The continuing influence of Halsey on mediation (Part iI)

Continuing the post-Halsey development, we now look at two more recent decisions which clearly illustrate scenarios where mediation can reasonably be refused.

The first case was Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken heard in the Commercial Court.  Euroption had previously brought a claim against SEB for €135 million arising from losses in equity options trading in the turbulent financial markets in October 2008 .  Euroption’s claim failed entirely, and SEB sought indemnity costs. Euroption argued it should pay standard costs with a 15 per cent deduction. One reason for the suggested deduction was SEB’s refusal to mediate. SEB, who throughout said the claim was unmeritorious, had only offered a “drop hands” settlement.

Euroption received very short shrift from Gloster J, who characterised Euroption’s claim as “a ransom claim”. In short, where SEB had made its position clear, and that position had been vindicated, there was no reason why it should have engaged in the mediation process.

The above point was made again in Swain Mason v Mills & Reeve .

Mr Swain and his family instructed Mills & Reeve solicitors to assist them in the sale of their shares in their company. Advice was sought as to the sale of the shares and some tax advice given as to how to structure the sale in relation to the proceeds of sale. As matters proceeded Mr Swain indicated he was suffering from an illness and was about to undergo an operation. There was no indication either was life threatening. No request for tax advice in the event of his death was sought or given. The transaction was entered into and completed. Unfortunately shortly afterward, following his operation, Mr Swain unexpectedly died. A claim was made that Mills Reeve should have advised taking into account Mr Swain’s possible death. The suggestion was that if he had received proper advice a substantial saving in inheritance tax would have been made either by deferring the transaction for a short period, so that it took place after his death or that it be arranged that the proceeds be immediately re-invested in qualifying securities.

Mills & Reeve declined to mediate throughout.  They were convinced they had a good case and went on to succeed at trial. They “lost” on various issues but were found overall not to be liable. The trial judge noted their refusal to mediate and he ordered that they could recover only 50% of their costs. Both parties appealed/cross appealed.

The Court of Appeal dismissed the claimants' appeal on the substantive merits.

On costs, the Court of Appeal was reluctant to interfere with the trial judge’s findings on the issues based decisions, including Mills & Reeve pursuing an extensive and costly disclosure exercise as regards the sellers’ accountants.

On refusal to mediate the Court of Appeal took a different view from the trial judge. It decided that the Mills & Reeve had not unreasonably refused to mediate.

It took the parties back to the Court of Appeal decision of Halsey v Milton Keynes General NHS Trust which had held that:-

  • Parties should not be compelled to mediate;
  • ADR and mediation was not a panacea for every case;
  • A party’s reasonable belief that it has a strong case is a factor in deciding whether it was unreasonable to refuse mediation;
  • Account needs to be taken of whether a meditation would succeed, given the parties’ stances;
  • The court should be alert to the risk that parties could be wrongly put under costs pressure as regards mediation.

The Court of Appeal taking a broad brush approach substituted an order that Mills & Reeve recover 60% as opposed to 50% of its costs.

This case needs to be set in context as an example of where the court had some sympathy for a party declining to mediate.

It is a reminder of a few of the non–exhaustive list of considerations from Halsey that the court will take into account when deciding if a party has unreasonably refused to mediate:

  • The nature of the matter. In Halsey the court recognised that some kinds of cases are not suitable for mediation (for example those with issues of law or construction). However it noted that many cases are not unsuitable for mediation.
  • Did the successful party reasonably believe it had a strong case?
  • Were other options for settlement pursued?
  • The costs of mediation (although It has been possible to conduct mediation on a reduced costs basis for some time).
  • Would the mediation delay the trial of the action? (although some mediation providers market an emergency service setting up a mediation as quickly as the next day)
  • Would the mediation have had no reasonable prospect of succeeding?

So to summarise:-
The onus is on the unsuccessful party to establish that the winning party unreasonably refused to mediate.

A party refusing to mediate will still remain at risk including where they consistently do so where there have been changes in the case (as often happens).

A party refusing to mediate due to its belief that it has a strong case will be subject to scrutiny by the court as to whether that opinion is reasonable.

Careful consideration of offers to mediate continues to need to be made.

Aldo Navato
LPC graduate.

[2012] EWHC 749 (Comm)

[2012] EWHC 584 (Comm)

[2012] EWCA Civ 498

[2004] EWCA Civ 576