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Snubbing mediation: An expensive error

by Antony Collins on 15 Sep 2014

snubbing mediation

The rationale for not engaging in mediation has plenty of customary justifications: parties may not believe the dispute is suitable for alternative dispute resolution (ADR), parties may believe there is no middle ground, parties may be very confident in the merits of their own case, and so on.

The dawn of Lord Justice Jackson’s Review of Civil Litigation Costs in 2010, however, has put these pretexts under much more scrutiny. Jackson’s review formed the foundation of a push towards ADR as a way of reducing court costs, with those who refused to review mediation running the risk of being hit with adverse legal costs.

 Since then, a growing body of case law has emerged on the subject, with the most recent addition being Phillip Garritt-Critchley & Others v Andrew Ronnan and Solarpower PV Limited [2014] EWHC 1774 (Ch). This case went even further into defining the criteria of when mediation should be considered.

Too far apart

The case centred on claims that certain shares in a company had not been assigned under the terms of a disputed binding agreement. The claimants laid out their willingness to explore ADR in their letter of claim, while the defendants rejected mediation in both their response and the allocation questionnaire on the basis that the two sides were “too far apart”. Likewise, the defendants are also said to have indicated their sureness in their own case, confident they would emerge the winning side in litigation.

The case was scheduled for trail, before which the claimants submitted a part 36 offer, which was not accepted, before a counter-offer to settle the dispute and contribute three quarters of legal costs was put forward by the defendants. A four-day trial was heard with judgment reserved, during which time the defendants revisited the part 36 offer with the view of accepting it, which duly occurred.

The lack of desire to mediate by the defendants prompted the claimants to seek indemnity costs, which Judge Waksman QC awarded in their favour, making it apparent that the defendants’ reluctance to engage with mediation was a central reason.

In his ruling, Waksman QC made a host of observations about the nature of mediation that provides new key guidance to disputed parties. He said a binding agreement dispute was a prime candidate for mediation because of the diversity of the scenarios involved, meaning the defendants’ belief that the two sides were “too far apart” to reach any middle ground was unfounded. After all, how would they know there is no middle ground without discussing the situation?

Likewise, the bad feelings and misgiving between the two sides was also not a valid reason to rebuke an offer of mediation because that is the common dynamic in litigious disputes and, of course, the raison d'être of a mediator is to bring two diametrically opposed sides together. The judge also highlighted the defence’s insistence in the strength of their case, which he found unrealistic because - if the case was so overwhelming - they would have sought a summary judgment.

Mediation hesitation

Legal experts have been quick to highlight the implications of the Phillip Garritt-Critchley decision through briefings. It “reinforces the message that mediation is strongly supported by the judiciary and that parties and practitioners need to carefully consider the potential ramifications of a refusal to engage in ADR,” explained Peter Barnard from Pannone, which advised the claimants, while Edward Cooper from Taylor Wessing wrote if the other side offers to mediate or to engage in another form of ADR “it would be very risky in most cases to ignore or to refuse the offer”.

From a practical point of view, the case is yet another example of case law providing disputed direction on when to mediate to avoid hefty court fees. There have already been rulings on the costs of participation in mediation, the recoverability of fees, when to engage with mediation and the legal standing of not responding to an offer of mediation was unreasonable (click here).

Phillip Garritt-Critchley provides more food for thought, including:

  • The risk of over-confidence in the merits of a case, to the point of refusing to explore the idea of a settlement or not going for a full summary judgment;
  • Even what appears to be the most ill-tempered and bitter of spats may not be enough to justify avoiding mediation because the job of a mediator is to bring sides together to overcome such disagreements;
  • What may be seen as unreasonable by the parties, may not be by the court. The defendants’ total rebuke of mediation was not accepted even if they thought the other side was making unrealistic or unreasonable demands. If parties do not sit down to discuss their perceptions then there is no indication as to whether a claim is unreasonable.

Case law is proving that a refusal to mediate may be a costly error. Even with a strong case, shirking mediation in order to get a victory or an improvement settlement may come at a high price.

This post was written by Antony Collins who is a freelance journalist. He can be contacted at ac@acollinsmedia.com

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Topics: ADR, Mediation

Antony Collins

Written by Antony Collins