Civil conduct | Is mediation worth the money?

In Lord Justice Jackson’s final report on civil litigation costs, he firmly stated that mediation in the English courts should not be compulsory. Mediation can be an extremely useful and efficient method of resolving disputes when used at the right time and for the right dispute.

The statistics of leading mediation organisations traditionally report its strong performance: CEDR’s ‘Fifth Mediation Audit’, published on 15 May 2012, reported that, of the mediators they contacted, 70 per cent of their cases settled on the day with another 20 per cent settling shortly thereafter. The pros of mediation include it being less destructive to ongoing business relationships than litigation and the parties feeling more in control of the outcome than waiting for judgment to be handed down following trial. However, the more parties feel forced either by the courts or by their own lawyers into choosing mediation, the larger may be the disparity between what the principals need and the solution mediation provides.

Parties need to think carefully before embarking on mediation and consider whether it is the appropriate medium for settlement. It may be that another form of alternative dispute resolution would be more appropriate or a more informal without prejudice discussion between the parties’ lawyers would be sufficient to resolve the dispute without incurring the costs of a mediation. There is a concern that too many disputes are being directed to mediation when they could properly be resolved by the parties’ lawyers without the expense of a formal mediation.

However, if mediation is perceived to be the most relevant method for resolving a dispute, then it is important to ensure that it is used cost-effectively and proportionately to the amounts involved in the dispute and the likelihood of achieving a satisfactory resolution.

Unreasonable refusal

The decision whether to mediate may be instigated by receipt of an offer to mediate from another party. In these circumstances, while it is important to consider whether the dispute is suitable for mediation, it is also necessary to be mindful of the courts’ stance on parties who refuse to mediate and the potential for parties who unreasonably refuse to mediate being penalised on costs.

There have been many decisions on this issue since the decision of the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, in which the court confirmed that the NHS trust had not unreasonably rejected the claimant’s invitations to mediate; the NHS trust had a good case which it went on to win and had been reasonable in taking the view that the cost of mediation would have been disproportionately high in comparison to the value of the claim.

Whether a party will be deemed to have unreasonably refused to mediate will depend on the particular facts of the case. Recent examples where the courts have found a party to have acted unreasonably include: where the court was of the view that there was a reasonable prospect that the mediation would be successful (PGF II SA v OMFS Co [2012] EWHC 83 (TCC)) and where the type of case (a small building dispute between a householder and small builder) was well recognised as being particularly suitable for mediation (Rolf v De Guerin [2011] EWCA Civ 78).

Justified decision

The latest decision that has supported a party’s refusal to mediate is Swain Mason v Mills & Reeve [2012] EWCA Civ 498, in which the Court of Appeal was troubled by the approach of the first instance judge in penalising Mills & Reeve on costs on the basis of their refusal to mediate. On appeal, the judge said that it was difficult to see in the circumstances how a mediation could have had a reasonable prospect of success since the parties were “a hundred miles apart”.

Also, Mills & Reeve reasonably believed that they had a watertight case (which on the core issues was vindicated) and this was a relevant factor in justifying their decision to refuse to mediate.

The Court of Appeal has now on several occasions emphasised that although there is a push by the first instance courts towards mediation, there are legitimate circumstances when mediation is not appropriate. Nevertheless, if a party is of the view that mediation is not the most appropriate forum for the resolution of its dispute and wishes to refuse an offer of mediation, it needs to consider whether, later down the line, this decision will be considered unreasonable.