Mandatory mediation? “Alternative” dispute resolution no longer

In a June 2021 speech, Sir Geoffrey Vos, Master of the Rolls, said "Alternative Dispute Resolution should really be renamed as "Dispute Resolution" since it is not alternative at all." Few would disagree that mediation is now part of the mainstream. But there are signs that the courts are becoming more bullish than ever in forcing parties down this route.

An "obstruction"?

Can the court compel parties to mediate? The answer for a long time has been that found in Halsey v Milton Keynes General NMS Trust:

"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."

Yet as long ago as 2013, in Wright v Wright Supplies Ltd, Sir Alan Ward (one of the appeal judges who heard Halsey) questioned whether it was time to review that rule: "Is a stay really "an unacceptable obstruction" to the parties right of access to the court if they have to wait a while before being allowed across the court's threshold?".

Tougher approach

While suggesting that the courts could not force parties to mediate, Halsey established the proposition that a successful party at trial could be denied part or all of its costs if it had unreasonably refused an invitation to mediate. The courts have acted upon that in numerous cases since, the Court of Appeal extending the concept of refusing to mediate to encompass not replying to an invitation in PGF II SA OMS Company 1 Ltd.

Since then, the approach of the courts has got steadily tougher on parties not seen to be open to the possibility of negotiated settlement. In the County Court, it is becoming increasingly common for the court to order early neutral evaluation of a claim, or for a "dispute resolution hearing" at which the parties will negotiate, without a mediator.  Parties are often ordered to send their best offer to settle 7 days in advance of the directions hearing, to disclose this to the judge and to ensure those who attend the directions hearing have authority to settle.

Even in high value claims though, the court's attitude towards negotiated outcomes is becoming more mandatory. The Court of Appeal Mediation Scheme automatically identifies cases, including contractual claims up to £500,000, as suitable for mediation. Mediation under the pilot scheme is voluntary but "parties may be required to justify to the Court of Appeal their decision not to attempt mediation at subsequent court hearings."

In Gregor Fisken Ltd v Carlthe Court of Appeal, when granting permission to appeal, noted that "The case does not fall within the pilot scheme for mediation, but the parties are strongly encouraged to consider attempting to resolve their dispute by mediation." No steps to mediate were subsequently taken and the reason given by the claimant, namely that the defendant had failed to engage with its Part 36 offers, was described by the Court as "highly unsatisfactory". The judgment went on "Strong encouragement from the court to consider mediation merits careful consideration and is not simply to be ignored or rejected out of hand". Submissions were invited "as to the consequences which should follow".

The COVID factor

In May 2020 the Government published Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency, which it updated in June that year.  That guidance sought to strongly encourage the use of "negotiation, mediation or other alternative or fast-track dispute resolution" mechanisms, rather than resort to the courts.

We are not aware of any cases in which the courts have expressly referred to the guidance. However, the judge in Dwyer (UK) Franchising Ltd v Fredbar Ltd & Bartlett may have had it in mind. The dispute here involved a franchisee of a plumbing business seeking relief from payments due to the franichisor during the pandemic. Despite finding largely in its favour, the Judge was critical of the franchisor's "unattractive approach" to its dealings with the franchisee and noted that its approach "represented a failure to treat a franchisee compassionately in the context of exceptional circumstances which required all companies to adopt a reasonable approach rather than apply strict legal rights. It was contrary to the whole tenor of approach expected at the time". As the hearing had not dealt with final orders, the judge took the opportunity to suggest that his findings might provide the parties "with some perspective when deciding whether to try to reach an agreement as to the way forward".

Can you refuse to mediate?

Given that mediation has a high success rate for resolving disputes at a fraction of the cost of a trial, any party that instinctively does not want to mediate should reflect on why that is.  But if you do not wish to mediate, it is clear from recent caselaw that it will take a very good reason for that to avoid costs consequences. The fact that you have a strong case will certainly not suffice: DSN v Blackpool Football Club. Older caselaw that suggested that it could be a good reason if the parties were too far apart for mediation to have any prospect of success is also best now treated with care. More than one judge has noted that a skilled mediator can close a large gap or make one party see sense.

However, there are situations in which it can still be reasonable to refuse to mediate:

• Where there is more than one co-defendant, it may be reasonable to refuse to engage in bilateral mediation where other co-defendants have refused to take part, as one defendant successfully argued in Wales v CBRE.

• In Beattie Passive Norse v Canham Consultingthe defendant's refusal to mediate was reasonable as the claimant was proceeding on a factual basis that it knew to be incorrect. The fact that the claimant was advancing a "plainly untruthful case" meant that it could obtain no advantage from the defendant's refusal to mediate.

• If insufficient information is available to properly assess the case, it may be reasonable to suggest that mediation be deferred until that is remedied, for example after exchange of documentary, witness or expert evidence, where this is necessary to understand the merits of each side's position. However, the courts will be alert to whether this is just a way of trying to appear open to mediation, by saying "Not yet" rather than "No".

Where next for mediation?

In Lomax v Lomax in 2019, the Court of Appeal held that the court could order the parties to engage in Early Neutral Evaluation, despite their objections. It is hard to see why the same analysis should not apply to mediation. In 2013 in Wright, Sir Alan Ward spoke of "some bold judge" perhaps challenging the orthodoxy that parties cannot be forced to mediate.

On 12 July 2021, the Civil Justice Council published a report concluding that making mediation compulsory does not breach Article 6 of the European Human Rights Convention and is, therefore, lawful. The report states that more work is necessary in order to determine the types of claims and the situations in which compulsory mediation would be appropriate.

If the post-pandemic landscape sees a high number of contractual disputes despite the government's attempts to steer commercial parties away from the courts, the time for such a "bold judge" to step forward may arrive. Parties should consider very carefully before refusing an invitation, or ignoring a suggestion from the court, to mediate.

For more resources on mediation, see here.