WHAT IS HALSEY –V- MILTON KEYNES GENERAL NHS TRUST ABOUT?

The Court of Appeal has heard quite a few cases now in relation to mediation. For example, in Cowl –v- Plymouth City Council  in 2001 and Dunnett –v- Railtrack in 2002, the Court of Appeal sent out the clear message that parties who unreasonably refused to mediate their disputes would face the risk of a serious cost consequence at the end of the litigation.

On 11 May 2004, the Court of Appeal returned to the same subject in two cases heard at the same time: Halsey –v- Milton Keynes General NHS Trust and Steel –v- Joy and Halliday. This is a very important decision; Lord Justice Dyson gave the decision of the Court, so it was also a unanimous decision.

The important points are:

The Court emphasised its general support for mediation. It pointed out that the requirement of the Civil Procedure Rules for “active case management” include “encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure.”

The Court of Appeal expressly approved the ADR Orders made routinely in the Admiralty and Commercial Court as set out in Appendix 7 to the Court Guide (referring to them as “the strongest form of encouragement”) and the form known as Ungley Orders (after Master Ungley who devised them in clinical negligence cases – referring to these orders as “a less strong form of encouragement”). The Ungley Order provides:

“The parties shall by [date] consider whether the case is capable of resolution by ADR. If any party considers that the case is unsuitable for resolution by ADR, that party shall be prepared to justify that decision at the conclusion of the trial, should the judge consider that such means of resolution were appropriate, when he is considering the appropriate costs order to make.

The party considering the case unsuitable for ADR shall, not less than 28 days before the commencement of the trial, file with the court a witness statement without prejudice save as to costs, giving reasons upon which they rely for saying that the case was unsuitable.”

The next issue to be considered was: does a court have power to order unwilling parties to mediate? It was as in February 2004 in the Chancery Division of the High Court that Mr Justice Blackburne ordered an unwilling party to mediate (Shirayama Shokusan Company Limited and Others –v- Danovo Limited).

However, Lord Justice Dyson decided in Halsey that it is wrong to compel unwilling parties to mediate. It was said that such compulsion would be a breach of the right of access to the courts required by the European Convention on Human Rights (ECHR). That finding on human rights grounds has divided lawyers. The finding was based on the proposition that compelling mediation would probably be regarded as an unacceptable constraint on the right of access to the court and, therefore, would probably be a breach of Article 6 of the ECHR.

The counter-argument is simply that compelling mediation is not depriving parties of their rights of access to the court. Rather it is saying, you can have access to the court but while that procedure is running, you must also attempt mediation. In any event, Lord Justice Dyson said that even if he was wrong about the ECHR point, he found it difficult to conceive of circumstances in which it would be appropriate to order mediation in the face of objection from one or more parties.

The Court of Appeal considered the position as to legal costs where there had been an earlier refusal to mediate by one party. It is clear that cost sanctions will still be a big risk but the primary test now seems to be “suitability” of the dispute for mediation.

The matters that are relevant are: the nature of the dispute; the merits of the case; other settlement methods had been attempted; the costs of the mediation would be high compared to the sums in dispute; delay and whether the mediation had a reasonable prospect of success. Many experienced mediators would disagree with aspects of the categorisation of suitable cases by the Court of Appeal in this part of their judgment. In essence, the decision does, perhaps, permit of more arguments being available for parties against the imposition of costs sanctions but it will remain a very risky strategy to refuse mediation if it is suggested by the other party, and highly risky if the refusal to mediate followed a Commercial Court or Ungley type of Order.

In relation to the possibility of legal cost sanctions, guidelines were set out as to which party has the burden of proof in establishing whether or not there had been an unreasonable refusal to mediate.

All in all this decision sets mediation on a firm course because, whilst there will be no compulsion by the courts, the Court of Appeal have made it very clear that consideration of the use of mediation should be at the forefront of the minds of Judges in case management and of the parties’ legal advisers in giving advice, with the concomitant risk of serious cost sanctions at the end of a trial where there had been a refusal to mediate.

(Read the full decision in  Halsey -v- Milton Keynes General NHS Trust and Steel -v- Joy and Halliday >>)