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Involved in civil litigation? Fail to mediate at your peril

In the case of PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288, Lord Justice Briggs found the dispute “eminently suited to mediation”. Claimant PGF’s offer to mediate was not taken up by the defendant, which Briggs LJ determined was an “unreasonable refusal” to mediate, requiring a costs sanction. The case now stands for the proposition that or a failure to respond to an offer to mediate may expose a litigant, including a successful one, to a potential costs order.

Some commentators say that judicial attitudes in general are changing, as lawyers coming to the bench now will have had more exposure to mediation in their own practice. It is also said that in certain kinds of civil litigation, particularly commercial litigation, mediation is now almost obligatory. Consider the recent case of Northrop Grumman Mission Systems Europe Ltd v BAE Systems (AI Diriyah C4I) Ltd (No 2) [2014] EWHC 3148 (TCC) where Mr Justice Ramsey held that it was unreasonable for BAE, the successful party, to refuse to mediate. On the facts of the case, this did not result in BAE paying costs, but arguably it lost the potential benefit of an earlier settlement offer on costs, so there was a sanction of some kind.

There are trends in mediation practice which may make it increasingly attractive to potential participants. One of them is flexibility which may involve adapting or inventing the process to be used for a particular dispute. This may permit more time to be spent on others, which stands in contrast to a trial where all allegations must be proved an in a sense enjoy equal airtime. This may also lead to costs-savings, permitting parties to be robust and pragmatic when it is to their mutual advantage.

There is a growing realisation that mediation can be successful by recreating the atmosphere of a settlement on the steps of the Courthouse. These circumstances are not so much trepidation about the judge and the slings and arrows of a trial so much as a gathering together of key stakeholders who have been briefed on the risks of litigation and have the requisite authority to make decisions.

Cutting against the characterisation of mediation as being increasingly part of the ‘litigation’ process, is a structure that can remove some of the heat of the disagreement at the start. Stephen King of Payne Hicks Beach explains: ‘I have noticed an increased use of dispensing with a joint opening session, in circumstances where emotions run high and where clashes can stoke up the fire rather than lead towards a resolution.’ It is a practice noted by others.

As with anything, mediation is in a state of on-going evolution. Some have noted a rise in evaluative mediation; where the mediator offers a view on the arguments. The Manchester Technology and Construction Court’s offer a judicial mediation pilot project, where judges act as mediators. They tend to be more evaluative in their style. There are some indications of success in the pilot.

The Courts are moving closer and closer to compulsory mediation. Where an offer to mediate is made, it must be taken seriously. Where there is a refusal and the issue of costs is raised consequently, it will be necessary to show cogent reasons why the refusal was justified.

 

Mr. Antony Marquis
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