A number of experienced insurers might well take this stance: “Why do I need a mediator to tell me how to settle my case?”
So, the simple answer is most personal injury cases do not need a mediator, as most settle without the need for a neutral’s assistance. Experienced lawyers and claims handlers on both sides of the fence know their cases, and generally speaking get on with negotiating settlement when that is needed. Joint Settlement Meetings tend to work pretty well in the larger cases
That still leaves a small number of “hard nut” cases, where you would rather not go to court if you can avoid doing so, and you just cannot find a route to settlement. It may be that the other side are simply intransigent. It could well be that the Claimant doesn’t listen to the advice being given, or that the lawyer isn’t on top of the case. It could be that the nature of the claim means that one party finds it difficult to be objective: for example, fatalities, psychiatric injuries, chronic pain. A mediator can certainly help in some of those cases.
It is also worth considering whether there might be other reasons why mediation will prove useful. If nothing else, legal representatives need to understand the defensive reasons for considering mediation. Your client could be penalised in costs for not engaging in mediation, and Judges are beginning to flex their judicial muscles and do just that. The last year has seen a number of cases where the courts have demonstrated a willingness to penalise a party who unreasonably refuses mediation, and that includes ignoring an offer of mediation.
The Background on Refusal to Mediate and Costs Penalties
The authorities go as far back as Hurst v Leeming in 2001, but it’s useful to start with the Court of Appeal guidance given in Halsey v Milton Keynes NHS Trust and the associated case of Steel v Joy & another in 2004. The guidance can be summed up as follows:
- Most cases are suitable for mediation;
- Parties may need encouragement to use mediation;
- If a party unreasonably refuses mediation, it can be penalised in costs;
- BUT the burden of showing unreasonableness lies with the party offering mediation.
- The court gave some reasons for refusal to mediate. This included reasonably believing you have a very strong case, mediation costs being disproportionate, and whether mediation has a reasonable prospect of success.
For some time, it was perceived that it was difficult to persuade a Judge that a party refusing mediation was acting unreasonably. A number of factors however demonstrate that courts are increasingly willing to make an adverse costs order against a party who refuses mediation. Firstly, Lord Justice Jackson, in his Review of Civil Litigation Costs, re- emphasised the underutilisation of ADR. He recommended that there be a central text on ADR, and we now have the “Jackson ADR Handbook”, which is finding its way into an increasing number of judgments.
Last year’s Cases
A number of cases decided in the last year or so demonstrate that there is now a real risk of a court imposing significant costs penalties on parties who refuse (or ignore) mediation.
- PGF II SA v OMFS Co. 1 Ltd: not a personal injury case, but it needs to be heeded by all involved in litigation. The Claimant accepted a Part 36 offer nearly a year after it was made, a day before trial. In that time, the parties had amassed £250,000 of costs between them. Despite the Part 36 rules which gave the Defendant an apparent entitlement to costs after 21 days from the Part 36 offer, the court decided to make no order for costs for that period. This was because the Defendant totally ignored the Claimant’s offer to mediate. The court found that ignorance amounted to refusal and was unreasonable. The Court of Appeal upheld the decision, quoting the Jackson ADR Handbook.
- Mark Lynn v Borneos LLP T/A Borneo Linnels: this is an unreported High Court decision in a professional indemnity case. The Defendant succeeded, but the Claimant successfully argued that the Defendant had unreasonably refused to mediate. The Judge referred to “bland refusal…” to mediate. The Defendant was awarded only 60% of its costs.
- Garritt–Critchley & Others v Ronnan Solarpower PV Ltd: the Defendant accepted the Claimant’s Part 36 offer after trial but before judgment had been delivered. The judge awarded indemnity costs against the Defendant, who tried to rely upon a number of the reasons set out in the Halsey decision to justify refusal of mediation. The Judge was unimpressed.
- Northrop Grumman Mission Systems Europe Ltd v BAE Systems: the Defendant won on liability issues (the dispute being entitlement to terminate a licensing agreement), and the court accepted that the Defendant reasonably considered that it had a strong case. Unlike the court in Halsey, the Judge however found that it was unreasonable to refuse mediation. In the end, the Defendant was not penalised in costs because the court took account of refusal by the Claimant of a without prejudice save as to costs offer, but a resounding warning comes out of the judgment. Even when you think you have a strong case, it may be unreasonable to refuse to mediate.
How does that affect Personal injury Claims?
The writing is firmly “on the wall”. Halsey set the scene: the decision involved a personal injury claim and a clinical negligence claim. The principles in the recent cases quite clearly apply to personal injury cases.
If a party reasonably thinks it has a very strong case, what merit you might ask is there in sitting down with your opponent? It might sound fanciful, but sometimes people can be persuaded to withdraw a case. I have seen this happen in 2 cases, the first involving a litigant in person suing a police force for malicious prosecution, assault (and much more: he started by demanding £500,000 and by the end of the mediation discontinued his claim). The other involved a suspect looking RTA claim, with some suspicion of fraud.
The Claimant dropped hands at the end of a 4 hour mediation. Impossible is nothing, as Adidas once said (after Greece won the European football championships for those with no footballing experience!).
Litigants and their advisors need to have a strategy to deal with offers of mediation. Refusal creates a real risk of a costs penalty.
What about Cost-Benefit?
In the last month, the government has announced proposals to massively increase court fees. For disputes over £10,000 a 5% court fee is proposed, so a £50,000 claim could in the future face a court fee – payable up front – of £2,500. Claimant lawyers will be seriously thinking about cash flow for these claims. Defendants’ insurers and Defendants footing the bill themselves may wonder if this means that less claims will be issued, but if they are and they succeed, Defendants and insurers foot the bill, so it will have to impact on thinking on the Defence side of the fence also.
How much does a mediation cost then?
A 4 hour mediation will cost about £1,650 between the parties. It used to be thought that tricky cases needed much longer than 4 hours, but recent experience shows that all except the most difficult cases can be mediated within that timeframe.
VAT is payable in addition usually, but the proposed hike in court fees makes the cost of a mediation look more attractive. It may be that we see an increase in pre litigation mediation in due course. Are there any other benefits to mediation? Obviously, in some cases an apology is a very powerful tool, and that can be done in an effective way across the mediation table. Sometimes ingenious solutions can be thought through, although it is fair to say that most personal injury claims centre around how much money is going to change hands.
Seeing your opponent in the flesh can be useful in deciding whether you really want to put the case before a Judge. It may be that the Claimant comes across in a far more sympathetic manner than you expected, and you need to review your risk assessment and perhaps offer more than you thought would be needed to settle. It may be that you learn something about the other side’s case that either strengthens or weakens your own position: without that exchange, you might not have found it out until much later when significantly more legal costs had been incurred.
Whether you remain sceptical of the benefits of mediation in personal injury cases, the stark reality is that the courts are beginning to demonstrate that if parties do not engage in mediation, they will be punished with costs sanctions. Soaring court fees and delays in the court system – which seem to get worse not better – also cry out for alternatives to putting a case before a Judge except in a very small number of cases. The message is clear: ignore mediation at your peril, and if nothing else, consider your strategic position when an opponent makes a reasoned offer of mediation. How do you avoid being hit in the pocket on costs?