Speech therapy

It is important to consider mediation in property disputes – not least because the row is often with a neighbour. By Stephen Shaw

Most of us in practice will have come across opponents whose attitude to litigation is guided by the advice: “If all else fails, try negotiation.”

The encouragement of alternative dispute resolution (ADR) in recent years has made inroads into this position, but there remains a residual perception that clients’ needs are best served by this ‘macho’ approach to conflict resolution, and that non-combative alternatives are in some way a demonstration of weakness.

There is undoubtedly a proportion of cases requiring a firm stance and with minimal scope for avoidance of litigation. However, these cases must surely be in the minority. Indeed, in the past month the Court of Appeal has expressed the view – albeit in a family case – that “there is no case, however conflicted, which is not potentially open to successful mediation, even if mediation has not been attempted or has failed during the trial process”
(Al-Khatib v Masry & Ors (2004)). There are compelling reasons why property litigation is especially well suited for mediation.

The advantages

One of the advantages of litigation in the property context is that often (but by no means always) it brings certainty. Litigation is an adversarial form of dispute resolution that traditionally produces a ‘winner’ and a ‘loser’, but is this always in the interests of the clients?

Within the property context, parties will often have to continue working with each other, notwithstanding the fact that a particular battle has been either ‘won’ or ‘lost’. In the commercial property context, this will typically be the case if the relationship between the parties is that of landlord and tenant, contractor or developer, or professional adviser and client. Certainty is sometimes achieved through litigation, but at the high cost of the complete destruction of the parties’ working relationship. In the residential context, the desirability of maintaining if not a cordial, then at any rate a workable, relationship is often just as acute, and sometimes more so. Again the parties may be in a landlord and tenant relationship having frequent contact with each other and the dispute may be one between neighbours or involve a boundary controversy. So how much more desirable might it be for the parties themselves to have a resolution of such disputes facilitated by a neutral intervener who assists them in finding their own solution with which they can work in the future, rather than having a resolution imposed upon them by a third party and which may shut out any prospect of future cooperation?

The Civil Procedure Rules

Civil Procedure Rule (CPR) 1.4(2) states in terms that 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.”

Rule 44.5(3) provides that, when considering the factors to be taken into account in deciding the amount of costs, “the court must also have regard to the conduct of all the parties, including in particular conduct before, as well as during, the proceedings; and the efforts made, if any, before and during the proceedings in order to try to resolve the dispute”.

These rules, and other moves to promote ADR, and perhaps in particular mediation, have generated some judicial comments as to the circumstances in which the courts might impose costs sanctions against even a successful litigant on the grounds that the litigant refused to take part in some form of mediation or other ADR.

All previous decisions on the topic need to be read in light of the careful and comprehensive judgment of Lord Justice Dyson in the conjoined appeals of Halsey v Milton Keynes General NHS Trust and Steel v Joy and Halliday (2004). The major point arising out of the case is the ruling that the courts have no power to compel unwilling litigants to refer their disputes to mediation. The court held that even if such jurisdiction existed, it would be difficult to conceive of circumstances where it would be appropriate to exercise it, given that the hallmark of mediation, as with other ADR procedures, is that they are processes voluntarily entered into by the parties. While therefore compulsion is outside the jurisdiction of the court, nevertheless judges, if they take the view that a case is suitable for ADR, are not obliged to accept without further investigation opposition from the parties. Such opposition requires exploration by the judge and continued encouragement.

Furthermore, on the costs issue, the court reiterated that the general rule was that costs would follow the event and the burden would be on the unsuccessful party to show that the successful party had acted unreasonably in refusing to agree to ADR. Unreasonable belief that one’s case is watertight as a reason for refusing to mediate might indeed be visited by an adverse costs order. However, a reasonable belief in the certainty of success might in some circumstances justify a refusal to mediate.

What is reasonable and unreasonable is often a difficult judgement to make, but the court set out clear guidelines, which included consideration of the nature of the dispute, the merits of the case, the extent to which other settlement methods had been attempted, whether the costs of the ADR would be disproportionately high, whether any delay in setting up and attending the ADR would have been prejudicial and whether the ADR had a reasonable prospect of success. The Court of Appeal did indeed put unreasonably obdurate litigants on notice, saying that a refusal to embark on the ADR process at all, after an order encouraging such a process, would put the party at risk for that reason alone – the refusal would be deemed unreasonable and would be penalised in costs.

The future

While mediation will not suit every case, litigators now at least have to put on their check list the serious consideration of whether or not mediation or some other form of ADR is appropriate. Moreover, if the election not to mediate is made, and such election is made despite judicial encouragement to do so, the parties and lawyers will have to be in a position, if called upon at the conclusion of the case, to justify this decision. An inadequate explanation may lead to a conclusion that the refusal was unreasonable, which in turn can be visited in a painful costs order.

Pre-eminently, however, mediation should be seen as an opportunity rather than as a threat, and a chance to exploit the possibility of creative solutions for the benefit of all.

Stephen Shaw is a barrister specialising in property law at Lamb Chambers and is a mediator accredited by the Centre for Effective Dispute Resolution