Mediation- why it really can be a good idea

Imagine the scenario: you are the defendant in a hotly contested case, where Court proceedings were issued following a long term dispute; you have your day in Court and succeed; when the submissions turn to costs the losing party asks that your costs are reduced by 50% because, they say, you unreasonably refused to mediate the dispute. Needless to say if the judge sided with the claimant this would not have been a good day in Court, however this was almost the position that BAE Systems found itself in the recent case of Northrop Grumman Mission Systems Europe Limited v BAE Systems (Al Diriyah C41) Ltd. [2014] EWHC 3148 (TCC).

The parties to a litigated dispute are not currently required to attend mediation, or another form of ADR (alternative dispute resolution) but they are required to consider ADR and are at risk of being penalised in costs if they unreasonably refuse to participate in ADR. The Court has a wide discretion when considering the issue of costs and can consider the conduct of the parties both before proceedings are issued and during the course of the litigation.

When deciding the issue of costs the Court will consider the following points:

• all the circumstances of the case, including the parties' conduct;
• whether the winning party had attempted ADR or refused to; 
• the nature of the dispute;
• the merits of the case;
• the costs of ADR;
• would any prejudicial delay caused by ADR;
• the prospects of successful ADR;
• if the winning party refused ADR the Court will consider whether the refusal was reasonable and in particular whether:
  • an offer to engage in ADR was ignored;
  • a written response was provided explaining why ADR was not suitable;
  • any shortage of information or evidence was raised as an obstacle to ADR;
  • any form of ADR was closed off for all time.

BAE Systems had made without prejudice settlement offers and on balance the judge decided that their refusal to attend a mediation was not unreasonable, taking into account the facts of the case. The point to note from this case is that the Court will carefully consider the winning party's conduct when considering costs and in particular whether they unreasonably refused to mediate or participate in another form of ADR.

If you have a dispute and would like to discuss possible routes to its resolution, please contact us.

NOTE:

Whilst we obviously hope that this Guide will be of assistance to you, it is intended to provide only generalised guidance on English Law for our clients, and is no substitute for specific advice in relation to the circumstances of a particular case, which we are happy to provide. If, after reading this guide, you have any queries or comments, please do not hesitate to contact your litigation contact at Ashfords LLP.