Mediating disputes: To jaw-jaw is always better than to war-war28 Jun 2017 // Insights
John Melville-Smith, solicitor in the Seddons Dispute Resolution team, discusses how warring parties may resolve their disputes informally.
Granted, Winston Churchill wasn’t known for his pacifist tendencies and neither was he referring to civil litigation. However, since the case of Halsey v Milton Keynes General NHS Trust in 2004, pressure on warring parties to resolve their disputes informally has been growing, supplemented by an ever-increasing willingness on the part of judges to impose unpleasant costs sanctions, even on parties who are ultimately wholly successful, simply for failing to attempt settlement. The Halsey case noted the basic principle that a loser has to bear the winner’s costs of the litigation and asserted that departure from that, on the grounds of a refusal to mediate, could only be justified if the winner had acted unreasonably in refusing to agree to it. There was no presumption in favour of mediation, although the court advised refusing parties to explain their reasoning by reference to certain criteria.
Not so now.
In PGF v OMFS (2014), the claimant sued the defendant for refurbishment costs carried out on a commercial property. Shortly before starting proceedings, the claimant made what litigators refer to as a Part 36 offer to accept £1.125m in settlement. For the benefit of non-lawyers, this is an ‘under the table’ offer made without prejudice to a party’s case and not to be shown to the judge before judgment. Subsequently, it made a further Part 36 offer and invited the defendant to take part in mediation, providing a detailed mediation proposal. On the same day, the defendant made its own Part 36 offer, to pay £700,000. None of the offers were accepted and the claimant's invitation to mediation, which was subsequently repeated, received no response of any kind from the defendant.
Just before the trial, the claimant accepted the defendant's £700,000 offer. Normally, this would have obliged the claimant to pay the defendant's costs of late acceptance (from 21 days after the offer was made to trial). However, the court decided that the defendant's silence in the face of an offer to mediate had amounted to an unreasonable refusal and deprived it of the costs to which it would otherwise have been entitled. Silence in the face of an invitation to mediate was, as a general rule, unreasonable, regardless of whether an outright refusal, generally or at the time requested, might have been objectively justifiable. The onus lies squarely on the recipient of an invitation to mediate to explain the refusal or face the consequences in costs.
A more recent case is Laporte v The Commissioner for the Police of the Metropolis (2015). The claimants’ claim against the police for damages for assault, false imprisonment and malicious prosecution, failed entirely at trial. All that remained was the issue of costs. Ordinarily, the claimants would be liable. They had, more or less continuously, sought to persuade the defendant to engage in mediation. However, despite initially indicating a willingness, the defendant eventually rejected the suggestion on the grounds that it was not an appropriate use of resources, which would be better spent on preparing for trial.
Applying the Halsey criteria, the judge said that the case was one suitable for mediation, that despite the defendant’s victory at trial the case had not been one that was so strong as to justify a refusal to mediate, and that a mediation would have had reasonable prospects of success. He awarded the defendant two-thirds of what would otherwise have been its full costs entitlement against the claimants.
The bottom line
Courts like mediation and, except in a few categories of cases where it may be impractical, they expect parties to suggest it, agree to it and pursue it with, so far as possible, an open mind. Seddons has a policy of raising it with clients at the outset of a matter, indeed in the retainer letter, and thereafter at appropriate intervals.
There are good reasons for this. A case settled by way of mediation, especially earlier rather than later in the litigation timetable, can save a fortune in legal costs, particularly for whoever turns out to be the ultimate loser at trial. Uncertainty as to who that will be often impels parties who may agree on nothing else to try to mediate the dispute so as to avoid trial.
The overall success rate of mediation is high. CEDR asserts an aggregate settlement rate of around 86%, with the proportion of cases that achieve settlement on the day of the mediation at around 67% (meaning that others settle shortly afterwards).
Finally, mediation allows the parties to achieve settlement on almost any terms, including ones the court could not impose. I am reminded of a case I heard about years ago. It involved a claim, many years ago, by the mother of a young man against the local bus company for damages arising out of his death in an accident. The case was not settling. At a meeting arranged to establish why (it wasn't called mediation in those days), it emerged that what the mother really wanted was not to have to see the very same bus that had killed her son passing her house several times each day. The bus company immediately offered to remove it from the route and replace it with a new bus. The case settled immediately.
The court could not have ordered that.