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News articlesDispute Resolution, Commercial Dispute and Litigation, News

9

Oct 2014

Judge asks parties to a commercial dispute to mediate at the earliest opportunity

What should a party to a dispute do when it considers it has a cast iron case? Can it simply ignore the benefits of mediation and proceed straight to a trial, confident in the strength of the case?  Or, in addition to a review of the legal strength of their case, should they also be considering wider factors?

The recent court decision of PGF ii SA v OMFS Company Limited shows that the courts have decided that the latter is the correct approach, with parties in disputes encouraged to mediate at the earliest time in the dispute.

The Defendant’s put forward the following arguments as alleged justification for their decision not to mediate:

 1.           They did not consider the claim had any middle ground between the parties.

2.            The Defendants were confident no agreement would be reached.

3.            There was considerable mistrust and dislike between the parties.

4.            The cost of mediation was disproportionate to the sums involved in the claim.

The Judge commented that whilst these views are not uncommon among parties in dispute they could not be justified.  It was held that where there is mistrust, the presence of a mediator can resolve issues and that no party can be truly confident as even the strongest case carries a litigation risk in terms of costs recovery.  That both parties in the dispute cannot fully know the other‘s position until they do come together to mediate. Mediators can usually decide within an hour if the parties are too far apart to make the process viable.

It was also stressed that the cost of mediation should be considered against the cost of the trial, not the claim. The Judge said that their failure to enter into mediation until a very late stage was unreasonable.  By mediating earlier, the cost, and length of time taken to resolve a dispute can be reduced.  It will also keep the cost of the dispute proportionate to the disputed issue.  Fighting for principles through the courts, without regard to practicalities, can be very costly and sometimes leads to financial ruin.

There are disadvantages to mediation which need to be assessed when deciding how best to proceed. However, the Civil Procedure Rules actively encourage mediation so parties to a dispute should consider it carefully.  It is important to note that taking part in mediation does not prevent the issuing of court proceedings at a later stage.

Contact: Alan Porter