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Articles, News | Wed 23rd Jun, 2021
For those with a taste for risk, drama and the elongated nature of the court process, mediation is not for you. If you have an inexhaustible pot of funds to expend on legal costs, including the other side’s – potentially even if you win at trial – mediation may seem like an unwanted interruption in the unrelenting course of litigation as it grinds towards trial.
Forgiving these somewhat glib propositions, no article on the benefits of mediation could credibly maintain that mediation is appropriate, let alone essential, in every case. Choosing the timing of an invitation to mediate may significantly influence an opponent’s receptiveness to that invitation. Mediation may be effectively deployed at any stage: after a failure of early settlement discussions; after the completion of the pre-action protocol process; after issuing the claim itself. Some document-heavy cases, where issues may be concealed in the papers, will require some form of disclosure before a productive mediation can occur. In other cases, participants may need a greater degree of expert engagement before they can meaningfully enter a mediation. One size clearly does not fit all.
This article will consider all the very good reasons which you might have for entertaining mediation after all!
What is mediation?
Mediations are conducted on a contractual basis, with or without the assistance of mediation advocates, facilitated by an independent mediator whose costs are usually jointly borne. The mediation is confidential and without prejudice. Attending participants have full authority to settle, and a formal settlement agreement often in the form of a Tomlin Order will conclude a successful mediation.
Participants have multiple opportunities to address the mediation in plenary session – with all parties present; to hold lawyer to lawyer discussions; or to allow individuals to address each other privately always under the watchful supervision and marshalling of the mediator. The mediator will also participate in any number of private sessions with each party, the aim of which is to understand the party’s underlying aims and interests, as distinct from their pleaded case. A good mediator will not hold back from asking challenging questions – just as a judge would at trial – not for the purpose of opining on the issues, but to encourage broader and more objective thought processes in the participant and to appreciate possible hazards on the litigation horizon.
The argument for mediating
Mediation is the logical development of effective and, in particular, early case management. The court process is entrammelled to a great extent by a rigid set of rules and procedures. Even judicially imposed or quasi-judicial methods of dispute resolution – such as arbitration and Early Neutral Evaluation – can have a binary quality which promotes a winner / loser outcome.
Mediation can bring a number of tangible benefits to all participants that engage, most obviously the avoidance of the likely substantial cost and delay in seeing a matter through to conclusion at trial. Additionally, mediation possesses an essential creativity and flexibility which allows participants to achieve a mutually agreeable resolution, occasionally preserving a commercial relationship, and engaging in a broader spectrum of potential remedies.
In fact, experience suggests the process of mediation may be just as useful where participants have an unrealistic view of their prospects of success or an inadequate understanding of litigation risk. Given that a mediation settlement is out with the framework of a conventional court judgment, the process is not about exposing prospects of success but about reaching an agreement which can meet the real needs of the participants set against the inescapable cost of continuing litigation.
All litigators are familiar with the client who cannot recognise the limitations of their own case when taking advice from their representatives. Participation in mediation provides one’s client with the opportunity to stress-test their case, to take a reality check and, ideally, to reach an entirely new solution.
Mediation or other forms of ADR?
Unlike other forms of ADR such as arbitration, mediation – at least when at its most effective – is non-evaluative.
Under CPR Rule 3.1 (2)(m) of the court’s general case management powers, the court may take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation (ENE) with the aim of helping the parties settle the case.
ENE, especially when conducted judicially (JENE), necessarily entails a close examination and analysis of the legal and evidential strengths or weaknesses of each party’s case. Such a close level of scrutiny may render settlement – at least on more balanced terms – less likely, not more likely, as a party in a strong position will feel justified in staying focused on a trial-based outcome. Thus, ENE can tip the balance very strongly in one party’s favour. One of the appeals of mediation is that participants remain equals: no evaluative assessment means neither participant has their guns spiked in litigation.
Norris J considered the benefits of ENE in Robert Seals (1) Andrew Seals (2) v Florence Williams EWHC 1829 Ch, commenting: “The advantage of such a process over mediation itself is that a judge will evaluate the respective parties’ cases in a direct way and may well provide an authoritative (albeit provisional) view of the legal issues at the heart of the case and an experienced evaluation of the strength of the evidence available to deploy in addressing those legal issues. The process is particularly useful where the parties have very differing views of the prospect of success and perhaps an inadequate understanding of the risks of litigation itself.”
In Telecom Centre (UK) Limited v Thomas Sanderson Limited  EWHC 368, Master McCloud provided guidance on how parties and judges could approach the ENE process.
Want of judicial compulsion
It remains the case that courts cannot compel parties to engage in mediation. In Halsey v Milton Keynes General NHS Trust 1 WLR 3022, the Court of Appeal stated that such compulsion would amount to an unacceptable obstruction of the parties right of access to the Court, in breach of Article 6 of the European Convention on Human Rights.
However, the court’s duty actively to manage cases includes CPR 1.4 (2)(e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure; and (f) helping the parties to settle the whole or part of the case.
The Court has been willing to impose JENE as seen in the case of Lomax v Lomax  EWCA Civ 1467, CA.
Might a trend be developing in favour of court-imposed mediation? Sir Geoffrey Vos asked this very question in McParland v Fairstone Financial Management  EWHC 298 (Ch) when, observing that the Court of Appeal held in Lomax that there was no need for the parties to consent to an order for a judge-led process, he concluded that Lomax inevitably raised the question of whether the court might also require parties to engage in mediation despite the decision in Halsey.
Costs consequences when mediation is rejected
Increasingly courts will use sanctions under the general discretion as to costs in CPR 44.2 to reflect an unreasonable refusal to agree to ADR. Unsuccessful litigants who refuse mediation can face indemnity costs. Even those who win at trial risk an adverse costs order if the court considers their behaviour to have been unreasonable. This was the notable outcome of PGF II SA v OMFS Company 1 Limited EWCA Civ 1288, the Court of Appeal holding that – as a general rule – silence in the face of an invitation to participate in ADR was in itself unreasonable, as was an outright refusal or a refusal to engage in the type of ADR requested, regardless of whether there may have been a good reason to refuse to engage. For its failure to respond to two invitations to mediate, a costs penalty was imposed on the winning party.
A finding of unreasonable conduct constituted by a refusal to accept an invitation to participate in ADR or a refusal even to engage in discussion about ADR, produces no automatic results in terms of a costs penalty, but is simply an aspect of the parties’ conduct which needs to be addressed in a wider balancing exercise. The Court stated that the proper response in any particular case may range between the disallowing of the whole, or only a modest part of, the otherwise successful party’s costs. In principle, a court might go further and order the otherwise successful party to pay all or part of the unsuccessful party’s costs, but that Draconian sanction should be reserved for only the most serious and flagrant failures to engage with ADR.
In DSN v Blackpool Football Club  EWHC 670 (QB) a defendant which had refused to engage in mediation because it was confident in the strength of its defence was required to pay some of the costs on the indemnity basis when the claimant beat its Part 36 offer. No defence, however, strong, justified on its own a failure to engage in alternative dispute resolution.
There are always exceptions, and Simon Kelly v Rowland Kelly (2020) is an example of such exceptional circumstances. The court refused to apply a 50% reduction to the successful defendant’s costs sought by the claimant on account of the defendant’s refusal on a third occasion to engage in mediation. The defendant produced a list of reasons why he declined the invitation to a third mediation, not least the Claimant’s failure to honour the terms of the first two mediation agreements. The court was only able to make this assessment in the wake of parties waiving privilege in relation to previous mediation offers. Absent this waiver, the contents of a mediation will remain confidential and outside the knowledge of the court.
More recently In BXB v (1) Watch Tower and Bible Tract Society of Pennsylvania, (2) Trustees of the Barry Congregation of Jehovah’s Witnesses (No.2) EWHC 656 (QB), Chamberlain J ordered that the Defendants should pay the Claimant’s costs on the indemnity basis, following the Defendants’ refusal to attend a joint settlement meeting. He did so notwithstanding that the Defendants had reasonable grounds for defending the claim, and that the damages sought by the Claimant were considerably in excess of those eventually recovered. The Judge reiterated the PGF II SA principle that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless of whether a refusal might have been justified by the identification of reasonable grounds. He cited the judgment of Briggs LJ: “a failure to provide reasons for a refusal is destructive of the real objective of the encouragement to parties to consider and discuss ADR, in short to engage with the ADR process”.
There is therefore a clear incentive for a party to invite its opponents to mediation. If the recipient of the invitation either refuses unreasonably, or simply ignores the request, and can provide no justification to the court, a costs sanction is likely even in the event of success. Conversely, advisors whose client has been invited to mediate should always respond, advising their client of the need to have compelling reasons not to entertain mediation if that is to be the response. In fact, whilst mediation can be a painstaking process and is not cost-free, even failed mediations present an opportunity to test an opponent’s mettle and resolve, to flush out some of the arguments they may deploy at trial, and to lay the groundwork for possible settlement post-mediation. Ultimately, even when settlement is not reached mediation is rarely unfruitful.
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