The perils of refusing to mediate

With the summer holidays over, and the autumn weather setting in, this time of year often marks a busy period for litigation lawyers as we regroup and revisit case strategies with a view to building momentum for the coming year. Part of this exercise includes considering the suitability of mediation.

As advisers, we are well-aware of the obligations to warn clients of the perils of refusing to mediate, and we will all no doubt have sent, and received, threats to ‘bring this letter to the attention of the Court’ in the event that a request to mediate is refused. But what does this mean in practice? Is it really all that bad if parties refuse to mediate? Can parties really be bullied into spending a day of their life cooped up in a tiny room, often with only rations of food and drink, just metres away from their adversaries?

In short, yes. Of course, the world is not going to end if parties refuse to mediate, but to do so could have real and serious implications for parties and, in turn, their lawyers.

Over recent years, the courts have demonstrated that the sanctions for refusing to mediate are not just an idle threat and I have seen first-hand the courts play a far more active role in encouraging parties to mediate. For example, it is not uncommon for a directions order to set out a process and timetable for parties to select a mediator and to require them to revert back to the court if no agreement can be reached. It is also becoming increasingly common for courts to require parties to serve a witness statement setting out their grounds for refusing mediation.

Strictly speaking, the courts cannot order a party to mediate against their will but, in practical terms, it has become difficult for parties to avoid mediation. The courts have penalised unwilling parties and it would be foolhardy to brush those consequences aside and take the view that ‘it will never happen to me’.

Unreasonable refusal

Earlier this year, in Garritt-Critchley and others v Ronnan and another [2014] EWHC 1774 (Ch), the court affirmed this approach by awarding indemnity costs against a defendant who refused requests to mediate and then subsequently accepted a
part 36 offer four days into a trial. In the course of the proceedings, the defendant had lodged a witness statement at court explaining why mediation was inappropriate. The court deemed the excuses were not good enough.

The defendant contended the case concerned a question of disputed fact. However, the court took the view the dispute was “classically a case where both parties had to engage in a risk analysis as to whether their side of the coin would be accepted or not”. It went on to stress “the fact that a party believes that he
has a watertight case…is no justification for refusing mediation” because “that is the mind frame of so many litigants”.

The message is clear – parties who refuse to mediate, or simply pay lip service to the rules, put themselves at risk.

However, as PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 demonstrates, even parties who have a good reason not to mediate will not necessarily escape the court’s reach. In this case, the Court of Appeal held that a failure to respond to an invitation to mediate was unreasonable, regardless of whether there was a good reason for doing so. The defendant was suitably sanctioned by being deprived of its costs for the relevant period under CPR 36.

Judicial intervention?

These cases demonstrate that the practical consequences of failing to properly consider mediation are real and serious. As advisers,
it is essential we consider mediation for every case we deal with, and revisit the possibility throughout the lifetime of a case. While the courts recognise not all cases are suitable for mediation, those cases are the exception rather than the rule.

If a party is thinking about refusing to mediate then it is important to isolate the reason for that refusal, and to then consider whether anything might be done to overcome that difficulty. In some cases it might be appropriate to defer mediation until a later stage, such as after disclosure or, in cases where costs and proportionality are a concern, a half-day mediation might be appropriate.

Each case will need to be considered on the basis of its own circumstances, but if a refusal to mediate seems appropriate, carefully review the guidance from the relevant case law before making a final determination.

Alternatively, if a mediation does take place, even if it is contrary to the parties’ preferences, take time to select an appropriate mediator, go well-prepared and with an open mind. Settlements are achieved in the most unlikely of scenarios, and even if that does not prove possible, they can be a great opportunity to better understand your opponent’s case and the weaknesses of your own position. SJ

Danielle De Val is a solicitor at Kennedys