Saturday, 13 October 2012

THE FOLLY OF REFUSING TO MEDIATE……. ( Research article by Professor Hu Chi Ku Chi )

Any social club caught up in a long running dispute with a player should never allow the situation to proceed to a point, where one or both parties want their day in court. One would always hope and expect that if there was a provision in the club’s constitution to approach an outside independent body to make a final and binding ruling, then this sensible ADR option would be taken up as a matter of common sense and financial prudence.

Now, as the law stands if one party is pushing for mediation but the other steadfastly refuses ( possibly without good reason ) then this deliberate obstinacy becomes a high risk strategy. Although the courts can’t compel both parties to seek mediation, it may well impose an adverse ruling regarding costs on the party, who has initially refused to mediate …...even if that party ultimately goes on to win the case. These highly instructive words of Lightman J seem to sum up the prevailing attitude the courts currently take towards those that have wilfully refused mediation:    

 "Refusal is a high risk course to take… the hurdle in the way of a party refusing to proceed to mediation on this ground is high, for in making the objective assessment of the prospects of mediation, the starting point must surely be the fact that the mediation process itself can and does often bring about a more sensible and more conciliatory attitude on the part of the parties than might otherwise be expected to prevail before the mediation."

Indeed, parties must make genuine attempts to mediate and the Court will impose costs sanctions on those who do not have strong grounds for refusing to mediate. The recent decision in Golden Eagle International (Group) Limited v. GR Investment Holdings Limited sends the message that parties should make a genuine attempt to mediate before continuing with litigation. Failure to provide a reasonable explanation for refusing to mediate might well result in adverse costs consequences.
 The Defendant in the above case tried to rely on the English decision in Halsey v Milton Keynes General NHS Trust to justify its refusal to mediate. It was held in Halsey that departure from the general rule that the 'losing party should pay the winning party's costs' would only occur where the winning party acted unreasonably in refusing to mediate. The judge in Golden Eagle concluded that a party must have strong grounds for refusing to mediate.  A contention that a dispute could not be 'easily mediated' is not a strong enough ground since it was noted in Golden Eagle that few cases were unsuitable for alternative dispute resolution. Similarly , a contention that " mediation is completely out of the question if the expelled member is seeking reinstatement " might again be viewed as unacceptable grounds for refusal.  'Reasonable belief of a strong case' is only relevant in clear-cut cases e.g. where a party would have succeeded in an application for summary judgment. Borderline cases will not fall within this category.
Parties wishing to litigate should be warned - they must show the courts that, before engaging in time-consuming and costly litigation, they have made a genuine attempt to mediate the matter, or face adverse costs penalties. Forced to accept ( at the death ) the other side's repeated offers of mediation , only because a case management review judge made it perfectly plain that this was the sensible course of action to take, will not escape the attention of the judge , should in the worst case scenario the unresolved dispute finally goes to court.  As enunciated in Golden Eagle, the Courts will not tolerate a party's unreasonable failure to mediate. Parties should therefore seek advice on and seriously consider whether mediation is appropriate and whether it is reasonable to mediate, particularly where the other party has requested it.

However , it does need to be noted that in 2012 the Court of Appeal did agree that the successful party was not unreasonable in refusing mediation , and therefore should not be punished in costs on that basis ( see Swain Mason v Mills & Reeve ). Indeed , this was a rare move which illustrates that in certain circumstances a refusal to mediate may be justified. This could happen if the party genuinely believed he/she had a watertight case , or that the distance between the two parties was so great that mediation offered no realistic prospect of succeeding. Nevertheless, the Court of Appeal still maintained that this was a high risk strategy , and that any unreasonable refusal to mediate ought to carry significant cost penalties. Parties in dispute should not take such a decision lightly.

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