Courts in the UK impose cost sanctions on parties who unreasonably refuse or fail to mediate. In the US, mediation is more firmly embedded in the litigation process, the courts applying varying degrees of coercion to encourage the parties to participate in mediation. In some US states, disputes that fall in a certain category have to be mediated before being litigated. In other states, judges have the discretion to order the parties to mediate. The goal of the UK and US approaches is the same: the optimal use of mediation by litigants and less reliance on adjudication.
In Florida judges have the discretion to order the parties to attend mediation and more than 100 000 court ordered mediations took place during 2013. 1 Despite the positive trend towards mediation in the UK, the uptake of mediation has been slower. In Halsey v Milton Keynes General NHS Trust 2, the UK Court of Appeal held that “to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to courts.” Without deciding the point, the court expressed concern that compulsory mediation infringed on the right of access to courts under article 6 of the European Convention on Human Rights.
The Halsey court had to decide when it is unreasonable for a party to refuse mediation and held that to deprive a successful party of all or part of their costs, the (other) party who requested the mediation, must show the successful party had behaved unreasonably in refusing to mediate. By placing the onus on the party who requested mediation to prove that the refusal to mediate was unreasonable, the Halsey court addressed the concern that the threat of a cost sanction may indirectly impose an ‘unacceptable obstruction’ on the other party’s right of access to courts. LJ Dyson made the following positive comments about mediation:
“Parties sometimes need to be encouraged by the court to embark on an ADR. The need for such encouragement should diminish in time if the virtue of ADR in suitable cases is demonstrated even more convincingly than it has been thus far. The value and importance of ADR have been established within a remarkably short time. All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR. But we reiterate that the courts role is to encourage, not to compel. The form of encouragement may be robust.” 3
“Mediation provides litigants with a wider range of solutions than those that are available in litigation: for example, an apology; an explanation; the continuation of an existing professional or business relationship perhaps on new terms; and an agreement by one party to do something without any existing legal obligation to do so.” 4
In Dunnett v Railtrack plc 5, LJ Brooke pointed out:
“Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve. This court has knowledge of cases where intense feelings have arisen, for instance in relation to clinical negligence claims. But when the parties are brought together on neutral soil with a skilled mediator to help them resolve their differences, it may very well be that the mediator is able to achieve a result by which the parties shake hands at the end and feel that they have gone away having settled the dispute on terms with which they are happy to live.”
The Halsey court set out the following factors that should be taken into consideration to determine if the successful party behaved unreasonably:
- The nature of the dispute and its inherent suitability for ADR. The court stated, “in our view, most cases are not by their very nature unsuitable for ADR.”
- The merits of the case and the reasonableness of the parties’ belief that they have a strong case.
- Whether other settlement offers have already been made but rejected.
- Whether the costs of mediation would be disproportionately high.
- Whether mediation would result in an unacceptable delay to the trial of the action where it is suggested late in the day.
- Whether mediation would have had a reasonable prospect of success
UK case law since Halsey demonstrated ambivalence towards imposing cost sanctions on successful litigants for refusing to mediate. Some advocates of mediation argue that the without prejudice, confidential and non-binding nature of mediation, makes it always unreasonable to refuse to mediate. Their argument is that the parties have nothing to lose by attending mediation, because mediation pushes the pause and not the delete button on their rights. Mediation sceptics counter this argument with:
- The inconvenience, loss of opportunity and cost factor, including the legal costs of lawyers to prepare and attend an unsuccessful mediation.
- The concern over who pays for mediation, especially in developing countries.
- The concern that reluctant parties may pay lip service to a process foisted on them.
- On a more fundamental level they ask whether direct or indirect coercion does not go
against the grain of the consensual nature of mediation.
The US courts are less reluctant than the UK courts to compel parties to attend mediation. Judicial activism in the US has made mediation a principal outlet for the most litigious society on earth. In less litigious societies, judicial activism in favour of mediation may be less pronounced and mediation may thus take longer to take root. In the US industry-based mediation by mediators who have knowledge and experience of the industry in which the dispute arose has become the norm. This in part may explain why mediation is thriving in the US.
In the US mediation is used regularly to resolve mega-cases that involve complex legal and technical issues. Commercial disputes such as class actions, mass torts, bankruptcy, intellectual property, anti-trust and financial fraud cases are increasingly being mediated. 6 In the Sherman anti-trust cases the mediator had the opportunity to work with creative business leaders and skilled negotiator to craft significant win-win commercial deals and the same result followed the multi billion-dollar Microsoft ant-trust dispute over its Internet Explorer browser. Mediation is the US is no longer the little cousin of litigation that is good enough only to resolve family and labour disputes. Commercial lawyers in South Africa should take note of the commercial mediation trend in the US.
There are drawbacks to the US approach of making mediation compulsory. A cost sanction is considered (in some states) if one of the parties in a court ordered mediation failed to mediate in good faith. This approach is criticised for creating what is known as satellite litigation over whether a participant failed to mediate in good faith, potentially compromising the confidential and without prejudice nature of mediation. In fairness it should be mentioned that US courts have interpreted the good faith requirement narrowly and in Karahuta v Boardwalk Regency 7, for instance, the court held that it is bad faith to knowingly send someone without the proper settlement authority to attend mediation.
On a more fundamental level, compulsory mediation may paint mediation with the same coercive and adversarial brush as litigation - thus creating the risk that mediation may develop into an adversarial process that that is not all that different to litigation. This is a risk that may be emphasised by some advocates of mediation who believe that elements of positional bargaining and compromise are anathema to mediation. In medical negligence mediation, elements of positional bargaining and compromise negotiation are however par for the course and generally require a mediator who is knowledgeable and respected in the subject matter of the dispute.
On 25 August 2009, the South Gauteng High Court in Johannesburg in the case of Brownlee v Brownlee 8 expressed its displeasure at attorneys who failed to advise their clients in family matters to mediate before venturing to court. It limited the costs that the attorneys who failed to mediate could recover from their clients to those that they could tax on the party and party scale and thus deprived them of their full attorney and client fees. Brassey AJ extolled the virtues of mediation as follows:
“How much richer would this solution have been had it emerged out of a consensus seeking process rather than in adversarial proceedings in which positions were taken up that gave every appearance of callousness and cruelty. This is but an instance of what mediation might have achieved. In fact, the benefits go well beyond it. In the process of mediation, the parties would have had ample scope for an informed but informal debate on the levels of their estates, the amount of their incomes and the extent of their living costs. Nudged by a facilitative intermediary, I have little doubt that they would have been able to solve most of the monetary disputes that stood between them. The saving in time and legal costs would have been significant and, once a few breakthroughs had been made, I have every reason to believe that an overall solution would have been reached.”
The Brownlee court noted that in terms of the Rules of Court, one of the matters that must be considered at a pre-trial (Rule 34) conference is whether the dispute should be referred for possible settlement by mediation. In the case, the attorneys had no hesitation in answering this question in the negative. One of the prevailing myths about mediation is that the more angry and entrenched the parties’ positions are, the less successful “soft” options like mediation tend to be. Attorneys who are genuinely ignorant about the potential of mediation may be forgiven for being invested in this myth. The legal profession in South Africa has virtually ignored the Brownlee court.
The key for a successful court-annexed mediation initiative in South Africa may be found in the UK case of PGF II SA v OMFS Company 1 Ltd. 9The UK Court of Appeal held that the failure to respond constructively to an invitation to ADR would in most cases constitute an unreasonable refusal to ADR. Briggs LJ broadened the principles set out by the Halsey court. After summarising the ADR Handbook in the UK, the court held that constructive engagement rather than flat rejection or silence in the face of an invitation to mediate is required. It is an important decision in that it forces the parties and their legal teams to actively apply their minds to the potential that ADR may resolve or narrow the issues in dispute before they venture to court.
The PGF ll SA decision may turn out to be an important step towards making mediation mainstream in the UK. It does not make mediation compulsory, but makes it impossible for parties and their lawyers to simply dismiss mediation. In the UK, parties and their lawyers now have to apply their minds constructively to the question whether or not to mediate, failing which they may be met with a cost sanction at the end of the trial.
The Rules Board, the judiciary, the legal profession and mediators with practical experience of litigation and mediation in South Africa, should collaborate to design, develop and implement a court-annexed mediation scheme that will respect the autonomy of the parties to decide whether or not to mediate, but at the same time ensure that a party who turns down an invitation has to provide reasons in writing for the belief that mediation is not likely to resolve or narrow the issues in dispute. In this regard the Halsey court gave helpful guidance as to when mediation may not be suitable:
- Where the parties, or a party wishes the court to resolve a point of law to provide a useful precedent.
- Where injunctive (interdictory) relief is necessary on an urgent basis.
- Where one of the parties actually have a watertight case, if the party’s belief that his case is watertight is reasonable.
- Where a party has no reasonable confidence in the future conduct of the other party as a result of allegations of fraud or dishonesty.
- Where the issues are generally important for those participating in a particular trade, profession or market.
If there is one important lessons to be learnt from the US and the UK experiences, it is that the lack of judicial activism, together with the absence of Mediation Rules explain why commercial mediation has not become mainstream in South Africa.
1 Dorcas Quek“Examining the Feasibility of Implementing a Court-Mandated Mediation Program”(2010) 11 Cardozo Journal of Conflict Resolution 479 at 505, available at http://cardozojcr.com/vol11no2/479-510.pdf.
2  1 WLR 3002.
3 Halsey v Milton Keynes General NHS Trust at 3008.
4 Page 3008 LJ Dyson in Halsey v Milton Keynes General NHS Trust.
5  1 WLR 2434, 2436Ð2437, para 14.
6 Eric D Green Re-examining mediator and judicial roles in large, complex litigation: lessons from Microsoft and other mega-cases. Boston University Law Review 2006 Vol 86: 1171. Also available at http://www.bu.edu/law/central/jd/organizations/journals/bulr/volume86
7 2007 US Dist LEXIS 72510.
8 2008/25274, unreported.
9  EWCA Civ 1288.