Knowledge

This briefing focuses on mediation, perhaps the most common form of alternative dispute resolution ("ADR") procedures.  Mediation is widely used in the UK and has well established advantages over traditional litigation including: substantial costs savings and the ability to preserve commercial relationships. This briefing will guide you through some of the main issues to consider when thinking about making a proposal for mediation or, indeed, when you are faced with such a proposal from your opponent.

Most disputes, however big or small, and however complex the issues, can be resolved in a number of ways other than by traditional litigation. There are a number of different types of ADR procedures which offer advantages over the uncertainty, delay and cost of traditional litigation. These ADR procedures include: arbitration, mediation and negotiation. A separate briefing exists titled "Dispute resolution in Jersey" which provides, in summary form, a guide to the various different types of ADR that are available.

What is mediation?
A mediation is essentially a negotiation between the parties with the intervention of an impartial third party tasked with the function of brokering a settlement.  The following are key characteristics:

• The process is voluntary. All that is required is a wish, on the part of each party, to resolve the dispute.
• The solution will be intended, in some way, to be to the satisfaction of everyone i.e. mutually beneficial.
• If the mediation is successful, there will be no need to go to court. Where court proceedings have already been commenced, they can be stayed.
• In the event of an unsuccessful mediation, the parties can still go to court. However, in this event, they do so being better prepared and having focused upon the real issues in dispute between them.
• Mediation encourages early resolution of disputes. This means it can result in much quicker and therefore less costly solutions.
• Mediation is much less formal, and so much less stressful for all involved, than traditional litigation.

The UK position
The position in the UK was revolutionised with the advent of the Civil Procedure Rules 1999 which introduced an overriding objective to deal with cases justly. This objective translated into a duty of the court to deal with cases in such a way as to:

• save expense;
• ensure expeditiousness; and
• use only an appropriate amount of the court's resources.

In practice, the UK courts have sought the co-operation of the parties to disputes in order to achieve the overriding objective by encouraging all of the following prior to the commencement of litigation:

• more contact between the parties;
• improved exchange of information between the parties; and
• attempts to settle cases fairly and early.

Any party that fails to co-operate with the court, and with the furtherance of the overriding objective, can expect to receive penalties in the form of adverse costs orders.

The position in Jersey
In a number of ways, the position in Jersey is less advanced than the position in the UK.  Nonetheless, a significant development in the culture of ADR in Jersey came with a small yet fundamental change to the Royal Court Rules 2004 (the "Rules") pursuant to which the court now has the power and discretion to direct that litigation be stayed for such period as the court thinks fit to enable the parties to try to settle the dispute by ADR, which includes mediation (Rule 6/28). The parties may agree to stay proceedings to allow for mediation, subject to the court's approval.  If the parties are unable to agree, a party may apply to the court requesting a stay to ADR. In either case, there are a number of key issues to be considered in determining whether or not a dispute should be referred to mediation. Each of these issues is considered below against the backdrop of what a court will take into consideration when weighing up whether or not a party has acted unreasonably in refusing to engage in mediation and any consequent costs' penalties.

Factors relevant to a decision to mediate
In the case of Bespoke Investments Limited v Lincoln Nominees Limited and in Others [2005] JRC 098 ("Bespoke") which followed the seminal decision of the UK Court of Appeal in Halsey v Milton Keynes General NHS Trust (2004) 4 All ER 920/(2004) EWCA Civ576, the Bailiff held that, when determining the reasonableness of a party's refusal to mediate, the following factors may be relevant:

• whether the mediation has a realistic prospect of success;
• whether mediation may result in an unacceptable delay in the final resolution of the dispute; and
• the costs to be incurred in preparing for mediation.

Other relevant factors might include:

• the timing of the mediation;
• the stage reached in proceedings (if mediation is proposed in the midst of litigation); and
• whether any other attempts at settlement have been explored as between the parties.

In Bespoke, the Bailiff went on to say that both litigants and counsel must bear in mind that mediation is often a cost effective and appropriate way to resolve disputes and should routinely be considered as an option for the resolution of disputes.

In Manley v Bell [2007] JLR N20, the Bailiff said (in the context of matrimonial proceedings) that a party's refusal to engage in mediation would not be unreasonable if mediation were proposed at a late stage in the proceedings and against the background of less than full disclosure. An unreasonable refusal to mediate is likely to have adverse costs' consequences.

The prospect of mediation achieving success
Some cases, by their very nature, are unsuitable for mediation. For example, cases where the parties specifically wish the court to determine a point of law or construction and need a binding precedent. Other cases which may not be suitable for mediation include: cases involving allegations of fraud, or where urgent injunctive relief is required. Outside of these specific circumstances, there are a large range of cases which are suitable for and may proceed to successful mediation subject to the willingness of the parties.

A party's lack of willingness to mediate often stems from a belief that it is in the right, or has been wronged, and so will succeed at trial. However, few cases are so simplistic and a party's belief that it has a watertight case is not generally a good enough reason of itself to refuse to mediate. A valuable function of mediation, linked to the skill of the mediator, is its ability to diffuse the polarisation of views and associated tensions. A skilled mediator will assist the parties to approach their dispute in a more reasoned way, as an impartial third party (i.e. a judge) might do. As such, even if a mediation is unsuccessful in concluding the dispute, it may still prove to be helpful in narrowing the issues outstanding as between the parties and assisting them to review those issues as another party might do. This is an essential step in achieving the resolution of a dispute. As such, mediation could lead to savings in both time and costs with regard to any further attempts at mediation or indeed any court litigation that eventually takes place.

When evaluating the prospects of success of mediation, consideration might also be had to what other attempts at settlement may have been made by the parties. For example, one party may have made numerous efforts to settle, another party may have resisted these and/or have unrealistic views on the merits of the case. Be that as it may, many cases have been successfully resolved at mediation even where earlier attempts to settle the case have been unsuccessful. It is the addition of an impartial third party, specifically trained in managing and resolving disputes and conflict, that can result in breakthrough. Accordingly, mediation may be particularly useful in cases where the parties have reached a deadlock. For a party faced with a difficult or unwilling opponent, given the view that the court is likely to take of a party who unreasonably refuses to attempt resolution in a cost and time effective way (i.e. by ADR), a proposal to mediate the dispute may constitute a tactical advantage.

Timing and delay
There are no definitive rules as to when a mediation can take place, although the timing of mediation can be critical. It can take place either before or after proceedings have commenced. In practice, it is commonplace to see mediation proposed after proceedings have been commenced since the commencement of proceedings can be perceived as a "seal" on the seriousness of the party with regard to the resolution of the dispute. In cases where proceedings have been commenced, those proceedings will be stayed for such period as the parties agree, or the court thinks fit, to allow for the mediation to take place. Upon the expiration of the stay, the parties must revert back to the court to update it on whether or not the stay has been successful. It if has, the proceedings will come to an end; if it has not, the proceedings may continue or, if the parties are making progress, the stay may be extended to allow time for further negotiations between the parties.

Where mediation is suggested late on in proceedings, consideration may need to be given to whether or not a stay might delay any trial that has already been set down. This is a key point the court will consider when deciding whether a party's refusal to mediate at a late stage was reasonable. At the other end of the spectrum, cases can arise where mediation is proposed too early in the process. Here, the view may be taken that mediation is premature in the absence, for example, of the disclosure of expert reports. As such, it is advisable, in the context of any dispute, to have the possibility of its resolution by ADR in mind at all times and, particularly, at procedural milestones. For example, where a next step, such as the preparation of expert reports or witness statements, might be a costly one, it would be prudent for the parties to ask themselves: "do we have enough information to attempt ADR?", "can the expense of the next step be justified now that we have this information?" or "should we now consider ADR?". Alternatively, the parties could consider agreeing a timetable to mediate subject first to sight of all expert evidence. Any such attempts to manage the resolution of a dispute effectively are likely to be considered favourably by the court and can be factored in to the terms of and timescale of any stay agreed by the parties and sanctioned by the court.

Costs
In all likelihood, mediation will be cheaper and quicker than litigation. In practice, the cost of the mediation, including the mediator's fees, will often be split equally between the parties. This should be considered against the likely timeframe and cost of preparing for and proceeding to trial which, even in the case of low value disputes, can often run to several thousands of pounds. Furthermore, a winning party, even assuming it received a full recovery on costs, would, upon taxation, recover only around 70% of those costs.

Litigation v mediation
Mediation is inherently less adversarial that litigation allowing for a flexible process which may help to preserve commercial relationships. Additional features of mediation, which often make it particularly appealing, are that it is private and confidential, and that it seeks to provide commercially realistic solutions. This is in sharp contrast to litigation which can be slow, costly, open to the public and devastating to business.

The advantages of mediation were helpfully summarised by the Bailiff at the launch of the amendment to the Rules mentioned above, which allow proceedings in Jersey to be stayed for mediation:

"Experience in other countries has shown that mediation can often leave the parties in a better position than litigation. First, if a dispute can be mediated at a relatively early stage, there can be a significant saving in cost of the parties. Secondly, a dispute settled confrontationally through the courts will often have a bruising effect upon the parties.  There is always a loser, and sometimes there is no real winner. A mediated settlement, while not necessarily leading to total satisfaction on both sides, can enable the parties better to understand the other's point of view and occasionally to offer or to accept an apology. Particularly in a small community, where trading and even personal relationships between the litigating parties may continue, the ability to settle a disagreement in private without creating lasting wounds is, in my view, an important positive factor in favour of mediation".