Mediation has advantages as a confidential non-binding and consensual process which can yield flexibility in terms of outcomes cost-effectively which makes it attractive to parties. Commercial Disputes partners, Gearoid Carey and Gerard Kelly set out why parties should take mediation seriously in view of the consequences which may follow if they do not.
Mediation has become an increasingly common feature of the dispute resolution landscape in Ireland. Gone are days when proposing mediation raised suspicions. Mediation has proven itself to be a means by which cases can be settled confidentially, quickly and cost-effectively. Mediation is inherently attractive to litigants as it permits flexible resolutions with high success rates[1].
However, developments in statutory provisions, court rules and case law make clear that mediation should be taken seriously and that failure to do so can have serious consequences.
Incentives to mediate
The relevant legislation, the Mediation Act 2017, aims to promote mediation and minimise recourse to the courts. Lawyers are obliged to advise clients about mediation before litigating,[2] and a statutory declaration confirming they have complied with that obligation is to accompany the originating document.
Of greater practical consequence is how the approach to mediation can influence costs awards. RSC Order 99 provides that consideration must be given to Section 169(1) of the Legal Services Regulation Act 2015. This is particularly relevant in decisions regarding how litigation costs are to be awarded as between the parties. For example, one factor to be considered in awarding costs is where the parties were invited by the court to settle the claim, by mediation or otherwise, and one or more of the parties was unreasonable in refusing to engage.
Relevant Irish case law on this point is limited,[3] but the Court of Appeal[4] recently declined to impose a reduction in the costs awarded to a successful party which it said it normally would do as sanction for his conduct in not being forthcoming to the court. However, the stated reason for not doing so was because the other parties had “equally conducted the litigation in a manner which this court cannot condone and they twice refused the opportunity to resolve the dispute by mediation.”
Other cases have made interesting observations about a party’s approach to mediation but no formal orders were made on that basis. In one High Court decision, while the focus of the costs application was on matters other than mediation, it was stated that “[t]he most obvious way in which litigants might resolve their dispute in the most cost-effective manner possible is by the use of mediation, failing which there may be cost consequences”.
Avoiding a day in court
All parties to litigation should at least consider resolving their disputes without court intervention, but this is particularly the case where one party is a State body. In both the costs decision[5] and the related principal judgment[6] in a recent High Court case, the court stressed that a state agency in particular should at least consider mediation in every dispute in which it is involved and that litigation should be the last resort. This was because, unlike almost every other litigant, there is nobody in a State agency who will be personally out of pocket if the litigation is won, lost or drawn and they do not have the financial incentive that most other litigants have to consider mediation.
Conclusion
Mediation’s inherent advantages aside, legislation, court rules and especially an ever-developing case law all mean that mediation needs to be taken seriously. It will be interesting to see how the case law develops around not only the cost consequences of failure to mediate but other applications which may be based on reluctance to engage in the process. The Irish courts are becoming more willing to make orders, and costs orders in particular, in cases where a party is found not to have properly considered mediation or other efforts to achieve a cost-effective resolution. Whether a different standard is applied to State bodies in these considerations also remains to be seen.
For more information and expert advice on bringing claims and mediating disputes, contact a member of our Commercial Disputes team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
[1] For example, CEDR states that 80% of cases referred to it settle - https://www.cedr.com/commercial/
[2] Section 14, Mediation Act 2017.
[3] By contrast, English case law has historically been clear that there are cost consequences for unreasonably refusing to mediate - see, for example, Halsey v Milton Keynes General NHS Trust [2004] 4 All E.R. 920
[4] Mascarenhas v Karim & Anor [2022] IECA 48
[5] Sere Holdings Limited v HSE [2023] IEHC133
[6] Sere Holdings Limited v HSE [2023] IEHC 63
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