“For all of those reasons I think that the failure to engage in mediation or any other serious ADR was unreasonable.”
–Judge Waksman, QC, in the High Court of Justice, Chancery Division, Manchester District Registry, England, Feb. 3, 2014.
Perhaps we can learn about mediation from other legal systems.
Here’s an example: an opinion on a mediation issue from a lawsuit filed in England. The opinion is by Judge Waksman, QC, from a case titled “Phillip Garritt-Critchley and Others, Claimant, and Andrew Ronnan and Solarpower PV Limited, Defendants.”
The lawsuit parties are fighting a contract dispute. And they are subject to rules requiring a reasonable participation in mediation or other ADR processes.
The defendants refuse to participate in mediation by this initial statement from their legal representatives to opposing counsel and by their subsequent conduct:
“Both we and our clients are well aware of the penalties the court might seek to impose if we are unreasonably found to refuse mediation, but we are confident that in a matter in which our clients are extremely confident of their position and do not consider there is any realistic prospect that your client will succeed, the rejection is entirely reasonable.”
The Court imposes penalties on the defendants for “an unreasonable failure to engage in mediation.” The penalties require defendants to “jointly and severally pay the claimants costs . . . in the sum of £80,000 plus VAT” and “pay the claimants’ costs of today.”
The Court identifies multiple grounds for imposing penalties on the defendants, including these:
–“This trial started on 14 January 2014 . . . [and] took place over four days.” But before a judgement could be entered, the parties settled for payment by defendants to claimants of £10,000 plus all of the claimants’ costs.
–“This was an action of a fairly typical kind . . . essentially a question of fact applying well-known contractual principles.”
–Potential damages were on “an obvious sliding scale . . . This was not an all or nothing case.” This is “a classic matter where mediation should be considered because there is ample room for manoeuvre within the wide range of possible quantum scenarios.”
–“Unfortunately, as it seems to me, the defendants did not approach this matter in the correct way at all.”
–“In my judgment, this case by its very nature was eminently suitable for ADR.”
–If Mr. Ronnan actually believed that “all odds are so stacked in his favour that there is really no conceivable point in talking about settlement,” why did he fail to make an “application for summary judgment”?
–Mr. Ronnan’s statement of “extreme confidence” in the merits of his case, “does not, in my judgment, seem to be a reaonsable position to take.” Moreover, a party’s belief “that he has a watertight case” is “no justification for refusing mediation.”
–“But in my judgment it is not just a matter of not seizing the opportunity to negotiate . . . It was a continuing failure to engage with the process from the word go . . . closing off ADR of any kind and for all time” is, effectively, “what the defendants, I’m afraid to say, were doing here.”
–The existence of “a considerable dislike and mistrust between the parties” is not a valid reason for rejecting mediation because mediators “are well trained to diffuse emotion, feelings of distrust and other matters” so that “parties can see their way to a commercial settlement.”
–“The costs of mediation, on any view, would have been far less than the costs of the trial.”
–“I take the view that one of the significant defects of this failure to engage in mediation was that this trial took place at all.”
The foregoing decision and rationale are different from what we normally see here in the States—at least in the Federal court system.
So, are there any lessons we in the States might learn from this opinion from England?
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Its my opinion that Mediation between parties at war is never productive. Companies or parties who have worked together in the past and will necessarily work together in the future have a much better path to settlement. The actual setting is productive because each party gets a time to see what someone else thinks about their position and the natreal setting makes it easier with a active Mediator to walk thru the case and point out minefields. I do not believe that Mediation is productive if forced on the parties since the armed encampment aspects seem to make it a them or me mentality. Success sometime comes as a open communication rather than a shut down defense. Fining parties because they have a strong case and do not wish to participate in settlement is a new process that I find to be not productive or make it easier in settlement in any future Mediation. At least one Contract will be modifoied from that point forward.
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Thanks, George, for your thoughts on this!
For many years, Hong Kong judges have had in place a practice direction obliging parties to file a certificate prior to going before the judge stating the result of their mediation, or the reason for which they did not mediate. Judges routinely award costs against parties who refuse to mediate. Even if this unofficially mandatory mediation has a somewhat lower success rate than totally voluntary mediation, it does settle a lot of cases and can avoid crippling litigation/arbitration costs for the “losing” party.
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Thanks, Louise, for an example from another culture. Much appreciated!
Well, we got the idea from England! HK, despite being back under Chinese rule, maintains its own laws and legal system, much of which was legacy from the Brits. And of course, given the huge proportion of foreigners and foreign investment, we are very ADR friendly!
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You live and work in Hong Kong?
I think the Court’s decision in this case is well justified. Why should a party, however strong he thinks his case might be, hold out against another, forcing him to adopt the most expensive (both to the parties and the public) process available to bring an end to a dispute which might otherwise have been resolved relatively quickly and inexpensively without unnecessarily engaging the publicly funded justice institutions of the state. Mediation is voluntary and no person can be compelled to settle. Equally though, no person should unreasonably refuse to engage with it. To do so betrays a lack of good faith which, in this case, was quite properly sanctioned by the court.
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Thanks for all the comments above!