It’s good to talk

Commercial enterprises thrive on saving time and costs, which is why mediation is threatening to take over from traditional litigation.

It’s good to talkCommercial organisations tend to be intensely competitive, shy of adverse publicity and busy, with management and staff focused on securing new ­business. They seek to win and retain ­customers and not to alienate them. Resources are allocated and money ­prioritised towards business development, and the in-house and external lawyers are paid to keep the company out of the courts, not in them.

This focus neatly encapsulates the ­reasons why there should always have been an alternative dispute resolution (ADR) process. One of the most significant drivers for any business is to minimise expenditure. Preparation and appearance costs for ­merely an injunction in the courts can run to between £15,000 and £25,000 for each party. A mediation will be about 10 per cent of that sum. In the ADR v Litigation match, ADR scores the first and significant goal.

Actually, almost the entire match is one-sided in favour of ADR. Management time spent on disclosure and the preparation of witness statements is not management time well spent. Preparation of a key bundle of documents and a short statement setting out each party’s position for a mediation hearing can be easily accomplished ­internally or delegated to external lawyers.

A senior management day spent in mediation is infinitely advantageous to weeks or months spent in court. Discussions around a table brokered by a ­neutral third party may result in ­settlement terms of a ­dispute being well outside what any court could award. Indeed there are cases where such disputes have been mediated after trial because the silks involved were not able to work out what the damages would be as some of the settlement terms are outside the court’s jurisdiction. There are many other advantages in favour of ADR and as long as ­potential litigants look not to their legal rights but to what is in their best commercial interests in resolving the dispute quickly and easily, ADR will continue to thrive.

Mediation has generally been the ­accepted form of ADR since it became an ­established part of the legal landscape at the end of the 1990s. There are others. The most usually recognised is the early neutral evaluation (ENE), where a non-binding opinion is rendered by a neutral third party. Expert determination enables a binding opinion to be given and adjudication is a well-worn method of solving particularly complex construction disputes. However, and slightly surprisingly, the ‘mini-trial’ process, where presentations are made to a neutral and a senior executive of each party who then resolve the dispute, is rarely used.

Many of these dispute resolution ­processes are neither distinct nor mutually exclusive. For example a mediator could act as the neutral third party retained to ­mediate on one aspect of a dispute and then subsequently provide an ENE written opinion on the interpretation of another aspect of the contract between the two parties.

But how do the courts react to ADR? The starting point now is Halsey v Milton Keynes General NHS Trust (2004). The principles can be summarised into six points:

The courts cannot order mediation in the face of a flat refusal to mediate but should encourage mediation
If one party made it clear at an early stage that it did not wish to mediate, the court could order a stay of proceedings to enable them to rethink.

The court could warn a party that a refusal to mediate might have adverse costs ­consequences even if they were successful.

The court can refer a party to a suitable ADR organisation.

There is a general presumption that the successful party receives its costs and it is up to an unsuccessful party to displace that presumption. This would be done on the basis that the other party had unreasonably refused to mediate.

In deciding whether a party had acted unreasonably, the courts should bear in mind the advantages of ADR over the court’s own process and have regard to all the circumstances of the case.

With the court putting an emphasis on ADR over litigation, does that mean the latter is on the way out? Not at all. There are many cases where one or both parties refuse ADR even though it would appear to be in both their interests. Mediations fall through despite the normally high success rate, which, according to the Centre for Effective Dispute Resolution, stands at 88 per cent. There are instances of where mediation is ­simply inappropriate, such as ­statutory interpretation.

Litigation, with all its costs and time implications, will ­survive, and the ­commercial bar should participate enthusiastically in both forms of resolution.

Graham Cunningham is a barrister and mediator at Hardwicke Building