WHEN CAN YOU REFUSE TO MEDIATE?
Where parties to a commercial contract are involved in a dispute, they should consider mediation as a viable means to resolve the matter without going to court. But when is it reasonable to refuse to engage in mediation?
A recent ruling from the High Court(1) in the UK considered this question and has clarified that contractual parties should engage in mediation - or potentially face adverse costs consequences. The court made it clear that mediation (or other forms of ADR) should always be considered to avoid litigation where possible.
In this case, the defendant company (BAE) succeeded in its commercial claim. Whilst it was entitled to its costs of the action the claimant argued that these costs should be reduced by 50% because of its failure to enter into mediation. BAE had refused to mediate because it believed it had an irresistible case
The court decided that as the case was suitable for mediation (and would likely have been settled at mediation) and would have avoided incurring significant costs, BAE’s refusal to mediate was not reasonable grounds to refuse to mediate - even if it had a strong case. In any event, mediation would not have caused delay to the litigation process.
The court held that where a party rejects an offer of mediation without strong grounds, in circumstances where there are reasonable prospects of successfully resolving the dispute by mediation, then it will be generally be considered unreasonable to refuse to mediate the dispute.
However, in this case no deduction was actually made on BAE’s cost, because it had made an offer to settle proceeding which the claimant had failed to beat at trial. This was treated as a relevant factor in determining costs. For this reason, BAE received all its costs in spite of its unreasonable failure to mediate.
The lessons for lawyers and their clients are clear: mediation must be considered as a means to settle a dispute. Refusal to mediate could result in costs consequences for the party refusing to mediate - even if that party believes it will win at trial.
WHAT DOES THIS MEAN IF WE HAVE A DISPUTE?
We will advise our clients to engage in mediation or another effective ADR mechanism whenever possible. Where our clients resist mediation or ADR we will advise our clients whether it is reasonable to refuse to do so. We also encourage our clients to negotiate a settlement where possible to bring the matter to an efficient and timely conclusion.
HOW CAN WE HELP?
The commercial litigation lawyers at ParrisWhittaker are experienced in advising clients where they have a dispute with a contractual party. Our expert team will advise on the best possible alternative means of resolving your dispute without having to litigate in court, which can prove very expensive. Contact us now for experienced advice and representation.
1 Northrop Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4I) Ltd