MEDIATION AND LITIGATION: A REVIEW OF KEY CASES: IGNORE THEM AT YOUR PERIL
It is sometimes difficult to keep track of the cases that refer to mediation. Given that ADR can play a central role in the litigation process this is an appropriate time to review the key cases, particularly in the light of the Court of Appeal judgment in Thakkar -v- Patel.
“In my judgment, the time has now come for this court firmly to endorse the advice given in para 11.56 of the ADR Handbook , that silence in the face of an invitation to participate in ADR is, as a general rule, of 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.”
A CLEAR WARNING: THAKKAR -v- PATEL
In Thakkar -v- Patel  EWCA Civ 117 Lord Justice Jackson issued a warning:-
“The message which this court sent out in PGF II was that to remain silent in the face of an offer to mediate is, absent exceptional circumstances, unreasonable conduct meriting a costs sanction, even in cases where mediation is unlikely to succeed. The message which the court sends out in this case is that in a case where bilateral negotiations fail but mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction. In the present case, the costs sanction was severe, but not so severe that this court should intervene.”
HALSEY: SETTING OUT THE TEST
Halsey v Milton Keynes General NHS Trust  1 WLR 3002 The central issue in Halsey was how the successful litigant who had been “recalcitrant” on the issue of ADR should fare on the issue of costs. Dyson L.J. held at para 13:
“In deciding whether to deprive a successful party of some or all of his costs on the grounds that he has refused to agree to ADR, it must be borne in mind that such an order is an exception to the general rule that costs should follow the event. In our view, 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 (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR.”
The Court went on to identify some of the factors which fall to be considered when addressing the issue as to whether or not a refusal to agree to ADR is to be regarded as having been unreasonable and held at para 16:
“The question whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case. We accept the submission of the Law Society that factors which may be relevant to the question whether a party has unreasonably refused ADR will include (but are not limited to) the following: (a) the nature of the dispute; (b) the merits of the case; (c) the extent to which other settlement methods have been attempted; (d) whether the costs of the ADR would be disproportionately high; (e) whether any delay in setting up and attending the ADR would have been prejudicial; and (f) whether the ADR had a reasonable prospect of success. We shall consider these in turn. We wish to emphasise that in many cases no single factor will be decisive, and that these factors should not be regarded as an exhaustive check-list.”
- In PGF II SA v OMFS Co 1 Ltd  1 W.L.R. 1386, the Court of Appeal revisited Halsey and, in particular gave guidance as to the proper approach to the issue of costs in cases in which the winning side had failed adequately to articulate its earlier failure to engage in ADR. Briggs L.J. concluded at para 30 that the advice given in the ADR Handbook (2013) was sound:
“The ADR Handbook , first published in 2013, after the period relevant to these proceedings, sets out at length in para 11.56 the steps which a party faced with a request to engage in ADR, but which believes that it has reasonable grounds for refusing to participate at that stage, should consider in order to avoid a costs sanction. The advice includes: (a) not ignoring an offer to engage in ADR; (b) responding promptly in writing, giving clear and full reasons why ADR is not appropriate at the stage, based if possible on the Halsey guidelines; (c) raising with the opposing party any shortage of information or evidence believed to be an obstacle to successful ADR, together with consideration of how that shortage might be overcome; (d) not closing off ADR of any kind, and for all time, in case some other method than that proposed, or ADR at some later date, might prove to be worth pursuing. That advice may fairly be summarised as calling for constructive engagement in ADR rather than flat rejection, or silence.”
And at para 34:
“In my judgment, the time has now come for this court firmly to endorse the advice given in para 11.56 of the ADR Handbook , that silence in the face of an invitation to participate in ADR is, as a general rule, of 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. I put this forward as a general rather than invariable rule because it is possible that there may be rare cases where ADR is so obviously inappropriate that to characterise silence as unreasonable would be pure formalism. There may also be cases where the failure to respond at all was a result of some mistake in the office, leading to a failure to appreciate that the invitation had been made, but in such cases the onus would lie squarely on the recipient of the invitation to make that explanation good.”
- The Court went on to emphasise at para 51 that a failure to engage with ADR did not mechanistically disentitle the successful party to claim all of its costs:
“… a finding of unreasonable conduct constituted by a refusal to accept an invitation to participate in ADR or, which is more serious in my view, a refusal even to engage in discussion about ADR, produces no automatic results in terms of a costs penalty. It is simply an aspect of the parties’ conduct which needs to be addressed in a wider balancing exercise. It is plain both from the Halsey case  1 WLR 3002 , itself and from Arden LJ’s reference to the wide discretion arising from such conduct in SG v Hewitt  1 All ER 1118, that the proper response in any particular case may range between the disallowing of the whole, or only a modest part of, the otherwise successful party’s costs.
52 There appears no recognition in the Halsey case that the court might go further, and order the otherwise successful party to pay all or part of the unsuccessful party’s costs. While in principle the court must have that power, it seems to me that a sanction that draconian should be reserved for only the most serious and flagrant failures to engage with ADR, for example where the court had taken it on itself to encourage the parties to do so, and its encouragement had been ignored. In the present case the court did not address the issue at all. I therefore have no hesitation in rejecting Mr Seitler’s submission that the judge did not go far enough in penalising the defendant’s refusal to engage with ADR.”
CHRISTIAN -v- THE COMMISSIONER OF POLICE FOR THE METROPOLIS
Christian -v- The Commission of Police for the Metropolis  EWHC 371 (QB) This case contains an extensive review of the previous cases (and the ADR handbook). The defendant had been successful in defending the action. The failure to engage in ADR led to a reduction in the costs that the claimants were ordered to pay.
“66. Taking into account all of the factors listed in Halsey and all other relevant matters to which I have referred in this judgment I am satisfied that the defendant’s failure fully and adequately to engage in the ADR process should be reflected in the costs order I make. Regardless of this aspect of the case I would not have been minded to have made an order for indemnity costs in his favour. My adverse findings on the conduct of some of the police officers involved and the reasonable way in which the claim was presented on behalf of the claimants procedurally would militate against that. Further, I am not satisfied that public bodies should normally have a stronger claim to indemnity costs than other litigants.”
67.I do not consider that the scale of the defendant’s shortcomings in the context of his failure to engage with ADR was such as to justify disentitling him from claiming any of his costs. He did ultimately win on every substantive issue and, although ADR made settlement a sufficiently likely possibility, it would have been by no means certain. Exercising the broad discretion afforded to me by the rules, I award the defendant two thirds of his costs against the claimants to be assessed on the standard basis.”
THE COSTS OF A MEDIATION
In Savings Advice Limited -v- EDF Energy Customers Ltd  EWHC B1 (Costs) Master Haworth had to consider the issue of admissibility of evidence relating to a mediation.
The whole purpose of the mediation was to achieve a settlement. In those circumstances any costs information given in mediation is and must be admissible in order to work out the consequence of any subsequent settlement. In that sense in my judgment, costs information in the form of statements of facts can be separated out from documents or other information that comes into the domain of either party for the purposes of negotiating a settlement of the substantive claim.
FAILURE TO MEDIATE DID NOT LEAD TO COSTS PENALTIES
A reminder that each case is fact specific can be seen in the judgment of Judge Pelling QC (sitting as a High Court judge) in Orientfield Holdings Ltd -v- Bird & Bird  EWHC 1963 (Ch).
“Having embarked on litigation to mitigate the losses for which the defendants would otherwise be liable, it is not open to the defendants then to second guess the judgment of the claimant’s advisers after the event as to how they should have conducted the litigation other than perhaps in very clear and obvious circumstances”
COURT ORDERED MEDIATION
In Bradley -v- Heslin Norris J set out , in strong terms the desirability of a formal order for mediation.
“If in any boundary dispute or dispute over a right of way, where the dispute could not be disposed of by some more obvious form of ADR (such as negotiation or expert determination) and where the costs of the exercise would not be disproportionate having regard to the budgeted costs of the litigation, any District Judge (a) imposed a 2 month stay for mediation and directed that the parties must take all reasonable steps to conduct that mediation (whatever the parties might say about their willingness to engage in the process) (b) directed that the fees and costs of any successful mediation should be borne equally (c) directed that the fees and costs of any unsuccessful mediation should form part of the costs of the action (and gave that content by making an “Ungley Order”) and (d) gave directions for the speedy further conduct of the case only from the expiration of that period, for my own part (recognising that certainly others may differ) I think that such a case management decision would be difficult to challenge on appeal.”
THE CANNY KNACK OF THE MEDIATOR
Ghaith –v- Indesit  EWCA Civ 642. The Court of
Appeal allowed an appeal in a fairly low value personal injury case. Longmore LJ stated:-
26. It is a great pity that Indesit did not pursue the option of mediation rightly encouraged by Toulson LJ when he gave permission to appeal. Mr Peebles informed us that it was not pursued because the costs had already exceeded the likely amount in issue. This is an inadequate response to this Court’s encouragement of mediation since a full day in this Court will inevitably result in a substantial increase in costs. Indesit’s reaction is all too frequent and the Court has, since April of this year, decided that any claim for less than £100,000 will be the subject of compulsory mediation. It is devoutly to be hoped that such mediation will mean that these comparatively small claims will not have to be adjudicated by this Court so frequently in future.
Lord Justice Ward:
29. I fully endorse Longmore LJ’s postscript. When this Court grants permission to appeal, it does so because there is a real prospect of success. That does not mean that the appeal will succeed, but it does mean that the appeal is by no means hopeless. That should tell both parties that there is still all to play for. If they have any sense, they will therefore heed a recommendation to mediate because the costs of mediation are likely to be exceeded by the costs of the appeal by a significant margin. It is not enough, as Mr Peebles suggested, that there had been some attempt in the correspondence between solicitors to settle the case. The opening bids in a mediation are likely to remain as belligerently far apart as they were in correspondence but no-one should underestimate the new dynamic that an experienced mediator brings to the round table. He has a canny knack of transforming the intractable into the possible.
That is the art of good mediation and that is why mediation should not be spurned when it is offered.”
AIDI: A CASE CRYING OUT FOR MEDIATION
|In Faidi –v- Elliot  EWCA Civ 287|
Jackson LJ, giving judgment in a neighbour dispute, stated:
I agree that this appeal should be dismissed for the reasons stated by Lloyd LJ. I wish to add a comment about the manner in which the litigation has been conducted.
This case concerns a dispute between neighbours, which should have been capable of sensible resolution without recourse to the courts. During the course of his submissions in the Court of Appeal Mr Pearce for the claimants observed that this may not be an “all or nothing” case. A moderate degree of carpeting in flat 8 might (a) reduce the noise penetrating into flat 6 and (b) still enable the occupants of flat 8 to enjoy their new wooden floor. This is precisely the sort of outcome which a skilled mediator could achieve, but which the court will not impose.
Of course there are many cases where a strict determination of rights and liabilities is what the parties require. The courts stand ready to deliver such a service to litigants and must do so as expeditiously and economically as practicable. But before embarking upon full blooded adversarial litigation parties should first explore the possibility of settlement. In neighbour disputes of the kind now before the court (and of which I have seen many similar examples) if negotiation fails, mediation is the obvious and constructive way forward.
In the present case a mediator would not have been concerned about the interaction between the various leases and the licence to carry out works. Nor would he have been concerned about the other interesting points of construction, which first the county court judge and now this court have been called upon to decide. Instead he would have been helping the parties to find a sensible resolution of the practical problem which had arisen. I have little doubt that such a mediation would have been successful. The points of law upon which the litigation has turned are not easy ones and at the time of the hypothetical mediation neither party could have been confident of victory.
As it is, neither side wrote to the other proposing mediation until shortly before the hearing in the Court of Appeal. By then huge costs had been incurred. The claimants’ costs up to the end of trial were £23,195. The claimants incurred a further £34,609 costs on the appeal. The defendant’s costs up to the end of trial were £32,798. The defendant incurred a further £49,532 costs on the appeal. Thus the total costs thrown away amount to £140,134. If the parties were driven by concern for the well being of lawyers, they could have given half that sum to the Solicitors Benevolent Association and then resolved their dispute for a modest fraction of the monies left over.”
Ward LJ stated:
I wish enthusiastically to associate myself with the observations of my Lords on the desirability of mediation in neighbourhood disputes. To repeat what I recently said in Oliver v Symons, a boundary dispute:
“I wish particularly to associate myself with Elias L.J.’s pointing out that this is a case crying out for mediation. All disputes between neighbours arouse deep passions and entrenched positions are taken as the parties stand upon their rights seemingly blissfully unaware or unconcerned that they are committing themselves to unremitting litigation which will leave them bruised by the experience and very much the poorer, win or lose. It depresses me that solicitors cannot at the very first interview persuade their clients to put their faith in the hands of an experienced mediator, a dispassionate third party, to guide them to a fair and sensible compromise of an unseemly battle which will otherwise blight their lives for months and months to come.”
Not all neighbours are from hell. They may simply occupy the land of bigotry. There may be no escape from hell but the boundaries of bigotry can with tact be changed by the cutting edge of reasonableness skilfully applied by a trained mediator. Give and take is often better than all or nothing.
DUNNETT: FAILURE TO MEDIATE WAS OFF THE RAILS
In Dunnett –v- Railtrack PLC  EWCA Civ 203 the Court of Appeal dismissed an appeal by a claimant whose horses had been killed due to the alleged negligence of Railtrack. Despite dismissing the appeal the Court refused to give Railtrack the costs of the appeal. Brooke LJ stated.
It appears to me that this was a case in which, at any rate before the trial, a real effort should have been made by way of alternative dispute resolution to see if the matter could be satisfactorily resolved by an experienced mediator, without the parties having to incur the no doubt heavy legal costs of contesting the matter at trial. There is no evidence that this was ever suggested by the court. I say nothing more about that except to say that it is understandable, in these circumstances, that passions may have been running fairly high.
However, the time did come when this court in terms suggested that this was a case for alternative dispute resolution. CPR 1.4 reads:
“(1)The court must further the overriding objective by actively managing cases.
(2)Active case management includes-
(e)encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure.”
In the helpful notes to that rule in the Autumn 2001 edition of the White Book Service 2001, the editors write on page 18:
“The encouragement and facilitating of ADR by the court is an aspect of active case management which in turn is an aspect of achieving the overriding objective. The parties have a duty to help the court in furthering that objective and, therefore, they have a duty to consider seriously the possibility of ADR procedures being utilised for the purpose of resolving their claim or particular issues within it when encouraged by the court to do so. The discharge of the parties’ duty in this respect may be relevant to the question of costs because, when exercising its discretion as to costs, the court must have regard to all the circumstances, including the conduct of all the parties (r.44.3(4), see r.44.5).”
The value of that observation is that it draws attention to the fact that the parties themselves have a duty to further the overriding objective. That is said in terms in CPR 1.3. What is set out in CPR 1.4 is the duty of the court to further the overriding objective by active case management, which includes the feature to which I have referred.
Mr Lord, when asked by the court why his clients were not willing to contemplate alternative dispute resolution, said that this would necessarily involve the payment of money, which his clients were not willing to contemplate, over and above what they had already offered. This appears to be a misunderstanding of the purpose of alternative dispute resolution. Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve. This court has knowledge of cases where intense feelings have arisen, for instance in relation to clinical negligence claims. But when the parties are brought together on neutral soil with a skilled mediator to help them resolve their differences, it may very well be that the mediator is able to achieve a result by which the parties shake hands at the end and feel that they have gone away having settled the dispute on terms with which they are happy to live. A mediator may be able to provide solutions which are beyond the powers of the court to provide. Occasions are known to the court in claims against the police, which can give rise to as much passion as a claim of this kind where a claimant’s precious horses are killed on a railway line, by which an apology from a very senior police officer is all that the claimant is really seeking and the money side of the matter falls away.
It is to be hoped that any publicity given to this part of the judgment of the court will draw the attention of lawyers to their duties to further the overriding objective in the way that is set out in Part 1 of the Rules and to the possibility that, if they turn down out of hand the chance of alternative dispute resolution when suggested by the court, as happened on this occasion, they may have to face uncomfortable costs consequence.
In my judgment, in the particular circumstances of this case, given the refusal of the defendants to contemplate alternative dispute resolution at a stage before the costs of this appeal started to flow, I do not think that it is appropriate to take into account the offers that were made. In my judgment, taking into account all the circumstances of the case, as we are bound to do under CPR Part 44, which applies as much to the Court of Appeal as it does to courts at first instance, the appropriate order on the appeal is no order as to costs.
- Mediation and Litigation: Another example of the dangers of ignoring offers to mediate.
- Court ordered mediation: draft precedents
- Mediation in the Court of Appeal
- Wholly successful defendant recovers only two-thirds of csts because of failure to engage in ADR
- Some things may be better mediated than litigated
- A party unreasonably refuses to mediate but recovers all its costs
- “Mediation is a judgment call”: when is a refusal to mediate reasonable?
- Disclosing details of costs information provided for mediation: disclosure allowed: High Court decision.