03 February 2014
To mediate or not?
It’s always a good idea to try and avoid litigation by considering mediation (or some other form of alternative dispute resolution, “ADR”) – this can be done at any stage of a dispute, up to the outcome of Trial.
There are two main problems though. The first is obvious - it takes two to tango; the second is the cost.
Litigation, (or the lead up to it), can be expensive, and mediation can add to that costs if the matter is complicated and requires professional input.
So why mediate (or take part in some other form of ADR)?
Well, there is a good chance they will succeed – thereby reducing costs overall, allowing you to get on with your life and concentrate on something more productive. If it doesn’t work, but you win at Trial, you might be able to get some of the mediation costs back (so long as this is made clear in the mediation agreement).
If you receive an offer to mediate, but you aren’t keen to take part, don’t ignore it (or instruct your lawyer to ignore it). Why?
Well, leaving aside what is said above the Court of Appeal case of PFG II SA v OMFS Company 1 Limited  EWCA Civ 1288 makes it much more risky for you, in terms of a potential adverse costs order at Trial, to do so.
It is settled law (Halsey v Milton Keynes General NHS Trust  EWCA 3006 Civ 576) that at the end of a trial, a court will usually order an unsuccessful party to pay the costs of a successful party (with some exceptions, such as small claims (ie claims under £10,000) etc.). If the losing party wishes to try to convince the court to depart from this general rule the unsuccessful party needs to demonstrate that the successful party was unreasonable in refusing to agree to take part in alternative dispute resolution, and relevant facts in this regard include the nature of the dispute, the merits of the case, other attempts at settlement, the cost of mediation, the possibility of delaying the trial, the prospect of a successful mediation, and whether the court has encouraged mediation in the case.
In the PFG case the claimant landlord offered mediation. The defendant tenant ignored this offer. The tenant made a “Part 36 offer of settlement” (a form of settlement, detailed in the Civil Procedure Rules, at Part 36), which the landlord accepted some time later, but just before trial. Costs had increased substantially for both parties between making the offer and the trial. The usual rule, in these circumstances, is that the landlord pays the majority of the tenant’s costs, but the landlord argued that the tenant had unreasonably refused mediation and should be deprived of some of their costs and pay some of the landlord’s costs instead. The court in PFG agreed, in part, with the landlord on the basis that silence to such an offer was unreasonable. It deprived the tenant of some of its costs, but did not order the tenant to pay any of the landlord’s costs.
Apart from demonstrating that costs are in the discretion of the court, the PFG case shows that an offer to mediate must no longer be ignored, but considered properly, and responded to appropriately. If you don’t wish to mediate (or take part in ADR) your reasons for the rejection may well be examined in detail by a judge, so they need to be objectively reasonable.