New Law Journal
Graham Huntley sees limits to mediation in many commercial disputes.
So much of the attention given to the Jackson reforms has been on the issue of proportionality of costs. However, Lord Justice Jackson also advocated a resurgence of interest in alternative dispute resolution (ADR) and in particular mediation. His Review of Civil Litigation Costs in January 2010 reached a conclusion that “ADR (particularly mediation) has a vital role to play in reducing the costs of civil disputes by fomenting the early settlement of cases” and that “its potential benefits are not as widely known as they should be”.
In support of the general proposition he recommended an authoritative book on ADR be published, setting out practical elements and guidance for all judges who hear civil cases. The resulting book was published in May and apparently copies have been given to almost all High Court judges. At the same time the Ministry of Justice has cited mediation as the “raison d’être” or “excuse” for withdrawing legal aid from whole swathes of litigation, the argument being that if it works properly the last resort of litigation should be a rarely needed process.
As with so much of the reforms over the years in civil litigation, it is questionable whether that thesis is of universal application. In the field of consumer and small claims it is easily understood. But does it really apply in large commercial claims? Perhaps the best example is in relation to the issue as to whether the court should have the power to make mediation compulsory.
Since its introduction the CPR, which positively encouraged parties to resolve disputes “otherwise than through the normal trial process”, the courts have strongly supported the use of ADR and mediation in particular. Famously, inHalsey v Milton Keynes General NHS Trust  EWCA Civ 576,  4 All ER 920, the Court of Appeal identified six reference criteria for determining whether a refusal to mediate should be taken into account in denying a successful party the costs of its subsequent success in the litigation. However, the court stopped short of recognising a jurisdiction to order compulsory mediation (thereby overruling earlier cases to the contrary). Dyson LJ observed that this would, at least for unwilling parties, represent an “unacceptable obstruction on their right of access to the court”.
Inevitably, this has been stress-tested in recent cases in the field of consumer and small claims litigation. Recently, and most seriously, in Wright v Michael Wright Supplies Ltd & Anor  EWCA Civ 234,  All ER (D) 02 (Apr) Ward LJ, conscious perhaps that he was soon to retire from the Court of Appeal, expressed his frustration with not being able to shift intransigent parties “off the trial track onto the parallel track of mediation”. He questioned whether mediation was truly an “unacceptable obstruction” on the right of access to the courts, in circumstances where CPR 26.4(2)(b) allowed the court to stay proceedings on its own initiative.
This view had previously found weighty support from Sir Anthony Clarke, former Master of the Rolls, who for some years argued that it could not be beyond the courts’ case management powers to direct the parties to meet and discuss settlement in the presence of a mediator—such powers for example existing in CPR 1.4(2)(e) which includes, within active case management, judicial scope for “encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure”. CPR 3.1(2)(m) also enables the court to take any step in managing a case which would further the overriding objective which of course now expressly includes resolving disputes at proportionate cost.
In Wright, Ward LJ was concerned with two intransigent litigants in person. Focusing on that paradigm example of the problem he invited another “bold judge” to rule on the question of compulsory mediation given developments in the field in the last 10 years or so.
Of course the example of litigants in person triggers the old proverb that “you can drag a horse to water but you can’t make it drink”. Despite the obvious logic of that, it is clear that Ward LJ was speaking for many judges who recognise the counter-argument that a horse is more likely to drink if it is taken to water.
The difficulty in the field of commercial litigation, is that, as with so many other reforms, the temptation to agree with the sentiments of Ward LJ and Sir Anthony Clarke is mitigated by a concern that the power to compel mediation may prove to be unsuitable or unworkable in the field of serious and complex commercial disputes. There may be an intuitive benefit in mediating relatively low value cases or claims in negligence (particularly where contributory negligence is a factor and therefore a whole range of outcomes may be possible) or for example mediating disputes in sectors where it has become more cultural (such as construction).
However, mediation is rarely, if ever, going to be desirable or of much use in many commercial disputes where there is a “black and white outcome”, ie where one party stands to gain everything and, if it succeeds, the other party lose everything. Moreover, if a commercial dispute of that nature is of a relatively low value then surely a judicial power to order meditation may well generate more cost, and thus more disproportionate cost.
The point comes into sharper focus given the recent volte-face and removal of automatic cost budgeting for claims above £2m in the High Court, and for any claims in the Commercial Court. What is arguably worse is that the revocation of Practice Direction 43, which previously contained the teeth to police and take advantage of estimates of costs, means that we now have less rather than more effective control of costs despite the Jackson reforms (unless of course the judges very actively manage cases in a proactive way on which there are, to say the least, mixed views about what can be expected, particularly in heavy commercial cases).