Any decent mediator will focus on the positive reasons for mediation (though in reality even some of those positive are simply, and quite necessarily, the flipside of the negatives). Reuben Glynn, Managing Director, PIC, looks at both the pull and push factors.
The Pull Factors
Mediation is at the heart of litigation; one only has to consider the pre action protocols for clinical negligence and personal injury for evidence of this. Enshrining the term ‘litigation should be a last resort’ into the pre action protocols is no accident. Neither are references to using mediation, arbitration or early neutral evaluation – all built into the protocols.
It is true to say that mediation has had many false dawns in the past but in the current climate there seem to be more reasons than ever to embrace alternative forms of dispute resolution.
In much of this article we focus on mediation in costs disputes but much of the principles of mediation apply across all case types.
Court Fees and Costs of Assessment
Mediation is unlikely to be a useful or proportionate exercise in smaller costs cases, where by extension the court fees for detailed assessment are lower.
However, the higher the amount in dispute, the higher the costs of assessment tend to become and so the more appropriate mediation is likely to be.
In the latest fees hike it now costs £4620 for the privilege of a Judge for the detailed assessment of a bill in excess of £300,000 and £6160 for a bill in excess of £500,000. The prospects of avoiding those eye-watering fees alone would be enough for many to consider alternatives.
When one factors in the other costs of assessment, such as points of dispute, points of reply, negotiations, bundles for requesting assessment, bundles for the hearing and cost of advocates, it quickly becomes apparent there is a proportionality argument in considering a mediated settlement before costs of assessment escalate.
Therefore, subject to a suitable mediation agreement and mediation price it will often make financial sense to attempt a mediated settlement before further costs of assessment are incurred.
Virtually every Court in the country seems to be running to a delayed timetable.
The RCJ had to take a four-month break from costs budgeting to try and make some impact into its backlog of cases.
The Senior Courts Costs Office has recently imposed a back up listing system that has already seen some assessment vacated, just two days before they were due to take place and pushed back to a later month.
Numerous regional Courts are finding it difficult to find time to list full day or longer detailed assessments before a suitable judge without making the parties have to wait several months for a date.
This all contributes to keeping receiving parties out of pocket and exposes paying parties to larger interest payments.
Mediation is therefore a way of avoiding delays in achieving final resolution to a costs dispute given most mediation companies can swiftly appoint an accredited mediator to your case and are usually flexible as to time and location (unlike the courts).
The Ejector Seat
One of the comforting things about engaging in a mediation is that you can choose to end the mediation at any time. In fact, even if a verbal agreement has been reached there is no mediation agreement until the participants to the mediation have formally agreed the wording of the agreement, put that into writing and signed and dated the document. This is not a consent order but rather a contract. It is very much yours and your opponent’s agreement.
However, until you have put pen to paper you are free to end the mediation and return to traditional negotiations or indeed press ahead to a hearing. You remain in control at all times.
The Role of the Mediator
Depending on who you use some mediators will facilitate an agreement and others will take a more active role (evaluative mediation).
The first and most important role of the mediator is to ensure that those who have attended the mediation do so with an authority to settle. Without an authority to settle the mediation will not be able to achieve its intended purpose.
A ‘facilitative mediation’ is very much as it sounds and will see the mediator encourage the participants to talk openly about the strengths and weaknesses of their case. The mediator may ask probing questions which are designed to get the participants thinking in different way about their own case. However, you are not compelled to answer any questions you do not want to in these ‘open sessions’.
The mediator will keep the participants in open session for as long as possible but where it becomes apparent that some private one-to-one sessions may assist, the mediator will offer that as an option.
In private sessions the mediator will ask more probing questions, likely playing devil’s advocate in order to identify the strengths and weaknesses in your case. The important thing is that anything said in a private session remains private. This can at times mean that a mediator will be in possession of information from both sides which would make achieving a compromise relatively easy but unless the participants wish to repeat private comments in open session, the mediator must honour the confidentiality of the private sessions.
Wherever possible, the mediator will seek to return to open sessions because ultimately a compromise is far more likely to be achieved face-to-face. However, a mediator will be just as happy to pass proposals from one party to another.
Whilst it is common to hear parties profess that facilitative mediation doesn’t work and that the exercise would likely be over in 10 minutes, more often than not, the results are quite the opposite. Hours are spent and agreements are achieved (or, commonly, an agreement is reached within days after an initial apparent failure to secure a mediated settlement).
An ‘evaluative mediation’ is where the parties invite the mediator to become much more involved. In effect this is where the mediator acts in a matter similar to an assessor. It is open to the parties to seek an evaluative mediation from the outset or move to an evaluative phase after exhausting facilitative mediation first. As such, the mediator will still use the techniques outlined above but will then perform their own ‘assessment’ of what the costs are worth and deliver that view in open session before the parties.
An evaluative mediation is not binding and the sums discussed remain private to the parties (i.e. they may not be used to persuade a Judge at a detailed assessment). Either party can reject the evaluative mediation, or it can be used as a trigger point to engage in further progressive discussions to move towards an agreement that suits all the parties.
For example, it is plausible that an evaluative mediation may exceed a receiving party’s own expectations such that they would in fact be willing to agree a lower sum in any event.
An evaluative mediation of course does require different skills to a facilitative mediation, including a great deal of experience of costs law and up to date experience. Yet, with the right mediator, that neutral experienced voice giving their view can often be the final push needed to secure an agreement.
The Push Factors
If not convinced by the pull factors, then the number of push factors are stacking up as we receive an increasing number of penalising decisions from the courts.
The Courts are showing an increased appetite for hitting the purses or wallets of those who unreasonably refuse to engage in forms of alternative dispute resolution. As such, we would invite all of our clients to be aware of the costs penalties which could be imposed.
There is a growing body of case law to show that costs sanctions are imposed on Defendants for refusing to enter ADR after it has been offered.
Increasingly, we have also seen case management directions impose a heavy burden to offer mediation and require parties refusing mediation to explain in a witness statement why they refuse it.
Mediation in costs and the implications of rejecting an offer to mediate, is something anyone dealing with costs ought to be aware of.
In the case of Reid v Buckinghamshire NHS Trust  EWHC B21 (Costs) Master O’Hare stated:
“If the party unwilling to mediate is the losing party, the normal sanction is an order to pay the winner’s costs on the indemnity basis, and that means that they will have to pay their opponent’s costs even if those costs are not proportionate to what was at stake. This penalty is imposed because a court wants to show its disapproval of their conduct. I do disapprove of this defendant’s conduct but only as from the date they are likely to have received the July offer to mediate.”
Master O’Hare went on to state:
“In respect of the (losing party) defendant’s failure to mediate, I think the only sanctions available for me to impose are to award costs on the indemnity basis and to award interest on those costs from a date earlier than today, today being the normal date. I am persuaded that the defendant’s refusal to mediate in this case was unreasonable. It took them six weeks to reply to the offer (to mediate) and they then replied in the negative. But nevertheless I do not think I should impose the indemnity basis penalty from a date earlier than the date the defendants are likely to have received the claimant’s offer, and that is why, in item (iii) I said interest should run from 27 July, that is, some three days after the offer was sent.”
A more recent example is Bourne v Poznyak (2016) Costs.
In that case the claimant brought a claim seeking a declaration that he had a beneficial interest in a house and a café, both of which were owned by the defendant. The defendant had been in a relationship with the claimant and had lived with him for some of the duration of the relationship.
At the two day trial of the action, the claims were dismissed by HHJ Worster and in those circumstances one would ordinarily expect a usual costs order in the Defendant’s favour.
However, there had been an earlier case management direction from a District Judge which provided that:
“At all stages the parties must consider settling this litigation by any means of ADR (including mediation); any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal; such witness statement must not be shown to the trial judge until questions of costs arise.”
This is an increasingly standard direction that many of our clients will be familiar with.
The claimant had offered to mediate but the defendant had refused. Instead, the defendant filed a statement stating that she considered the claim to be spurious and that the only basis upon she would be willing to attend mediation was if the claimant intended to offer her repayment of any of the monies allegedly withdrawn from her business.
In effect, this was a refusal by means of imposing unreasonable terms of the acceptance of any offer to mediate.
With respect to the award of costs, the claimant successfully argued that regardless of how the defendant viewed the claim and, notwithstanding the fact the defendant had been proved right at trial, this was a case suitable for mediation. Different outcomes were certainly plausible and mediation would have had a reasonable prospect of success.
As a result, whilst HHJ Worster awarded the successful defendant their costs of defending this action, the amount was then to be subject to a 50% reduction due to the defendant’s refusal to mediate.
As such, a successful party had their entitlement to costs halved due to a refusal to mediate on reasonable terms, even where the successful party believed their refusal was not unreasonable.
This treatment of a successful party followed a similar approach taken in the 2015 case of Laporte v Commissioner of Police of the Metropolis  EWHC 371 QBD.
Here, another successful party was denied a portion of their costs (in this case a third) as a result of a failure to engage in mediation.
As the bank of decisions mount up (and more key decisions are expected before the turn of the year) it is increasingly the case that the Courts are willing to impose penalties on any party who unreasonably refuses mediation.
Where you are the receiving party, this could mean you are then limited in what percentage of costs you can recover (whether that be main action or costs of assessment).
Where you are the paying party, this could mean an indemnity costs order for costs incurred after the date of your refusal.
Generally, it ought to be noted that the court will treat silence in response to an offer of mediation in the same way as a refusal. Therefore, simply ignoring an invite to mediate is no solution to avoiding penalties.
It is of course important to stress that there will always be examples of a reasonable refusal to mediate. The courts do not expect mediation at all costs and on all cases. You must however be confident that you can display your reasonableness where you refuse an offer to mediate.
PIC actively promotes mediation on appropriate cases and we can assist you in either finding a suitable mediator, or representing you at a mediation. If you would like to contact us regarding any cost matter or related mediation concern, please click here or call us now on 03458 72 76 78.