mediation news

important ADR case law and practice advice

Burchell v Bullard (2005 EWCA 358)  

The Halsey case (see below) has been to a certain extent misunderstood, particularly by parties who believed that their case was watertight. This issue has been addressed by the Court of Appeal in Burchell. The case concerned a building dispute where the claim was for £18,300 and the counterclaim was for £100,000. In the event, the claimant was awarded his claim in full and the counterclaim succeeded only in the sum of £14,300. The costs of both parties amounted to over £185,000 – a figure which Ward LJ described as “horrific”.

Ward LJ said in his judgment, “The defendants behaved unreasonably in believing, if they did, that their case was so watertight that they need not engage in attempts to settle…..The stated reason for refusing mediation, that the matter was too complex for mediation, is plain nonsense”. He went on to say, “Halsey has made plain not only the high rate of a successful outcome being achieved by mediation but also its established importance as a track to a just result running parallel with that of the court system”.

Litigation lawyers should take note, therefore, that the preference of the judiciary towards “mediation before litigation” continues. The risk of a successful litigant not obtaining his costs at trial if he refuses mediation overtures increases with each new step in the Court of Appeal.

Halsey v Milton Keynes NHS Trust. (May 2004)

This decision establishes three new principles which lawyers should note:

1. "The value and importance of ADR have been established within a remarkably short time. All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR."

2. "The fundamental principle is that [a] departure [from the general rule that costs follow the event] is not justified unless it is shown (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR."

3. "The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. But the fact that a party reasonably believes he has a watertight case may well be a sufficient justification for a refusal to mediate."

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Set out below are a number of other important ADR/Costs sanctions decision cases

McMillan Williams v Range 2004

Court of Appeal: A solicitor who received advance salary in excess of her actual earnings had to repay the excess to her employers when she left the firm. The court at first instance advised mediation, but both parties refused. The court ordered both parties to bear their own costs.

Dunnett v Railtrack 2002

Court of Appeal: Costs denied to a successful party because it had earlier flatly refused to mediate. This case was a benchmark towards the requirement to mediate and followed earlier cases warning of likely costs sanctions (see Cowl v Plymouth City Council below).

Hurst v Leeming 2002

In appropriate cases, it is acceptable to refuse to mediate, but it is "a high risk strategy". The critical factor in coming to a decision on the reasonableness to mediate is whether the mediation had any real prospect of success. A refusal will only be reasonable if, objectively, that prospect does not exist. This decision has, however been modified by Halsey in that whilst Hurst placed the burden on the successful party who refused mediation to justify that refusal, Halsey places the burden on the unsuccessful party to show that mediation had a reasonable prospect of success.

SITA v Watson Wyatt and Maxwell Batley 2002

A successful litigation party refusing mediation escaped costs sanctions because the invitation to mediate was made at short notice in an effort to "dragoon, browbeat and bully" and in a way that was "disagreeable and off-putting". The mediation proposal was a litigation tactic rather than genuinely designed to seek settlement.

Cable & Wireless v IBM United Kingdom Ltd 2002

Mediation clause enforced by the court adjourning the litigation. The clause was not a mere agreement to negotiate and therefore unenforceable, but a real contractual commitment to find solutions "which are mutually commercially acceptable at the time of the mediation". Mediation is described as "a firmly established, significant and growing facet of English procedure".

Cowl v Plymouth City Council 2001

Court of Appeal: here are the significant comments of the court

"Without the need for the vast costs which must have been incurred in this case….. the parties should have been able to come to a sensible conclusion as to how to dispose of the issues which divided them. If they could not do this without help, then an independent mediator should have been recruited to assist. That would have been a far cheaper course to adopt. Today, sufficient should be known about ADR to make the failure to adopt it, in particular where public money is involved, indefensible."

Lord Woolf could not have made his meaning clearer. Parties (and it seems unlikely to be limited to public bodies) who fail to consider ADR will be criticised by the court.

Thus, Hurst and Dunnett and Halsey make it clear that any solicitors who fail to give due consideration to ADR may well find themselves at the wrong end of a negligence action by a winning client who fails to recover costs.

Practice advice issued jointly on 22 April 2005 by the Law Society's civil litigation committee and its alternative dispute resolution committee.

"This practice advice relates to the giving of information on mediation and other dispute resolution (ADR) options to clients before, and during the process of resolving any disputes between the client and third parties. The principle of why this advice and information should be given is to be found in the dicta of Lord Justice Dyson in the case of Halsey v Milton Keynes NHS Trust and Steel v Joy [2004] EWCA 576:

"All members of the legal profession should now routinely consider with their clients whether their disputes are suitable for ADR"

Solicitors should note that the court has a duty to encourage parties to co-operate with each other in the conduct of the proceedings - Civil Procedure Rules 1998 (CPR), rule 1.4(a) - and to likewise encourage parties to use mediation or some other alternative dispute resolution technique in appropriate cases - CPR rule 1.4(d). Where the parties cannot agree to use mediation or another ADR process, the obligation is on the party wishing to use mediation or another process to say why it is appropriate in the circumstances. Section 2 of the guidance summarises the factors to consider in ascertaining whether a case is suitable for ADR.

The term ADR means both mediation and any other alternative to formal litigation or arbitration that might be an appropriate alternative means of resolving the dispute in the particular circumstances of the case. This might include expert evaluation, early neutral evaluation or conciliation, as well as mediation.

This practice advice applies to advice and information at the appropriate time, which may be at the commencement of a dispute within the initial advice, or at any later stage of the dispute.

Practitioners should keep these options under review throughout the course of the matter. Solicitors should:

• In appropriate cases, and at appropriate times, explain to clients whether there are ADR techniques that might be used other than litigation, arbitration or other formal processes; what those alternative processes involve, and whether they are suitable in the circumstances; and
• Keep the suitability of mediation and other ADR techniques under review during the case and advise clients accordingly.

In assessing whether a case is suitable for mediation or some other form of ADR, the solicitor should have in mind:

• The nature of the dispute;
• The merits of the case;
• The extent to which other settlement methods have been attempted;
• Whether the costs of the ADR process would be disproportionately high;
• Whether any delay in setting up and attending the ADR process would have been prejudicial to the client; and
• Whether the ADR process had a reasonable prospect of success.

Solicitors should be aware that failure to provide information and advice at the appropriate stage may have costs or other consequences."

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