Court Decisions About Mediation in 2021

My periodic trawl through a years-worth of reported civil non-family cases in BAILII has thrown up a selection in which mediation has been mentioned.  Again, it is important to note the relatively few cases in which controversy over its use has been suggested.

Many note simply that mediation has happened which led[1] (or did not lead[2]) to settlement or recommend that it be used in future where there are outstanding issues[3].  So the normalisation of mediation as a component of civil justice dispute resolution is continuing, and there are signs of its being reinforced.

In Ralph v Ralph[4], the Master of the Rolls observed that it was a case that cried out for mediation, drawing attention to the Civil Justice Council report Compulsory ADR, published in July 2021, saying that judges might take powers to order mediation in future.  In Wilmington Trust v Spicejet[5], the judge said:

I cannot force parties to mediate but it does seem to me that it would be a sensible step which I should encourage, robustly if necessary.

How the concept of court-mandated ADR will develop is a continuing issue, following the CJC report and the MoJ consultation on the use of mediation.  But as we shall see under the section below dealing with costs sanctions, there is still no unanimity among judges about that topic.

Informal Mediations

Informal mediators did not impress judges in 2021.  In Dalkilic v Pekin[6] two informal “mediators” were brought in but failed to facilitate settlement.  One was later called as a witness for one party.  They had described themselves as arbitrators.  The judge found that they had always been intending to give evidence for one side and their evidence was “biased and untruthful”.  A similar finding of bias on the part of an informal mediator was made in Wozniak v Rattan[7].

ADR Contract Clauses

In NWA and others v NVF and others, an LCIA arbitration clause required mediation to be tried first under its mediation rules.  NVF sought to start the mediation and asked for an [8]immediate stay for mediation.  NWA declined to mediate, asserting a limitation defence, but then sought to argue that because NVF had in fact not mediated first as required, the arbitrator had no jurisdiction (despite NVF’s clearly expressed desire to mediate.  It was held that mediation was not a condition precedent, but that the arbitrator still had jurisdiction to make directions as it was a perfectly valid referral to arbitration. 

Enforcement of Mediation Settlements

Decisions in 2021 have underlined judicial determination to see that settlements emerging from mediation should be binding and performed.  A consensual example was in RPY v Barnet Enfield & Haringey Mental Health NHST[9], where approval was given to settlement terms and apportionment of damages for minors emerging from the mediation of a clinical negligence claim.  There is little evidence that mediated settlements requiring court approval do not get it.

In Gibson v New[10], a sadly long-running boundary dispute, the mediated settlement provided that the boundary line would be determined by a surveyor.  The defendants did not like the surveyor’s decision and challenged it in various ways, but unsuccessfully initially and on appeal.  As usual the costs lost were enormous.  Whether it was wise for a mediation to settle on the basis of a later expert determination is an interesting question.

In Pedriks v Grimaux[11], P alleged that G had failed to comply with the terms of a mediated settlement over the sale of a company, and an oral agreement made 18 months later.  P claimed that at the mediation, G had represented that he was not owed money by the company, but later he claimed to be owed US$4.4 million on an alleged promissory note.  P alleged that this was not a genuine debt, but claimed that a later oral agreement had resolved the disagreement.  G then denied this.

For various detailed reasons the judge found that there was no breach of the settlement agreement terms, but did find that G had represented during the mediation that he was not owed money, and was thus estopped from relying on the promissory note to reduce what he owed P.  She also found that G was bound by the terms orally agreed later between G and P.  Interestingly there is no indication in the judgment of any qualm about admitting evidence as to the representation made during the mediation (the mediator is named but does not seem to have been called as a witness), nor any suggestion that the later oral agreement should have been in writing to comply with the usual requirement for this in a standard mediation agreement.

An interesting underlining to court willingness to enforce agreed terms appears in Trebisol v Varlot and others[12].  Although not concerning a mediated settlement, agreed terms in a Tomlin Order in usual form were found to be binding, despite being beyond what the court could have awarded in the original litigation.

Duress and estoppel were also considered and rejected, and the settlement terms enforced.  As mediated settlements often contain terms well beyond what was sought in the original litigation, this is comforting.

In the SCCO decision in Jones v Richard Slade & Co Ltd[13], J had instructed RS in a contested will claim, which was compromised at a mediation, one of the terms of which was payment of a specified sum for RS’ s costs.  J sought to challenge RS’s costs on a Solicitors Act assessment, and RS opposed this in an application, saying that the compromise figure disentitled J from doing so.  J argued that undue influence and economic duress had been inflicted on them by RS to pressurise them into settling.  The SCCO judge rejected RS’s application allowing the assessment to proceed.

Finally on this topic, in Hawansenti v Wickramasingh[14], in an unsuccessful challenge to an agreed valuation set up at a successful mediation, the judge, in unusually ordering specific performance of the settlement terms, said:

It is important that the court ensures that valid settlement agreements are enforced according to their terms.

Privilege and Confidentiality in Mediation

The unquestioned admission of an alleged misrepresentation during a mediation has already been noted above[15].  The issue of unambiguous impropriety has been considered further in 2021.  In Motorola v Hytera[16], the Court of Appeal overturned the judge’s finding that there was unambiguous impropriety to justify admission of privileged material.  H had indicated without prejudice an intention to withdraw assets from the jurisdiction which M saw as at=n attempt to frustrate enforcement.

If the indication had been admissible, a freezing injunction would be made: but if inadmissible there was insufficient justification for freezing H’s assets.  The Court of Appeal emphasised the need for lack of ambiguity about what was said and declined to regard H’s remarks as impropriety.  More than a “good arguable case” was required to establish it, and the freezing injunction was overturned.

That appeal decision was cited in King v Stiefel[17], where one party’s warning to the other in a privileged mediation position paper of adverse costs consequences if litigation was not discontinued was found not to come near the required level for unambiguous impropriety.

The appeal in Berkeley Square Holdings v Lancer Properties[18], also about the admission of a privileged position paper in evidence, was heard in 2021.  There LP sought to have admitted their position paper which had informed BSH of facts which tended to exonerate them from BSH’s allegations of fraud.  BSH tried to have the document excluded as privileged.

The Court of Appeal admitted the document to prove its contents on the basis that it proved the factual nexus in the dispute, but refused to accept the trial judge’s view that it was admissible because the case was not justiciable without admitting it.  The tortuous discussions around privilege arising in recent cases are fully discussed in my long paper The security of mediation and the interests of justice to be found on the CEDR website[19].

In Jones v Lydon[20], a case involving the Sex Pistols, it was that without prejudice material had given rise to estoppels.  The judge declined to dissect out admissions against interests from other WP material (relying on Robert Walker LJ’s well-known dicta in Unilever v Proctor & Gamble[21], and upheld privilege and found neither waiver nor estoppel.

In Escalate Law (1) Bermans (2) v Kennedy & Kennedy[22], EL/B acted for KK in a claim against former solicitors who had allegedly failed to protect KK’s interests in a land deal.  A mediation did not settle the claim against the solicitors, after which EL/B terminated the retainer with KK alleging that they had not been open and honest.

KK counterclaimed that EL/B should have advised them to accept what had been offered at the mediation.  Details of offers and counteroffers at the mediation were introduced without reported query from any party.  The judge found for EL/B, agreeing with them that even if they had recommended acceptance of the last offer at the mediation, KK would not have accepted it.

Negligent Advice Given at Mediation

Counter to what happened in the Escalate Law case above, in Percy v White[23],  An offer was made at a mediation which counsel (when later instructed) advised his client to reject.  When sued, both counsel and solicitors were found to have been negligent in advising against acceptance. 

Costs Sanctions for Refusing or Failing to Mediate

A few cases still reached judgment in 2021 on whether mediation was unreasonably refused or ignored, though generally, the impression is that mediation is voluntarily undertaken in a wide range of cases, especially in commercial, professional indemnity and clinical negligence claims., which means that the underlying concern about costs sanctions for refusal may be working.

Ignoring a firm judicial recommendation to mediate is very likely to incur a sanction.  In Gregor Fisken Ltd v Carl[24], Males LJ added a strong addendum to the court’s finding in favour of GF:

GFL has been the successful party. Prima facie, therefore, it is entitled to its costs of the appeal. I would make no discount from these to reflect the issues on which Mr Carl [who was the Appellant] has succeeded. I would order the costs of the appeal to be paid on the indemnity basis to reflect the court’s disapproval of Mr Carl’s failure to take any steps in response to the suggestion of mediation. In this regard it is notable that my order granting permission to appeal not only contained the strong encouragement to mediate to which I have referred, but also indicated a provisional view that the outcome of the appeal might well prove to be exactly as it has been. If the suggestion of mediation had been taken up in good faith in the circumstances of this case, it is hard to think that the costs of the appeal would have needed to be incurred.

In Active Media Services v Burmester[25], the unsuccessful claimant’s refusal to mediate impacted on the adverse costs order made.

But in two cases, the judge declined to penalise a party who refused to mediate.  First in Beattie Passive Norse v Canham Consulting[26], BPN claimed £3.7 million against engineers in a construction claim, but were awarded £2,000, less than a Part 36 offer made by Canham.  Canham sought indemnity costs while BPN argued for their costs up to the Part 36 offer and standard costs thereafter.

They also argued that Canham had refused to mediate until late on and then only by using blind bidding with a mediator.  The judge nmade no order as to costs up to the Part 36 offer and ordered indemnity costs thereafter against BPN.  He pointed out that when the mediation proposal was made, BPN was advancing a  knowingly untrue case, and it was thus reasonable to refuse to mediate then.  This suggests the need for “clean hands” in a losing party who seeks to rely on the winner’s refusal to mediate, not unlike the approach taken by the late lamented Lightman J in Hurst v Leeming[27], who declined to penalise a winner faced with an utterly intransigent claimant.

The final case is Philip Warren & Son Ltd v Lidl[28], which illustrates how judges can be selective about use of authorities on this topic depending on their inclination, and their view of the parties and facts.  Lidl decided to give a solid English name – Warren & Son – to their fresh butchery department.

They discovered the claimants PWS – a successful butcher in Launceston, Cornwall, who had not registered their trade mark, before starting to use the new branding between 2015 and 2020 when it was withdrawn.  PWS did not make a claim until 2019, not having realised they might have a substantial claim until consulting Stobbs IP solicitors in 2017, with whom they entered a damages-based agreement (DBA) to fund the  litigation.  In the event the deputy High Court judge[29] found against PWS’s claim for passing-off.

Lidl sought indemnity costs, especially because PWS would not accept an offer to settle. PWS said that Lidl refused to mediate, and they had won on a half-hearted counterclaim by Lidl that PWS had benefited from getting associated with Lidl’s brand.  PWS made a Part 36 offer of £28 million and offered mediation, in response to which Lidl made a part 36 offer of £230,000 (in the event not beaten by PWS).  Six months later PWS offered £15 million under Part 36.  On costs, the judge decided on a narrow balance to order standard basis and not indemnity costs against PWS and reduced those costs by 10% to reflect that PWS had not lost hands down on everything.

However, he declined to penalise Lidl for refusing to mediate.  Unfortunately, the BAILII judgment has omitted part of para 85 (a citation from Gore v Naheed) and para 86, which probably refers to an otherwise unexplained reference to Ramsey J which is likely to be his decision in Northrop Grumman v BAE Systems[30].  So the basis for this decision is not fully explained as it stands.  But broadly he found that the parties were too far apart for mediation to be likely to succeed, with £28 million playing £230,000 at the time of the invitation to mediate.  He relies on Gore v Naheed[31] for the principle that:

a finding that a party has unreasonably refused even to engage in ADR does not result in an automatic costs penalty.  It is an aspect of the party’s conduct which may be taken into account in evaluating reasonableness.

In Gore, Patten LJ cited Briggs LJ in PGF v OFMS[32] in support of that comment.  But what Briggs LJ said about that in PGF[33] was:

In my judgment, the time has now come for this court firmly to endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds. I put this forward as a general rather than invariable rule because it is possible that there may be rare cases where ADR is so obviously inappropriate that to characterise silence as unreasonable would be pure formalism.

Warren hardly appears to be a case in which ADR was “obviously inappropriate”.  Indeed the judge looked at all the Halsey factors and found it was eminently suitable.  The only one which he used was the “no reasonable prospect of success” point.  Why judges expect counsel for a successful party to make any concession that mediation might have had any prospect of success is mystifying.  The Briggs dictum hardly justifies the spin put on it by Patten LJ in Gore.  Another citation might have been worth considering this time from Waksman J in Garritt-Critchley v Ronnan[34]:

Parties don’t know whether in truth they are too far apart unless they sit down and explore settlement.

So judges may feel they can pick and choose cases to quote on this topic.  Mediators are well used to parties using the confidentiality of mediation to abandon their claim or their defence or to move huge distances for a compromise.  It is the very security of setting up a totally confidential environment for those discussions which make this possible.

Parties so often emerge blinking from a mediation saying that they simply never believed that a settlement would emerge that makes mediators so insistent that it is a process worth trying in almost every case, especially in a case like Warren where (as the judge found) the cost of doing so paled into insignificance against the sums at stake.

The one issue that lurked at the edges of the judge’s thinking in Warren seems to be the fact that PWS only embarked on a huge claim when they sought advice from IP lawyers who were prepared to act on the basis of a DBA which would have brought them substantial rewards if the claim had succeeded, and might have led to a degree of intransigence I the advice they might have tendered during a mediation.

All one can say about that is that mediation restores parties to the centre of their own claim.  Perhaps the Warren family might have decided at the mediation to cut their losses and settle for a far more modest sum, which would in turn have reduced what their lawyers might have been entitled to receive (depending on the terms of the DBA).  With DBA possibly resurfacing as a means of funding litigation, this is a space worth watching.

[1]   See e.g.YH v Kent CC [2021] EWCOP 43

[2]   See e.g. Cranstoun v Notta [2021] EWHC 133 (Ch); Abdulrazzaq, v Hassan [2021] EWHC 3252 (QB);

Malik v Habboub Hussein [2021] EWHC 3161 (Ch); Galtaz v Versant Developments [2021] EWHC 3657 (Comm)

[3]   See e.g. Various v News Group [2021] EWHC 3083 (Ch); Howes v Howes [2021] EWHC 591 (Ch); Benyatov Credit Suisse [2021]; and – the only 2022 reported decision so far! – Meric v Naris and QBE [2022] EWHC 221 (QB).

[4]   [2021] EWCA Civ 1106

[5]   [2021] EWHC 1117 (Comm)

[6]   [2021] EWHC 219 (Ch)

[7]   [2021] EWHC 2341 (QB)

[8]   [2021] EWHC 2666 (Comm)

[9]  [2021] EWHC 180 (QB)

[10] [2021] EWHC 1181 (QB)

[11] [2021] EWHC 3448 (QB)

[12] [2021] EWHC 2494 (QB)

[13] SC-2021 APP 000714

[14] [2021] EWHC 2045 (Ch)

[15]  See Pedriks v Grimaux and f/n 11

[16] [2021] EWCA Civ 11

[17] [2021] EWHC 1045 (Comm)

[18] [2021] EWCA Civ 551

[19] The link is https://www.cedr.com/the-security-of-mediation-and-the-interests-of-justice/

[20] [2021] EWHC 2322 (Ch)

[21] [2000] 1 WLR 2436

[22] [2021] REHC 2232 (Ch)

[23]  [2021]EWHC 22 (Ch)

[24]  [2021] EWCA Civ 792

[25]  [2021] EWHC 352 (Comm)

[26]  [2021] EWHC 1414 (TCC)

[27] [2002] EWHC 1051

[28] [2021] EWHC 2372 (Ch)

[29] Daniel Lawrence QC

[30] [2014] EWHC 3148 (TCC)

[31] [2017] EWCA Civ 369

[32] [2013] EWCA Civ 1288

[33] At para 34

[34]  [2014] EWHC 1774