Fair to middling
19 April 2004
While commercial litigators are not quite extinct, there is no doubt that the litigation landscape has completely altered since the Woolf reforms and the introduction of the Civil Procedure Rules (CPR) in April 1999.
There has been an increased awareness of alternative dispute resolution (ADR) and in particular mediation. The latest statistics from Cedr Solve confirm the growth of mediation, with an overall increase of 35 per cent in 2003 to an all-time high of 631 cases. We are told that 81 per cent of cases came to mediation through mutual agreement between the parties. This is an increase on last year, suggesting that more and more organisations are coming to the mediation table with no direct intervention needed from the courts.
This is welcome news, as ADR organisations have been asked to make submissions concerning first whether mediation should be compulsory, and second in what circumstances cost sanctions should be awarded.
Anybody who has attended an introductory talk in relation to mediation will have grasped the basics. The first is that mediation is a voluntary process. The second is that the process is entirely without prejudice and confidential to the parties. The third is that the mediator does not adjudicate upon any issues unless invited to do so by the parties. One of the benefits of the new regime is that it encourages parties to settle and provides the solicitor with an opportunity to persuade their client that the sensible course of action is to attempt to settle a dispute as opposed to litigate it. An invitation to attend a meeting to attempt to settle a dispute is no longer taken as a sign of weakness. In many cases mediation succeeds where without prejudice settlement negotiations fail. The without prejudice rule provides an umbrella under which the parties can hopefully negotiate a settlement. Mediation extends this so that the proceedings are conducted on the basis that they are to remain without prejudice and confidential as between the parties and indeed the mediator. This gives the parties the confidence to approach a mediation. Mediation, however, is neither a substitute for negotiation nor indeed litigation. Each have their own place in the process.
The overriding objective of the CPR is to enable the court to deal with cases justly, which includes dealing with the cases in ways that are proportionate to the amount of money involved, the importance of a case, the complexity of the issues and the financial positions of the parties. To achieve the overriding objective, the court is under a duty to actively manage cases, which includes encouraging the parties to use an ADR procedure if the court considers it appropriate, and indeed the court is there to facilitate the use of such procedures.
There can be no objection to that objective, in principle. The question is: how and to what extent will the court encourage parties to mediate in the future? In Susan Dunnett v Railtrack plc (2002), Lord Justice Brooke emphasised the role of the court in facilitating some form of ADR and the obligation of the parties to seriously consider ADR to settle the dispute. He penalised Railtrack on costs for its refusal to consider mediation or arbitration.
Dunnett was followed by Hurst v Leeming (2003), where the court set out guidelines when considering whether or not a party’s conduct had been unreasonable. In Hurst, Mr Justice Lightman decided that cost sanctions should be imposed unless the party rejecting the proposal to mediate could show that the mediation stood no reasonable prospect of success. Judge Lightman had previously advocated that the court should go further and enquire into a party’s conduct in relation to the actual mediation process should the mediation fail and the case then proceed to a trial.
Dunnett and Hurst were followed by a series of decisions where one party or another argued that the opposing party had acted unreasonably in refusing to mediate a particular dispute. The position has been redressed as a result of the decisions in Valentine v Allen (unreported) and Allen and Corenso UK Limited v Burden Group plc (2003). In Corenso, the court took the view that ADR is not synonymous with mediation and that as long as the parties were genuinely willing to try to resolve the dispute by some form of negotiation or ADR, then the rejection of one particular form, for example mediation, would not result in automatic cost penalties.
This latter approach is to be preferred to any move towards making mediation compulsory. Why should any party be obliged to embrace a process in which it has no confidence? If mediation were to be made compulsory it would undermine the process and lead to a number of mediations being conducted when one or another of the parties has no genuine desire to resolve the dispute by this method. If in those cases the court has ordered that the mediation take place, the court may want to investigate why the mediation has proved not to be successful. In these circumstances there will have been no refusal to mediate, otherwise the party will suffer the consequences of a costs sanction. But will the court then start inquires into the actual conduct of the parties and will it enlist the assistance of the mediator in order to assess this? If it does it will risk undermining the mediation process, the confidence that the parties have in the process and the success rate of mediations so far. It will also undermine the without prejudice nature and the confidentiality of the process. There is a danger of the mediator becoming the adjudicator as to the genuineness of one or the other party to a mediation and their conduct throughout the course of the mediation.
In applying any cost sanctions in respect of the behaviour of a party during the course of a mediation, the court will be breaking new ground. Under CPR 44, the court only has power to consider the conduct of the parties both prior to and during the course of the litigation. It does not allow the court to breach the without prejudice rule and consider the conduct of the parties during either without prejudice negotiations or a mediation convened by the parties voluntarily or at the direction of the court.
At the moment, a mediator can say to one party that anything discussed with them will remain confidential until such time as the mediator is released from their obligation to keep that information confidential. If a court might inquire as to the conduct of a party, the mediator will have to add a very hefty health warning in relation to the process – and indeed a hefty insurance policy. Any erosion of the without prejudice rule that prevents the court from looking at without prejudice material unless it is produced on the basis that it is “without prejudice save as to costs”, should be resisted at all costs.
David Parkin is head of Berwin Leighton Paisner’s commercial/corporate dispute resolution group