A recent Appeal Court decision on the use of mediation was generally positive, but leaves many questions unanswered Three lawyers give their opinions.
Tony Allen, Solicitor and a director of CEDR (Centre for Effective Dispute Resolution)
What should the insurance industry make of the Court of Appeal's latest foray into the issue of mediation in Halsey v Milton Keynes NHS Trust and Steel v Joy and Halliday? In neither case had the court recommended mediation, but each winner had turned down mediation and the loser sought costs sanctions.
Although neither loser won costs relief on the merits, the Appeal Court emphasised that mediation is an integral tool of active civil case management which the courts should encourage parties to use.
Lord Justice Dyson, commenting on both appeals, said: "All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR (alternative dispute resolution)." He also said: "Most cases are not by their very nature unsuitable for mediation."
Halsey itself was not seen as inherently unsuitable, though Steel involved a point of law which insurers wanted to litigate rather than settle.
These are very important developments as to lawyers' professional duties, and the Law Society is revisiting its advice to solicitors. Questions need to be asked of panel solicitors and properly considered answers required to satisfy not just insurer clients and the courts.
Halsey makes it clear that judges may penalise winning parties who refuse to mediate. If a procedural judge has recommended mediation as part of case management and that is ignored, a costs sanction may well follow for that reason alone. Even without court recommendation, a losing party seeking costs relief may show that mediation was unreasonably refused by the winner applying tests set out in Halsey.
What will be the effect of Halsey for insurers and their insureds? Dunnett v Railtrack remains good law. So mediation is clearly here to stay, and training in how best to use it is necessary for both them and their lawyers.
Should insurers offer mediation first? Yes, since defendants lose litigation cases as well as win them. Proposing mediation creates another way of ending cases which are difficult to settle. Even if the trial is lost, an earlier genuine proposal to mediate may generate costs savings where a claimant refuses mediation.
When mediation is proposed by a claimant, it is risky to refuse it. It will never be easy to be sure that the Halsey tests (that refusal was reasonable) are met where a claimant proposes mediation. If in doubt, raise the issue at a case management conference, but your solicitors must understand how judges, now trained about ADR, will decide.
The overall message of Halsey is: keep using mediation, as failure to use it may be penalised in costs. There is little to lose in agreeing to mediate. Settlement rates are high in personal injury claims, and there are a good number of experienced mediators available now.
Philip Bartle QC, Littleton Chambers (Appeared in Halsey for the ADR Group)
Although mediation was supported in the case, parts of the judgment suggest that the judges were not wholly convinced of the virtues of mediation.
I give three examples.
First, the court gave guidance that a party may be able to refuse mediation and avoid cost sanctions against him if he reasonably believes that he has a watertight case. This ignores the great advantage of mediation recognised in Dunnett v Railtrack [2002].
In Dunnett the court said: "Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve."
These results are achieved precisely because the mediation concentrates not on merits but on the needs and wants of parties. So the guidance in Halsey may well prevent a resolution in cases that ought to have mediated.
Second, the court accepted that allegations of fraud cannot be successfully mediated. This is contradicted by experience. Fraud cases are frequently successfully mediated no doubt in part because parties want to avoid litigating in public. Also, this part of the decision was contradicted by the subsequent Court of Appeal decision in Couwenebrgh v Valkova [2004] in which the court urged mediation in a case of alleged forgery of signatures to a will.
Third, the court stated that ordering unwilling parties to mediate would achieve nothing except to add to the costs. This is also contradicted by experience. The success rate of mediations is fairly constant and is not affected by the fact that one of the parties is unwilling to mediate.
As judges become more knowledgeable about and have experience of mediation, I hope there will be an even greater judicial confidence in mediation as the way in which the majority of disputes can be resolved.
Finally, the court's decisions that ordering an unwilling party to mediate is contrary to Article 6 of the European Convention on Human Rights is surprising.
Like most commentators, my view is that such an order is not in breach of Article 6 as the party is not prevented from going to trial. Such is the strength of opposition to this part of the judgment that it is likely it will be reconsidered by the Court of Appeal in the near future.
Tim Wallis, Chairman of law firm Crutes
The impression given by early commentaries on Halsey, that the Court of Appeal has dampened down the progress of ADR and mediation, may be rather misleading.
Certain aspects of the judgment are capable of significant impact on the conduct of personal injury insurance claims. The decision also raises an interesting question concerning judicial education.
Having stated that all lawyers should now routinely consider ADR with their clients, the Court went even further in the field of personal injury litigation, advising that an Ungley Order (see box below) should usually be made. This order devised, by Master Ungley is currently used in clinical negligence cases.
The upshot of failing to comply with such an order is simple: the party refusing to consider ADR is at risk on costs even if it is ultimately held by the court to be the successful party.
On the subject of judicial education, the court provided guidance about the factors that should be considered when deciding whether a refusal to agree to ADR is unreasonable. One of the key factors is, as the court put it, "... whether the ADR had a reasonable prospect of success".
It seems to be the case that most members of the judiciary have little or no experience of ADR and many have received minimal training in the subject.
The question that arises is this: upon what basis can a judge decide that question if he or she has no real idea about what ADR procedures are, what they are capable of and how they work? It is a bit tricky.
It's rather like deciding whether Frankie Dettori's mount has good prospects in the 3.30 on Saturday if you have never been to the races in your life.
The Ungley Order
The parties shall by (date) consider whether the case is capable of resolution by ADR.
If any party considers that the case is unsuitable for resolution by ADR, that party shall be prepared to justify that decision at the conclusion of the trial.
But this would only occur if the judge considers that such means of resolution were appropriate, when he is considering the appropriate costs order to make.
The party considering the case unsuitable for ADR shall, not less than 28 days before the commencement of the trial, file with the court a witness statement without prejudice save as to costs.
The statement should give reasons on which they rely for saying that the case was unsuitable.
