The Costs Risk Of Late Mediation
Posted on 29 January 2008 at 17:35
Last Friday the Technology and Construction Court decided a novel point. It held that a successful party in litigation might not recover some of its costs simply for delaying mediation. To date the cases have focused on punishing successful parties who have failed to engage in mediation at all. This latest case pushes parties not just to mediate but also to mediate as soon as the time is right.
The judge said that a successful party might suffer an adverse costs order "in an exceptional case … where there was a mediation but very late when its chances of success were very poor and … if it could be shown that the successful party unreasonably delayed in consenting to the mediation". However, no such order was made in the present case because:
There was nothing to show that the Defendants unreasonably delayed in consenting to the mediation. Both sides missed the critical moment to mediate if it ever existed. When the parties mediated only two months before trial they had already incurred extensive costs and their attitudes were hardened.
Even if there had been an earlier mediation it would not have had a reasonable prospect of success given the claimant’s uncompromising attitude. For instance he informed the mediator that one of the defendants was "a donkey" whom he had "under enormous pressure" and that the defendants collectively were "the clients from hell". It is unclear from the judgment how these comments were proven to the court given that if made during the mediation evidence of them would usually be inadmissible. It is likely that the claimant waived any privilege in the entirety of his mediation submissions to try to show that an earlier mediation might have succeeded.
The "successful" defendants (who incurred costs of over £123,000 in winning a judgment for £1,683) did, however, have a proportion of their costs disallowed to reflect the late abandonment of part of their case.
The mediator had been another TCC judge. He seems to have been appointed under the TCC’s pilot scheme in which trained judges became available to act as mediators. In the pilot’s first year, from June 2006, TCC judge-mediators were reportedly involved in just seven cases (of which six settled). A report on the pilot and its future is awaited. It remains to be seen whether the scheme will be taken further and, if it is, how it will fit into the Ministry of Justice’s reported plans for a national court mediation service.
Discerning when the time is right to mediate may be hard. As the judge observed: "The trick in many cases is to identify the happy medium: the point when the detail of the claim and the response are known to both sides, but before the costs that have been incurred in reaching that stage are so great that a settlement is no longer possible".
It will therefore often be hard to show that a successful party unreasonably delayed in consenting to mediation not to mention, in addition, that an earlier mediation would have had a reasonable prospect of success. It seems that only in the plainest cases will the courts punish successful parties who delay mediation. But the message to those to whom mediation is suggested is clear: delay at your peril.
18 January 2008
Article by Rupert Choat and Stephen Tester
This article was written for Law-Now, CMS Cameron McKenna