All business owners would agree that court trials can be expensive. The costs are inflicted not just on the parties in dispute, but also on the court system, which, being part of the public sector, does not have endless resources to indulge every and any disagreement indiscriminately.
For this reason, resolving disputes before trial is desirable. The methods by which resolution might be achieved are grouped together and commonly known as Alternative Dispute Resolution (“ADR”).
What is mediation?
One of the most popular styles of ADR is mediation. This is a format which brings parties together at an agreed venue - without actually requiring them to meet - and uses an independent professional (a ‘mediator’) to facilitate negotiations between them. Mediation creates excellent conditions for settlement. It is effective, and therefore popular.
In fact, the court is so enthusiastic about the use of mediation that it is quite prepared to penalise parties who reject overtures to explore settlement by such means.
The move towards this approach can be traced back certainly to 2002 when in the case of Cowl & others v Plymouth City Council, the court stated that, at the very least, the parties’ legal representatives were under “a heavy obligation to resort to litigation only if it is really unavoidable.”
Soon after, in Dunnet v Railtrack plc, the court not only put the theory into practice by making an adverse costs order against a party who had refused to mediation, but did so even though that party had succeeded in the dispute.
This decision was not without its critics who feared a shift towards mediation becoming a compulsory regime, at the expense of access to justice. Regardless, the court did not look back. The risks associated with a decision to decline mediation have become embedded in customs and practices of resolving civil disputes.
Is mediation compulsory?
In fact, many businesses believe mediation is compulsory and it can come as a surprise to learn that it is not actually a mandatory requirement of our legal system.
In Halsey v Milton Keynes General NHS Trust, the court made it clear that it would not require unwilling parties to mediate if refusal to do so could be justified. The court went on to list the following factors on which a party might base a decision to decline an invitation to mediate:
- The nature of the dispute
- The merits of the case
- Extent to which settlement was attempted
- Costs involved with pursuing ADR
- Delay to trial date
- Prospect of success using ADR
Mediation is not capable of performing miracles and it offers no guarantees of success. Further, whilst the costs of mediation compares very favourably to trial, the process itself can still prove to be expensive. In addition, mediation usually requires participants to make concessions and there are occasions when a party feels entitled to stand firm in the face of an unreasonable opponent.
Ultimately, if mediation were made compulsory, it might risk becoming a tick-box exercise. Instead, the court ensures that mediation is encouraged mainly by the incentive to save costs, and no doubt, it remains all the more effective for it.
Very often, the parties to a business dispute will need to give serious consideration to the benefits of mediation and the risks of refusing to mediate. On occasion, mediation at any given time may not always be appropriate. Either way, ADR remains a voluntary exercise and what matters most to us at BakerLaw above all is getting the best possible outcome for your business.
If you would like assistance with a business dispute, please do not hesitate to contact a member of our Dispute Resolution team who will be happy to assist you.
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