Property mediation in the post-Jackson and Mitchell world

It has been clear for a while that both politicians and many members of the judiciary have left behind their initial scepticism and now become fervent supporters of formal alternative dispute resolution (ADR) processes, mediation in particular.

There are doubtless many reasons for this radiant enthusiasm, not least the fact that the more cases that can be resolved without requiring litigation to be fought to the bitter end, the better the chances of our overstretched court system keeping its head above the floodwaters of issued claims.

However, the less cynical might also note that mediation really does seem to work; settlements are apparently achieved in at least 80 per cent of cases where mediation is used. Furthermore, the prospects of parties being able to interact reasonably with one another in future, which can be particularly important in the context of a property dispute, are significantly enhanced by finding a practical solution to which each can commit, rather than having a legal outcome imposed by a judge.

Clear statement

Property cases are rarely simply about who owes what to whom; where property is in some way the subject of the litigation, then a clear statement about its status or use in future may well be the key.

Nevertheless, those who regularly mediate in disputes concerning property have been conscious for some time that, while the underlying issues about ownership, rights, obligations and the
like are often capable of being worked through and a sensible way forward defined in terms
which both sides can accept, it is the costs that
frequently prove to be the greatest hurdle to
a negotiated settlement.

The amount of money expended by both sides before reaching mediation is enough of a problem where parties are funding the litigation personally, especially if their legal team is working under a conditional fee arrangement (CFA); where insurers are involved, the sense on at least one side of the argument that they are immune to the financial consequences of litigation risk makes the mediator’s task yet more difficult.

As for so much of civil litigation, major changes to the landscape in which property disputes are mediated have been affected by implementation of the Jackson reforms. One aspect which deserves particular mention is the ban on recovering success fees under CFAs (s 58A(6) Courts and Legal Services Act 1990 as amended by s 44 Legal Aid, Sentencing and Punishment of Offenders Act 2012) and after-the-event (ATE) insurance premiums (s 58C Courts and Legal Services Act 1990 inserted by s 46 Legal Aid, Sentencing and Punishment of Offenders Act 2012).

Now that cases issued since the law changed
on 1 April 2013 are filtering through the system
to a point where the parties have to think seriously about attempting mediation, we are starting to
see a different approach to risk assessment,
even among those who might previously have
felt complacent about the relative security of
their position.

Jackson has given us back the concept of an inevitable costs shortfall with which to promote realistic negotiation between litigants where at least one has the benefit of insurance and/or a CFA.

Costs budgeting

Another Jackson reform to impact on property mediations significantly is the requirement for costs budgeting. Mediators have always sought to persuade parties to examine and usually to disclose their current and projected costs expenditure to the other side in advance of a mediation or, at least, in the course of the day.

For disputes that have passed the stage of an initial CMC since April 2013 there will now generally have been at least an exchange of precedent H budgets providing detail about actual and anticipated expenditure. There may also have been costs management under CPR part 3 and practice directions 3E and 3F.

In many ways, these developments are helpful
for mediation purposes. They provide a level of clarity and openness about the costs position on each side in place of the caginess and distrust which otherwise frequently surrounds the subject. However, they may also create difficulties, especially where one party has been the subject of
a costs capping order or there has been active costs management and the parties (or one of them) are aggrieved by the limits placed on their ability to recover from one another as a result.

Similarly, it is not unusual for parties negotiating over costs at a mediation suddenly to realise with a sinking heart that their precedent H costs budget is out of date and substantially underestimated what they have since spent or now anticipate requiring to reach trial.

Blithe observations that they will simply make
an application to revise the budget if the case doesn’t settle unsurprisingly tend to cut little ice with opponents.

The recent amendments to part 3 taking effect from 22 April 2014 will reduce the extent to which costs management applies to property disputes, principally by clarifying that those provisions do not apply automatically to cases commenced under CPR part 8.

However, the court retains a discretion to order that CPR 3.12 and practice direction 3E will apply to any proceedings and, with the current judicial zeal for keeping costs under control and proportionate, it is to be expected discretion will be exercised in a significant proportion of part 8 property claims.

Slightest slip

There has been a further development which will, perhaps, provide the greatest single impetus towards mediation and settlement. If any of us had somehow failed to appreciate the change of approach to litigation heralded by the Jackson amendments to CPR 3.9, our eyes were forcefully opened by Mitchell and many of the authorities flowing from it. SJ

Sara Benbow is a founder member of the Property Mediators and a barrister at Hardwicke