Judges encouraging parties to attempt to mediate their differences is certainly not a new phenomenon. However, the degree to which parties can be coerced into mediation is subject to the constant evolution of judicial guidance. This article seeks to illustrate the current state of play by bringing to light some recent developments.
The Halsey guidelines and PGF II
Last November, we reported on the case of PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288, in which it was held that silence in the face of an invitation to participate in Alternative Dispute Resolution ("ADR") is, as a general rule, itself unreasonable and therefore liable to provoke judicial sanction on costs.
The case effectively extended the guidelines from the Court of Appeal in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which set out the following factors that will generally be instructive as to whether or not a party was unreasonable in refusing to mediate:
- The nature of the case – The courts recognise that not all disputes are suitable for mediation (although such cases are exceptional);
- The merits of the case - A party might refuse to mediate because it has the utmost confidence in the strength of its case. If such a belief is reasonable, it may justify a failure to mediate;
- Other settlement methods have been attempted – It is relevant if other offers to settle have been made by the party who refused to mediate;
- The costs of mediation would be disproportionately high – The courts are naturally concerned that costs remain proportionate in relation to the amount in dispute;
- Delay – The time at which mediation is proposed is a relevant factor, so that a party refusing to mediate in the face of a proposal "at the court's door" may well escape the court's wrath;
- 6. The mediation's prospect of success – The Court also recognised that parties are entitled to proceed to litigation if the mediation objectively stands no chance of succeeding.
Recent Decisions
This month has seen two decisions of note in this area, both in the High Court, and both underlining the importance of the above guidelines, with one in particular raising the question of how far a judge may go to compel the parties to engage in ADR.
In Northrop Grumman v BAE Systems (Al Diriyah C4I) Limited [2014] EWHC 3148 (TCC), BAE successfully defended the claim before Mr Justice Ramsey in the Technology and Construction Court. On the issue of costs, Northrop Grumman argued that BAE's costs should be reduced by 50% to reflect the fact that it had unreasonably refused to take part in mediation, notwithstanding the fact that BAE had prevailed in court.
In considering this argument, Ramsey J adopted the Halsey guidelines set out above and found that none of them weighed in BAE's favour apart from the fact that other settlement methods had been explored, and that BAE considered its own case to be watertight. The parties had attended a without prejudice meeting, following which BAE made an offer to settle that, had it been accepted by Northrop Grumman, would have represented a better result for the claimant than that which it achieved at trial.
The judge declined to punish BAE on the issue of costs, although he noted he ordinarily would have done so. In this case, BAE's unreasonable refusal to mediate was somewhat balanced out by Northrop Grumman's failure to accept a without prejudice offer to settle, which it then failed to beat at trial. The decision therefore confirms that arguing against mediation will prove a difficult mountain to climb.
In another case, Mr Justice Norris presided over a neighbour dispute that made its way to the High Court in Bradley v Heslin [2014] EWHC 3267 (Ch). The case concerned a driveway shared by both the Bradleys and the Heslins, leading to their respective properties. The driveway was served by a set of security gates, which one party wanted closed and the other left open. The previous system of neighbourly cooperation had broken down following a change of ownership, and the escalation of the matter culminated with the parties facing each other down in the High Court.
Unsurprisingly, Norris J admonished both sides for allowing such a dispute to intensify, observing that sensible neighbours would have got together to iron out differences without ever coming near a court. More interestingly, he commented as follows:
"I think it is no longer enough to leave the parties the opportunity to mediate and to warn of costs consequences if the opportunity is not taken. In boundary and neighbour disputes the opportunities are not being taken and the warnings are not being heeded, and those embroiled in them need saving from themselves. The Court cannot oblige truly unwilling parties to submit their disputes to mediation: but I do not see why, in the notorious case of boundary and neighbour disputes, directing the parties to take (over a short defined period) all reasonable steps to resolve the dispute by mediation before preparing for a trial should be regarded as an unacceptable obstruction on the right of access to justice."
In other words, he accepted that mediation must remain a voluntary process but made clear that he saw no obstruction in theory to a Court validly ordering the parties to take "all reasonable steps" to mediate the dispute before taking litigation forward.
Conclusion
Whilst Norris J's comments were apparently limited to boundary and neighbour disputes, they may well have wider significance. Parties should therefore not be surprised if they are ordered, during the course of litigation, to take all reasonable steps to pursue mediation. In simple terms, a party still cannot be forced to mediate, but they could be ordered to try.
The message from the cases discussed above is clear: if you choose not to mediate, your reason had better be stronger than ever before.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
