Originally Published November 2012
In ADS Aerospace Ltd v EMS Global Tracking Ltd[2012] EWHC 2904 (TCC) (24 October 2012) following dismissal of the Claimant’s $16m claim, the High Court has rejected an argument that the costs to be awarded to the Defendant should be reduced due to the Defendant’s refusal to mediate.
Following Halsey v Milton Keynes NHS Trust[2004] EWCA Civ 576Mr Justice Akenhead said: “The onus being on the Claimant in this case to establish that the Defendant acted unreasonably in refusing or not wishing to participate in mediation, I am not satisfied that the Defendant did act unreasonably”. His reasons for this conclusion were:
The Claimant had for some time been unwilling to engage in without prejudice discussions notwithstanding attempts by the Defendant to initiate these, and there was no good reason why that approach should not have been tried.
The Claimant had a strong view that it was entitled to substantial compensation and gave every appearance that it was simply not interested in a nuisance payment. There was “no evidence that it would have been interested, even through the good offices of the mediator, in settling its claim at that level.”
The suggestion of mediation came very late in the proceedings, less than 20 days before trial. Without prejudice discussions would have been quicker, cheaper and less intrusive into trial preparation than mediation which, even if it lasted only a day in itself, would have diverted solicitors and counsel by more than one day because they would have had to prepare for the mediation. Mediation would have also cost substantially more than without prejudice discussions.
The Defendant did not act unreasonably in believing that it had a very strong case on liability, causation and quantum. It might be said that a good mediator would have been able to “work on” the Claimant to accept what would in effect be a nuisance offer but, in the context of this case, with sensible solicitors and counsel, without prejudice discussions would probably have achieved the same result or at least got to the same stage. Mr Karlsen “clearly and very obviously wholly believed in the Claimant’s case” and would have found it very hard to accept a small six-figure sum inclusive of costs, which was all that would have been available either in mediation or in without prejudice discussions and which would have left the Claimant with nothing after costs had been paid.
The judgement is interesting, not just as an example of the application of the Halsey principles, but also because it highlights the relationship between mediation and without prejudice negotiations.
It would be a rare case that would go to mediation without negotiations having taken place first. These can range from fairly perfunctory discussions between the parties to full-blown negotiations through solicitors, but in most cases, mediation is tried when other attempts to settle have failed. What then does mediation add, beyond having someone else to (as Mr Justice Akenhead said) “work on” one or other (or both) of the parties?
At least part of the answer is in the different negotiation techniques used. 30 years ago Fisher & Ury developed the techniques of “principled negotiation” as distinct from “positional bargaining”.[1] These techniques (separating the people from the problem, focusing on the parties’ interests rather than their positions, using objective criteria and ensuring that win-win possibilities are not overlooked) are essential parts of a mediator’s toolkit, but are hardly the stuff of Part 36 offers.
I have no reason to suppose that mediation would have worked in the ADS Aerospace case, but at some stage, perhaps before the parties’ positions had become entrenched and hundreds of thousands of pounds had been spent on costs, it might have been worth a try.
[1]Fisher, R., & Ury, W. (1981). Getting to yes: Negotiating agreement without giving in. Boston: Houghton Mifflin.