Mediate Before You Litigate

20 November 2014

There are many advantages in considering mediation as opposed to litigation. As an alternative method of resolving disputes, mediation is not new but it would be fair to say it it has been slow to catch on in Northern Ireland notwithstanding the efforts of the Law Society and to some extent the Judiciary. Why there has been a reluctance to embrace mediation, is hard to fathom given the obvious advantages. Some recent events may encourage more widespread engagement.

The publication in September 2014 of Access to Justice (2) suggested there was an opportunity to utilise mediation in family law matters. What is true for family law should also be true for commercial, construction and labour law disputes.

It is worth recapping on the advantages of mediation;

(i)            Less formality and more flexibility.  In a mediation, the parties are in control.  They reach agreement rather than depending on a Judge to make a decision;

(ii)          Voluntary.  The parties come to the mediation on a consensual basis minus the labels of plaintiff or defendant which immediately removes the barrier between them;

(iii)         Faster and less expensive.  Given the recent High Court Practice Direction on the delays which can be expected in the Family Court and the inevitable knock on effect in other divisions, the speed of mediation becomes more relevant;

(iv)         Preservation of confidentiality.  The mediation process is confidential to the parties. The nature of the dispute therefore does not become public;

(v)          Preservation of relations.  Since the aim is to reach an agreed outcome and avoid litigation, hostility between the parties can be avoided allowing sustainable and workable relationships e.g. in family relationships and in the preservation of commercial relations.

Further encouragement to enter into mediation can be seen in some recent English case law.  There is no reason to doubt that Northern Ireland courts will not embrace those decisions and impose cost penalties where a party has been unreasonable in refusing to enter into the mediation process.

In Halsey -v- Milton Keynes General NHS Trust Lord Justice Dyson indicated that not every case was suitable for ADR.  He stated"....the court's role is to encourage, not to compel. The form of encouragement may be robust". He then set a number of bench marks in considering whether a party who had refused ADR would be said to have acted reasonably.

The plaintiff had claimed bereavement damages. She made an offer to the Trust to mediate but the Trust refused on the basis that they did not accept any liability. The plaintiff's medical negligence claim was dismissed and the question for determination by the Court of Appeal was whether or not the offer of mediation had been sufficient to usurp the normal practice that the loser pays the winners costs. In determining whether the refusing party had acted reasonably the court had to consider

• The nature of the Dispute.
• The merits of the case
• What alternatives to litigation had been tried
• The cost of mediation and whether mediation was going to delay matters if trial date had been fixed
• Was there a reasonable prospect of mediation succeeding

Dyson LJ stated that "the burden is on the unsuccessful party to show why there should be a departure from the general rule. The fundamental principle is that such departure is not justified unless it is shown that the successful party acted unreasonably in refusing to agree ADR". This is an onerous burden but some recent decisions demonstrate how the court is now interpreting Halsey. A decision in the Technology and Construction Court in 2013 in PGF 11 SA considered the effect of a Part 36 offer and the timing of its acceptance where significant costs had been incurred between the offer and acceptance. The Plaintiff had made an offer to mediate which was ignored. The court viewed this as a refusal to mediate which was unreasonable. The silence from the defendant was itself unreasonable regardless, "whether an outright refusal or a refusal to engage in the type of ADR requested, or to do so at the time requested might have been justified by the identification of reasonable grounds. The fact that there had been a Part 36 offer is not of itself a ground for refusing to mediate where the Plaintiff had not accepted that offer". The Court recognised that a Part 36 offer did not necessarily represent the final say in closing the gap between the parties. This decision was a Court of Appeal decision.

Two decisions in 2014 in the English High Court reflect further how the court will be prepared to use costs sanction against parties where it is deemed that the refusal to mediate was unreasonable.

Garret Critchley -v- Rowan and Solar Power. The Defendant refused to mediate. In fact their solicitors put in writing that "we are confident that in a matter in which our clients are confident of the position and do not consider there is any realistic prospect that your client will succeed, the rejection is entirely reasonable". Notwithstanding this blunt refusal the claimant solicitors sought on a number of occasions to encourage both mediation and negotiation. The Judge said that the action was a case where both parties needed to engage in a risk analysis as to whether their side of the coin would be accepted or not. He said it was not an all or nothing case on quantum. There was potentially a significant range of awards. It was his view that the defendants had not approached the case in the correct way at all and he looked at the reasons for failing to mediate through the eyes of the Halsey decision and determined

• It was misconceived to consider mediation to be unsuitable because of a difference of opinion on the merits. Thinking that there is a watertight case is not a justification for refusing mediation.
• The gap in valuations from both parties was not insurmountable even though the defendant thought so. It required them to sit down and explore settlement to then see if they were too far apart.
• Compared to the costs of trial, the costs of a mediation were not disproportionately high.

Put simply the belief that one party has such a strong case that a mediation had no prospect of success was an unreasonable position.

In the case of North Group Grumman Mission Systems, the Court said that where a party to a dispute, in which there are reasonable prospects of successful resolution by mediation, rejects mediation on grounds which are not strong enough to justify not mediating, then that conduct will generally be unreasonable.

These decisions should be sufficient food for thought in Northern Ireland.  We have a court system which is under pressure and where the Masters accept there will be delays in obtaining Court hearings.  Adopting mediation may therefore be the way forward.  The party at odds with the proposal to mediate may end up with a costs sanction to explain to its client.

For further advice on Mediation, contact Pat Eastwood at Murphy O'Rawe Solicitors.