“Hope is not a strategy.” – Vince Lombardi
Mediation is the most popular form of Alternative Dispute Resolution (ADR) in multi-party claims. This is because it presents a clear opportunity for multiple claims and counter claims to be resolved at the same time, taking away the risks of a party settling with just one other party, but being brought back into the remainder of the dispute subsequently. At Weightmans LLP, we frequently advise on claims arising from construction projects. These usually involve several parties because of the nature of construction. Liability for a design error, for example, can potentially be the responsibility of the design and build contractor, the architect, the engineer, a particular design sub-contractor or a combination of these.
While mediation is usually advisable to attempt to resolve a claim, not least because of the obligations on the parties to consider ADR, it requires a significant investment of time and money, and several factors should be properly considered if the opportunity to resolve the claim is to be maximised so as to make the cost investment worthwhile.
Compared with claims comprising one claimant and one defendant, it is helpful that in multiparty claims, there are several parties to contribute to a settlement but, on the other hand, it is more tempting for each party to “shut up shop” in the hope that other parties will take the lead and make the settlement contributions. Various factors should be considered when preparing to mediate a multi-party claim.
The choice of mediator
Agree a mediator with the right technical background and experience. It is essential that the mediator is able to quickly and effectively convey the risks and strengths of each parties’ case in a multiparty mediation, given time constraints on the day, which are increased because of there being more than just two parties. Parties need the comfort of knowing that their arguments have been understood and correctly conveyed to the other parties for progress to be made. The mediator should be experienced in and comfortable with having to facilitate a negotiation between three or more parties, given the need to cut through the volume of information and argument in one day in the hope of settlement terms being agreed.
A second issue to be aware of in multi-party mediations is the length of time it can take to agree the identity of the mediator, which can sometimes take months due to the preferences of multiple parties. This needs to be planned for in advance and flexibility is required if the mediation needs to take place in a particular time frame, such as in a gap in the directions timetable.
Timing of the mediation
Mediations usually take place either during the Pre-Action Protocol phase to avoid the costs of proceedings or, if proceedings have been issued, prior to the CCMC to avoid the very significant costs of this and the costs of implementing the Directions timetable, beginning with disclosure.
Legal costs on all sides will clearly be lower if the mediation takes place as part of the Protocol phase but there can be an advantage, particularly in multi-party claims, if the mediation is after statements of case have been served i.e. after proceedings have been commenced. Pleadings focus the parties’ minds on realistic arguments and tend to cut out the froth that is often part of Protocol correspondence, not least because counsel can moderate arguments in the drafting of pleadings and input risk advice that solicitors sometimes do not see.
The downside of mediating after the issue of proceedings in multiparty claims is that the legal costs increase significantly due to the preparation of multiple statements of case for each party. Expert evidence, even at a preliminary high level, is often obtained to inform the drafting of the Defence and Third Party Claims.
Multi-party mediations can end up being pushed back to take account of the views of different parties as to the optimal stage in the proceedings for realistically tackling settlement. This may even be after the exchange of expert reports and witness statements. However, a mediation should not take place too close to trial and the date by which counsels’ trial brief fees are due. Brief fees rise exponentially in high value multi-party claims, and these can be a hugely significant cost to clients, as well as adding pressure to settlement discussions.
The length of the mediation
“Parkinson’s law” holds true here - work expands to fill the time available for completion. In most cases, a one-day mediation will be better than a two-day mediation, by virtue of the time available for the parties to negotiate being shorter. A two-day mediation, which is often suggested in multiple-party claims, often means that virtually no movement or concessions happen on the first day, rendering it unproductive and unnecessary. If parties are properly prepared with an understanding of their risk and reward, one day should be enough, even where the mediator is dealing with three or more parties. Placing time restrictions on one day mediations can be a good idea to encourage decisive actions and continuous progress throughout the day.
Expert evidence
Expert reports on liability and quantum are sometimes provided by the claimant before mediation on a “Without Prejudice” basis. It is not usually the case that multiple defendants can share the same liability report in professional liability claims, as each discipline requires its own liability expert, so an expert engineer for one party cannot provide a report for a co- defendant architect. Assuming you do hold draft expert liability evidence that is supportive of the policyholder’s case at the point of mediation, it is likely to be helpful to disclose it on a Without Prejudice basis. This will usually be sensible to get value from the cost of the report. If the expert’s conclusions are not entirely helpful so that it is not going to be disclosed, the queries raised in the report can be used instead to challenge the claimant’s case and push the claim towards a co—defendant from a technically informed perspective.
If you consider that the policyholder’s defence is strong on liability, you may elect not to incur the cost of a quantum report, especially if the mediation is during the Protocol phase. Sometimes a co-defendant may have obtained such a report and will provide it on a Without Prejudice basis to all the other parties before the mediation, meaning that the policyholder can take advantage of the contents of that report too, as against the claimant’s assertion of the value of the claim.
Co-defendants working together
In multiple party claims, mediators often seek to take the “easy route” of encouraging the defendants to get together early in the mediation to put together a combined offer to the claimant. While ultimately this is likely to be necessary for a deal to be achieved, it may not be sensible to present the policyholder early on as being on an “equal footing” in liability terms with other defendants in this way. The better tactic may be to make clear that primary negotiating responsibility is with one of the other defendants, who should be seen to be taking the lead with negotiating with the clamant. This may help set expectations as to relative responsibility, which should then be mirrored in respective contributions to settlement.
Draft/in-principle settlement agreements
The most frustrating part of a mediation can be the negotiation of the settlement agreement between multiple parties, which can take hours, even after the whole day has been spent in the primary negotiations concluding with an “in principle” agreement. This is especially the case if there are unusual aspects, such as the need for guarantees or warranties or the carving out of particular issues. Some mediators encourage an outline Settlement Agreement to be agreed in the days leading up to the mediation, although this is fairly unusual as parties usually do not wish to ‘send the wrong message’ by engaging in the production of a draft settlement agreement which may imply that a payment of damages is contemplated. At the very least, each party should attend the mediation with its own draft prepared, ready to put this forward and respond quickly to the clauses proposed by the other parties, thus saving both time and cost.
CPR Part 36 and CPR Part 44 Offers
The use of CPR Part 36 and Part 44 offers, where the relevant period lapses before the mediation takes place, can be a useful tactic to encourage settlement and should be considered, even where the parties have agreed to mediate and have set a date. These offers can increase the strength of your negotiating position, as they will put cost risk on the other parties and may even result in settlement prior to mediation, avoiding the significant costs of the mediation itself. In multi-party mediations, it is also an option to have calls with some or all other co-defendants in advance of the mediation to begin discussions of common issues which can be advanced against the claimant. This may make the mediation itself more likely to succeed on the day by providing more time for negotiations with the claimant.
As with most aspects of life, planning and preparation is everything and this is certainly the case when approaching multiparty mediations. The costs of time invested in planning this are rarely wasted.
