REUTERS | John Kolesidis

Mediation of relatively low value claims

To the surprise of the man on the street, relatively low value disputes are difficult to litigate cost effectively. Often the value of the claim is soon exceeded by each party’s legal costs. At the end, when one side comes second, it is presented with a very large bill. Mediation offers the parties a way to avoid this.

To illustrate, let’s take a defects dispute between homeowners and a builder worth £30,000. To litigate this, the party claiming for repair costs will need to instruct an expert building surveyor to prepare a scott schedule that itemises each defect and identifies the cost to repair it. If that individual is instructed before the parties have an opportunity to consider a single joint instruction, it is likely the builder will also have to instruct its own expert. Pleadings will be prepared and witness statements and experts’ reports exchanged. If, say, 20 defects are not agreed by the experts, they will attend the trial and give evidence.

Can litigation be avoided?

However, what if the builder, on first receiving the scott schedule, is able to take a commercial view of the claim instead? This may be even more so after visiting the property and hearing what the homeowners have to say. If such a visit was attended by a mediator, at a cost split between the parties, early resolution of the dispute may result.

Using mediation

One function of a mediator is to “reality test” each party’s case and what they consider are the strengths and weaknesses of their positions. Such a test should include practical and common sense factors, as well as legal and procedural points.

Because the mediator talks separately to each party in confidence, each party can frankly discuss their position. Further, by using the mediation to exchange information (which they may not otherwise have been privy to until late into the litigation proceedings), the parties will be able to make informed decisions about how to behave. This sharing of information is possible because the mediation is held on a without prejudice basis.

What do the parties really want?

In our example, the mediator may ask the builder if he would be satisfied with the quality of the work if this was his home or whether he wants to spend his time building rather than litigating. Another question may be whether he wants his firm’s name appearing in the local press.

The mediator will then carry out the same process with the homeowners. For example, he may ask their solicitor to provide them with a cost estimate to trial. This will inform them of the costs risk of losing at trial. Armed with this information, the mediator can facilitate and assist the parties in moving towards a solution.

Another function of the mediator is to probe what the parties really want and how that can be achieved. In our example, the mediator could ask whether the homeowners would be happy to have the builder (or someone he recommends) come back and repair their property. If so, he could ask whether the builder would be prepared to do this.

That these are possible options highlights a further benefit of mediation: the scope of the settlement agreement can encompass more than what a court could order, which is merely the payment of money. Further, by making such an agreement, the parties may be able to preserve their relationship, which is often impossible after a trial.

When should you mediate?

Even if the litigation process starts, at the first CMC, the parties may agree an order that they attend mediation. By this time, however, each party will have less money in its settlement pot, but that shouldn’t be a reason for not attending the mediation. If one party refuses to attend mediation offered by the other, this will be taken into account by the court when costs orders are made at the end of the trial. Depending on the circumstances, a winning party’s costs may be reduced because of any such refusal and a reduction of 25% is not unusual.

So, in conclusion, early consideration of mediation in low-value cases is well worth it.

2 thoughts on “Mediation of relatively low value claims

  1. Elizabeth’s conclusion was echoed by Rix LJ in the Court of Appeal last week in Rolf v de Guerin. The court was considering an appeal about liability for costs, in a dispute between a home owner (Mrs Rolf) and her builder (Mr de Gijerin), over the partially completed garage and loft at Mrs Rolf’s home. Mrs Rolf’s claim varied between £45,000 and £92,500 but the county court judge awarded her just £2,500 for defective works.

    Rix LJ described the case as “sad” and one of “lost opportunities for mediation”. Also that it demonstrated how, in certain disputes, litigation can be “wasteful and destructive”.

    Mrs Rolf had shown a willingness to mediate throughout the dispute, whereas Mr de Gijerin had not, recognising only days before the trial was due to start that he should make an effort to do so. By then, it was too late.

    As ever in low-value disputes, neither party has been successful. Mr de Gijerin is broke and has a debt management programme to pay his creditors. Mrs Rolf has a new garage, but at a significantly greater cost than the original estimate of £34,000. It is arguable that Mrs Rolf’s offer to accept £14,000 was pitched too high (certainly Mr de Gijerin argued so). Mr de Gijerin also suggested that a mediator would not understand just how much Mrs Rolf’s husband had interfered with the project and was the cause of the repudiatory breach of contract (by Mrs Rolf). Only a trial judge, after hearing the husband give evidence could do this.

    Both issues are the type of issues that are suited to mediation. It is the role of a mediator to find common ground. They almost always do. Rix LJ held that a mediator or negotiator would have had a reasonable prospect of success and Mr de Gijerin had been unreasonable in spurning Mrs Rolf’s attempts to settle.

    To read more on the Court of Appeal’s judgment, see Legal update, Costs decision in “sad case about lost opportunities for mediation”.

  2. Elizabeth’s conclusion was echoed by Rix LJ in the Court of Appeal last week in Rolf v de Guerin. The court was considering an appeal about liability for costs, in a dispute between a home owner (Mrs Rolf) and her builder (Mr de Gijerin), over the partially completed garage and loft at Mrs Rolf’s home. Mrs Rolf’s claim varied between £45,000 and £92,500 but the county court judge awarded her just £2,500 for defective works.

    Rix LJ described the case as “sad” and one of “lost opportunities for mediation”. Also that it demonstrated how, in certain disputes, litigation can be “wasteful and destructive”.

    Mrs Rolf had shown a willingness to mediate throughout the dispute, whereas Mr de Gijerin had not, recognising only days before the trial was due to start that he should make an effort to do so. By then, it was too late.

    As ever in low-value disputes, neither party has been successful. Mr de Gijerin is broke and has a debt management programme to pay his creditors. Mrs Rolf has a new garage, but at a significantly greater cost than the original estimate of £34,000. It is arguable that Mrs Rolf’s offer to accept £14,000 was pitched too high (certainly Mr de Gijerin argued so). Mr de Gijerin also suggested that a mediator would not understand just how much Mrs Rolf’s husband had interfered with the project and was the cause of the repudiatory breach of contract (by Mrs Rolf). Only a trial judge, after hearing the husband give evidence could do this.

    Both issues are the type of issues that are suited to mediation. It is the role of a mediator to find common ground. They almost always do. Rix LJ held that a mediator or negotiator would have had a reasonable prospect of success and Mr de Gijerin had been unreasonable in spurning Mrs Rolf’s attempts to settle.

    To read more on the Court of Appeal’s judgment, see Legal update, Costs decision in “sad case about lost opportunities for mediation”.

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