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Why might you choose to mediate?

by Luke Lofthouse on 17 Mar 2017

choose_to_mediate

During his keynote address to the Civil Mediation Conference 2015, Lord Neuberger advanced his view on the economic advantages of mediation in today's climate: "Ever more attractive… litigation is becoming ever more expensive and time-consuming; the law is getting increasingly complex; legal aid is ever more attenuated; and, court fees are being increased markedly." The senior judge described this as an "almost perfect storm of financial difficulties", which risks "depriving most ordinary people of access to justice". It was his contention that, given these circumstances, mediation represents a more than satisfactory alternative to litigation.

Speed

Indeed, in the context of corporate disputes, the English paradigm following Halsey v Milton Keynes General NHS Trust [2004] is to impose cost sanctions on parties that act unreasonably in refusing to mediate. Subsequent case law has highlighted the inherent contradiction in this policy (in Wright v Michael Wright Supplies Ltd & Anor [2013], Sir Alan Ward in the Court of Appeal commented in strong terms on the difficulties of persuading intransigent parties to mediate). That is that, to force the unwilling to mediate is a flawed premise – mediation requires willing cooperation from both parties from the beginning to work. However, from a financial perspective, even if the dispute is acrimonious, it makes sense to choose to mediate from the outset.

Ultimately, a successful mediation can bring litigation or arbitration to an end early – or in fact avoid the need for either entirely. Naturally this will save both parties considerable time and costs. It is worth noting that of the cases mediated at the Singapore Mediation Centre in 2012, over 90 per cent of those that settled were concluded within one working day.

Confidentiality

Notwithstanding the clear time advantages for those that engage in mediation willingly, there is also the point of confidentiality to consider. For two corporate entities about to litigate, there will likely be issues of privacy and potential reputational loss exposed during disclosure – in such circumstances, mediation offers a way to obviate such problems. The process is entirely private and mediations are covered by two levels of confidentiality: one covering all that is said or happens during the mediation, the other covering the separate private meetings between each party and the mediator.

With specific reference to privilege and any potential future disclosure, mediations are also generally protected under common law by without prejudice privilege; this is because they amount to "communications" made with the bona fide aim of settling the dispute. What this essentially means is that admissions made during the mediation are not the only aspect covered by privilege (Unilever v Proctor & Gamble [2001]) – everything said during the entire process can be withheld from future disclosure (Aird v Prime Meridian [2006]), as can any documents that were created for the purposes of the mediation (Smith Group v Weiss [2002]).

These broad rules should, however, be accepted carefully in light of how the concept of without prejudice privilege has been dealt with by the courts. As is typical following many mediated settlements, parties will often look to raise a claim against a related third party. These so-called "three-party" cases may concern the paying defendant's dissatisfaction for the liability he has incurred – he may wish to blame a third-party subcontractor – among other situations. Clearly the mediation discussions may be relevant to issues uncovered in any subsequent three-party litigation and, indeed, the courts have adopted the approach that in such circumstances, the public policy reasons for refusing disclosure on privileged grounds may no longer apply.

This is a complex area of law, but the rationale (as expanded on in Muller and another v Linsley and another [1996] PNLR 74) may be explained as such: statements made during a mediation that might be revealed by disclosure can no longer function as admissions of liability (as the litigation has moved on to concern an unrelated third party) and are no longer being relied on as such. If said statements are relevant to the new litigation then, the policy considerations for refusing disclosure have evaporated. To illustrate this concept with an example: in Brown v Rice & Patel 2007 EWHC 625 what mattered was that an offer to settle was made and accepted. The fact that the offer involved some acceptance of liability was irrelevant to the question in the case.

Jurisprudence has developed incrementally and with care in this area, though. In Cumbria Waste Management v Baines Wilson 2008 EWHC 786, for example, the court was reluctant to take the approach in Muller at all. Indeed, while it is important to be aware of this potential restriction on the idea of without prejudice privilege, it should not be seen as neutering the effectiveness of mediation as a whole.

Active control

Clients often feel detached from what happens during a court hearing. The nature of litigation is such that a given party fights their corner vicariously through either a barrister or solicitor, often both. Mediation allows clients to be actively involved in the settlement process, and its malleable nature means that they can either speak freely or take a back seat. Should a client decide to speak freely though, he or she can have a say without the normal constraints of the evidential rules – as it's all covered by privilege. Being able to address the other side directly/verbally in this way is not something that's achievable during a court hearing, and it's highly conducive to reaching a mutual agreeable settlement position. This flexibility is further reflected in how the mediation is actually run. Any English litigation will be progressed according to the CPR - compliance will be enforced by the court and any unreasonable deviation punished. Conversely, parties can decide how they want a mediation to be run, with the procedure capable of being adapted "on the fly" to their respective needs.

Healing division/ encouraging communication

At the point of litigation, where lawyers get heavily involved in a dispute, there is a tendency to see a case through an exclusively adversarial lens. Traditional approaches to case analysis fail to sensitise practitioners to the emotional dimensions and hidden agendas involved in clients seeking adversarial solutions to their problems. This is also true for commercial disputes. Simply because the argument relates to something contractual, it does not mean that the parties are emotionally detached from whatever contentious points the disagreement is about. Once formal proceedings have begun, parties also tend to become entrenched in their positions – at which point mediation becomes more challenging.

Mediation offers a route to ameliorating a strained commercial relationship before attitudes harden/entrench, potentially saving it and ultimately leading to a solution that is mutually agreeable to both parties. A good mediator will enable the parties to reconceptualise the main issues while emphasising an objective view and common interests. It is genuinely possible for a mediator to be able to produce something "win/win" in substance by focusing on common interests – this is not some amorphous concept without teeth. Any mediation settlement is fundamentally not concerned with the enforcement of legal rights - simply, it's not about winning. Parties to a mediation can obtain settlement terms that may not be possible in a litigation context, such as an apology, or the chance to work on further projects in the future. Conversely, at the point of commencement, litigation usually represents the total breakdown of a relationship; the likelihood of continuing any business relationship beyond that point is remote.

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Topics: ADR, Mediation

Luke Lofthouse

Written by Luke Lofthouse