dispute resolution. There is an emphasis
on proportionality, where the courts
look at the amount of costs spent on a
claim, versus the actual benefits gained
from the litigation; mediation can be a
much cheaper and cost-effective way of
resolving the dispute.
There is a Practice Direction on
Pre-action Conduct (PDPAC) and
specific pre-action protocols that every
party to a dispute must follow, and
this specifies the need for parties to
consider alternative dispute resolution.
The aim of the protocols is to enable
parties to avoid litigation wherever
possible by agreeing a settlement of
the claim even before they have issued
proceedings at court.
The Civil Procedure Rules, which prescribe
how to run a case, encourage the use of
dispute resolution (including mediation),
and the various courts (including the
Commercial Court) have court guides that
promote the use of mediation. Judges have
looked for and commented on the need for
mediation, particularly where the value of
the claim is low.
Consequences when parties fail to mediate
Given the courts’ promotion and
encouragement of mediation in
commercial disputes, parties risk severe
consequences if they fail to consider
whether mediation is suitable.
If a claim proceeds to trial without either
party first considering whether they
should mediate, or if one party refuses
the request of the other to attempt
mediation, the courts can consider
those actions when deciding where to
award costs. This is because by refusing
to mediate, the parties have lost the
opportunity of resolving the dispute
without there being a hearing.
Even if a party has been successful at
trial and is able to recover the amount
claimed from the other side, the issue
of who pays legal costs still has to be
considered by the court. Legal costs,
particularly when the matter has
proceeded all the way to trial, can be
huge and both parties will be concerned
as to how much they will be able to
recover or how much they will have to
pay to the other side. When deciding
costs, the judge will look at all the
circumstances of the case, including
the conduct of the parties before and
during the proceedings. If they have
unreasonably refused to mediate, the
judge has the power to order costs even
against the winning party.
In some cases, mediation will not be
suitable. However the parties will still
need to consider it and be able to say
why they do not want to mediate or why
it is not suitable. The judge will consider
whether these explanations or refusals
are reasonable and if it is found that they
are not, cost consequences may follow.
By Miranda Jenkins
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