The
rationale is easy to follow. The courts are becoming increasingly burdened by
an ever growing number of litigants and ADR, if used properly, increases the
chances of early settlement. Early settlement reduces the strain on the courts,
freeing them up to manage cases more efficiently (or so the theory goes). That
the courts are prepared to employ quite drastic measures to encourage litigants
down the conciliatory route is testament to how overstretched they are.
Costs
are at the heart of this. Consideration of the costs of running your case can
be just as, if not more, important than assessing your chances of success. And
unfortunately it is not that uncommon for legal costs to exceed the amount
actually in dispute. The question of recovery is therefore paramount and
correspondingly the court’s most effective weapon to encourage ADR.
The
general rule on costs recovery will be familiar; the winner pays the loser.
However, this is only a general rule and there are exceptions. Ultimately, it
is for the court to decide who gets what, if anything, and the court has the
power to penalise the parties if they misbehave. In exercising its discretion
the court will normally look to, among other factors, the conduct of the
parties to determine the appropriate award. That is, the court will determine
whether the parties have conducted themselves reasonably in their interaction
with each other, complying with orders, making any offers to settle and yes,
you guessed it, whether they may have declined to mediate and, if so, why.
It
is the latter consideration which we are concerned with here and of which you
really do not want to fall foul! For if you are deemed to have unreasonably
refused an offer to mediate you will be penalised on costs whether or not you
are successful at trial. This may even be the case if you believe, and rightly,
your case to be undefeatable as proven to be at court. A recent line of cases
is showing that successful trial litigants, found to have unreasonably refused,
are suffering up to a 40% reduction in their costs. If you really upset the
court then it could be worse.
The
point is that the courts want to see evidence that both parties have exhausted
all reasonable opportunities to dispose of the matter before it is significantly
troubled. The new model directions (to be determined for the running of your
file after a defence is filed) even include an order that where a party does
refuse to mediate it must file a witness statement explaining its decision in
an envelope that is not opened until the conclusion of the trial. Reasons for
justifying refusal are few and far between and again they are linked to costs –
mediation is not cheap.
So,
for example, where the claim of the offering claimant party can be said to be
totally without merit, you will be justified in refusing to mediate on the
basis that spending time and costs negotiating would be absurd. The same too
may apply where you are claiming an undisputed debt; you could reasonably
refuse the defendant’s offer of mediation as compromise could not be justified.
On less firm ground are reasons relating to the merits of the case, suggestions
of other methods of settlement, offers made, costs of mediation being
disproportionate and slim chances of settlement; used together you may be able
to make a convincing argument for reasonable refusal but you must tread
carefully.
In
most cases, however, mediation should be seen as a good thing. While costs of
preparing and attending may be considerable they will likely pale into insignificance
compared to the costs running the claim through to conclusion and, if used
properly and at the right time, will give you a good chance of settlement if
previous attempts have not done the trick.
Moreover,
if you are willing to mediate or, even better, you know the other party will
refuse, an early offer of mediation can serve as a useful tactical weapon to be
used as leverage in later negotiations. If you are on the receiving end and
plan to refuse, make sure you have good reasons.
Please note that is intended as a general guide only and
not legal advice.
If litigation looks to be unavoidable, it is strongly
recommended that you seek early legal advice to maximise your chances of a
successful and swift conclusion. A City Law Firm Limited has a strong Dispute
Resolution team who offer affordable and comprehensive legal advice in this
area.
For
more information please call us on 0207 426 0382 or email us at enquiries@acitylawfirm.com.