Mediation: The question is not if, but when

1 September 2015

Refusing to engage with ADR has significant risks, irrespective of merits or another party's conduct, warn Richard Foss and Katherine Pymont.

The ascent of alternative dispute resolution (ADR), especially mediation, continues with the court reinforcing its pro-ADR stance with costs penalties for refusing to mediate. This, coupled with the rise in court fees and revised pre-action protocols, obligates parties to seriously consider and engage with ADR early on in any dispute.

The advantages of using alternative methods to resolve differences between parties are well known, with management of reputational risk, confidentiality, flexibility of process, speed of resolution, and costs control all important factors. Settling a case rather than fighting it is more often than not in the client's best interests. A key consideration in achieving the best possible settlement will often be the timing of an offer or a refusal to mediate (at that time), which means balancing strategic considerations, including the risks associated with a refusal.

The principles set out in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 are the starting point for considering the impact of not mediating. The key principles are the nature of the dispute; the merits of the case; whether alternative methods of settlement have been considered or attempted; cost; delay to the trial timetable; and whether mediation has a reasonable prospect of success.

Minimal wriggle room

In the decade since Halsey, the courts have significantly narrowed the scope of the principles, leaving minimal wriggle room for seeking to justify a refusal to mediate, even when a defendant is faced with an unmeritorious claim (or vice versa).

This lack of room to manoeuvre was clearly demonstrated in Garritt-Critchley and others v Ronnan and another [2014] EWHC 1774 (Ch), in which Judge Waksman QC ordered indemnity costs against the defendants for unreasonably refusing to mediate despite setting 'to engage with the process from the word go and the reasons that have been given simply do not stack up'.

More recently, in Laporte and another v The Commissioner of Police of the Metropolis [2015] EWHC 371 (QB), Mr Justice Turner made a one-third deduction from the successful defendant’s cost award following the defendant’s

‘failure fully and adequately to engage in the ADR process’, having reached its own decision that ADR would not succeed. This was despite the fact that Turner J acknowledged the defendant ‘did ultimately win on every substantive issue and, although ADR made settlement a sufficiently likely possibility, it would have been by no means certain’.

In circumstances where a judge has held that a party was wholly successful, penalising that party for refusing to mediate appears unjust. However, short of enforcing mandatory mediation (as is the case in other jurisdictions, including in some US courts), cost sanctions provide the courts with the only means to ensure parties give ADR due consideration. Whether it is unreasonable to refuse mediation will depend on the facts and circumstances of each case, the burden of proving unreasonableness being on the other side. There will still be cases where refusing to mediate is reasonable (provided, of course, reasons are given).

As to strategic considerations, in Laporte Turner J warned against taking it as a given that mediation will fail, asserting that ‘tactical positioning should not be too easily labelled as intransigence’ and noting: ‘It is always likely that those representing any given party to a dispute will seek to lower the expectation of the other side in preparation for ADR.’

The message is clear: while timing is key, refusing to mediate has significant risks, irrespective of merits or another party’s conduct.

This article first appeared in Solicitors Journal 10 August

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