Solicitor, James McNally, looks at recent developments in mediation in civil litigation

Lord Neuberger, the Master of the Rolls, has announced his support for a new pilot scheme within the Court of Appeal Mediation Service. The new scheme sees the automatic referral of appeals to mediation for claims worth less than £100,000, with judges open to recommend mediation for claims of any value where they feel it would be productive.

Mediation is now something that must be seriously considered by all parties engaged (or about to become engaged) in litigation: a view that was confirmed in the recent decision of Ghaith v Indesit [2012] EWCA Civ 642.

Mr Ghaith sued his employers for an accident at work. The value of his PI case was assessed at around £60,000. Indesit successfully defended the claim at trial but Mr Ghaith was given permission to appeal. Lord Justice Toulson recommended that both parties use mediation.

Although Mr Ghaith himself was keen to mediate, Indesit refused. They took the view that the legal costs were already more then the amount in dispute.

The appeal was successful. The Court of Appeal made it clear that Indesit were at fault for refusing to mediate and criticised their reasons for not doing so.

Lord Justice Longmore commented:

“This is an inadequate response to the Court’s encouragement of mediation, since a full day in this Court would inevitably result in a substantial increase in costs…Indesit’s reaction is all too frequent.”

Lord Justice Ward was also critical, making reference to Halsey v Milton Keynes General NHS Trust, one of the leading cases in relation to mediation.

In the Halsey case, Lord Justice Dyson had said:

[the] factors which may be relevant to the question whether a party has unreasonably refused ADR (Alternative Dispute Resolution) will include (but are not limited to the following:

  1. the nature of the dispute;

  2. the merits of the case;

  3. the extent to which other settlement methods have been attempted;

  4. whether the costs of the ADR would be disproportionately high;

  5. whether any delay in setting up and attending the ADR would have been prejudicial; and

  6. whether the ADR had a reasonable prospect of success.”

LJ Ward added::

It is not enough, as [counsel for Indesit] 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 under-estimate 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.”

Refusing to mediate can result in a hefty cost penalty at the end of the case – see for instance PGF II SA v OMFS Company & Anor [2012] (where the offer to mediate was ignored) and Rolf v De Guerin [2011] (where the offer of round table discussions was repeatedly rejected with no reason being given.)

Mediation is not just restricted to the Court of Appeal. Local County Courts frequently make what is known as an “Ungley Order.” An Ungley Order will normally include the following wording:

The parties shall consider whether the case is capable of resolution by ADR. If any party considers that the case is unsuitable for resolution by ADR, that party shall be prepared to justify that decision at the conclusion of the trial, should the judge consider that such means of resolution were appropriate, when he is considering the appropriate costs order to make.

The party considering the case unsuitable for ADR shall, not less than 28 days before the commencement of the trial, file with the court a witness statement without prejudice save as to costs, giving reasons upon which they rely for saying that the case was unsuitable.”

Costs sanctions are not currently automatic, but we are clearly heading that way. Over time, as the Courts become more stretched and funding becomes critical, the importance placed on mediation will grow.

Accordingly, an offer of mediation should be considered very carefully by all parties involved in a professional negligence dispute. If an offer of mediation is made then the potential costs consequences of unreasonable refusal should be spelled out. The refusing party should also be asked for the reasoning behind their decision.

Whilst there may still be uncertainty at the moment this is an area of law that is likely to rapidly develop. Any party considering entering into litigation (or already involved in it) should make sure that an offer to mediate - or take part in other suitable forms of ADR - is put forward at an early stage. If the invitation is rejected then the opponent’s decision to reject should be brought to the attention of the trial judge so that costs sanctions can be imposed, whatever the outcome.

Find out more about mediation and ADR.