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable…”.

The end of Halsey?

The tide of support for mediation then swelled in Laporte v The Commissioner for the Police of the Metropole [2015] EWHC 371whenTurner J punished the successful Defendant by reducing its costs by one third because it had unreasonably refused to mediate.  It was not enough that it felt strongly it would succeed and was unwilling not to make any financial offer to the Claimant.

Laporte represents a move forward from Halsey.  In 2004 when Halsey was decided the belief was that mediation is not a panacea.  That remains true – there will be cases where mediation is unlikely to produce a solution.  But they seem to be getting fewer and the litigation world is very different in 2015 from that in 2004 when Court fees were reasonable, costs budgeting was something for accountants not courts and Mitchell / Denton principles were unheard of.  Now it’s different.  Court expect parties to try to settle.  Moreover, the prospect of a successful party not getting any costs appears to be real.  In Laporte Tuner J concluded:  “I do not consider that the scale of the defendant’s shortcomings in the context of his failure to engage with ADR was such as to justify disentitling him from claiming any of his costs. He did ultimately win on every substantive issue and, although ADR made settlement a sufficiently likely possibility, it would have been by no means certain. Exercising the broad discretion afforded to me by the rules, I award the defendant two thirds of his costs against the claimants to be assessed on the standard basis.”

It is clear that Turner J did consider a greater penalty.  So did Arden LJ in SG v Hewitt [2013] 1 All ER 1118, where she said that the proper response to a refusal to engage in ADR may in any particular case may range between the disallowing of the whole (emphasis added), or only a modest part of, the otherwise successful party’s costs.

Whilst we are not yet at a position where mediation is compulsory – but where one party offers it, the other is now clearly very much at risk if it rejects or ignores it.  So much so, it will be easier and safer to accept.

In Hurst v Leeming[2003] 1 Lloyd’s Rep 379–381 Lightman J said: “The fact that a party believes that he has a watertight case again is no justification for refusing mediation. That is the frame of mind of so many litigants.”

Prophetic words indeed.  The frame of mind of litigants and their lawyers now is probably that it is safer to engage in ADR/mediation than not.  It already costs a fortune to get to trial.  What could be worse than investing in getting there, winning on “every substantive issue” and then losing a huge percentage of costs because you (correctly) considered your case so strong that you rejected mediation?

So is mediation now compulsory in civil and commercial cases? Not technically.  The rules do not make it so – but it’s getting there and it’s a brave party, or lawyer who now doesn’t propose or accept an offer to mediate.  Jackson LJ speaking at a lecture in London in May 2015 expressed the view that that within 10 years costs management will be accepted as an ‘entirely normal discipline’.  He could equally have been speaking about mediation taking place in all commercial disputes.

Mark Manley
Mark has nearly 20 years’ experience as a commercial mediator and has handled more than 300 commercial mediations. He is a registered and accredited mediator with CEDR Solve, ADR Group, ADR Chambers, the Association of Northern Mediators and Early Resolutions, and is a panel Mediator for Sports Resolutions.

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