Mediation- an Offer You Cannot Refuse

Mediation- An Offer You Cannot Refuse.

Sir Gavin Lightman’s Lecture to

The Public Access Bar Association

on 16th October 2008

INTRODUCTION.

In law,as in life, most offers you can accept or refuse at will – there is no sanction for refusal of an offer, whether the offer or the refusal is reasonable or otherwise, save perhaps regret afterwards for a lost opportunity to enter into the proffered deal. This is most particularly the case if the offer is merely an offernot to agree a deal, but merely to enter into negotiations for a deal .But quite exceptionally the position is quite different where the offer is to enter into the process of mediation. An offer of mediation cannot lightly be refused . Like an offer from the Mafia, an offer of mediation calls for anxious consideration: it is an offer which (without such consideration ) you cannot safely and with impunity refuse.

PUBLIC POLICY.

There has long been a strong public interest in avoiding avoidable litigation and (where this is possible ) in settling litigation which can and should reasonably be settled.This public interest has redoubled force today with the ever increasing complexity, length and ruinous cost of litigation, putting it beyond the affordable means of most potential litigants. Today litigation has to be recognised to be a flawed process,calculated to produce injustice in many cases. This is the product of the marked disparity of means of litigants and the progressive withdrawal of public funding in civil cases.There is a conspicuous absence of equality of arms.The withdrawal of public funding effectively bars those without means from access to and representation in court in civil cases.Those with means can alone afford both the risks of adverse costs orders if they lose and the quality legal representation and preparation which (as they are designed to do) are calculated to improve the prospects of a successful outcome. The scales of justice favour the “haves” against the “have nots.” Accordingly, if the goal is the achievement of justice (or its product peace), litigation must be the recourse of last resort. This is reinforced by the public interest in the saving of court time and resources.

The public interest to which I have referred long ago gave rise to recognition of the privilege against disclosure of settlement negotiations and the principle that ,if a defendant makes an offer of settlement and the claimant recovers less than what was offered to him,the “unsuccessful”defendant and not the “successful “ claimant should be awarded his costs. More recently, the Civil Procedure Rules have made provision:(1) that a claimant who has unreasonably refused an offer by a defendant should likewise be penalised; (2) for Protocols which require claimants,before they commence proceedings, to write to the proposed defendant setting out and explaining their case so as to give the proposed defendant the opportunity to make an informed decision whether to concede the claim in whole or in part,whether to make an offer in settlement or whether to challenge the claimant to do his worst.In a word, the parties and their legal advisers are under a duty,so as to facilitate a settlement, to act responsibly in providing information and in making and responding to offers of settlement.

The favour with which the law now regards mediation has led the courts to develop and extend these principles further.The courts now require the parties, not merely to respond to offers, but to go further and (under the umbrella of mediation ) to enter negotiations for settlement .There are three striking novelties in the court’s approach today:

(a) The first novelty is the legal significance attached to negotiations and willingness to negotiate.The law has long treated a contract to negotiate as “writ in water” and having no legal effect. Indeed there is Court of Appeal authority for the proposition that a contractual provision precluding the issue of proceedings until after negotiations for settlement have taken place is without legal effect whatever may be the prospects of success of such negotiations if they do take place. But the whole premise on which the court favours mediation is that negotiations,at any rate in the context of a mediation, may have a positive value in themselves:the possibilityof a positive outcome is a sufficient justification to order mediation and to impose sanctions on those who refuse to take part in the exercise;

(b) The second novelty is the assumption by the court of jurisdiction to order parties to proceed to mediation whether or not they consent This jurisdiction is essential to the fulfilment by mediation of its full potential.Parties may not agree to mediation for a multitude of insufficient reasons. They may not understand the process, or appreciate how often it produces a successful outcome,however improbable that outcome may appear to be before the process is begun .They may regard the making of the offer of mediation or the acceptance of the offer as a sign of weakness. In reality, it may be an act of mercy by the judge to make the order for mediation, thereby saving the parties from the need to make any decision in this regard.It is true that this was too much for the Court of Appeal in Halsey v. Milton Keynes NHS Trustwhere (untutored in the ways of mediation) the court expressed the contrary view.But those observations cannot survive the considered comments of Lord Phillips and Sir Anthony Clarke in recent speeches to which I referred inan article in the Summer issue of The Expert;

(c)The third novelty is the placing of the onus of proof of the reasonableness of a refusal of mediation on the party refusing. The obiter observations to the contrary in Halsey again cannot stand, both as a matter of common sense (for who else can know and explain the reasons ? ) and because of the observations to the contrary in the speeches to which I have referred. An authoritative judgment of the Court of Appeal or above would no doubt be welcome to disapprove the observations in Halsey and set the law beyond question in the above regards,but surely it is not necessary.

TOPICS FOR DISCUSSION

There are two topics of importance on which I want to speak. The first (which I want to consider in some detail ) is the criterion by which is to be judged the reasonableness or otherwise of a party`s refusal to proceed to mediation.The second (which I want to consider shortly) is the underlying principle to be applied in deciding what (if any) sanctions should be imposed for unreasonable refusal to mediate

A. Refusal to Mediate.

The CPR make plain that the court can and should take into account when exercising its discretion (most particularly in respect of costs) any relevant unreasonable conduct of the parties both before and in the course of proceedings.It is important to stress that the unreasonableness that we are having primarily(if not exclusively) to consider, isunreasonableness in refusing to enter upon the process of mediation.Once the parties have entered upon the process of mediation,in the absence of agreement to the contrary,the privilege attaching to settlement negotiations will preclude any reference to conduct in those negotiations.Accordingly, on established principles,unreasonableness in the course of the mediation by a party,however extreme,cannot found a claim to the imposition of sanctions unless that privilege is excluded by the mediation agreement or court order for mediation or is waived by the parties.Only if the privilege is excluded, or waived, can the unreasonable conduct of a party in the mediation (or any unreasonable stance in the negotiations) be a factor for the court to take into account .But in practice the exclusion or waiver of privilege must be quite exceptional.The reason is that the existence of the privilege is essential for fruitful negotiations.

It isof the greatest importance to examine the grounds which do and do not justifya refusal of an offer of mediation.I would like to suggest a number of principles which may guide the parties and the court:

(1)First and foremost,as it seems to me, the grounds for refusal have to be objectively reasonable. It is not sufficient that they appear subjectively reasonable to the party relying on those reasons. If the party cannot at the time of the refusal explain his reasons clearly and justify them rationally,his decision may not otherwise survive scrutiny;

(2)Secondly, the reasonableness or otherwise of the refusal must be tested on the facts as they were or should have been known to the party refusing.Facts not so known and facts learnt thereafter, cannot justify or impugn a decision previously made. On learning of facts favouring mediation after a prior refusal of an offer of mediation,it may be incumbent on the party who previously refused the offer of mediation to make this known and to reconsider the offer;

(3)Thirdly, the party requesting mediation should in his letter of request ask that in the event of a refusal of the offer of mediation there should be given afull statement of the reasons for the refusal; and any party refusing mediation should in his letter of refusal most carefully prepare a statement of his reasons.In order that the court may take account of the request and refusal and any reasons given, the letters should be “open” or “without prejudice save as to costs;”

(4)The best evidence of the reasons for a refusal of mediation must be the reasons given at the time of refusal. There is no rule precluding the earlier reasons being supplemented or corrected later, but the court may regard later-given reasons as representing current and not previous thinking;

(5)If in the opinion of the party requesting mediation,the reasons given by other party for refusing mediation require clarification or if the objections taken to mediation can be met in a way enabling mediation to proceed,this should be explored in the correspondence;

(6)Changes of circumstances and new information may justify or indeed require a change of attitude to mediation.The reasons for any change in attitude should be explained to the other party;

(7)The circumstances which may constitute reasonable grounds for the refusal of an offer of mediation are infinitely variable. The issue of reasonableness must turn on the particular facts of the particular case.Many grounds of objection which might otherwise be reasonable may be rendered unreasonable by concessions made in respect of the objection. For example-

(a)objection to the proposed mediator may be met by an agreement to accept appointment of an alternative by the parties or by an independent body;

(b) objection on the ground of cost to mediation may be met by an agreement by the party proposing mediation to an abbreviated process or to pay the costs of the mediation (or the costs save for the costs of representation of the opposing party);

(c)objection on the ground of delay likely to be occasioned by the mediation may be met by an agreement that the court process continue in the meantime or that a trial date be fixed or that a previously fixed trial date shall stand or of an accelerated mediation process;

(d)objection on thegroundthat a trial is urgent because the claimant is seeking a permanent injunction to restrain some threatened action may be met by an offer of an undertaking to delay the threatened action with or without a cross-undertaking in damages .

The perceived prospects of success or otherwise of proceedings will not ordinarily on their own constitute reasonable or sufficient grounds for refusal.But the character of an opponent may in exceptional circumstances justify a refusal,for example if it is apparent that the opponent is incapable of any balanced view of the merits or is conducting a vendetta.

B: Sanctions

A question of fundamental importance is the question whether the imposition of sanctions has a compensatory or a penal function. The sanctions ordinarily in mind are: (1)the award and scale of costs and (2) the payment and rate of interest on damages and costs. If a party unreasonably refuses mediation, should the measure of any order for costs against him be compensation for the consequent damage flowing from the refusal to the opposing party or may an order be made which goes beyond that and punishes the party who has refused mediation, “pour encourager les autres ?”

.If the sole criterion was compensation, it would be necessary, in order to assess the damages, to evaluate the prospects that the mediation would have been successful. This would however prove to be an impracticable exercise and could only start if the parties waived their privilege in respect of their perceived prospects of success and their negotiation tactics–and ifthe award turned on theprospects of success of the mediation,a party might escape any sanction by proving that his demands in the mediation would have been extortionate and accordingly that the mediation was doomed to failure.Inmy view,the public policy in favour of settlement of disputes requires that the court can and should enforce this policytreating the sanction as having a role going beyond protecting the parties from loss and extending to ensuring that the courts are not required to try, and the public are not required to be party to, avoidable litigation,and that accordingly the courts are not constrained in respect of interest and costs to losses incurred. The approach should bea predisposition in favour of an adverse order against the party refusing mediation in respect of all costs incurred and in respect of all interest accruing after the date on which the offer of mediation should reasonably have been accepted.But the court should also take into account,as well as the public policy to which I have referred, the particular facts and circumstances and the interests of justice.