Commercial Dispute Resolution Newsletter - December 2014

Author:Mr Paul Friedman, Neil Jamieson and Sapna Garg
Profession:Clyde & Co


Dislike and mistrust between parties should not prevent them mediating

Garritt-Critchley & Ors v Ronnan & Anor (2014)

This High Court decision penalising a party in costs for refusing to mediate, demonstrates that refusing mediation is a high risk strategy. Although not compulsory, the courts remain keen on mediation and other ADR and parties should always bear this in mind when litigating.

The dispute was over whether or not a binding agreement had been reached. In the letter before claim, the claimant (Garritt-Critchley) indicated that it would be prepared to resolve the dispute via ADR. The defendants (Ronnan) indicated that they did not wish to engage in mediation and subsequently, that they were aware of the possible penalties for unreasonably refusing mediation, but that they were extremely confident of their position. They continued to refuse to mediate, even following directions to trial which encouraged the parties to do so. Just before judgment, following a four day trial, Ronnan decided to accept, out of time, the claimant's Part 36 offer requiring Ronnan to pay GBP 10,000 and standard costs. The claimants then applied for their costs (of the whole action) to be paid by Ronnan on the indemnity basis rather than the standard basis, given its unreasonable failure to mediate.

The High Court ordered Ronnan to pay Garritt-Critchley's costs on the indemnity basis, finding that its consistent refusal of mediation was wrong. The leading case, Halsey v Milton Keynes General NHS Trust (2004) stated that "most cases are not by their very nature unsuitable for ADR". The sort of case where mediation might, exceptionally, be inappropriate, was where it concerned the resolution of a point of law, where a binding precedent would be useful or where injunctive or other relief was required.

Here, however, the claim was suitable for mediation. It essentially involved a question of fact and Ronnan could not be sure that their position on the facts would be accepted. It was also a case with a wide range of possible quantum scenarios if Ronnan lost and therefore mediation should have been considered as it would have given them room to manoeuvre. The Court remarked that: "Parties don't know whether in truth they are too far apart unless they sit down and explore settlement. If they are irreconcilably too far apart, then the mediator will say as much within the first hour of mediation. That happens very rarely in my experience."

The fact that there might be considerable dislike and mistrust between parties did not prevent them mediating. The Court stated: " is precisely where there may be distrust or emotion between the parties ...where the skills of a mediator come in most usefully. They are well trained to diffuse emotion, feelings of distrust and other matters in order that the parties can see their way to a commercial settlement." In any event, the costs of mediation would have been far less than the costs of the trial. Had the parties met for sensible negotiations or mediation at the last time that Ronnan was invited to do so by the claimants, the claimants' costs were around GBP 65,000. Those costs grew to around GBP 161,000.

Agreement to negotiate in good faith within a limited period held enforceable

Emirates Trading Agency v Prime Minerals (2014)

This case is significant because it creates an exception to the general principle that an agreement to negotiate is unenforceable. The High Court decided that it...

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