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The risk of refusing mediation.

Byline: By Paul Reekie

The courts have for some years now espoused the policy that parties pursuing their disputes through the courts should have considered the alternative.

Chief amongst these alternatives is mediation. In mediation a mediator is employed to assist the parties in exploring the possibilities for compromise and settlement.

A number of cases in 2002 tested how far the courts will go beyond encouragement and apply sanctions against those who would avoid mediation.

In February 2002 in the case of Dunnett and Rail Track, the Court of Appeal refused to award Rail Track their costs of a successful appeal.

At an earlier stage the court had suggested mediation. The claimant responded positively, but Rail Track flatly refused. In refusing Rail Track costs in the appeal, the court warned that parties and their lawyers may face uncomfortable costs consequences if they turned down out of hand the possibility of mediation suggested by the court.

In May last year, the case of Hurst and Leeming considered the claim of a solicitor against a QC who had acted for him in previous claims.

Mr Hurst had been unsuccessful in actions against his former partners, his former solicitors, and finally in the action against his QC.

Those representing the QC had however refused Mr Hurst's invitation to mediate. In allowing costs against Mr Hurst the court recognised the force of the decision in Dunnett, but also took into account the hopelessness of Mr Hurst's claims and the unlikelihood of mediation succeeding.

In October the High Court made an extremely important decision in the case of Cable & Wireless and IBM. The parties had entered into a contract containing clauses requiring them to negotiate any dispute and if this failed to attempt a resolution by mediation. The question was whether the requirement to mediate was binding or whether it failed in the face of the basic tenet of law that agreement to negotiate is unenforceable.

The court enforced the mediation clause on two grounds. Firstly, they found the references to mediation were sufficiently specific to distinguish them from a vague promise and secondly, the mediation clause was analogous to an arbitration clause and therefore enforceable.

Also in October the High Court considered a three-party action involving the Wyatt Company (UK) and Maxwell Batley. They argued over costs where the successful party had previously refused an invitation to mediate.

The court again underlined the Dunnett decision, but held that the circumstances were totally dissimilar and refused to deprive the successful party of their costs.

In November the Court of Appeal in McCook and Lobo had the opportunity to consider its own decision in Dunnett. This time they distinguished the circumstances from Dunnett in allowing costs to a party who had not even responded to an invitation to mediate. They held the circumstances did not lend themselves to mediation, but emphasised the warning that parties who refuse invitations to mediate may well find themselves having to explain to the court why or risk Dunnett-type orders.

Accordingly it would appear that the courts are determined to reduce litigation volume by expecting parties to mediate wherever reasonably possible.

Many issues arising in construction matters regarding defects, design, payment and damages lend themselves to resolution through mediation. Accordingly a refusal to mediate without good reason may well lead to some difficulty in obtaining an order for costs on a successful conclusion before the court.

* Paul Reekie is a partner at North- East law firm Ward Hadaway. For more information, contact: (0191) 204-4000 or visit the website at www.wardhadaway.com.
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Title Annotation:Business
Publication:The Journal (Newcastle, England)
Date:Apr 24, 2003
Words:591
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