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It has long been established that a successful party can be deprived of all or part of its costs if it is shown that in all the circumstances of the case it unreasonably refused to agree to alternative dispute resolution
(ADR) (Halsey vs Milton Keynes General NHS Trust).

This point was recently considered by the Court of Appeal in PGF II SA vs OMFS Company 1.

The important points that arise out of the decision are these:

• Silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable. In the case, the claimant wrote twice to the defendant asking it to mediate. The defendant failed to respond. The defendant was found to have unreasonably refused to enter into mediation and penalised in costs.
• Civil litigants are required to engage with a serious invitation to participate in ADR. If a party considers that it cannot participate in ADR, discussion is required about why. For example, if there is a concern about lack of information, can there be limited voluntary disclosure or ADR at a later date than proposed?
• It is essential for parties to consult The Jackson ADR Handbook - the Court of Appeal endorsed certain advice given in that book in its decision.
• There is an ever-increasing responsibility on parties to engage in ADR, wherever that offers a reasonable prospect of producing a just settlement at proportionate cost. This includes engaging with each other to consider the suitability of ADR, rather than having to be robustly encouraged to do so by the court.

So, if mediation is agreed, how should parties approach it?

The first question is always when to mediate. As to this, there are a number of statements from the Court of Appeal about mediating early, including in Bradford vs James where it was said: 鈥淎n attempt at mediation should be made right at the beginning of the dispute and certainly well before things turn nasty and become expensive. By the time neighbours get to court it is often too late for court-based ADR and mediation schemes to have much impact. Litigation hardens attitudes. Costs become an additional aggravating issue.鈥�

Secondly, there is the question of what should be done by way of preparation.

Certainly, a different approach to litigation is required because:

• at facilitative mediation (which is the norm) a party needs to persuade the other party - and not the mediator - of its case; and
• the mediation advocate鈥檚 aim is, as stated in The Jackson ADR Handbook, not to 鈥渨in鈥� but to ensure that his client achieves an appropriate settlement.

In preparing for the mediation, as stated in The Jackson ADR Handbook, 鈥渢he lawyers acting for each party should ensure that a full risk assessment is carried out in relation to the client鈥檚 case鈥�.

This should include assessing merits, costs to date and costs to trial. Parties should work out the win and lose scenarios, as well as the reasons motivating them to continue and/or stop the litigation.

An attempt at mediation should be made at the beginning of the dispute before things turn nasty and become expensive

Parties would be wise also to internally draft out their 鈥渋deal deal鈥�, which contains each and every settlement term necessary and required. The dangers of not drafting in advance are underlined by the cases of AB vs CD Ltd and Newbury vs Sun Microsystems, both of which concerned disputes about whether parties had entered into binding settlement agreements.

In both cases, one party wanted to add extra terms to the settlement, but the other party successfully argued that it was too late as the agreement had already been concluded.

The Jackson ADR Handbook contains guidance about documents for the mediation. A mediation bundle can - and usually should - be presented differently to a trial bundle. Certain documents ought to be included, for example offers. Mediation does, however, allow a dynamic approach. For example, in a construction case involving a number of items, position papers can contain tables grouping items by issue or value and cross referencing items to packs of documents that support or attack them.

Before the mediation day serious consideration should be given to having a pre-meeting - perhaps by telephone - to deal with matters which, if not resolved, will eat up part of the mediation day. The mediation agreement, attendees and authority ought all to be agreed in advance.

There is no fixed structure for a mediation day: mediation is an entirely flexible process. The process is, however, often greatly assisted if the person from the party who is making a point, request or offer - or their representative - is willing to explain their point, request or offer to the other party in a face-to-face meeting.

Elizabeth Repper is a barrister and mediator at Keating Chambers