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Case law: Court finds reasons for refusing to mediate were all unreasonable

Parties to disputes should think carefully before refusing to take part in mediation. In a recent case, a party to legal proceedings put forward multiple reasons for refusing mediation, but the court rejected all of them as unreasonable.

Legal Alert

This update was published in Legal Alert – September 2014

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

An agreement required a company to allot shares, and a dispute arose as to whether the agreement was binding. The claimant wanted to try alternative dispute resolution such as mediation, but the other side did not, arguing they were 'too far apart' from each other. Their solicitors said they and their clients knew of the possible costs consequences of unreasonably refusing to try mediation, but were 'extremely confident' of their case; and their rejection of mediation was therefore reasonable.

Throughout various proceedings, offers and counter-offers the claimant continued to press for mediation and the other side continued to refuse it.

Eventually, the claim was settled on the basis of an early offer made by the claimant, which the other side had initially refused. The claimant argued that the other side should pay its legal costs on an indemnity basis because they had refused to engage in mediation. Awarding indemnity costs means that if there is any doubt whether a claimant's costs are reasonable or reasonably incurred, the court gives the benefit of the doubt to the claimant.

The court said mediation was suitable for this sort of dispute and extreme confidence is not a good reason to refuse mediation: a party claiming its case is so strong that there was no conceivable point in trying mediation will usually be acting unreasonably. If a party is so confident of its position it should apply for summary judgment.

The court also found that the other side was wrong in claiming there was too much dislike and mistrust between the parties for mediation to be worthwhile - a mediator's skills were most useful in situations of distrust and emotion.

Finally, it also found the argument that the parties were too far apart was not a good reason to refuse mediation – it's only through mediation that they know whether they are too far apart or not. The court ordered the other side to pay the claimant's costs on an indemnity basis up to the date it accepted the offer to settle.

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Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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