The Technology and Construction Court has recently given judgement in the case of Northrop Grummon v BAE Systems in which it has made a number of interesting comments about mediation and moved forward our the understanding of when it is and is not reasonable to refuse mediation.
In this case there was a dispute between NG and BAE over software licensing and particularly about the terms of a series of software licensing agreements. BAE took the view that the matter required a court decision to settle the terms of the contracts and that they had a very strong case. NG considered that they had a good case as well but that the matter could be settled by way of mediation. A number of requests for mediation were made to BAE all of which were rejected. The matter ultimately came before the TCC and BAE indeed won the case. NG contended that BAE should have its costs reduced by 50%.
Some of the statements made by BAE's solicitors in correspondence are surprising to say the least. Particular phrases that surprised me include "in view of the weakness of the claim made, it is not reasonable to expect our client to incur the significant cost of a mediation" and "to the extent that it is necessary further to debate the issues, it will be more cost efficient to do so in correspondence than through a mediation." As a convinced mediator I would have to say that both statements reveal a complete failure to understand the value of mediation and show a bizarre view of the relative cost of mediation, which BAE appear to have estimated at £40,000 and litigation, which cost £500,000.
More interesting were the comments made by Mr Justice Ramsay.
First and, most usefully, the Court expressed a coolness toward statements made in Halsey v Milton Keynes NHS Trust, Swain Mason v Mills & Reeve, and Daniels v Commissioner of Police for the Metropolis that refusal of mediation is justifiable where a case is very strong or in order to prevent a nuisance claim. Particular note was made of the Jackson ADR Handbook on this issue with the Court saying:
The authors of the Jackson ADR Handbook properly, in my view, draw attention at paragraph 11.13 to the fact that this seems to ignore the positive effect that mediation can have in resolving disputes even if the claims have no merit. As they state, a mediator can bring a new independent perspective to the parties if using evaluative techniques and not every mediation ends in payment to a claimant.
Although it was accepted that there was a limited justification for BAE refusing mediation due to the strength of their case it is clear from this that relying on strength of case is no longer a strong argument for refusing mediation and that aspect of Halsey, Swain Mason, and Danielsshould be read with some care.
The Court entirely dismissed arguments from BAE regarding the cost of mediation on the basis I have already referred to and the delay in litigation associated with it. Given the very wide range of mediation scenarios and mediators available it is possible to obtain mediation at most price points (even free) and mediation can be arranged at very short notice indeed so that litigation is not disrupted by the mediation process.
The need to have a contract interpreted was not considered important by the Court. Agreement as to the proper interpretation of a contract can be found within a mediation and frequently are. The suggestion by BAE that mediation would not add anything to the correspondence was dismissed and was, frankly in my view, simply incorrect. Halsey made the point that a skilled mediator can extract a settlement from the most unlikely situations even where exchange of correspondence or a round table meeting has failed. Nothing has changed since. The Court also stated that the Jackson handbook shows that mediation has a very high rate of success and concluded that it would have likely succeeded here. The direct comment that the statistics of mediation success implies that mediation is likely to succeed leads to the conclusion that Mr Justice Ramsay at least is not prepared to entertain arguments that mediation would not have been successful in all but the most extreme cases. Therefore this argument must again be considered as weak and high risk.
This case is only in the High Court and it would be interesting to see the views of the Court of Appeal. However, it provides a very useful perspective on what arguments are likely to justify refusal of mediation. It also makes clear that the tests set out in Halsey have evolved and some of them may now be less relevant. It may now be time for Halsey to be retired as a leading case and for it to be replaced by the Jackson handbook.