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Time to Mediate before it’s too late?

Tue 01 Jul 2014

Introduction

The recent decision in Garritt-Critchley and others v Ronnan and another (“Garritt-Critchley”) reminds us that if a party to a dispute refuses to engage in a form of alternative dispute resolution (“ADR”) such as mediation, then a punitive costs order might be made against it.

ADR

ADR is a well-established part of modern litigation. The Civil Procedure Rules govern the way in which litigation is conducted and give the courts case management powers which include “encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure”.

Mediation

Mediation is often characterised as a form of ‘structured negotiation’ in which the parties put their cases to a mediator and then seek to find a resolution to their dispute themselves. It is considered to be a flexible system since the process adopted is decided between the parties, and its findings are non-binding. For this reason, it can be used throughout the dispute resolution cycle, from the pre-action stage onwards – even during trial.

Mediation has therefore become the ADR method of choice for resolving disputes. It can also be extremely effective. The latest statistics from the Centre for Dispute Resolution [1] show that 70% of mediations settle on the day, with an additional 20% settling shortly afterwards.

Moreover, as Garrit-Critchley shows, an active engagement in the mediation process can be a powerful statement of a party’s commitment to managing costs. Courts look on this attitude favourably and, therefore, there can be costs benefits for parties which respond positively to a request to mediate.

Facts: Garritt-Critchley And Ors V Ronnan And Another

In Garrit-Critchley, the parties had been in dispute on more than one occasion over a number of years. In the latest case it was disputed whether or not a building contract was in existence, and in the pre-action correspondence the claimant had proposed “an appropriate form of ADR, such as mediation” as a way of settling and avoiding proceedings. Throughout the ensuing negotiations the defendants refused to take part in mediation, citing amongst other things the ill-will which existed between the parties and the substantial differences between their interpretation of the relevant facts and law.

Judgment: Indemnity Costs

The parties reached a settlement shortly before the court was due to give its judgment, and so it was required only to determine whether the claimant should be entitled to recover costs on an indemnity basis [2] as a result of the defendant’s alleged unreasonable refusal to engage in ADR.

The judge found in favour of the claimants and criticised the defendants for avoiding ADR from the pre-action stage until the trial had effectively been concluded. In particular, the court made the following points:

i. Confidence in one’s case is not a reasonable basis on which to refuse to engage in ADR

ii. Mediation may be appropriate even when the parties’ positions appear to be ‘binary’. If the parties disagree on a significant point of law, such as the existence of a valid contract or the interpretation of facts arising from the parties’ conduct, mediation may still be a useful way of addressing central issues. Taking the view that mediation does not serve a purpose in such circumstances was described in the judgment as ‘misconceived’.

iii. Distrust between the parties is not a reasonable excuse for failing to mediate as it is not always a bar to a successful mediation

iv. Mediators are adept at identifying those matters which would be better decided by the courts

v. It may be cost-effective to mediate even if its cost seems high in relation to the value of the claim, since a trial is likely to be more expensive

The courts are therefore adopting a robust approach to the unreasonable avoidance of ADR and are willing to make strong statements as to its relevance and appropriateness in the vast majority of civil disputes.

Conclusion

The judgment recognises that there may well be circumstances in which ADR will not be a productive step in attempting to resolve disputes, for example where lengthy negotiations have been conducted to no avail, or if one of the parties requires the protection of an injunction. But such circumstances are rare. In all other circumstances, even if the parties might appear to be irreconcilable, ADR has a role to play and should be considered seriously by the parties.

Even more significantly, it is incumbent on any party seeking to exclude the option of ADR to have reasonable grounds for doing so. If no such grounds exist, there may well be consequences in costs.

If you require any further information about mediation, or require any advice, then please do not hesitate to contact us using the details below.

Useful Links

The Ministry of Justice’s Mediation guide

The Civil Mediation Council

The Centre for Effective Dispute Resolution

Footnotes

[1] See its Fifth Mediation Audit (May 2012) here.

[2] Meaning that costs need not be proportionate and that the onus is on the paying party (here, the defendant) to prove that they are unreasonable.

 

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