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Mediation - being unreasonable and maintaining privilege

08 August 2008

Mediation has been triumphed as the way forward but what about when it fails? Do the costs consequences mean you should always take part even if you fail to actively participate and are the costs of mediation itself recoverable?

There have been a number of cases recently involving issues surrounding mediation. We have previously extolled the virtues of mediation (in the right circumstances) and indeed the Courts have penalised parties for failure to mediate when it was unreasonable to do so. This principle has now been extended by the case of Earl of Malmesbury v Strutt & Parker.

In this case after the claimant had succeeded on liability in a negligent valuation case, the parties went to mediation on quantum. The claimant offered to accept £9 million and was ultimately awarded £900,000 at trial. The court held that the claimant’s position was unreasonable and that this had caused mediation to fail.

They also held that the unreasonableness in the mediation could be treated as placing a party in the same position as someone refusing to go to mediation and hence their unreasonableness was reflected in the costs order, in which they were awarded only 70% of their costs in relation to quantum.

Interestingly in this matter, both parties agreed to waive mediation privilege which enabled the court to review the quantum position discussed in the mediation. The case of Cumbria Waste Management v Baines Wilson examined this further. In this case, HHJ Frances Kirkham upheld both “without prejudice” privilege and contracted confidentiality in refusing to order disclosure of documentation connected with the mediation.

This bold decision reinforces the security of what goes on at mediation. Accordingly, if the parties maintain this privileged position the situation in the Earl of Malmesbury case is unlikely to arise again.

Another issue that has arisen recently in relation to mediation is whether the costs of participating in that mediation are recoverable. In the case of Lobster Group Limited v Heidelberg Graphic Equipment Limited HHJ Coulson decided that if the mediation was convened after the issue of proceedings the costs were in principle recoverable, but not if the mediation was convened before. Whilst this is a non-construction case, its principle is interesting and arose in this case for consideration in respect of a security for costs order.

To sum up, mediation is still recommended, in suitable circumstances and unless the parties waive privilege, one party’s failure to reasonably participate in the mediation is unlikely to be damaging in costs. The costs of the mediation itself may be recoverable if it was conducted after litigation had commenced.

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Charissa Shears

Associate
T: 08700 86 6742
I: +44 (0)1489 61 6742
E: charissa.shears@shoosmiths.co.uk