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Property mediation in the post-Jackson and the Mitchell world

This article was first published in the Solicitors Journal on 27 May 2014.

It has been clear for a while that both politicians and many members of the judiciary have left behind their initial scepticism and now become fervent supporters of formal alternative dispute resolution (ADR) processes, mediation in particular.

There are doubtless many reasons for this radiant enthusiasm, not least the fact that the more cases which can be resolved without requiring litigation to be fought to the bitter end, the better the chances of our overstretched court system keeping its head above the floodwaters of issued claims.

However, the less cynical might also note that mediation really does seem to work; settlements are apparently achieved in at least 80% of cases where mediation is used.

Furthermore, the prospects of parties being able to interact reasonably with one another in future, which can be particularly important in the context of a property dispute, are significantly enhanced by finding a practical solution to which each can commit, rather than having a legal outcome imposed by a judge.

Clear statement

Property cases are rarely simply about who owes what to whom; where property is in some way the subject of the litigation then a clear statement about its status or use in future may well be the key. Nevertheless, those who regularly mediate in disputes concerning property have been conscious for some time that, whilst the underlying issues about ownership, rights, obligations and the like are often capable of being worked through and a sensible way forward defined in terms which both sides can accept, it is the costs that frequently prove to be the greatest hurdle to a negotiated settlement.

The amount of money expended by both sides before reaching mediation is enough of a problem where parties are funding the litigation personally, especially if their legal team is working under a conditional fee arrangement (CFA); where insurers are involved, the sense on at least one side of the argument that they are immune to the financial consequences of litigation risk makes the mediator’s task yet more difficult.

As for so much of civil litigation, major changes to the landscape in which property disputes are mediated have been effected by the implementation of the Jackson reforms. One aspect which deserves particular mention is the ban on recovering success fees under CFAs1 and ATE insurance premiums2. Now that cases issued since the law changed on 1 April 2013 are filtering through the system to a point where the parties have to think seriously about attempting mediation, we are starting to see a different approach to risk assessment, even among those who might previously have felt complacent about the relative security of their position. Jackson has given us back the concept of an inevitable costs shortfall with which to promote realistic negotiation between litigants where at least one has the benefit of insurance and/or a CFA.

Costs budgeting

Another Jackson reform to impact on property mediations significantly is the requirement for costs budgeting. Mediators have always sought to persuade parties to examine and usually to disclose their current and projected costs expenditure to the other side in advance of a mediation or, at least, in the course of the day.

For disputes that have passed the stage of an initial CMC since April 2013 there will now generally have been at least an exchange of Precedent H budgets providing detail about actual and anticipated expenditure. There may also have been costs management under CPR Part 3 and Practice Directions 3E and 3F.

In many ways these developments are helpful for mediation purposes, as they provide a level of clarity and openness about the costs position on each side in place of the caginess and distrust which otherwise frequently surrounds the subject.  

However, they may also create difficulties, especially where one party has been the subject of a costs capping order or there has been active costs management and the parties (or one of them) are aggrieved by the limits placed on their ability to recover from one another as a result.

Similarly, it is not unusual for parties negotiating over costs at a mediation suddenly to realise with a sinking heart that their Precedent H costs budget is out of date and substantially underestimated what they have since spent or now anticipate requiring to reach trial.

Blithe observations that they will simply make an application to revise the budget if the case doesn’t settle unsurprisingly tend to cut little ice with opponents.

The recent amendments to Part 3 taking effect from 22 April 2014 will reduce the extent to which costs management applies to property disputes, principally by clarifying that those provisions do not apply automatically to cases commenced under CPR Part 8.

However, the Court retains a discretion to order that CPR 3.12 and Practice Direction 3E will apply to any proceedings, and with the current judicial zeal for keeping costs under control and proportionate it is to be expected we shall see that discretion being exercised in a significant proportion of Part 8 property claims.

Slightest slip

There has been a further development over the past year which will, perhaps, provide the greatest single impetus towards mediation and settlement. If any of us had somehow failed to appreciate the change of approach to litigation heralded by the Jackson amendments to CPR 3.9, our eyes were forcefully opened by Mitchell v News Group Newspapers Ltd3 and many of the authorities flowing from it.

No longer can litigants and their lawyers assume that a missed date or an inaccurate document can be sorted out with minimal fuss; instead the slightest slip is capable of requiring an application for relief from sanctions, with no guarantee of success. Not only is compliance with the strict terms of rules and orders clearly to be seen as compulsory rather than an “optional indulgence”4, but the co-operative landscape of post-Woolf litigation seems to have been replaced with a minefield around which parties lie in wait to ambush their hapless opponents.

However competent the legal team, there has to be a sense that the path to trial is no longer as easy as it used to be, and the possibility that things may go horribly wrong hangs over everyone at every stage.

Let’s hope that a renewed awareness of the substantial risks inherent in litigation following Jackson and Mitchell will also lead parties to consider mediation at a far earlier (and cheaper) point than has become the norm.

Of course it is important that everyone understands the fundamental issues in the case before attempting to resolve them with the assistance of a mediator.

However, there are relatively few situations in which it is really necessary to have done much more than exchange proper pre-action correspondence including justified assessments of quantum and enclosing pertinent documents before seeking a mediated settlement.  

1. s58A(6) Courts and Legal Services Act 1990 as amended by s44 Legal Aid, Sentencing and Punishment of Offenders Act 2012.
2. s58C Courts and Legal Services Act 1990 inserted by s.46 Legal Aid, Sentencing and Punishment of Offenders Act 2012.
3. [2013] EWCA Civ 1537
4. Turner J in MA Lloyd & Sons Ltd v PPC International Ltd [2014] EWHC 41(QB)