LEXLAW Solicitors & Barristers
Whilst this litigation produced the leading judgment of the Court of Appeal on DBAs the case itself was not resolved by trial of the preliminary issue. The parties have now amicably settled the matter.
This latest High Court case again demonstrates the pitfalls for litigants who unreasonably refuse to engage in Alternative Dispute Resolution such as mediation to resolve issues. Parties that fail to do so risk be punished by the court when it comes to costs.
Mediation and arbitration are alternatives to litigation. Mediation is “without prejudice” commercial negotiation to settle a dispute. Arbitration is a private court hearing where parties agree to be bound by the decision of the arbitrator. Both forms of ADR have their pros and cons, and the most effective method depends on the parties themselves and the nature of the dispute.
If a party completely foregoes mediation will that party be punished in costs? The High Court judgment highlights that although the court cannot compel parties to mediate, an unreasonable refusal to do so is likely to result in costs penalties for a defaulting party. The costs risks of unreasonably refusing to mediate or not responding to a mediation proposal may be severe.
All solicitors have a duty to advise their clients about alternative dispute resolution (ADR), including mediation. Along with the ADR requirements in the pre-action protocols, the CPR and court schemes, overall, mediation is an option that must be considered by parties both before and during litigation (and a failure to do so can lead to costs penalties).