Landmark Mediation Decision at Court of Appeal

November 2004

THE Court of Appeal in May gave important general guidance in the use of Mediation and mediation in personal injury litigation. The court ruled particularly on the circumstances when it is appropriate to penalise a party who refuses mediation.

The judgement (in the consolidated appeals of Halsey-v-Milton Keynes General NHS Trust and Steel-v-Joy and Halliday) was reached after giving consideration to the representations of four Mediation providers and interested bodies. It was therefore taken as the court’s definitive view on how Mediation should and should not be encouraged in this field.

Paul Hughes, Solicitor and Partner at Crutes Law Firm, is one of the country’s leading exponents of the use of Mediation in insurance and personal injury cases. He said of the case:

“At first blush this judgement appears to be a major setback to supporters of mediation. On careful analysis however, the jury is out as to whether the guidance given by the Court of Appeal will in fact encourage the greater use of mediation, in particular in personal injury cases where the take up of mediation has been notoriously slow."

A clinical negligence case (Halsey) was consolidated with a personal injury case (Steel) with a view to the court reviewing the present position relating to costs penalties following unreasonable refusal of mediation, and offering guidance to the personal injury sector for the future.

Interested bodies were invited to make submissions to the court and weighty submissions were made by the Law Society, Civil Mediation Council, Mediation Group and CEDR.

Halsey was a clinical negligence case involving the death of an elderly patient. Many invitations to mediate were made by the claimant, which were refused on the grounds that the claim had no prospect of success in the eyes of the Trust, and in any event value of claim was nominal so that the cost of mediation would be disproportionate. The claim failed and the judge refused to penalise the Trust for its refusal to mediate, finding that at least some of the offers to mediate were somewhat tactical.

The Court of Appeal agreed and found:

The Defendant reasonably believed it had a strong defence

• The Solicitor’s letters were “somewhat tactical” in a very small claim which at best was speculative
• The Defendant rightly concluded that the mediation costs would be disproportionately high
• The Defendant’s stance was therefore not unreasonable

Steel was a personal injury case involving two separate accidents to the same claimant. Accident one caused a serious spinal injury. Accident two then occurred and medical evidence suggested that accident two aggravated the injury that was already there by three to six months, but that if accident one had not happened, accident two would have caused a virtually identical injury. The judge found in favour of the defendant to accident two. The Court of Appeal agreed and dismissed the appeal on the substantive point of law. Before trial the Defendant to accident one offered to mediate but the defendant to accident two refused on the grounds that it felt strong on its legal position and was not prepared to compromise. The first instance Judge found that this was a reasonable stance and refused to penalise the defendant to accident two.

The Court of Appeal found:

The refusing party reasonably believed that the claim had no merit

• The claim involved a point of law and it was not unreasonable for a refusing party to insist upon resolution of that point by the court. The court stated: “In the circumstances the nature of the dispute was one which was towards the “intrinsically unsuitable” end of the spectrum (of cases suitable for mediation)”.
• It could not therefore be shown that there was a reasonable prospect that the mediation would have succeeded; the refusing party decided to take a stand on a point of law and in doing so was not acting unreasonably.

The court went on to give some general guidelines for the use of Mediation and mediation in personal injury litigation cases. These included:

• The court does not have the power to order reluctant litigants to mediate as to do so would be a violation of Human Rights legislation.
• The court’s role is to encourage parties to enter into mediation, and not compel.
• All those involved in litigation should routinely consider with their clients whether their disputes are suitable for Mediation.
• If a party refuses to mediate, at a subsequent trial, the court can displace the normal costs rules and order that party to pay costs despite it winning at trial. This will only occur if the successful party acted unreasonably in refusing Mediation.
• The burden of showing that the refusing party was acting unreasonably lies with the unsuccessful party.
• If the case is mediated, the parties are entitled to adopt whatever position they want and if the case does not settle, the court is not entitled to examine why that happened (preserving the confidentiality of mediation).
• Although most cases are suitable for Mediation, there should not be a presumption in favour of mediation.

So is this judgement a step forward or a step backward in the encouragement of mediation in personal injury litigation? The general tenor of the judgement is clearly in favour of mediation, and indeed of favour of increased use of mediation.

The message in the vast majority of cases must be that to refuse to mediate still carries the potential risk of a costs penalty. Parties will increasingly need to carefully consider their position in deciding whether it is in their interests to mediate.

Since the judgement, we have already seen the courts and government acting to encourage mediation, for example:

• Courts have started to issue orders that parties to personal injury claims should consider mediation, and be prepared to justify a refusal at any subsequent trial;
• The Department for Constitutional Affairs have accepted the Better Regulation Task Force (report on the compensation culture) recommendation to encourage greater use of Mediation.

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