Mediation Law During the COVID-19 Pandemic

by Tony Allen

The dispute resolution world awaits the first manifestations of COVID-19 litigation, starting probably with the interpretation of business interruption clauses in business insurance policies.

Who knows how far COVID-related litigation will reach, given the forensic imagination of the legal profession and its determination to find new avenues of business?

Will force majeure come into its own?

Will the NHS be sued for making allegedly wrong treatment decisions?

Will the Government be sued for mishandling lockdown?

If so, will it be for imposing it at all or for not imposing it strictly enough?  Sadly, the scope for dispute is huge and not obviously for the benefit of society as a whole.

CEDR has anticipated it in various ways, not least by establishing its joint scheme with the Chartered Institute of Arbitrators for dealing with pandemic-related claims.

Meanwhile, decisions which deal with the existing ramifications of mediation and its place in civil justice have continued to percolate through.  Decisions have been more quickly and comprehensively reported on the British and Irish Law Institute website (BAILII) because this has been deliberately utilised to publicise judgments during a time when the public has not been able to sit in court to hear decisions delivered orally.

This article reviews decisions published in BAILII during the first nine months of 2020 which impinge upon mediation and ADR.

The usual suite of decisions over costs sanctions shows that the judiciary are becoming increasingly intolerant of excuses for not mediating, perhaps as a result of judges of first instance courts having themselves seen how effective the mediation process can be from their prior private practice.

There are signs too that judges are not only recommending mediation as a next step but are also adapting decisions about directions to accommodate mediation at the most effective time.  On confidentiality issues, there are some signs that judges might want occasionally to enquire about mediation documents and conversations in order to do justice as they see it.  This will need careful monitoring.

A few cases discuss conflict of interest and traps over settlement terms.  There are also two more cases concerning “right-to-life” cases, which show that Family Division judges still feel that mediation has an important role to encourage safe and frank communication even where resolution is very hard to achieve. 

1.          Costs Sanctions for not Mediating

Two significant cases have shown how risky it is to place much reliance on the Halsey factors to excuse refusing to mediate, one leading to loss of expected costs by a winning party who refused to mediate, the other leading to indemnity costs against a losing party who refused.

In Wales v (1) CBRE and (2) Aviva [2020] EWHC 1050 (Comm), the claimant C had managed a pension scheme for CBRE (D1), who changed their platform, rendering C’s services superfluous.

He sued D1 and Aviva (D2) for commissions either unpaid or wrongly clawed back.  His solicitors indicated, both prior to proceedings and subsequently, their willingness to utilise mediation, but D1 declined at the outset, though agreeing to the usual Fontaine direction that ADR should be considered at all times.

In response to this direction, D1’s solicitor filed a witness statement saying that it would be premature to convene a mediation before close of pleadings.  D2 were prepared to mediate but only if D1 joined in, as they argued that D1 were the claimant’s primary target. D1 took no steps about mediation when pleadings did close, but offered a drop hands settlement, “subject to contract”, thus not being an offer capable of acceptance by C.  C did not pursue this, but after D2 had amended their defence, a mediation was again proposed in the weeks leading up to trial.

D2 again agreed so long as D1 agreed to participate but D1 again declined, now saying that time was too short to prepare.

At trial, C lost against both defendants, but at a separate costs hearing argued that the defendants’ failure to mediate deserved costs sanctions.

The judge declined to penalise D2 on this basis, though depriving them of 20% of their costs for much of the case because they had put their case on an initially misleading basis.

But he accepted that D1 should be penalised for unreasonably refusing to mediate, applying the six factors on Halsey fully and carefully.  He had no problem over four of the factors.

But as to D1’s asserted beliefs in the strength of their case and that mediation had no reasonable prospect of success, the judge rejected D1’s arguments on both of these.  He criticised them for not mediating in response to the relevant pre-action obligation to consider it, and rejected the excuses given by D1’s solicitor in her witness statement for her initial and later refusals.

On D1’s belief in the strength of their case, HHJ Halliwell found that C had a genuine and not a merely tactically contrived sense of grievance which D1 had themselves fostered by dealing inadequately with C’s claims in the first place.  On prospects of success for a mediation, the judge had no difficulty or reluctance in finding that mediation might well have succeeded whenever tried.  As support for his approach, the judge quoted both Halsey and Dunnett v Railtrack in showing the value that mediated discussions can bring, often unexpectedly and imaginatively, to the resolution of litigation.  The judge imposed different sanctions for different stages of the case, reflecting varying degrees of D1’s culpability.

In DSN v Blackpool FC [1] [2020] EWHC 595 (QB) – the trial judgment; and [2020] EWHC 670 (QB), the claimant C alleged that he had been sexually assaulted by a volunteer coach working for the defendants DD on one occasion during a youth team football tour of New Zealand in 1987 when aged 13.

The perpetrator had earlier been convicted of offences relating to other boys and imprisoned. Limitation expired when C attained 21 in 1995.  He only disclosed what had happened in the wake of the Jimmy Savile scandal.  He first saw solicitors in 2017 and his claim was issued in January 2018.  DD maintained a robust denial throughout the litigation.

They pleaded a limitation defence; required the claimant to prove the facts of his claim; denied vicarious liability for the perpetrator; and challenged both medical causation and quantum.  Directions included the “Fontaine” direction requiring ADR to be considered at all times.  DD’s solicitor filed a witness statement explaining that because of the strength of their case, no purpose would be served by ADR.  C made three Part 36 offers: £50,000 in March 2018, £20,000 in February 2019 and £10,000 in December 2019.

The first two were ignored by DD, and they rejected the last one.  The trial lasted five days, and Griffiths J found for C in every respect and awarded him just under £19,000 damages.  As C had beaten the last Part 36 offer, the judge found little difficulty in awarding  indemnity costs to C from late December to the end of trial, but he was scathing about the way DD had behaved, and he awarded indemnity costs against them from one month after the Fontaine direction was made to the end of the case. Paragraphs 27 to 32 of his judgment repay reading.

The decision in BXB v Barry Congregation of Jehovah’s Witnesses [2020] EWEHC 656 (QB) followed a similar path.  The claimant C sued DD for a rape allegedly committed by an Elder in DD and succeeded at trial.  She was awarded more than her Part 36 offer to settle, but sought indemnity costs for her whole claim on the basis that DD had refused to mediate or to enter settlement discussions.

Again a Fontaine Order was made, but DD did not file a witness statement excusing their decision.  Chamberlain J awarded indemnity costs from the date when DD conveyed an unreasoned refusal to enter negotiations.

In DBE v Biogas [2020] EWHC 1285 (TCC), C was found to have substantially won, but D secured a 10% reduction in the standard basis costs payable by D because C declined to mediate.  C also claimed the costs of complying with the Pre-Action Protocol and of a “failed” pre-issue mediation.  The judge found that C had not complied with the protocol and as there was no waiver of privilege as to what happened at the mediation, and no information as to what happened, the judge made no order as to either.

Even late participation in a mediation did not rescue the defendant DD from an indemnity costs order in Rihan v Ernst & Young [2020] EWHC 1380 (QB), when DD continued to cast unjustified attacking aspersions at C during the later trial.

2.         Confidentiality of the Mediation Process

In Berkeley Square Holdings v Lancer Property Asset Management [2020] EWHC 1015 (Ch), DD had managed properties owned by CC.

A dispute arose over a performance bonus claimed by DD based on a side letter to the management agreement.

A mediation was convened preceded by exchange of position statements, and settlement emerged soon after the mediation.

After the management agreement terminated, CC alleged that DD had fraudulently obtained excessive income through the side letter arrangement and claimed return of these excess payments.

DD asserted that CC had known the true position all along, partly evidence by what was in the mediation position statements.

The judge found that because CC had alleged dishonesty by DD, who in turn wished to show that he had disclosed what was being done, albeit in a normally privileged document (the mediation position statement), CC could not insist on withholding the document on grounds of privilege.  Roth J said:

Since [CC] rely strongly on their lack of knowledge, I consider that this is an issue, and indeed a potentially critical issue, raised by the way [CC] have advanced their case. In my judgment, this issue is not fairly justiciable if [DD] cannot put in evidence of what the First Defendant (Lancer) told [CC] in its mediation statements in September 2012. Put another way, I do not see that [CC] can fairly advance a case based on their ignorance until May 2017 of certain key facts while excluding evidence that they were told those facts some five years earlier. I consider that justice clearly demands this evidence should be admitted.

This may sit a little uncomfortably with normal expectations that mediation position papers are safe from judicial scrutiny, and the decision seems to suggest a significant additional exception to without prejudice privilege.

A contrary decision to disclosure was made by Fancourt J recently in Briggs v Clay [2019] EWHC 102 (Ch, who felt that it was unnecessary to see otherwise privileged material for the purposes of deciding the issue.

The “interests of justice” have been deployed before to override security norms in mediation before[1], and it can only be hoped that such occasions will arise rarely and in the narrowest of circumstances.  “Interests of justice” should be wider than just to make it easier for a judge to decide something, and should include the benefit of protecting the integrity of mediation.

In Motorola v Hytera China Comms [2020] EWHC 980 (Comm), CC sought a freezing order after obtaining a US judgment against DD in relation to copyright infringement and misuse of trade secrets.

CC feared that DD was dissipating assets.  During settlement meetings, DD’s Chief Finance Officer has said that DD would dispose of assets and already had done so.

The judge held that the unambiguous impropriety exception to without prejudice privilege applied, admitted that evidence and granted the freezing injunction.

In Integral Petroleum v Petrogat: Sanchouli and Sanchouli (Third Parties), [2020] EWHC 558 (Comm), Integral (CC) sought to have two Third Parties (TPs) committed for contempt for breaching injunctions not to ship oil to Iran rather than to CC.

TPs argued that CC were trying to inappropriate pressure to force a settlement, and cited Ferster v Ferster[2] in support of this (in which a mediator conveyed a series of threats from one party to another which were found to have constituted improper pressure to force a settlement, leading to the admission of that privileged communication as an act of unambiguous impropriety.  

TPs again asked the court to see privileged material in an attempt to show how improper pressure was generated by the threat to commit.  CC did not oppose its admission but successfully argued that there was nothing improper in threatening to seek committal for the breaches in this case.  Both TPs were found to be in contempt of court.

3.         Judicial Encouragement and Facilitation of Mediation

Parties were urged in a number of cases to try mediation to seek to resolve their differences -see Ingram v Green Cape Ltd [2020] EWHC 821 (QB); Re Ethiopian Orthodox Church of London [2020] EWHC 1493 (Ch); and Preventx v Royal Mail Group [2020] EWHC 2276 (Ch).  In UKIP v Braine, [2020] EWHC 1794 (QB) the court ordered a stay for mediation to be tried.

In McParland & Ptnrs v Whitehead [2020] EWHC 298 (Ch), the court was asked to give detailed guidance on disclosure.  In doing so, Sir Geoffrey Vos recommended that mediation be tried as soon as disclosure had been completed.

In Daimler v Wallenius [2020] EWHC 525 (Comm) the defendants sought a split trial.  The court rejected this on the basis that mediation was less likely to succeed if quantum was deferred by ordering a split trial on liability only.

4         Conflicts of Interest and Mediator Appointments

In C v D and X [2020] EWHC 1283 (C0mm), C sought an order to remove X as an arbitrator in a dispute between C and D, on the basis that X had misrepresented his previous experience on appointment, when he had said he was an experienced counsel and mediator>  In appointing him, LCIA knew he had not done a LCIA arbitration before.  C sought costs when X resigned during the process as a result of this complaint.  The court declined to award them to C.

In Glencairn IP Holdings v Product Specialities [2020] EWCA Civ 609, CO had brough proceedings against D over a design.  They sought an order restraining D’s solicitors from acting for D because they had acted for another company at a mediation which led to a similar settlement of an IP claim by C.  D’s solicitors claimed they had erected a secure “Chinese wall” between different offices deaing with each matter.  The court held that it was for C to show on facts that there was prejudice.  None was found.  The situation was not comparable to Bolkiah, where a solicitor was acting against a former client.

5          Problems Over Settlement Terms

In Akay v Newcastle University [2020] EWHC 1669 (QB), the claimant C appealed against the striking out of his personal injury claim against D University in the County Court as an abuse of process.

C had applied to the Employment Tribunal (ET) in respect of his dismissal and (separately but at the same time) harassment and discrimination.  His harassment case was dismissed by the ET for C’s failure repeatedly to supply particulars and for being brought out of time.  However, his Dismissal claim was the subject of a mediation.

The Compromise Agreement signed as a result of an agreement to pay C £65,000 provided inter alia that:

  1. The Claimant confirms that he is aware of no other cause of action which he has made against the Respondent (save for the personal injury claim referred to in clause 7) …

  2. The Claimant is not precluded by this agreement from bringing any personal injury claim against the Respondent where he is not and could not reasonably have been, aware of any such claim at the date of this Agreement. For the avoidance of doubt nothing in this Agreement prevents the Claimant from pursuing the personal injury claim that he has already made. The making and pursuing of this claim is not a breach of this agreement.

C tried to continue a claim for personal injury arising out of broadly the same facts as the harassment claim.

After some delay, D applied to strike out this claim on the basis that it should have been brought in the ET proceedings and it was an abuse of process to permit it to continue.  Lavender J upheld D’s position and dismissed C’s appeal.  The fact that C claimed to have chosen not to bring the claim before the ET (said to be on advice) did not assist him, and D was not estopped from their defence of abuse of process by the wording of the Compromise Agreement.

6         Right to Life and “Best Interests of Child” Mediations 

It may be thought that mediating over whether a child should live or die is pointless, as the family and medical profession will always be at loggerheads over such matters.

However, in Great Ormond Street v X and others [2020] EWHC 1958, GOSH sought permission to give only palliative care to a grievously ill child.  Mediation was encouraged – even insisted on – by the court.

No overall agreement was reached, but the judge observed that it had improved communications between clinicians and family, and the family did come to accept that there should be no more elective surgery, only palliative surgery.

The court carefully set terms over other future medical treatment.

As there were no signs of campaigning or threats to staff, as had occurred in other cases, the judge allowed GOSH to be named as the applicant, while keeping the identities of all medical staff and family members confidential.

In Re M (declaration of death of a child) [2020] EWCA Civ 164, a NHS Trust obtained a declaration from Lieven J in the Family Division that M was dead (based on demonstrable brain stem death) and that ventilation could be removed, despite opposition by the parents, who sought permission to appeal.

Refusing permission, on the basis that there was no reasonable ground for appealing, in dealing with criticism about the time taken to reach a hearing, the President of the Family Division commented in the Court of Appeal:

In so far as the Trust chose to exhaust options one-by-one before issuing proceedings, including attempts at mediation, they are not to be criticised. However, in future cases, it should not be thought that the mere issue of an application to the court is such a negative step as to compromise other attempts to resolve the matter by way of second opinion, further tests or mediation.  Indeed, in a proper case, where an early application is made, as well as adjourning to allow the parents to obtain legal representation, the court itself might direct and facilitate reasonable further testing and may encourage mediation.

Mediation in cases like this remains very important, and was first recognised as such in the case of GOSH v Yates and Gard [2017] EWHC 1909 (Fam), just to ensure that an independently conducted conversational process makes it possible for those involved to explore all avenues before referring anything unagreed back to a judge for an agonisingly serious decision.  Indeed, partial or delayed agreement has emerged following mediation of such cases.

[1] See Farm Assist v DEFRA (No. 2) [2009] EWHC 1102 (TCC)

[2] [2016] EWCA Civ 717

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