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Mediation update: the new TCC Guide and an unreasonable refusal to mediate

Mediation remains a hot topic. Section 7 of the TCC Guide (ADR) has just been revised and there are two recent cases about an unreasonable refusal to engage in ADR, R (on the application of Paul Crawford) v The University of Newcastle-upon-Tyne and Garritt-Critchley v Ronnan.

The TCC Guide

The TCC Guide is now in its third revision. Section 7 concerns alternative dispute resolution (ADR). This section is unchanged in that it still says:

  • Although the TCC is an appropriate forum for the resolution of all IT and construction/engineering disputes, “ADR can lead to a significant saving of costs and may result in a settlement which is satisfactory to all parties”.
  • “Legal representatives in all TCC cases should ensure that their clients are fully aware of the benefits of ADR and that the use of ADR has been carefully considered prior to the first CMC.”

This guidance is in line with the decision late last year in PGF II SA v OMFS Company 1 Ltd, in which the Court of Appeal made clear that the responsibility to consider ADR is firmly on the parties who should engage with each other to consider its suitability, rather than waiting for encouragement from the court.

Section 7 continues by saying:

  • As to timing, “ADR may be appropriate before the proceedings have begun or at any subsequent stage. However the later ADR takes place, the more the costs which will have been incurred, often unnecessarily”.
  • As to type, in most cases, mediation will be the appropriate ADR procedure.

Notably, section 7 refers to the Jackson ADR Handbook, the importance of which is again underlined by the fact that parties are “advised” to refer to it.

Costs and an unreasonable refusal to participate in ADR

Section 7.4 (non co-operation) reminds parties of the principle in Halsey, namely that as an exception to the general rule that costs should follow the event, a successful party can be deprived of all or part of its costs if it is shown that, in all the circumstances of the case, it unreasonably refused to agree to ADR. A reference to the PGF case has been added at 7.4.1.

Two recent decisions where it was argued that a party should be penalised in costs because of an unreasonable refusal to mediate are considered below.

R (on the application of Paul Crawford) v The University of Newcastle-upon-Tyne

After dismissing the claim in R (on the application of Paul Crawford) v The University of Newcastle-upon-Tyne, the court was asked to decide costs:

  • The defendant asked for its costs.
  • The claimant argued that each party should pay its own costs because, amongst other things, it said the defendant had unreasonably refused to engage in ADR, in particular mediation.

Two points of general interest arise from the decision.

Firstly, the court found that when the claimant proposed mediation both parties were fully and actively engaged in a parallel form of ADR, namely addressing the claimant’s complaint before the Office of the Independent Adjudicator (OIA). Although this was separate to the judicial review claim under consideration, the substance of the matter was the same. ADR procedures in public law cases included dealing with complaints by using ombudsmen, including the OIA.

Secondly, the court considered PGF. One argument made was that while the defendant had not initially remained silent when the claimant asked it to attend mediation (it had replied to the claimant’s letter and said it agreed “in principle to ADR”), there was a “subsequent silence” when the defendant failed to respond to further chasing letters. Despite the initial agreement “in principle” to mediation, the court said:

“… in truth the claimant was met effectively with silence. With the passage of time, the defendant’s position equated… to the situation contemplated [in PGF] by Briggs LJ of ‘silence in the face of an invitation to participate in ADR’.”

However, the court was not persuaded that the defendant’s silence should be characterised as unreasonable and, in itself, be sufficient to deprive the defendant of all its costs. The court therefore rejected the claimant’s argument that the general rule on costs should be departed from on the basis of an unreasonable refusal to respond to an offer of mediation or mediate.

Garritt-Critchley v Ronnan

In Garritt-Critchley v Ronnan, the claimant said in his letter of claim that he was willing to enter into an appropriate form of ADR, such as mediation. Thereafter the claimant repeated his offer to mediate on numerous occasions. The defendant either ignored the offers or refused them.

After a four-day trial, but before judgment was given, the defendant accepted an offer to pay the claimant a sum plus all his costs, at least on a standard basis. The court was asked to decide whether the claimant was entitled to his costs on an indemnity basis because of the defendant’s unreasonable failure to mediate.

The court said the case was a classic case where mediation ought to be considered. This was because, firstly, the case was fact and evidence intensive and required the court to judge the credibility of witnesses. This meant, the court said, that both parties needed to engage in a risk analysis as to whether their side of the coin would be accepted or not. Secondly, this was a case where there was a range of quantum outcomes that “was very considerable indeed” which the court said gave “ample room for manoeuvre within the wide range of possible quantum scenarios”.

The court made short shrift of the defendant’s reasons for refusing to engage in mediation holding that they were misconceived, unrealistic and did not accord with the authorities.

In relation to the reason given that the claim did not naturally provide any middle ground, the court said that this was often the case on liability, which was usually a binary issue, and “to consider that mediation is not worth it because the sides are opposed on a binary issue, … seems to me to be misconceived”.

That the defendant was “confident no agreement [would] ever be reached” was rejected by the court because, given the nature of the dispute, it did not seem realistic for the defendant to say that that all the odds were so stacked in its favour that there was really no conceivable point in talking about settlement. The court endorsed Lightman J’s words in Hurst v Leeming that:

“The fact that a party believes that he has a watertight case again is no justification for refusing mediation. That is the frame of mind of so many litigants.”

The further reason given that there was “considerable dislike and mistrust between the parties” was also found by the court to be without foundation on the basis that:

“… it is precisely where there may be distrust or emotion between the parties, which it might be thought is pushing them down the road to an expensive trial, where the skills of a mediator come in most usefully.”

Finally, the court rejected the reason given that the parties were too far apart and observed that:

“Parties don’t know whether in truth they are too far apart unless they sit down and explore settlement. If they are irreconcilably too far apart, then the mediator will say as much within the first hour of mediation. That happens very rarely in my experience.”

The result was an award of indemnity costs against the defendant.

Conclusion

These two decisions, as well as the new TCC Guide, again underline the  importance of the decisions in Halsey and PGF, and the ADR Handbook.

8 thoughts on “Mediation update: the new TCC Guide and an unreasonable refusal to mediate

  1. Thank you for this useful insight. I currently have two separate cases that this is really relevant too.

    Thanks again.

  2. Thank you for this useful insight. I currently have two separate cases that this is really relevant too.

    Thanks again.

  3. Thank you Elizabeth. This is an excellent summary and has given me some food for thought on a few cases that I am working on. Mediation can be such a useful tool as it has so much scope to enable the parties to work through their differences and come to their own solution. So often though, it is used as a tactical device and there is nothing more disheartening, or poorly reflective of the legal profession, to get to a mediation to be met by an opponent and a legal team who sit in stoney-faced silence and watch the clock tick the hours by with no desire to make good use of that time. It is such a wasted opportunity, though I don’t know whether any other lawyers feel the same as I do.

  4. Thank you Elizabeth. This is an excellent summary and has given me some food for thought on a few cases that I am working on. Mediation can be such a useful tool as it has so much scope to enable the parties to work through their differences and come to their own solution. So often though, it is used as a tactical device and there is nothing more disheartening, or poorly reflective of the legal profession, to get to a mediation to be met by an opponent and a legal team who sit in stoney-faced silence and watch the clock tick the hours by with no desire to make good use of that time. It is such a wasted opportunity, though I don’t know whether any other lawyers feel the same as I do.

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