MEDIATION -V- LITIGATION

by Talog Davies LL.B, a Senior Solicitor with GHP Legal and Associate of the Chartered Institute of Arbitrators

It seems only now, at a time of austerity, that political attention is being focused on mediation. Unfortunately, that focus appears to be for all the wrong reasons.

Firstly, mediation is being seen largely as an alternative to litigation.   Moreover, when the Justice Minister Djanogly addressed CEDR's (Centre for Effective Dispute Resolution) 20th Anniversary Awards Dinner last November, he denied that the Government's sudden enthusiasm for mediation was driven by the economics of the legal aid budget. However, it is hard not to be persuaded that that is in fact what is motivating political will.

Be that as it may, commercial litigators may be forgiven for a wry smile at this belated attention to mediation, because mediation, or in its wider sense, ADR (Alternative Dispute Resolution), has been very much part of the litigation framework for some time and certainly should not be seen as an "either/or".  Arbitration clauses in construction contracts have been around even longer.   Forcing parties down the mediation route, as an alternative to litigation, has already been heavily criticised by the Master of the Roles, Lord Neuberger, who warned against an attempt to expand mediation beyond its proper limits, as a compliment to justice.   For the present, political will seems to be directed at those areas of litigation where the state often finds that it is funding the litigation, such as divorce and housing.   However, it is worth looking at the role that mediation plays in commercial disputes and highlighting what might happen to those who ignore it. 

Long before the Government's new buzz word, the courts had played their part in emphasising the importance of considering mediation in the litigation process.   The overriding objective at CPR Part 1 provides the court with case management powers to encourage the parties to use an alternative dispute resolution procedure, if it considers it appropriate, and to facilitate the use of such procedure.

CPR Part 26 makes express provision for the court to place proceedings on hold to enable ADR to take place.   This power can be used by the Court of its own motion and does not necessarily require an application by one or both parties.

Whilst commercial lawyers are generally alive to the potential benefits of ADR however, parties can still take some persuading to see ADR as anything other than a sign of weakness or a nebulous means to an unsatisfying end.   At first blush, our adversarial system does not sit particularly easily with a more consensual and collaborative approach.

Nevertheless, the signs are that ADR does not only work, it is positively flourishing, particularly in commercial dispute resolution.  The statistics are that between 2007-2009, the London Court of Arbitration, saw cases handled by it more than doubling.   During the same period, the Centre for Effective Dispute Resolution saw the number of its mediations conducted up by 66%. 

In Darren Egan -v- Motor Services (Bath) Limited [2007] Lord Justice Ward noted that mediation brings an air of reality to negotiations.   It was considered a perfectly proper adjunct to litigation ........................... "the results are astonishingly good.  Try it more often".

If however parties feel that ADR is being foisted on them and are aghast at the notion that they may be forced to compromise and will probably have to pay their own costs as part of the deal, then there is still no absolute requirement to use ADR.   The parties may be encouraged, even extorted, but they cannot be forced.   

However, parties can be penalised in costs, unless they can show good reason to refuse to mediate.  The Court of Appeal laid down some ground rules for what constitutes a reasonable refusal in Halsey -v- Milton Keynes General NHS Trust [2004]   A list of considerations include (1). the nature of the case, i.e. does it reasonably prevent it being suitable for mediation,   (2) the merits of the case, i.e. does a successful party have a reasonable belief that his case is watertight, (3) other options for settlement, i.e. have other attempts been made to settle the dispute by way of offers etc; (4) the cost of mediation, i.e. will the cost be too high; (5) delay, i.e. will the trial be delayed by mediation or (6) the prospects of success, i.e. are there no reasonable prospects of a mediation being successful.  

Nevertheless, all commentators agree that if a party is going to rely upon a reasonable refusal, then it is a high risk strategy.   Moreover, simply paying lip service to mediation and going through the motions won't do either.

In James Carlton, Early Of Malmesbury and Others -v- Strutt and Parker (a Partnership) [2008] the successful claimant was penalised in costs, notwithstanding, for adopting a plainly unrealistic and unreasonable stance during mediation.

For commercial litigators, ADR has been for some considerable time, very much part of their tool kit.   In that sense, the title to this piece is misleading, because despite mediation being a popular political buzz word, it is not and never has been a question of either or, or one not the other.   ADR in all its various forms is a compliment to the litigation process and in my experience works best when it is utilised early in the proceedings, before substantive pleadings polarise positions and costs become an issue in themselves.  

It is true that ADR can introduce an extra layer of cost and generate yet more documentation, but compare the former to the costs of a fully contested trial and the latter with the substantive pleadings and other documents that are inevitably required within a more strict set of directions, and ADR often comes out on top.

Timing of course is everything - but do it, and do it as soon as possible.   You cannot afford not to and, in so doing, you can show that you are well ahead of the latest political band wagon.

MR R. TALOG DAVIES LL.B, A.C.I.Arb

Senior Solicitor, GHP Legal, Wrexham

T:  01978 291456   E: talog.davies@ghplegal.co.uk  www.ghplegal.co.uk

January 2011

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