How onerous is the obligation to advise a client to consider mediation in modern court litigation?
The obligation to advise on mediation under the Mediation Act 2017 is increasingly significant in modern court litigation. Courts are emphasising compliance and imposing cost penalties for failing to engage in mediation. This trend highlights the necessity for solicitors to provide thorough advice on mediation, ensuring clients make informed decisions and promoting alternative dispute resolution ("ADR"). As the legal landscape evolves, the role of mediation in achieving efficient and amicable resolutions becomes ever more critical, benefiting both litigants and the legal system alike. The future will likely see even stricter enforcement of these obligations, highlighting the ongoing importance of mediation in the wider disputes process.
Obligations under the Mediation Act 2017
Part 3, section 14 of the Mediation Act 2017 (the "Act") imposes specific obligations on practicing solicitors but is silent on the role of counsel. Solicitors must advise clients to consider mediation as a means of resolving disputes, provide information about mediation services, and explain the benefits of mediation. Clients should be advised that mediation is voluntary and may not be suitable if their safety or their children's safety is at risk.
Additionally, clients must be informed about relevant legal matters as per section 14(2) and (3) and sections 10 and 11. Section 14(2) of the 2017 Act requires a solicitor to swear a statutory declaration confirming that obligations under section 14 (1) have been discharged with respect to both the client and the proceedings to which the declaration relates, and that declaration must be filed in court when issuing the proceedings. Failure to file the declaration may result in the court adjourning the proceedings under section 14 (3) pending compliance. Sections 10 and 11 of the Act incorporate provisions on confidentiality of the process, and the enforceability of mediation settlements, respectively.
The Court's Role in Encouraging Mediation
Section 16 allows the court to invite parties to consider mediation and the court may adjourn proceedings to facilitate this. Section 21 permits the court to consider unreasonable refusals to mediate when awarding costs, a provision that has grown real teeth in recent months.
Effective from 24 June 2024, Practice Direction HC127 requires a solicitor, when completing a Trial Summary Form, to confirm that they have complied with their obligations under section 14 (1) of the Act and to specify the date when those advices were given when seeking a trial date in the non-jury list.
Recent Case Law in Ireland and the UK
Byrne, Hyslop & Kerrigan v Arnold1
In this recent High Court decision, Kennedy J2 imposed a cost penalty when making a final costs order. This order followed complaint being made by the unsuccessful defendant that the plaintiff's solicitor's had failed to comply with the statutory obligation enshrined in section 14(1) of the Act to advise on mediation prior to commencing the proceedings.
The court warned how the statutory obligation to advise a client about the benefits of mediation prior to litigating was "not unreasonable or burdensome" and was critical of the plaintiffs' solicitor for failing to do so. Uniquely, the court imposed a 5% reduction on costs permitted to the successful plaintiff; noting that compliance with section 14 of the Act assisted clients in making informed decisions, and more critically warning practitioners that even stricter penalties could be imposed into the future.
The court also considered section 168 of the Legal Services Regulation Act 2015 (the "LSRA") and order 99, rule 2(3) of the Rules of the Superior Courts, in assessing its jurisdiction to award costs on interlocutory applications and was satisfied it had the authority to consider costs within its inherent jurisdiction, when assessing how parties had conducted their cases.
Interestingly, the issue raised did not relate to an alleged unreasonable refusal to engage in mediation but the basic failure of the solicitor to meet the statutory obligation to inform the client of the option/benefits of mediation, before issuing proceedings. The court noted that the requirements of section 14 were not unreasonable or burdensome and were in the best interest of the client. It was accepted that this did not obligate parties to mediate but merely to explain the options and noted the appropriateness of mediation in the factual circumstances of the case for clients to make informed decisions.
It was also accepted by the court that the plaintiff might not have engaged in mediation or proposed mediation, this fact did not excuse non-compliance with the Act.
The court held that even if there was a minimal (ie 5%) prospect of engagement in mediation from the outset that the plaintiffs should have been encouraged to consider this option. If successful, it could have opened significant benefits for the parties and for the courts in terms of minimising the significant costs actually incurred. It was further noted that even if mediation was not appropriate when initiating the proceedings compliance with section 14 would have ensured a 'seed is planted' for consideration of mediation, at a later date.
It was accepted that the plaintiffs had largely succeeded at trial, and were entitled to their costs, but due to the failure to comply with the statutory obligation in section 14 the court was satisfied to impose a 5% deduction on the plaintiff's actual entitlement to costs.
The case not only highlights the importance for solicitors to comply with their statutory obligations under the Act but is a stark warning that the onus falls to the solicitors profession alone.
Similar and stronger dicta have emanated from the UK courts, as seen below.
Northamber PLC v Genee World Ltd & Ors (Rev1)3
The English Court of Appeal considered the costs consequences for parties who remain silent in the face of an offer to mediate. Here the court had made a case management order directing the parties to consider settling by means of ADR "at all stages" and stating, "any party not engaging in any such means proposed by another must serve a witness statement giving reasons within 21 days of that proposal".
The claimant's solicitor sought mediation and the Defendants' solicitor responded saying it would take instructions, but never formally requested to the invitation to mediation, and did not deliver the required witness statement explaining the reasons for not engaging upon it.
The High Court had earlier dismissed an argument that a failure to engage in mediation could result in a costs sanction, noting that the offer in question was a "half-hearted attempt" to suggest mediation at a late stage after "very considerable costs" had already been incurred. On appeal, the Court of Appeal, found that the trial judge had erred and that the failure to respond to the mediation offer was unreasonable conduct, making a costs allowance to reflect this fact and increasing the claimant's cost recovery by 5% to 75% against one of the defendants.
Conway v Conway & Anor 4
The English Circuit Court provided an ex-tempore ruling on costs, following the successful defendants' failure to engage in mediation and reduced the costs recoverable by the successful Defendants by 25%.
As part of the substantive judgment, the trial judge observed at para 129:
"[o]ne matter that seriously concerns me is why the Defendants did not agree to mediation when it was put to them. The importance of mediation can never be over-emphasised... The Defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand."
Here the defendants had rejected the claimant's offer of mediation out of hand; where offers were made in 2022 and a year later in 2023, but both were rejected on various grounds including that the dispute was unsuitable for mediation and that the mediation would delay the final determination. After strong judicial encouragement to settle, a without prejudice offer to settle was also rejected after day one of trial, and thereafter the trial was adjourned with a further mediation offer being rejected.
The judge considered that the decision to refuse mediation, especially the first one, was misconceived and other refusals were unreasonable. The court rejected an argument that the defendants were almost certainly likely to win and consequently rejected the idea that the mediation offer had no merit whatsoever. There was nothing to demonstrate that a trained mediator could not have assisted in putting forward acceptable alternatives to settlement.
Future Implications
The Irish courts have yet to assess the impact upon a costs award where it is demonstrated that one party has unreasonably refusal to mediate – but it does seem that this may only be a matter of time before it is considered. Solicitors, in particular, should take care to demonstrate that they are taking a fair and transparent approach to offers to mediate and not reject such offers without providing a justification for doing so. Indeed, the Irish judiciary will undoubtedly be influenced in their thinking by section 169 of the LSRA, which permit courts to take various factors into account when deviating from the general rule that costs follow the event. This includes rejecting/ignoring settlement offers and unreasonable refusals to engage in mediation.
This evolving legal landscape further highlights the importance of proactive engagement in mediation to avoid potential cost penalties and the important role of the solicitor in the wider process.
Footnotes
1. [2024] IEHC 308
2. The case concerned the costs of two interlocutory motions relating to an intestate estate restraining the dissipation of part of the proceeds of the family home and dismissing an application to strike out the claim.
3. [2024] EWCA Civ 428
4. [2024] EW Misc 19
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.
