Mediation – what do I have to do?

Nichola Evans, Browne Jacobson

The message from the court that it is incumbent upon the parties to mediate has become even stronger. This time Mr Justice Ramsey, who has been responsible for much of the implementation of the Jackson reforms, has issued some strong guidance in the case of Northrop v BAE Systems [2014] EWHC 3148 TCC and the cost consequences of making a decision not to mediate.

In the case of Northrop the parties had an ongoing commercial relationship and the case concerned one party to the contract asking the court to make a series of declarations so that the contract could be terminated.

BAE believed that it had a very strong case and believed that Northrop was endeavouring to use the offer to mediate as a negotiation tool to engineer a better settlement than it was entitled to given their prospects of success. As a result BAE refused to mediate.

Mr Justice Ramsey looked at the refusal to mediate and whether it could be said that BAE had acted reasonably given its assessment of the merits of the case. Mr Justice Ramsey agreed with BAE’s assessments of the merits of the case and said that BAE had a “strong case”.

However he was not sympathetic to the view that this would entitle a party to refuse to mediate and in expressing this view he departs from the views previously expressed in a number of judgments. He believes that a good mediator can engineer a settlement whatever the merits of a claim and that “a mediator can bring a new independent perspective to the parties if using evaluative techniques and not every mediation ends in payment to a claimant.”

As a result he took the view that the parties should have considered mediation even if one of the parties believed that their prospects of success to be extremely high. He said:

“This was a classic case where I consider that a mediator could have brought the parties together. In assessing the prospects of success I do not consider that the court can merely look at the position taken by the parties. It is clear that if BAE did not want to pay anything and if NGM would not settle without payment then there would not be a settlement. However this is the position in many successful mediations. It ignores the ability of the mediator to find middle ground by analysing with each party its expressed position and making it reflect on that and the other parties’ position. It allows the mediator to bring the necessary skills of evaluation and facilitation to find solutions which have not been considered. These may include such things as bringing other commercial arrangements or disputes into the discussion or, in this case, resolving the consequences of termination or finding future opportunities for the software or licences.

“The published success rate of mediation (see para 13.03 of the Jackson ADR Handbook) shows that generally mediation is likely to be successful. In this case for the reasons set out above, I consider that this is a dispute between parties where a mediated settlement would have been likely. There were therefore reasonable prospects of success.”

The clear message from this case is that parties should consider ADR in all cases or face financial penalties.

So on a practical level what should litigants do? Mediation can sometimes be expensive and where parties are litigating against say litigants in person there needs to be a financial reality check to ensure that litigation is being progressed and settled in the most cost effective way. It may also seem ‘unfair’ that there is an obligation to mediate where it is felt that the prospects of success are overwhelming.

Many people still think of mediation as a ‘one size fits all’ where mediation starts at 10am in the morning and the parties hammer out an agreement in the early hours of the morning. Alternatively the case is not settled and each party meets its own costs running into several thousands of pounds with those costs being irrecoverable in the litigation.

However mediation has evolved and there are a number of options to choose from and parties can tailor the choice of mediation to the circumstances of the case depending on the nature and value of the litigation, the financial circumstances of the litigants and the merits of the litigation. This can be particularly valuable when looking at claims with a lower value or where it is likely that the opponent is not going to be ‘good for the money’ when looking at the potential recoverability of costs or damages.

We can therefore look at mediation which will accommodate the following:

  1. A telephone mediation which will be limited to a certain period of time and with a limited amount of documentation being provided to the mediator. Telephone mediations can be extremely useful for low value claims and have a good success rate for instance in landlord and tenant and debt claims.
  2. A guillotined mediation in terms of either amount of documentation or time. Parties can be limited in terms of how long their position statements should be or how long the opening statements at the mediation should be. The parties can agree how long the mediation bundles should be limiting the documentation to the key documents involved in the dispute.
  3. Mediators will take account of the time pressures people work under and early evening guillotined mediations are becoming more common. Parties can meet after work between say 5pm and 8pm to discuss their differences.

By looking at these different types of mediation parties to litigation can make a significant saving in cost, looking at hundreds rather than thousands of pounds in mediation costs but without losing out on the quality of experience of mediator. In addition by suggesting one of these options and explaining the reasons for making that suggestion, it is likely that the court will take the view that the question of ADR has been looked at reasonably by that party and hence any possible cost risk has been minimised.

Therefore although the message is that mediation should be considered in all cases, whatever the prospects of success, it is important to bear in mind that there are a number of options available to litigating parties and a suitable, cost effective option can be found.