Better late than never: delaying mediation
Refusing an invitation to mediate can be a risky approach
In Halsey v Milton Keynes General, it was held that a successful party can be deprived of all or part of its costs if it unreasonably refused to agree to alternative dispute resolution (ADR).
An established line of authority now makes it clear that the costs consequences of unreasonably declining to mediate can be severe. However, mediating at the wrong time, when there is not enough information available, can be a pointless and costly exercise. In many cases the parties will be able to agree the best time to mediate but if one party expresses a desire to mediate at a time when the other considers it to be premature a difficult balancing exercise may ensue.
Judges have recognised this conundrum. In Nigel Witham Ltd v Smith [2008] EWHC 12 it was noted that premature mediation wasted time and it could lead to a hardening of positions on both sides. On the other hand, if mediation was delayed and significant work undertaken costs might become the principal obstacle to settlement. The trick was said to be to “identify the happy medium: the point when the detail of the claim and the response were known to both sides, but before the costs that had been incurred in reaching that stage were so great that a settlement was no longer possible.” This is often easier said than done.
Getting the timing of mediation right is a complex question and will differ in each case. While a party may delay an agreement to mediate what sanctions might then be imposed by the court? In such a case it will be up to the unsuccessful party, who is alleging that the delay was unreasonable, to rebut the presumption that costs follow the event (the “loser pays” principal).
In Witham v Smith [2008] EWHC 12 (TCC) Mr Smith was awarded £1,683 and his costs. Witham argued that the amount of costs should be reduced as Mr Smith had refused to mediate until late in the day. Mr Smith had indicated that he would consider mediation once the claim had been set out. It was held that it could not be shown that an earlier mediation would have been successful and so no reduction was made to Witham’s costs liability.
In Car Giant v Mayor and Burgesses of the London Borough of Hammersmith [2017] EWHC 464 (TCC) it was noted that a court should be slow to conclude that a delay to mediate was unreasonable or, if slow, to order indemnity costs. Here the delay was due to experts legitimately holding different views – one party’s position was that mediation was more likely to be successful once the experts’ views had been fully set out.
In Beechwood House Publishing T/A Binleys v Guardian Products [2012] All ER (D) 43 (Mar) a claimant refused to mediate prior to issuing proceedings. This was held to be reasonable. At that time the costs were very low. Mediation was cost effective but there would be a cost attached to it. Further, a key issue was disclosure concerning information in a database which the defendant had refused. This disclosure was the only real issue between the parties and the claimant’s position was that efforts were best focused on that issue.
How then might a party react when invited to a mediation which it does not yet wish to attend? Some practical tips are set out below.
- Respond – Staying silent and simply ignoring the invitation is very unlikely to be a wise move. PGF II SA v OMFS [2013] EWCA Civ 1288 confirmed that generally silence in the face of an offer to mediate will be, by itself, unreasonable. Paragraph 11 of the Practice Direction Pre-Action Conduct and Protocols now incorporates the essence of this dicta into the Civil Procedure Rules.
- Be prompt – Dragging the process along and frustrating the process through poor engagement in an attempt to delay matters will likely do more harm than good. Frustrating the process by delaying for no good reason may merit a costs sanction. In Thakkar v Patel [2017] EWCA Civ 117 the Court of Appeal upheld an order that the defendants were to pay 75% of the claimants’ costs in a case where both parties achieved a measure of success at trial but the original judge considered that the case could have settled through mediation much earlier. Here the claimants had been proactive in making arrangements for a mediation but by contrast the defendants were slow to respond to letters and raised all sorts of difficulties. Ultimately it was the defendants’ conduct which had caused the claimants to lose confidence that a mediation could be arranged.
- Engage – Ensure you actively engage in ADR discussions – Explain, so far as appropriate and keeping in mind the Halsey principles, to the other party your reasons for not proceeding with mediation at this stage. Be pragmatic.
- Review the decision – While a case may not be suitable for ADR at a particular time this may change once matters have progressed. Ensure that any decision not to mediate is kept under review. Express that you will be doing this to the other party. In Murray v Bernard [2015] EWHC 2395 (Ch) the claimants (who were ultimately successful) initially refused to mediate but ‘had a change of heart’ and proposed mediation. It was held that there was not a failure to mediate. The claimants were not to be ‘fixed with a once stated but changed intention in relation to mediation. The relevant question is not a game in which the claimants will have one and one opportunity only to mediate for the purposes of the cost rule’.
- Make appropriate settlement offers – Consider making other settlement proposals such as a Part 36 offer which may settle the matter or provide additional costs protection.
- Consider other forms of ADR – Consider if any other forms of ADR will have any benefit at this time (for instance, a without prejudice meeting may have some of the benefits of a mediation but without the additional cost of the mediator).
- Be pro-active – Do not wait for judicial encouragement to mediate – if given judicial encouragement take it very seriously.
Posted:
