Mediation - Long version


Published: 24 June 2004

Following the Woolf Reform, after which the new English Civil Procedure Rules ("CPR") came into force on 26 April 1999, quite a substantial number of judgments dealing with mediation have been rendered in England. Presently, these judgments have culminated in the very important Court of Appeal judgment in Halsey and Milton Keynes General NHS Trust [2004] EWCA (Civ) 576, which judgment was rendered on 11 May 2004.

Within this article which will primarily concentrate on the most relevant judgments regarding mediation, it will not be possible to concentrate in great details on the general aspects of mediation, and thus here it shall merely be emphasised that it seems to be accepted that on a general basis at average both a substantial amount of costs and time are saved if a matter is mediated instead of litigated.

The scope of the article is, seen in the light of the most important judgements and especially Halsey, whether the court can order the parties to have their disputes mediated as well as the consequences on costs if a party should not be prepared to engage in mediation.
1. The CPR 1.1 (1) stipulates "These rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly" and in CPR 1.4 (1) it is stipulated "The court must further the overriding objective by actively managing cases" and in CPR 1.4 (2) (e) "Active case management includes encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure".

Furthermore, regarding costs issues the CPR 44.3 (2) provides that "if the Court decides to make an order about costs (a) the general rule is that the unsuccessful party will be ordered to pay the cost of the successful party; but (b) the Court may make a different order". CPR 44.3 (4) provides that "in deciding what order (if any) to make about costs, the Court must have regard to all the circumstances, including - (a) the conduct of the parties". CPR rule 44.3 (5) provides that the conduct of the parties includes "(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol".

Specifically, regarding alternative dispute resolution ("ADR"), it is stipulated in the Admiralty and Commercial Court Guide, article G.1.8., that an ADR Order may be made in the form of Appendix 7 to the Admiralty and Commerical Court Guide. Such an order requires the parties to exchange lists of neutral individuals who are available to conduct "ADR procedures" to endeavour in good faith to agree a neutral individual or panel and to take "such serious steps as they may be advised to resolve their disputes by ADR procedures before the neutral individual or panel so chosen".

2. Prior to Halsey it would seem to have been the position that the court could order a party to have the dispute mediated, cf especially Shirayma Shokusan Co. Ltd v. Danovo Ltd [2003] EWHC 3006 (Ch) (Shirayma (No. 1)) and Hurst v. Leeming [2001] EWHC 1051 (Ch). However, following Halsey it has now been emphasised that the court does not have the power to order a party to mediation, but may strongly encourage a party to have the dispute mediated with the consequence that if such an encouragement is not followed, then the party not willing to have the dispute mediated may face severe costs consequences once the judgment is rendered.

Besides situations where the court may have encouraged the parties to have the dispute mediated, judgments have also been rendered in cases where such an encouragement framed as a suggestion was made by one of the parties, cf eg Leicester Curcuits v. Coates Brothers Plc [2003] EWCA Civ 333 and 290, in which judgment the successful appellant was deprived of costs of trial for pulling out of mediation shortly before trial.

Probably in order to further the overriding objective of the new CPR, in March 2001 the Government published its own Pledge to consider and use in all suitable cases where ever the other party accepts it and to insert ADR obligations into government contracts.

In Cowl & Others v. Plymouth City Counsil [2001] EWCA Civ 1935, on a general basis Lord Woolf stated inter alia "It is indeed unfortunate that, that process having started, instead of the parties focusing on the future they are insisting on arguing about what had occurred in the past", and further "Today sufficient should be known about ADR to make the failure to adopt it, in particular when public money is involved, indefensible".

In Kinstreet Ltd b. Balmargo Corporation Ltd CH 1994 G 2999, CH 1994 K 4271, HC 1999 02806 it was indicated that the court had the power to order mediation even when one party objects, but probably this judgment has now been overruled by Halsey.

Following the judgment in Shirayama (No.1) which however may to some extent have been overruled by Halsey regarding the court's possibilities to order mediation, prior to the Halsey a further judgment was rendered in connection with this dispute, ie the Shirayama Shokusan Co. Ltd v. Danovo Ltd [2004] EWHC 390 (Ch) ("Shirayama (No. 2)"). In Shirayama (No. 2) it was decided that in any event the court could not order a named non-party to attend a mediation by ordering a stay unless and until that named person attended the mediation so long as the party concerned was adequately represented, and in this judgment Mr Justice Blackburne did specifically state that otherwise the Human Rights Act, article 6, would potentially be engaged.

In the very well-known judgment Dunnett v Railtrack [2002] EWCA Civ 302 + 303, the successful party was deprived of all costs because that party had declined to use mediation recommended by the judge.

In Neal v. Jones Motors [2002] EWCA Civ 1731 and 1730, the successful appellant was deprived of GBP 5,000 costs for declining mediation recommended by the judge.

In Royal Bank of Canada v. Secretary of State for Defence [2003] EWHC 1479 (Ch) and 18141, the government department was deprived of costs for failing to honour the government's ADR Pledge to resolve legal disputes by ADR when they were possible. However, this judgment was specifically overruled in Halsey.

In Hurst v. Leeming Mr Justice Lightman said that the critical factor in his view was whether mediation had any real prospect of success judged objectively rather than subjectively, like he stated that if mediation can have no real prospect of success, a party may with impunity refuse to proceed to mediation on this ground, but added that refusal is a high risk course to take, for if the court finds that there was a real prospect, the party refusing to proceed with mediation may be severely penalised. This judgment was to a certain extent criticised in the Halsey as having an unduly narrow approach focusing on the nature of the dispute and leaving out of account the parties' willingness to compromise and the reasonableness of their attitudes. It is emphasised in Halsey that the burden of proof that mediation had reasonable prospect of success should be on the unsuccessful party, ie it is up to the unsuccessful party to prove that the successful party had unreasonably refused to agree to mediation.

In SITA v. Watson Wyatt: Maxwell Batley Part 20 Defendant [2002] EWHC 2401 (Ch), Watson Wyatt did not offer mediation with an open mind as to outcome and had to pay costs despite Maxwel Batley refusing to mediate. This judgment seems to be in accordance with the guidelines laid down in Halsey.

In McMillan Williams (a firm) v. Range [2004] EWCA Civ 294, where when granting leave to appeal the judge had specifically stated "The costs of further litigating this dispute will be disproportionate to the amount at stake. ADR is strongly recommended", where nevertheless the parties did not agree to engage in mediation, the successful party was deprived of its costs, and the Court of Appeal did in rather firm terms state as follows:

"I do not intend to review this tedious correspondence, some of the letters being pages long, in any detail. My attitude is best summed up as "a plague on both your houses". Of course negotiating positions are bound to be taken and asserted prior to and in the course of mediation, but the lesson to be learned from the process is that the true bottom line is never known until the mediation is concluded, usually successfully, and unusually when one party finally closes the door of the negotiating chamber. In my judgment this is a case where we should condemn the posturing and jockeying for position taken by each side of this dispute and thus direct that each side pay its own costs of their frolic in the Court of Appeal. I would allow the appeal with no order for costs" (emphasis added).

3. Having so far referred to what is considered to be the most important judgments as far as voluntariness and costs aspects are concerned, including some references to Halsey, once more it is emphasised that whereas Halsey may not have answered all outstanding aspects of mediation, clearly some aspects have been clarified. Doubtless, Halsey is considered to be a very important judgment, not only due to the fact that the first article on Halsey was written already on the day of the judgment, ie 11 May 2004, but also that less than 3 weeks after the judgment more than 50 or possibly 75 articles had already been written. This judgment was also considered to be very important by the Court of Appeal which is apparent from the fact that the Court of Appeal invited the Law Society and various ADR providers to join the proceedings as Interested Parties, and moreover at the hearing the Law Society and the ADR Group were represented by Queen's Counsels.

Besides commenting on the burden of proof, cf the comments made in connection with Hurst v. Leeming above and overruling Royal Bank of Canada v. Secretary of State for Defence as far as the government's ADR Pledge is concerned, the Court of Appeal accepted the submission of the Law Society that factors which may be relevant to the question whether a party has unreasonably refused ADR will include (but are not limited to) the following:

A. The nature of the dispute.
B. The merits of the case.
C. The extent to which other settlement methods have been attended.
D. Whether the costs of the ADR would be disproportionately high.
E. Whether any delay in setting up and attending the ADR would have been 
F. Whether the ADR had a reasonable prospect of succees.

Furthermore, a clear distinction was made between situations where mediation had "merely" been suggested by one of the parties, and situations where the court had encouraged the parties to have the dispute mediated to the extent that in the latter scenario that would weigh heavily in favour of penalising the successful party in costs.

Additionally, although already at this stage having been criticised to a certain extent, in Halsey it was stated that the Human Rights Act, article 6, does also support the view that a non-willing party cannot be ordered to mediation. Probably this aspect, ie the Human Rights Act, article 6, and voluntariness of mediation may be a subject for further discussions and possibly further judgments in the future.

4. Having so far outlined what is considered to be the present position as far as encouragement of mediation and possible costs implications are concerned, it should however be emphasised that also in Halsey it is clearly emphasised that mediation has come to stay and further that in the Court of Appeal's view "most cases are not by their very nature unsuitable for ADR".

Whereas neither of the cases referred to above were maritime cases, there is no doubt that many maritime cases are actually mediated, and the number of such cases are also presently increasing. In this connection it should be added that in January 2002, BIMCO published its new "BIMCO Standard Dispute Resolution Clause" in which for the first time BIMCO had included mediation in its dispute resolution clauses.

Although meditation by its very nature is a confidential process and thus it is very difficult to obtain factual information about mediations, it was encouraging last year to read about a successful high profile maritime mediation, ie the Sea Empress, cf Lloyd's List of 4 September and 22 October 2003 and the IOPC Fund's Press Statement of 20 October 2003. In or about September 2003, the High Court had scheduled the hearing - estimated to last 8 weeks to begin in June 2004 after which the parties agreed to try to have the dispute settled in mediation. The total amount of the claim involved was GBP 36,800,000 and in a two-day mediation in October 2003 the dispute was settled basis payment of GBP 20,000,000 by the Milford Haven Port Authority to the IOPC Fund, and following this settlement both parties expressed the view that they had been very satisfied with the mediation.

5. The title of this article is "mediation" and "mediation" is referred to several times above, but it is quite interesting to note that in English law there is no legal definition of the concept of mediation. As mentioned under item 1. above, in the CPR in the broadest sense encompassing the Practice Direction as well as the Rules properly the word "mediation" is not at all mentioned. There are "merely" references to Alternative Dispute Resolution. Thus it is up to the parties to agree amongst themselves how they wish to have their disputes "mediated" in which connection they are however able to obtain assistance from the various mediation providers, like eg ACI A Commercial Initiative for Dispute Resolution,  Centre for Effective Dispute Resolution, London Maritime Arbitrators' Association and Maritime Solicitors' Mediation Services. However, having said this, it will always be possible for the parties to make their own tailor-made mediation agreement, and we would be pleased to assist our members in that respect.

Having advised that there are no legal definition of mediation in English law, it should be added that there are broad definitions in eg:

A. UN Resolution 57/18 "Model Law on International Commercial Conciliation of the United Nations' Commission on International Trade Law" of 19 November 2002.
B. The EU Directorate - General for Justice and Home Affairs "Preliminary draft proposal for a directive on certain aspects of mediation in civil and commercial matters".
C. The Uniform Mediation Act published by the National Conference of Commissioners on Uniform State Laws at its annual conference held on 10-17 August 2001. So far this act has been enacted as law in Illinois and Nebraska and - it is understood - is pending in a number of other states.

6. Summarising the present position it is not possible for the court to order - but the court may strongly encourage - the parties to attend to mediation and it may have severe costs consequences for a party declining to engage in mediation even though it will be up to the unsuccessful party in the litigation to prove that the successful party had unreasonably refused to attend the mediation, cf especially Halsey.

In any event there is no doubt that mediation has come to stay, and that the parties are well advised always also to consider alternative dispute resolutions including especially mediation, and we shall be pleased to assist our members with any aspects of mediation including but not limited to drafting mediation agreements, assisting our members at mediations and in general advising on all aspects of mediation.

Within the scope of this article, it has not been possible also to discuss concretely how mediations are or may be conducted, an aspect which has not been dealt with by the court, but surely which has been dealt with at very great length in the literature where there are various different schools of mediation like eg commercial-settlement driven, cognitive, transformative, humanistic and narrative styles of mediation, and having experts employed also within the field of mediation we will also be very pleased to answer any specific questions our members may have regarding these more scientific aspects of mediation.