Carrot and Stick – Mediation Use Evolving

Alternative Dispute Resolution (ADR) has been in existence for many years but was brought to prominence in 1999 when the Woolf Reforms were published. These reforms noted that the existing English civil law system was too adversarial as well as being  too costly and disproportionate to the value of the case. Two particular reforms noted in the report were the introduction of pre-action protocols and the use of  ADR, notably mediation, both designed to address the failings of the existing system and to provide quick, relatively cheaper and more effective justice for all.

Whilst the use of pre-action protocols was adopted, largely because there was no option given, the use of mediation as an alternative to litigation was slow to take off for a variety of reasons which are outside the scope of this article.

However, Lord Woolf must have been mindful of the slow take-up of mediation in 2001 when he heard the case of Cowl and Others v Plymouth City Council and he commented upon the use of traditional litigation in this low value case as follows :- “Without the need for the vast cost which must have been incurred in this case…….the parties should have been able to come to a sensible conclusion as to how to dispose of the issues which divided them. If they could not do this without help, then an independent mediator should have been recruited to assist. That would have been a far cheaper course to adopt. Today, sufficient should be known about ADR to make the failure to adopt it, in particular where public money is involved, indefensible.”

The stage was, therefore, set for the legal profession to consider the economics of litigation against mediation and whilst “noises” were made about possible cost sanctions being applied where litigation was inappropriate, it was not until the leading case of Dunnett v Railtrack (2002) was heard in the Court of Appeal before Lord Justice Brooke that these sanctions were actually applied.

On this occasion, Railtrack won their case at appeal and whilst under English law, costs normally follow the award, Lord Justice Brooke denied Railtrack their costs as they had refused to mediate when the lower court had suggested mediation should be attempted.

As an aside, Lord Justice Brooke became Sir Henry Brooke on retirement and has since become an accomplished mediator in his own right, also being elected as Chairman of the Civil Mediation Council. He admits, however, to undertaking no less than three training courses in mediation to rid himself of the habits of his lifetime in litigation.

The later case of Halsey v Milton Keynes General NHS Trust (2004) was used by some to suggest that Dunnett v Railtrack had been overturned since the unsuccessful Halsey was denied the same costs benefit despite requesting mediation at several stages in the process. However, the decision was specific to the facts of the case and the Court of Appeal judges, in their decision, affirmed the general support for mediation and pointed out that the Civil Procedure Rules include “ encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of that procedure”.

In the case of McMillan Williams v Range (2004) the decision in Dunnett v Railtrack was extended by the Court of Appeal. This matter involved a firm of solicitors suing a former employee for repayment of advance salary/ commission. Miss Range won the case at the County Court but, on appeal by her employers, she lost the case. However, when permission was given to appeal, a recommendation was made to mediate (having regard to the disproportionality of the costs of the appeal to the value of the amount claimed) which both parties chose to ignore. In the light of the actions of both parties, the judges refused to make an order as to the costs of the appeal and thus both parties had to stand their own (significant) costs.

The decision in Burchell v Bullard (2005) is also interesting since Dunnett v Railtrack was considered by the Appeal Court judges when making their decision. Burchell was a building contractor who constructed 2 extensions at the home of the Bullards and was paid regularly until a final payment of £18,000 became due. At this point the Bullards refused to pay stating that they were unhappy with the quality of the work.

When Burchell sued for his money, the Bullards counter-claimed over £100,000 and at the end of the resulting 5 day hearing their counter claim was judged to be worth only £14,000, thus Burchell received some of the monies owing. However, the costs at this stage were in excess of £160,000 and the question of who should pay those costs was considered at appeal.

The court was made aware that Burchell had first suggested mediation in 2001 when the dispute arose and then subsequently with regard to the costs dispute. The Appeal Court judges were reluctant to penalise the Bullards on the same basis as Dunnett v Railtrack, since this case was heard in 2002 after the initial refusal to mediate, but they ordered the Bullards to pay their own costs in full, plus 60% of Burchell’s costs and the entire cost of the appeal (£22,000). The judges’ comments suggest that, had the case arisen after the Railtrack decision in 2002, the Bullards would have faced the entire costs bill themselves.

Some of the judges’ other comments were “Mediation has established its importance as a track to a just result running parallel with that of the court system. Both have a proper part to play in the administration of justice. The court has given its stamp of approval to mediation and it is now the legal profession which must become fully aware of and acknowledge its value. The profession can no longer with impunity shrug aside reasonable requests to mediate. The parties cannot ignore a proper request to mediate simply because it was made before the claim was issued. With court fees escalating it may be folly to do so.”

Thus, over the 6 years described above since the Woolf Reforms were introduced with an encouragement to mediate, the courts had to increasingly use costs sanctions to force the use of mediation. Very much a carrot and stick situation historically, yet still today it is difficult to bring disputes to mediation where they can be resolved quickly, cheaply and amicably.

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This article has been prepared by Michael Dawson FRICS, MCIOB, ACII, FCILA, Accredited Mediator and one of the members of Cunningham Lindsey Mediation Services.

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