Can the court compel unwilling parties to mediate?

May 2004

The case of Halsey has been talked about and discussed for some months, even though judgement was not issued until May 11th. Unusually, the Appeal Court judges decided to request opinions from a number of professional experts before making up their minds how to proceed in this case. This has meant a degree of anticipation and excitement which is unusual in judgements about ADR; the expectation has been that this case would establish important principles about whether courts can compel parties to mediate, and establish factors for courts to take into account when deciding whether to impose cost penalties on parties who refuse to mediate.
 
In fact, the general principles established in this judgement, independent of the facts of the two cases involved, seem to strike a blow for common sense in making decisions about whether mediation is appropriate or not. The judges establish a number of factors to take into account, and avoid simplistic assumptions about either ADR or litigation.
 
In fact, judgement has been issued in two cases, covering the same grounds:

• Halsey v Milton Keynes General NHS Trust
• Steel v Joy and Halliday

Opinions on the issues were provided by the Law Society, the Civil Mediation Council, the ADR Group and the Centre for Effective Dispute Resolution.
 
The judgement confirms the duty of the courts to encourage ADR, following the Woolf report "Access to Justice" and the changes to the Civil Procedure Rules, but stops short of compulsion.
 
It refers to the three key cases which have set precedents in this area, and which have been featured in previous editions of this ADR Update:

• R(Cowl) v Plymouth City Council (2001) EWCA Civ 1935, (2002) 1 WLR 803
• Dunnett v Railtrack plc (2002) EWCA Civ 303, (2002)
• Hurst v Leeming (2001) EWHC 1051 (ch), (2003) 1 Lloyds Rep 379

Compulsion

In a couple of recent cases, courts have seemed to decide that they have the power to compel a party to mediate, even when they are unwilling. In Shirayama Shokusan Company Ltd and others v. Danovo ltd the court ordered mediation to take place, despite the unwillingness of the claimant. However, it stopped short at summonsing a third party to take part in mediation, and delaying the hearing because mediation had not yet taken place.
 
The Halsey judgement made a distinction between the duty of the court to encourage parties to use mediation, and the power to force parties to use mediation against their will. Lord Justice Dyson said:
"It seems to us that to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court." He quoted article 6 of the European Convention on Human Rights in support of this, and distinguished between a voluntary agreement to waive access to a court (such as an arbitration clause) and compulsion by the court itself.
 
Volume 1 of the White Book (2003) is quoted:
"The Hallmark of ADR procedures, and perhaps the key to their effectiveness in individual cases, is that they are processes voluntarily entered into by the parties in dispute with outcomes, if the parties so wish, which are non-binding. Consequently the court cannot direct that such methods be used but may merely encourage and facilitate."
 
The court suggested that to compel parties to attempt mediation risked simply adding to the total costs, delaying the date of the hearing, and bringing ADR into disrepute. Judges may well wish to explore with the parties the reason for an initial refusal to mediate, but "it would be wrong for the court to compel them to embrace it"

Cost penalties

CPR 44.3(2) gives the general rule that the unsuccessful party should pay the costs of the successful party. Rule 44.3(5) allows costs to be varied by the court, taking into account the behaviour of the parties both before and during the proceedings, including their attempts to resolve the dispute, and whether or not they have followed any pre-action protocol. In the case of Dunnett v Railtrack the successful party, Railtrack, was required to pay the costs of the case, despite being successful at appeal, as a result of refusing an offer to mediate from Ms Dunnett. In the case of Hurst v Leeming, reasons to refuse a proposal of mediation were significantly narrowed down by the court, and in effect depended on whether the mediation was likely to be successful.
 
The court re-stated the principle that penalising the successful party on costs, on the ground that they refused to mediate, should be the exception rather than the rule. The burden is on the unsuccessful party to show why the refusal of the successful party to mediate was unreasonable.
 
A number of key principles have been established:

• The process of mediation is confidential, and the court has no power to investigate why mediation did not result in agreement
• Mediation has a number of advantages over the court process, including the fact that it is generally cheaper, and has a wider range of solutions than litigation
• However mediation and ADR processes have disadvantages as well as advantages, and are not suitable for every case. There should not therefore be a presumption in favour of mediation
• The factors taken into account when deciding whether a refusal to mediate is unreasonable should include
  
  a - The nature of the dispute
  b - The merits of the case
  c - The extent to which other settlement methods have been attempted
  d - Whether the costs of the ADR would be disproportionately high
  e - Whether any delay in setting up and attending the ADR would have been prejudicial
  f -Whether the ADR had a reasonable prospect of success

 
a - The nature of the dispute
There may be cases where it is important for a court to resolve a point of law, where a binding precedent would be useful, or where an injunction is needed.
 
b - The merits of the case
The fact that a party unreasonably believes his case to be watertight is no justification for refusing mediation, but a reasonable belief that a case is watertight may well be sufficient justification. Courts should be alert to claimants with a weak case inviting mediation as a tactical ploy, using the threat of cost penalties to force a settlement.
 
c - Other settlement methods have been attempted
Attempts to settle and offers to mediate are just one factor for courts to consider when deciding whether a refusal to mediate is reasonable.
 
d - The cost of mediation would be disproportionately high
This is a particular factor when the sum in dispute is comparatively small. A mediation may be at least as expensive as a day in court, and the parties will also have to bear the cost of legal advice in preparing the case, and representation before the mediator. Generally speaking, the cost of the mediation will be borne equally by the parties regardless of outcome, though it is possible that the cost of mediation may be the subject of a costs order after the hearing. As it is not possible to predict the outcome of mediation, it may be that the cost of an abortive mediation would simply be added to the costs of the court process, and this is a relevant factor in deciding whether a refusal to mediate was reasonable.
 
e - Delay
Accepting a late offer of mediation may have the effect of delaying the hearing. This is another relevant factor when deciding whether refusal to mediate is reasonable or not.
 
f - Whether the mediation had a reasonable prospect of success
In Hurst v Leeming, Lightman J said that the critical factor for him in deciding whether the refusal to mediate was reasonable, was whether, objectively viewed, mediation had any real prospect of success. However, the judges in this case have decided that the more appropriate principle should be that the burden is on the unsuccessful party to show that “there was a reasonable prospect that mediation would have been successful". This does not mean that they have to prove that the mediation would in fact have succeeded, just that there was a reasonable prospect of success. If the successful party refuses to mediate despite the court’s encouragement, that is a further factor to take into account. The stronger the encouragement of the court, the easier it would be for the unsuccessful party to demonstrate that the other party’s refusal was unreasonable.
 
The court also considered whether public bodies should be particularly penalised when refusing to mediate, in the light of the previous Lord Chancellor’s pledge, in March 2001, that government departments would use ADR where appropriate. In a recent case the MOD was penalised for refusing mediation in a dispute about a lease, which they believed needed judicial resolution because it involved clarifying a point of law. The court stated that that was not a justifiable reason for refusing to mediate. However, the judges in this case have decided that the pledge is just one more factor to consider when deciding whether a refusal to mediate is reasonable, and that it should not place any greater burden on public bodies than on individuals.

• Halsey v Milton Keynes General NHS Trust, and Steel v Joy and Halliday
• Court of Appeal May 11th 2004
• (2004) EWCA (Civ) 576
• Lord Justice Ward, Lord Justice Laws and Lord Justice Dyson