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Refusal To Mediate

September 7, 2014

In Phillip Garritt-Critchley & Others v Andrew Ronnan and Solarpower PV Limited [2014] EWHC 1774 (Ch) Pannone Solicitors who reported the case on their website acted for four Claimants in proceedings against a Defendant whom their clients were in dispute with over his failure to allocate shares in a Company, under an agreement, which the Claimants said was in existence between the parties.  The court had to decide whether that agreement was binding between the parties.

The Claimants’ Solicitors, in their letter of claim, confirmed to the Defendant that they were willing to enter into Alternative Dispute Resolution (ADR) with the added hope that they would not have to resort to proceedings in the court. However, the response from the Defendants was a refusal to mediate stating that they were not at that stage ready to enter into mediation with the Claimants and because of this the Claimants issued proceedings on the 6th July 2012.

The Claimants had made it clear in their allocation questionnaire that they were ready and willing to negotiate and consequently requested a one month’s stay of proceedings to give both sides room to see if there was any chance of settling the matters between them. However, the Defendant’s allocation questionnaire let it be known that they could not agree to the stay of proceedings as there was too much of a gulf between the parties to be able to agree any settlement.

Although the Claimants’ Solicitors tried to ascertain the reason for the Defendants refusal to mediate , the Defendant’s Solicitors made it known that they and their Clients understood what the consequences were of refusing mediation if this was found to be unreasonable by the court but were very confident of their own position and did not believe that the Claimants had any prospect of success.

The Claimants’ Solicitors always made it clear to the court that they were ready and willing to enter into mediation but this approach was always rejected by the Defendant who was very confident of its own position and of winning the case.

A case management conference (CMC) was held on the 28th May 2013 before District Judge Khan who issued directions for trial. The District Judge noted that the parties should have made an attempt to find a solution to this matter by way of mediation and as such he asked for the Claimants and Defendant to let the court have witnesses statements from them, in sealed envelopes, as to why they had refused mediation.

About two months before the date of the trial, during November 2013, the Claimants made a Part 36 offer for £10,000 but the offer expired within the given period, without being accepted by the Defendant. The Defendant made a counter-offer on the 14th December for the Claimants to put a stop to their claim and pay 75% of the Defendant’s costs. Despite this counter-offer by the Defendant, the Claimants remained ready and willing to make progress with the Defendant and to open negotiations with them should they alter their position.

The trial opened on the 14th January 2014 lasting four days and judgment was reserved until the 3rd February 2014 when it was to be handed down by the Judge. In that intervening period the Defendant asked the Claimants to allow them to now accept the Part 36 offer made earlier to them in November 2013. The Claimants allowed this and the Defendant accepted the offer made in the Part 36 which then brought into the frame the issue of the Claimants costs which entitled them to be paid on the standard basis, to the date when the offer was accepted.

The matter of the costs was put before the Court at a hearing on the 4th February 2014. As the Defendant had failed on numerous occasions to agree to mediation, the Claimants Solicitors asked for an indemnity costs award which HHJ Waksman found in the Claimants’ Solicitors favour.

HHJ Waksman rejected the reasons given by the Defendant as to their refusal to mediate such as there was no area of compromise between the parties, that they did not like each other so, therefore, there was too much distance between them for a settlement to be explored. The Judge questioned as to how the parties would know this unless they sat down and discussed whether there was such a possibility.

This case highlights the fact that the Courts look to mediation as a way of finding common ground between the parties and as such a way of shortening the Court process and saving time and costs. To act unreasonably and reject this process to explore settlement of the matter would be looked on unfavourably by the Courts and result in severe cost consequences.