April 2016 Credit Management magazine

LEGAL MATTERS
REFUSING TO MEDIATE
EMMA EMERY IS A PARTNER AT FREETHS : emma.emery@freeths.co.uk
The use of mediation to solve commercial disputes is becoming increasingly popular as the
Courts put pressure on parties to avoid litigation. But can parties refuse to negotiate through
mediation? In this month’s legal matters we look at recent Court decisions on the subject and
discuss the issues you need to consider when deciding whether to partake in mediation.
A
recent decision by the Royal
Courts of Justice Senior Courts
Costs Office has demonstrated the
readiness of the Court to impose
costs sanctions when a party to litigation
unreasonably refuses to participate in
mediation.
In Bristow v Princess Alexandra
Hospital NHS trust [2015], the Judge
awarded the costs of detailed assessment
to the Claimant on an indemnity basis
because it was felt that the defendant could
demonstrate no good reason for refusing to
mediate. The Judge had reduced the
costs awarded to the Claimant to 80
percent because of other inconsistencies
within its costs budget. However, the
Judge ordered that this 80 percent should
be recovered from the Defendant on an
indemnity basis, thus with no requirement
NEGATIVE cost implications can be imposed
by the Court regardless of whether it is the
winning or losing party which has refused
to mediate without good reason. The
circumstances in Reid v Buckinghamshire
Healthcare NHS trust [2015] were similar to
Bristow v Princess Alexandra Hospital NHS
for proportionality to the amount originally
at stake.
This decision follows a long running
trend of the Court to penalise parties
which refuse to attempt settlement through
Alternative Dispute Resolution (ADR).
Mediation has become an attractive method
to get the parties together around a table
and achieve a commercially sensible
settlement which suits all involved, thus
avoiding the ever increasing costs of civil
litigation.
WHEN IS IT UNREASONABLE TO REFUSE TO
MEDIATE?
In Halsey v Milton Keynes General NHS
Trust (2004), the Court identified a list of
principals used to determine whether a
party has been unreasonable in refusing to
mediate.
CASE STUDY
Trust [2015], the Judge awarding the winning
party its costs on an indemnity basis from the
point at which they unreasonably refused to
mediate.
In Yorkshire Bank Plc and Clydesdale
Bank Asset Finance Ltd v RDM Asset Finance
and J B Coach Sales [2004], the Judge
THE HALSEY PRINCIPLES INCLUDE:
• The nature of the dispute – is ADR
appropriate in the case at all?
• The merits of the case – does the refusing
party have a much stronger case?
• Other settlement options – have there
been other offers or negotiation around
settlement?
• Costs of mediation – will the expense
of mediation be disproportionate to the
claim?
• Delay – is mediation likely to cause delay?
• Prospects of success – is mediation likely
to be successful?
The Court made it clear that this was not
to be considered as an exhaustive list. It is
however, a guide to the factors which should
be considered when assessing whether to
propose or agree to mediation.
identified the Claimants as the winning
parties but reduced the percentage of costs
recoverable to 50 percent as a result of being
unsuccessful on a number of issues in the
case. However, the Claimant was awarded 15
percent more of their costs as a result of the
Defendants rejection of an offer to mediate.
• An offer by the opposing party to
mediate must be considered extensively.
• It is likely that the Court will order
negative cost implications if a party is
deemed to have refused to mediate
unreasonably.
• It is important to consider suggesting or
agreeing to mediation at an early stage
KEY POINTS:
of a dispute. In Egan v Motor Services
[2007], the Judge emphasised that
mediation should take place before any
litigation is initiated.
• At the conclusion of proceedings,
the onus is on the unsuccessful party
to prove that mediation would have
succeeded.
• The Court cannot force a party to
mediate but may order a stay of
proceedings in order for it to take place.
• Refusing to mediate is a very high risk
option which can have very serious cost
implications when being considered by a
Judge, regardless of whether the party is
successful at trial or not.
AS A CICM MEMBER YOU CAN RECEIVE FREE LEGAL ADVICE
FROM FREETHS CALL THE CICM LEGAL HELPLINE 0845 0779698
26 April 2016 www.cicm.com
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