Mediation is something that law students have been learning about since the early 1990s when alternative dispute resolution (ADR) came into view. It is the idea that rather than going through an expensive court procedure, the parties get together and attempt to resolve a case without needing to resort to further proceedings and relying on a Judge to make a decision.
Are county court Judges impartial? Yes of course they are, but they very often apply their own interpretation on a contractual dispute that neither party had even dreamt was an issue, and with this in mind anyone thinking about going through the court to resolve an issue needs to have at the back of their mind that regardless of how strong their case is, there is always the possibility that a Judge will find against them.
Naturally we are unable to talk about the case we have just been involved with, but I should say that this was the first mediation our company has ever been through as usually we ensure that our fees are within the limits of the small claims track, which has the effect that even if we end up in court that in most cases, costs are not recoverable because the purpose of the small claims track is to ensure that court proceedings are inexpensive for amounts less than £10,000.
Unfortunately on this occasion we found ourselves with a potentially much larger bill and as a result did everything we could to avoid a court action. After commencing court proceedings we managed to persuade the other party to the case to agree to mediation, and asked the court for a delay (also known as a “stay”) so that we could attempt to resolve the matter without needing to spend significant amounts of money on court costs, and the risk of losing and paying the other side’s court costs is always at the back of your mind.
To put into context how important it is to think about a process like mediation, bear in mind the following case that we were involved with some years ago as a witness. A solicitor sued a solicitors firm for breach of contract and the amount in question was £22,000. The solicitors firm failed to agree any kind of negotiation, and pushed the solicitor all the way through the courts and two and a half years later the case had to be settled because the solicitors firm ran out of money and could not bankroll the case when the court asked them to pay money into court to continue.
A case worth £22,000 ending up with costs of around £180,000, which when you think about it is utterly ridiculous.
In fact, it goes against all principles of justice in that rather than one side getting restitution and some damages, it ends up with who can afford to stick out the court proceedings the longest, and very often this person wins. A scary thought because it does mean that the courts are the preserve of the rich only and everyone else has to tread very carefully when taking court action.
Before the mediation began we had to choose a provider. On this occasion we picked clerksroom.com (no connection to us), a recommendation from a solicitor who we regularly work with, and we contacted them to advise of the need for a mediator. Essentially this is a Barristers Chambers operating as mediators as well as advocates.
They got back to give us details of potential mediators relevant to our contractual disputes, and there are two options – either a senior mediator for 4 hours or a more junior mediator for 8 hours, both at the same price.
Once both sides had agreed to a mediator and also paid a fee, Clerksroom put us in touch with the mediator who indicated the documents he required. In the case we had we were advised by our external legal advisors to keep the amount of paperwork as limited as possible, but simply to include an outlying statement detailing what the case was and to indicate to the mediator and the other side what paperwork we had that could become relevant during discussions.
The mediation was held in a set of chambers in a city which was about a 2 hour drive through rush hour for our company but a 5 minute walk for the other side.
Hot Tip 1 – Choose a Location Equidistant from both Parties
A piece of advice we have picked up from doing this mediation is to always ensure, when agreeing to mediation, that you find a neutral location that is equidistant from both parties as this will ensure concentration from both sides and make it harder for either party to walk away. This is not something we had thought about in enough detail and a lesson has been learnt!
On the day of the mediation, which started at 10 o’clock and was booked to go through until 4pm, we managed to get stuck in traffic but arrived just on time, and the other side were there. One of the most daunting things is meeting face to face with the other side (i.e. the other party) whereas with small claims mediation and other forms of dispute most communication is undertaken via email or by the phone. We were fortunate in the case we were dealing with that the other side were perfectly pleasant and there was no animosity between the parties.
The mediator put us at ease and explained the process to both parties in a room specifically arranged for the mediation. The parties were sat at a table with a mediator and a trainee mediator who was observing proceedings. The case opened by the mediator asking each side to talk a little bit about their case, and then to ask each other questions to progress matters.
One thing became very clear early on in our mediation, which was that if the parties had communicated with each other from the outset then the case could have been cleared up very quickly without needing to resort to any form of action and further cost. Obviously I make no observation in our case as to who should have communicated with who, but it is very often the situation in cases like this that communication breakdown is the cause of a lot of court action that could be quite easily avoided.
Once the parties had given a bit of information as to what they were wanting to get out of the mediation they were given the opportunity to talk about the case a little bit, but not in too much detail because the whole purpose of the mediation is to avoid an examination of the facts, and instead of that to look at the way of resolving the case.
Hot Tip 2 – Do not rely on information given by the other party during mediation – its confidential!
Second tip for dealing with mediation is to be aware that all information given during the mediation is confidential, so essentially either party can lie through their teeth and get away with it at a future date because no-one can ever rely on the information given during the mediation. This was not something I had thought about during our discussions with the other party, and whereas in our case our company had turned up with evidence in paper form so we could show the other side, they had turned up without anything. We will certainly bear this in mind in future if we ever have the misfortune to go through mediation again!
Once the parties had had a chance to discuss their cases each party was put in a separate room and the negotiations began.
In our case it took about four to five visits from the mediator into each party’s room to come to an agreement. The role of the mediator is extremely important because, particularly in contract disputes, he is able to gently test the case of each party, although he or she is unable to give legal advice, they can ask pertinent questions which then make the parties think about their case and whether it is as strong in places as they believe it to be. In our case the mediator gave us helpful indications without needing to say anything that pushed us towards agreeing a deal that, although was not at our bottom line, was close enough to make us want to end the matter and walk away.
Hot Tip 3 – Always turn up to mediation with at least two people.
Our mediation team consisted of myself and a senior consultant. If I had been by myself I would not have agreed the deal we ended up with and it is possible that both parties would have walked away. It is difficult to come away from a mediation knowing that the other side have got away with not paying a considerable sum of money that you have strong legal advice on was fairly recoverable, and to have the feeling that the other side had in some way won.
Having someone else with you in the room simply to keep reminding you of the risks of carrying on with the case or ending up in court with a Judge casting his or hers own doubts and opinions on the case was one of the fundamental reasons for going into mediation to come out with a settlement. Much harder to do this as testosterone, alpha male syndrome and other things are inevitably going to kick in if you go by yourself.
We finished up with a deal that I was not completely satisfied with as it was lower than my bottom line in the case. However at the same time it resolved the case, reduced the risk of losing, and as we were outside our comfort zone of the small claims track it meant that we were able to walk away with some money without needing to gamble on future court proceedings.
The final tip is to keep in your mind the thought that at any time your opposing party can a) declare bankruptcy, b) go into company administration, or c) just refuse to pay until you have gone through all the process of court proceedings and then fold without needing to pay you any money.
Conclusion on Mediation for Small Businesses?
Our conclusions on using mediation? Very positive and we would recommend it to anybody who has a similar outlook to us on the need to avoid court proceedings at all costs. Whilst most companies will have a bottom line and not go below it without heading to court, mediation does give you a quick resolution to a case that could last months if not years, and result in your destruction if the other side manage to build up more costs than you do and you lose the case. We would strongly recommend considering it for every case you have that ends up litigious, but it will only ever work if both sides are prepared to mediate and to move on their bottom lines, which inevitably will be a considerable distance apart.
Jonathan Fagan is MD of Ten-Percent.co.uk Limited and TP Recruitment Limited, a set of websites involved in a range of recruitment work. Jonathan has been running small businesses for over 20 years and has a number of interests and investments in companies as diverse as transcription, legal recruitment and a bit of marketing. He is an author of a number of guides and books, together with a children’s novel. In his spare time he enjoys playing golf, cricket, coaching girls’ football, operating a parent taxi, lots of running and paddleboarding on Bala Lake and the River Dee. He is a strong believer in a good work-life balance and regular blogs on making money vs enjoying life. Jonathan’s website is https://www.jonathanfagan.co.uk