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IJLBE
1,1 Criteria for the appropriate use
of mediation in construction
disputes
82
Judicial statements in the English Technology
and Construction Court
Penny Brooker
School of Legal Studies, University of Wolverhampton, Wolverhampton, UK

Abstract
Purpose – The purpose of this paper is to consider the circumstances in which a refusal to refer a
construction dispute to mediation may be judged acceptable in the English Technology and
Construction Court (TCC), thus avoiding the imposition of a costs penalty.
Design/methodology/approach – The paper uses traditional doctrinal legal methodology in the
evaluation of judicial statements in the TCC on the criteria for determining the appropriate use of
mediation and combines this with a socio-legal approach which examines empirical findings on
settlement outcome.
Findings – An analysis of TCC cases indicates a significant steer from the judiciary on when
construction cases are deemed appropriate for the process of mediation. Most cases are identified as
suitable, particularly if they involve small sums compared to litigation and where there is uncertainty
about factual and legal issues. Judges continue to emphasise the ability of skilled mediators to deal
with intractable parties and the importance of continuing commercial relationships despite empirical
evidence to the contrary. The personal experiences and perceptions of TCC judges continue to drive
mediation “appropriateness criteria”. This could work negatively against its true potential if
construction parties’ actual experience of the mediation process involves less-experienced mediators or
a failure to achieve settlement.
Originality/value – The paper provides a detailed and scholarly analysis of the application of Court
of Appeal’s decision in Halsey in the TCC with specific reference to built environment cases.
It evaluates empirical findings on the effectiveness of construction mediation on settlement outcome
with the judicial steer on “appropriateness criteria”. It is of value to legal scholars, legal practitioners
and researchers in the built environment.
Keywords Judges, England, Legislation, Construction industry, Civil law, Law courts
Paper type Research paper

Introduction
Alternative dispute resolution (ADR) and mediation in particular, were given a pivotal
role in the UK Civil Procedure Rules (CPR) to encourage the settlement of cases, help
reduce costs for the parties and minimize pressure on the courts. CPR encourages the
use of mediation though the application of cost sanctions, which give judges the power
International Journal of Law in the to penalise unreasonable behaviour in litigation, if it is shown the successful party
Built Environment acted unreasonably by refusing an offer to use ADR or mediation[1]. The Court of
Vol. 1 No. 1, 2009
pp. 82-97 Appeal in Halsey v. Milton Keynes General NHS[2] dispensed guidelines on when a
q Emerald Group Publishing Limited
1756-1450
rejection of mediation is unreasonable but the list is not conclusive, leaving disputing
DOI 10.1108/17561450910950269 parties uncertain when a refusal will attract a cost sanction. Parties embarking on
litigation have two important considerations to evaluate. First, what criteria of a Judicial
construction dispute make mediation a suitable alternative to litigation; and second, statements in the
what circumstances do the courts regard as appropriate justification for refusing an
offer to mediate in order to avoid a cost sanction. This paper analyses evidence from English TCC
cases in the specialist Technology and Construction Court (TCC) to elicit court opinion
on “appropriate mediation criteria” and the existence of specific circumstances where a
refusal to mediate may therefore be judged acceptable thus avoiding a costs penalty. 83
Background
Court encouragement of mediation: CPR
The CPR were introduced as part of the civil justice reform programme to reduce the
costs of litigation, increase the efficacy of the courts and control confrontational
behaviour in the adversarial system (Woolf, 1995, 1996). Under CPR, control of
litigation is removed from the parties’ lawyers through case management meetings
(CMC) when the judge sets timetables and allocates trial dates (Woolf, 1996, para. 3).
Court protocols set down detailed requirements for pre-action meetings, document
disclosure and timing for responses and imparts a duty on the parties to consider
alternative ways of settling their dispute. ADR is given a significant role within case
management, as judges have a duty to encourage and facilitate settlement which might
be through the use of alternative procedures in appropriate cases[3]. For example, at the
request of one party, ADR may be endorsed by permitting a stay in the proceedings[4]
but stronger encouragement is achieved through the inclusion of a cost sanction for
unreasonable behaviour in litigation, which can take account of a party’s rejection of an
offer to mediate[5]. An unsuccessful litigant generally has to pay the costs of the
successful party but judges have discretion to take account of “any circumstances”,
including the parties’ efforts “if any, before and during the proceedings in order to try
to resolve the dispute”[6]. Cost sanctions have been made not only for non-compliance
with court protocols[7] but also for unreasonable refusals to participate in ADR[8].
Additionally, judges have discretion to award costs at a higher indemnity basis rather
than the standard rate[9].

ADR definitions
CPR concerns the encouragement of ADR procedures but this paper is primarily an
analysis of case law relating to mediation. In order to assist understanding, a brief
description is given of other ADR procedures utilised in the UK construction industry,
which are discussed in the text. Earlier explanations of ADR suggest the term involves
the “help of an independent third party” (Shipman, 2006 at En. 4) but the TCC guide
provides a broader definition by including “any process that the parties enter into
voluntarily” (TCC, 2005 at 7.1.1). The TCC Guide also counts “formal inter-party
negotiations” as an acceptable alternative and contends that the Civil Engineering
Protocol is a:
[. . .] type of ADR, because it requires there to be at least one face-to-face meeting between the
parties before the commencement of proceedings. At this meeting, there should be sufficient
time to discuss and resolve the dispute (TCC, 2005 at 7.2.2.).
The courts have accepted “round table meetings”[10], and “negotiation or attempts to
use an honest broker”[11] when considering whether the parties’ conduct in litigation
IJLBE has been reasonable, which is indicative of the importance placed on settlement by the
1,1 CPR (Shipman, 2006; Roberts, 2000).
The TCC Guide notes that ADR is usually a “form of mediation” with a neutral
(TCC, 2005 at 7.1.1). Different processes of mediation are described as “facilitative” or
“interest based” where the mediator assists the parties to create their own settlement
(Brown, 2002; Riskin, 1996). A more recent phenomenon is the recognition of mediators
84 taking an “evaluative” role by providing a view on the merits of a case or by making
suggestions for settlement outcomes (Riskin, 1996; Brooker, 2007). Some UK
construction literature identifies this as “evaluative mediation” but this term is also
referred to as “conciliation” where the conciliator makes a recommendation at the end
of the mediation phase if settlement has not been reached (Gaitskell, 2005; Kendall,
2000).
Statutory adjudication is regulated by the Housing Grants, Construction and
Regeneration Act 1996, which provides a statutory right for parties to construction
contracts to elect an adjudicator to give a decision which is binding on the parties until
practical completion. The UK construction industry has a long history of using
Arbitration, which is a confidential private tribunal where an arbitrator, selected by the
parties, makes a legally enforceable binding decision as governed by the Arbitration
Act 1996.
The UK construction industry also utilises early neutral evaluation (ENE) where the
parties jointly choose a neutral with specific expertise to give a non-binding decision.
Judges offer a form of ENE and recently the TCC piloted a Court Settlement Process – CSP
(2008) where experienced judges offer to assist the parties reach settlement, “in such
manner as the Judge considers appropriate”. The process prescribed by the Court
Settlement Order resembles mediation where the mediator adopts “evaluative” rather than
“facilitative” techniques (CSP, 2008).

CPR in the TCC

The TCC hears the majority of cases involving traditional building cases, adjudication
enforcement, engineering disputes, professional negligence claims and challenges to
arbitrators’ decisions (TCC, 2006). The TCC is governed by the Construction and
Engineering Court Protocol (HMCS, 2008). The parties are required to meet 28 days
after the claimant has received a letter of response from the defendant and at this
meeting should consider whether some form of ADR is “more suitable than litigation”
and if so try to agree the “form to adopt”. The TCC will in appropriate cases indicate
what type of ADR but indicates this will be mediation in most cases.
At the first CMC meeting, the parties are required to address the court on “the likely
efficacy of ADR, the appropriate timing of ADR, and the advantages and
disadvantages of a short stay of proceedings to allow ADR to take place” (TCC,
2005 at 7.2.3). There are two important considerations that lawyers and their clients
need to evaluate. First, what criteria of a construction dispute make mediation a
suitable alternative; and second, what conditions do the courts regard as appropriate
for mediation. This paper is essentially concerned with the second consideration. It
analyses evidence from cases to elicit court opinion on “appropriate mediation criteria”
and the existence, if any, of specific conditions where a refusal to mediate may be
judged acceptable. This paper considers the judgments from the civil appeal court,
which are binding on the TCC.
 CPR are underpinned by the principle of directing “appropriate” or “suitable” cases Judicial
to ADR procedures. Before considering the leading cases in the Court of Appeal, the statements in the
key findings from construction mediation studies on the effectiveness of the process
are reviewed. English TCC

Appropriateness criteria for mediation use: empirical findings in the

construction industry 85
There is still a shortage of empirical data which identifies the suitability and
effectiveness of mediation for construction disputes. One problem is that studies use
different measures for establishing effectiveness, for example determining mediation
success in relation to party satisfaction or non-compliance with mediation agreements
(Henderson, 1996; Stipanowich, 1996). This paper is concerned with judges’
encouragement of the parties to “settle” cases through mediation and will therefore
analyse survey findings relating to settlement outcome as the criteria for mediation
effectiveness.
A leading study in the USA found that mediation had little affect on the settlement
outcomes of construction disputes involving delays, changes, job site administration,
property damage, defective work, personnel injury or site conditions (Henderson,
1996). However, significant variables affecting outcome included the financial size
of the dispute (the higher amount in dispute the less often full settlement was
achieved); the level of discovery (mediation was less likely to settle when this activity
has not taken place); the duration of mediation (the longer the parties mediated,
the more likely mediation was to result in a settlement); the quality of mediators
(the more varied techniques used, such as caucusing, site visits or consulting experts,
the more likely settlement was to be achieved) and the parties’ perception of mediator
quality (mediation was less likely to achieve a settlement if the parties believed the
mediator was weak. However, the most important factor was the choice of rules
adopted in the mediation. When the parties created their own rules they were more
likely to settle their dispute than when the mediator adopted regulations designed by
the court or professional institutions (Henderson, 1996, pp. 144-5).
A study of UK construction mediation similarly found that settlement outcomes
were not affected by the type of dispute or the identity of the parties (contractor,
sub-contractor, employer, or client) (Brooker, 2002). Analogous with USA findings, the
critical factor for non-settlement was found to be the attitude of the parties (Henderson,
1996; Stipanowich, 1996). Mediation was often ineffective when one or more of the
parties had unrealistic expectations, were intransigent or unwilling to compromise or
when both parties were too far apart at the beginning of the process. Although not
dealing with construction, UK court schemes also indicate that “case type, case value,
party configuration, representation, and case complexity” are not determinative on
settlement. Mediation settlement is more likely to be a combination of factors including
“individual characteristics of the cases, attitude and motivation of the parties, skills
and knowledge of the mediator” (Genn, 2007, p. 47).
A review undertaken for the TCC to determine when the court should encourage
mediation and which techniques are particularly successful, found that most disputes
still settle through “conventional negotiation” (Gould, 2007; Hudson-Tyreman, 2008).
The report suggests that statutory adjudication is dealing with cases involving
payment, variation, delay and site conditions, leaving the court and mediation, if the
IJLBE parties are directed or encouraged to use it, with the more complex cases, which are
1,1 often multiparty, involving defects, design and negligence. Research suggests there is a
trend for more difficult cases being taken to mediation, with the result that settlement
is harder to achieve because of increasing familiarity and tactical use of the process by
lawyers (Booker and Lavers, 2005a, b). Perhaps, significant in the TCC findings, is that
mediation was most often undertaken voluntarily by the parties rather than through a
86 court order or court pressure and that most mediations were conducted by a small
cohort of experienced mediators, which confirms findings from other studies (CEDR,
2005; CEDR, 2007).
Construction studies suggest that the type of case and the relationship of the parties
are unlikely to create barriers to settlement but that there are a number of significant
determinants that may lead to failure. These centre on the skills and quality of
mediators; the mediation rules; the uncompromising attitudes of the parties and the
financial size in dispute. The following section evaluates how courts interpret the
appropriateness of mediation for the resolution of construction disputes.

Guidance from the Court of Appeal

The Court of Appeal first sanctioned a party for unreasonably refusing an invitation to
mediate in Dunnett v. Railtrack PLC[12]. The decision did not give guidelines on
appropriateness criteria but led the way to a number of cases eulogising on the ability
of mediation and the skills of mediators to transform the dispute resolution
environment[13]. Lord Justice Brooke observed that many cases can be successfully
settled by a “skilled mediator”, even those which appear unpromising because of the
intransigent attitudes of the parties. Further, experienced mediators are able to achieve
outcomes “beyond” the scope of the court and lawyers[14]. This view was reiterated in
Hurst v. Leeming[15] by Mr Justice Lightman, who affirmed that[16]:
[. . .] the mediation process itself can and does often bring about a more sensible and more
conciliatory attitude on the parts of the parties than might otherwise be expected to prevail
before the mediation.
The power of mediation to transform party relationships is well-documented
(Baruch Bush and Pope, 2002); however empirical data reported above suggest that the
parties’ attitudes are one of the key factors contributing to non-settlement. None of the
reasons given for not mediating in Hurst v. Leeming, a “watertight case”, excessive
costs already involved in litigation, defence of serious allegations, or the lack of
substance in the case, were found to “necessarily” lead to a reasonable rejection.
The test to apply was whether “objectively viewed” there was an “unrealistic prospect”
that the process would achieve settlement[17]. The decision was criticised for failing to
provide certainty on when it is safe to reject mediation in any given circumstances
because a judge could decide there was a good prospect for mediation to achieve a
settlement (Brooker and Lavers, 2005a, b).
The test in Hurst v. Leeming was considered by the Court of Appeal in Halsey[18]
Lord Justice Dyson’s judgement exhibited a change in emphasis on the virtues of
mediation by acknowledging that the merits of the process still need to be empirically
demonstrated[19]. Nevertheless, the decision is founded on the belief that mediation is
“suitable for many disputes”. Parties are encouraged to mediate, not only because the
court believes it is a less-expensive option than litigation, but also because it provides a
wider range of outcomes “including apologies, explanations, continuance of Judicial
relationship and agreements without legal obligations”[20]. Research in the UK statements in the
construction industry casts doubt on the notion that creative outcomes or continuing
relationships are often a consideration in construction mediation. However, engaging English TCC
in the process is perceived by legal advisors to offer benefits beyond settlement such as
narrowing issues, reality checking, testing evidence or witnesses or the strengths of the
case, and in extreme cases using the process for tactical advantages (Brooker, 2002; 87
Brooker and Lavers, 2005a, b).
Following Halsey, the unsuccessful party has the burden of proving a party has acted
unreasonably in refusing mediation. Six circumstances were identified that should be
taken into consideration when determining this question but these are not limited.

Nature of the case

Halsey takes the view that most cases by their nature are suitable, but accepts the
subject matter of some will be “intrinsically unsuitable for ADR”[21]. The court
illustrated a number of situations when it might be considered safe to reject mediation,
where:
.
a party requires a court determination on a point of law;
.
the issues are important for future business;
.
a case involves fraud or disreputable commercial conduct;
.
a party desire an injunction; and
.
there is a need for a binding precedent.

Merits of case
The merits of a case are more problematic and Halsey identifies only one “clear cut
criteria”[22] where a party is likely to be exonerated for refusing mediation, namely
when a party would have succeeded at summary judgement but had not made an
application. A more difficult judgment relates to the belief a party has regarding the
merits of their case. If a party believes that she/he has a strong case the court might
find this relevant. Future courts were warned to take account of the susceptibility of
large organisations and public bodies to cynical invitations to mediate from parties
with unmeritorious claims, which force them to make “nuisance-value” offers to avoid
the cost of mediation[23]. However, Brooker and Lavers (2005b) observe that smaller
organisations, perhaps sub-contractors, with “limited budgets and a good claim” are
equally vulnerable to tactical mediation strategies by large corporations, resulting in
settlement on unfavourable terms in order to avoid what is an increasingly expensive
ADR option.
Border-line cases involve an even more difficult assessment, because courts are
likely to view them as “suitable” for mediation. Halsey advises that “little weight”
should be given to a rejection in these circumstance unless there are “compelling
countervailing factors”[22], which the court does not specify but which are likely to
derive from the other five circumstances. Making judgments on the balance of success
at court is usually in the hands of legal advisors and the best line of action must be to
accept an offer to mediate in borderline cases. However, where parties believe that they
have a “watertight case”, in contrast to the decision in Hurst v. Leeming[24], Halsey
IJLBE held that a refusal may be justified but only if it is reasonable. An unreasonable belief
1,1 that a case is unbeatable will warrant a penalty for unreasonable behaviour[22].

Other settlement methods

Another relevant factor is whether other “settlement methods” have been attempted,
which is translated in the judgment to mean “settlement offers”. Refusing such offers
88 provides evidence of a party’s “unrealistic understanding of the merits of their case”.
Halsey highlights that mediation is often successful when other attempts have been
made to settle but suggests these are “no more than an aspect of factor”[25].
Nevertheless, it does indicate the importance of the dispute resolution strategy adopted
by the litigants. Parties should be advised to seriously consider any offer and to make
counter offers in order to justify continuing litigation. It is also indicative of
the importance that settlement is given in CPR (Shipman, 2006; Roberts, 2000) and the
broad concept given to ADR to include negotiation.

Costs
The TCC Guide states that ADR can lead to “significant savings in costs and may
result in a settlement which is satisfactory to all parties” (TCC, 2005 at 7.2.1). However,
the cost of mediation may justify rejecting the process where it is disproportionately
high compared with the sums at stake. Halsey notes that mediation can cost as much as
a day in court and that significant costs can accrue when settlement is achieved just
before the court date[26]. Studies suggest mediation is becoming expensive,
particularly if the parties are well advanced in litigation and intend to employ legal
representation and a leading mediator (Brooker and Lavers, 2005a, b). When judges
encourage mediation in unsuitable cases, the costs sustained in the process become
direct costs of litigation, although the courts have shown a willingness to award
aborted mediation costs to the unsuccessful party[27].

Delay
Weight is given to the timing of mediation: if the offer is late and has the effect of both
delaying trial and adding to litigation costs that may justify rejecting mediation. There
is little empirical evidence to assist the parties in achieving the optimum timing for
mediation and the TCC protocols merely note that ADR or mediation may be
appropriate at any time (TCC, 2005 at 7.2.1). The TCC mediation report advises that the
process may fail either if engaged in too early due to a lack of information about the
case or, too late because the parties may become entrenched and substantial expenses
incurred which may become the barrier to settlement (Gould, 2007).

Prospect of success
The factor that is most difficult to assess with certainty is whether mediation has a
reasonable prospect of success. Hurst v. Leeming[24] established this to be critical but
Halsey views it as relevant but not determinative. The court illustrated a party’s
response to an invitation to mediate with two cases. First, when the opponent takes an
intransigent position a party may “reasonably decide mediation has no reasonable
prospect of success because of the unlikelihood of reaching a reasonable
compromise”[28]. Second, if a party has been “unreasonably obdurate” the court
may decide that mediation has no reasonable prospect of success but a party is not
allowed to rely on their own uncompromising approach, which would be unreasonable Judicial
behaviour and could be penalised through costs[29]. statements in the
Halsey observed that some disputes are inherently more intractable than others
although crucially the decision does not specify which ones or, why. The case also English TCC
notes that some mediators are more skilful than others, and that this may affect the
outcome and the ability of the court to decide how reasonable a prospect there was for
success[30]. Shipman (2006, p. 206) argues that a party should not be allowed to cite 89
mediator skills or competence as a relevant factor as it creates uncertainty in case
management. However, mediator skills have been found to be a key factor in settlement
outcome (Henderson, 1996; Stipanowich, 1996; Brooker, 2002; CEDR, 2005). Specialist
courts and judges hearing complex construction cases have long been a feature of
litigation and parties in the building environment are now seeking subject-expert
mediators. This is leading to construction mediation being in the hands of a few
specialist well qualified, expensive mediators (Gould, 2007). As mediation grows so too
will the pool of experienced mediators but in the current climate a reasonable belief
that there is a shortage of mediators with relevant experience might suffice when
claiming it was not unreasonable to reject mediation. However, the likely success of
such a claim in the TCC is weakened for a number of reasons. First, the TCC provides
for judges to offer their services to help resolve the dispute through appropriate
methods. Second, the court guide directs the parties to where information can be found
about mediation (TCC, 2005 at 7.3.4). Finally, the TCC indicates that if the parties fail to
agree a mediator when involved in an ADR order, the court may facilitate selection
from lists provided by the parties (TCC, 2005 at 7.3.3).
The Halsey guidelines indicate broad circumstances where the court may find that
mediation was a suitable option. Although a party may wish to rely on their right to
seek redress from a court they may find they have little support from judges who use
their discretion when awarding costs. Shipman believes judges’ discretion in awarding
costs is influenced by their “ideological attitudes” to the function of the court by either
maintaining a “pre-CPR approach” of finding the correct legal outcome or adopting a
“post-CPR approach” of allocating limited court resources to appropriate cases. This
increases the uncertainty of predicting how the court will view a rejection to use
mediation (Shipman, 2006, p. 194). The following section will evaluate how judges in
the TCC have interpreted the Halsey guidelines.

Appropriateness criteria in the TCC

The court protocols require the parties to consider ADR but it is only when a party
claims there has been an unreasonable rejection of mediation that the court uses its
discretion to award costs against the successful party, which can be at the indemnity
basis[31]. A search was made of the databases reporting TCC cases (BAILII,
WESTLAW and LEXUSNEXUS) since the decision in Halsey, using the terms
mediation, mediate, mediator, mediating or ADR returned 54 cases. (Several cases had
involved more than one court appearance.) The data indicate four cases were determined
involving costs which are relevant to the identification of appropriateness criteria for
construction disputes. Reference will be made to other cases as the decisions indicate
categories or circumstances of construction disputes where judges view mediation to be
appropriate or inappropriate. It is also noted that in 15 cases mediation was reported to
have been attempted but not settled the dispute, which indicates a relatively high level of
IJLBE settlement failure. Four cases reported that mediation had taken place and achieved
1,1 settlement of some issues[32]. Other cases referred to evidence which mentioned
mediation in letters or contract clauses but with no further discussion.
Prior to Reid Minty v. Taylor[33], it was understood that indemnity costs were
awarded for behaviour “lacking in moral probity” or “deserving of moral
condemnation”. However, it was found not to be necessary to reach this standard in
90 Kiam v. MGN[34] but behaviour that is “unreasonable to a high degree” will be
penalised. The TCC considered whether the conduct of the successful party had
sufficiently reached this level when refusing to mediate in LMS International Ltd &
Ors v. Styrene Packaging and Insulation & Ors[35]. The court was unaware of any case
where a rejection of mediation was the “sole justification” for awarding indemnity
costs but accepted that in “exceptional circumstances” it may be “wholly unjustified to
reject an offer to mediate”[36]. Having examined the facts, the judge declined to
award indemnity costs because the successful party had not “wholly refused”
mediation when the offer was first made but both parties had been unable to reach
consensus on the form to take. Further, the court determined it was not unreasonable to
refuse mediation because the parties were already preparing for trial on the directions
of the judge.
Most cases concerning unreasonable behaviour in relation to mediation have
involved a refusal to mediate but in Witham v. Smith[37], the court had to consider a
“novel” claim based not on a failure to mediate, but on the successful party only
engaging in mediation when the majority of litigation costs had already accrued. The
defendant’s claim that mediation was “premature” until the claimant had set out the
details of their claim was not found to be unreasonable. The court suggests that
untimely, early mediation wastes time and can leads to a hardening of attitudes, which
is “doomed” to make later attempts at settlement fail[38] (Gould, 2007). Nevertheless,
the decision in Witham accepts the principle that a successful party could be
unreasonable if they only agree to the mediation very late in the day, leaving litigants
with a “tricky” balancing act:
The trick in many cases is to identify the happy medium: the point when the detail of the
claim and the response are known to both sides, but before the costs that have been
incurred[38].
In contrast, in Multiplex Construction (UK) Ltd v. Cleveland Bridge UK (No. 4)[39]
mediation was commended after trial to assist the parties in finding an “overall
settlement”. The TCC had determined preliminary issues of a complex construction
case involving an interpretation of the Heads of Agreement, an interpretation of the
Supplementary Agreement, a decision on the value of work completed and a resolution
of who had repudiated the subcontract, which resulted in both parties winning some
issues but no “overall winner”. Mediation at this stage was regarded as offering the
potential of saving costs and management time[40]. Although the parties did engage in
mediation after the case they failed to reach settlement on all matters and continued
litigation for a further two year on two issues, leading the court to later criticise their
negotiation tactics[41].
There may be a financially diminishing return on engaging in mediation close to
trial but research indicates that other benefits, such as testing witnesses or evidence or
narrowing issues, may make late mediation an attractive option for some parties
(Brooker and Lavers, 2005a, b). However, both research and findings from case Judicial
decisions establish that some parties are increasingly using mediation tactically to gain statements in the
an advantage in litigation. Following Dunnett[12], lawyers were reported to be using
mediation offers as a “cost terrorism” device (Brooker and Lavers, 2005a, b) and the English TCC
TCC recently condemned the tactics of “belated offers’” from solicitors, who get into
“costs difficulties”, because this conflicts with the intentions of CPR and the likelihood
of mediation settling under such circumstances[42]. 91
Although the courts have shown a willingness to award costs against the successful
party for unreasonably rejecting mediation, this alone is not sufficient at the indemnity
basis. In Tonkin v. UK Insurance Ltd (No. 2)[43], the claimants’ house had been
destroyed by fire and they were asserting the defendant’s scheme for reinstatement
was undervalued. They failed to better the defendant’s payment into court under a Part
36 offer and the judgment found they had refused “two sensible offers of mediation”;
their scheme for reinstatement was “wholly inadequate”; their case was “weak” as they
were found to be wrong on “almost every issue” and further that their conduct was
“unreasonable and at times reprehensible”, particularly their unjustifiable attack on the
bone fides of the defendant’s expert witness[44]. His Honour Judge Coulson, observed
that indemnity costs need not always be awarded because a party maintained a weak
case or because the losing party refused ADR[45] and had the claimants been
reasonable “in just one way” they would have avoided the higher rate[46]. On the issue
of rejecting ADR, the court stated this was a “grave mistake” because it was deemed to
particularly appropriate “in this case, for these disputes of architectural detail”
(emphasis given in judgment)[47].
The Halsey guidelines were considered in P4 Ltd v. Unite Integrated Solutions
PLC[48] in a case that Mr Justice Ramsey regarded as a “classic example” of suitability
for ADR[49]. P4 alleged that the defendant (Unite) had converted £70,000 of goods
supplied by them to Unite’s subcontractor, who subsequently became insolvent.
P4 claimed Unite had notice of a Retention of Title clause in the goods but had gone on
to install a significant number. P4 made several Part 36 offers but failed to better the
amount awarded by the court, therefore under Rule 36.20(2), the court, unless unjust to
do so, had to order the claimant to pay the costs up to the date of the Part 36 offer.
P4 claimed it was unjust and Unite claimed their costs for the whole period of the
litigation at the indemnity rate. In response, P4 submitted that no costs should be paid,
first, because Unite had failed to provide requested information about the
payment order made to the subcontractor and, second, because Unite had
unreasonably refused mediation. Mr Justice Ramsey, in giving the judgement,
reiterated that the Halsey guidelines are not limited to the six factors but Unite were
found to have unreasonably refused P4’s invitation to mediate for the following
reasons:
(1) Nature. The dispute was found to be suitable because, although not of
significant value, it did cover a number of factual issues including the number
of unfixed goods on site at the time P4 gave notice of the Retention of Title
clause and whether the subcontractor had been paid for the goods. The court
refuted Unite’s claim of an on-going relationship where a point of law needed to
be determined and the assertion that they needed to defend allegations of bona
fides on the grounds that both issues emerged after P4 offered mediation.
IJLBE (2) Merits. Unite’s claim of a “watertight case” at the time of the first mediation
1,1 proposal was rejected because it only became stronger later on, during the
course of the proceedings. In the judgment of the court, they did not have a
strong case when the first two offers of mediation were made. Further, the court
contended that mediation would have helped Unite’s weak oral evidence on the
number of fitting made, which may have narrowed the dispute[50].
92 (3) Other methods. Exchange of offers and information were not held to be evidence
of other settlement methods but the court noted that P4, during this phase,
increased the Part 36 offers indicating an “increasingly unrealistic view of the
merits of its case”[51]. The court observed that offers to settle might be relevant
but only as an “aspect” of whether there is a reasonable prospect of success for
mediation. Particular note was made that letters exchanging offers are not a
“proper substitute” for a process of ADR with a third party neutral, such as a
mediator, which allows the parties to gain a more realistic understanding of
their position and avoid “increasingly unrealistic offers” being made[52].
(4) Costs. The court disagreed with Unite’s argument that the cost of mediation
outweighed the amount in dispute because their analysis had failed to take into
account the cost of proceeding to a hearing and the time spent on litigating,
which should have been factored into the evaluation leading to the conclusion
that mediation would have been less expensive than going to trial[53].
(5) Delay. Unite accepted that P4 had not delayed making a mediation offer, which
the court acknowledged. However, Unite were found to be unreasonable
because in correspondence at the beginning of the claim they had stated that P4
had not considered mediation, which the found to be untrue and provided
evidence that Unite were not seriously considering ADR[54].
(6) Prospect of success. Mr Justice Ramsey took as the starting point that the
majority of cases are “capable of settlement and are in fact settled” when using
mediation[55]. Unite had cited Halsey’s example that a party’s intransigency
might suggest little prospect for mediation success and submitted P4’s
obduracy was an indication that settlement was unlikely. However, the court
stated Halsey had suggested success “may not only depend on the willingness
of the parties to compromise”, implying mediation can be successful even under
these conditions[56]. The court was of the opinion not only that mediation
would have had a “reasonable prospect” of success but also a “good prospect”
and there was a good possibility that P4 would have compromised if they had
the opportunity to meet face-to-face or with a mediator[57].

P4 was suitable for mediation because it involved small sums compared to the cost of
litigation and there were a number of “uncertain factual and legal issues”[58]. The court
were “persuaded” that it was of “great importance” that both parties had a
long-commercial relationship, albeit through the subcontractor, which P4 had been
seeking to develop because this would have given mediation a good prospect of
success[58]. Unite were found to have unreasonably refused mediation which prevented
an early resolution of the dispute but only for the period up to the Part 36 in July 2005
when P4’s case became weaker. After that date, Unite were awarded their costs but not
at the indemnity rate because P4’s conduct was not found to be “out of the norm”[59].
 The TCC is developing mediation appropriateness criteria, which construction Judicial
parties are employing to either refute challenges of unreasonable behaviour or to statements in the
support claims that mediation should have been used. The courts are likely to view
disputes involving a court determination on a point of law, important issues for future English TCC
business, fraud or disreputable conduct or where the party requires an injunction or a
legal precedent as inherently unsuitable for mediation and under these conditions a
party might safely refuse to mediate[18]. 93
TCC judges are likely to commence from the position that most construction
disputes are suitable for mediation when interpreting the six conditions supplied in
Halsey[18]. (Nature of dispute, merits of case, utilising other settlement methods, cost,
delay and prospect of mediation success.) The party’s belief in the strength of their case
may excuse a refusal to mediate but rejecting mediation in a borderline case is likely to
be found to be unreasonable. Parties should carefully consider the value of alternative
settlement offers and counter offers to avoid a finding of unreasonable conduct. The
timing of mediation continues to be difficult to gauge. It may be reasonable to reject an
early offer of mediation before the details of the claim are well-defined (Sorabji, 2008) or
a late offer close to trial when costs have escalated[60] but the parties are left with a
risky balancing act. Sorabji (2008, pp. 430-1) believes this could be addressed by the
courts penalising parties when they fail to “particularise” their claims in a way that
“facilitates mediation”. Equally as difficult is the assessment of the prospect of
mediation reaching successful settlement. Construction disputes between parties who
have been in a long-term commercial or ongoing relationship are likely to be viewed by
the TCC as suitable for mediation as it may offer the opportunity for creative
settlement outcomes[48]. Judges may find that construction cases where the expense of
litigation outweigh the amount in dispute[18], architectural issues[61] or disputed facts
or legal issues[48] to be appropriate as court opinion suggests mediation provides the
opening for the parties to gain a better understanding of the dispute or to narrow the
issues thus enabling settlement[48]. Certainly had the parties met face-to-face at an
earlier stage in P4, this might have shed light on the missing evidence of payment to
the sub-contractor, which was crucial to the dispute.
Settlement is undoubtedly the optimum mediation outcome but an understanding
by the TCC that other advantages can be gained is a factor that construction parties are
advised to take into consideration when reviewing dispute resolution strategy,
particularly when the courts make their judgments with the assistance of at least some
hindsight[62]. Research indicates other benefits can be achieved from mediating, such
as clarifying or narrowing issues, assessing strengths and weaknesses or reality
checking, all of which might stimulate a later settlement or help prepare for trial with
the added bonus of reducing litigation costs (Brooker and Lavers, 2005a, b). Tactical
benefits such as “feeling the financial muscle” of the other side or “testing” the evidence
have been acknowledged as incentives for mediating but some lawyers adopt a
more cynical use by employing “tactical games” and being “less open and more
manipulative with the mediator” (Brooker and Lavers, 2005b, p. 213).
Halsey states that the parties are entitled to adopt any position they like in
mediation and the court will not look behind the reasons settlement was not achieved
as this compromises the confidentiality of the process[20]. A “distinct mediation
privilege” was not found to exist in Brown v. Rice[63], but in Aird v. Prime Meridian
Ltd mediation is recognised as a form of “assisted without prejudice” negotiation
IJLBE which is privileged and “cannot be referred to or relied on in subsequent court
1,1 proceedings”[64]. Public policy affords privilege to without prejudice statements in
order to encourage the parties to settle their dispute without fearing what has been said
or revealed can be used against them in future litigation[65]. In Cumbria Waste
Management Limited (1) Lakeland Waste Management (2) v. Baines Wilson (a Firm)
the privileged status of mediation statements were upheld either on the grounds of the
94 parties’ confidentiality agreement or because of the “without prejudice” rule[66] (Allen,
2008), and unless the parties waive this right[67] (Sorabji, 2008), or the facts fit the
exceptions for privileged statements provided in Unilever Plc v. Proctor and
Gamble[68], the courts are unlikely to scrutinize the parties’ behaviour in mediation.
Parties who waive their privilege in the TCC court are likely to find the court adopting
the reasoning in the Queen’s Bench Division of the High Court that a “plainly
unrealistic and unreasonable position” in mediation is “not dissimilar” to an
unreasonable failure to mediate which “the courts can and should take into account in
the Costs order in accordance with the principles in Halsey”[69].
It would be unfortunate if the TCC, in its efforts to encourage mediation, play into
the hands of less-scrupulous parties who use the process to gain a tactical advantage.
The more construction parties experience mediation failing to work its “magic” with
intractable parties, or not producing creative outcomes, the less confidence there is
likely to be in the process (Brooker and Lavers, 2005b).

Conclusions
Mediation has been shown to offer benefits to disputing parties and it is irrefutable that
many TCC judges, with expertise in construction disputes believe it should be standard
practice for the parties to discuss and use the process. A failure to do so may be
sanctioned, although it is unlikely to be at the indemnity level unless there is other
evidence of unreasonable behaviour in litigation. Construction parties should take into
account that the court continues to emphasise the ability of mediation to deal with
intractable parties and the importance of continuing commercial relationships. This is
despite evidence suggesting that uncompromising attitudes are often a key factor for
non-settlement and that mediations rarely achieve creative outcomes enabling parties to
continue their ongoing relationship. Although Halsey witnessed a retreat from the
contention that nearly every case will acquiesce to mediation or the skills of experienced
mediators, the personal experiences and perceptions of judges continue to drive
“appropriateness criteria” in the TCC, which could in the long-term work negatively
against its true potential if construction parties encounter high levels of non-settlement.

Notes
1. Dunnett v. Railtrack PLC [2002] EWCA Civ 302.
2. [2004] EWCA Civ 576.
3. CPR Part 1 Rule 1.4(e) (Case Management).
4. CPR Rule 26.4 (Stay in proceedings).
5. CPR Part 44 (Costs).
6. CPR Rule 44.3.5(a).
7. Paul Thomas Construction Ltd v. Hyland and another 8/3/00 CILL /01 1743.
8. See for example; Halsey (n2) and P4 Ltd v. Unite Integrated Solutions PLC (2006) EWHC 924.
 9. CPR Part 44.4(1)(b) (Indemnity basis). Judicial
10. Alan Valentine v. (1) Kevin Allen (2) Simon Nash (3) Alison Nash (2003) LTL 29/09/2003. statements in the
11. Corenso (UK) Ltd v. The Burnden Group Plc [2003] EWHC 1805 (QB). English TCC
12. Dunnett (n1).
13. See for example; Dunnett (n1) and Paul Gaston, David Boughton v. Peter Courtney [2004]
EWCH 600.
95
14. Dunnett (n1) [14].
15. 1 Lloyd’s Rep. 379.
16. Hurst v. Leeming (n16) [5]-[6].
17. Hurst v. Leeming (n16) [12]-[10].
18. Halsey (n2).
19. Halsey (n2) [6].
20. Halsey (n2) [14].
21. Halsey (n2) [17].
22. Halsey (n2) [19].
23. Halsey (n2) [18].
24. Hurst v. Leeming (n16).
25. Halsey (n2) [20].
26. Halsey (n2) [21].
27. Days Medical Aids Ltd v. Pihisiang Machinery Manufacturing Co Ltd & Orr (2004) EWCH 334.
28. Halsey (n2) [25].
29. Halsey (n2) [25]-[26].
30. Halsey (n2) [27].
31. CPR Part 44.4(1)(b) (Indemnity basis).
32. For example, in Scobie & Orr v. Fairview Land Ltd [2008] EWCH 147 (TCC) mediation was
reported to have resolved some issues between the claimant and defendant prior to trial.
33. [2002] 1 WLR 2800 [28].
34. [2002] 1 WLR 2810.
35. [2005] EWHC 2113 (TCC).
36. LMS International Ltd & Orr (n39) [9].
37. [2008] EWHC 12 (TCC).
38. Witham v. Smith (n41) [32].
39. [2008] EWHC 231 (TCC).
40. Multiplex Construction Ltd (No 4) (n44) [666].
41. Multiplex Constructions (UK) Ltd v. Cleveland Bridge UK Ltd & Anor [2008] EWHC 2220
(TCC) (29 September 2008) 1670.
42. Wates Construction Ltd v. HGP Greentrue Allchurch Evans Ltd [2005] EWHC 2174 (TCC) [29].
43. [2006] EWHC (TCC) 1185.
44. Tonkin (n49) [42].
45. Tonkin (n49) [30].
46. Tonkin (n49) [40].
IJLBE 47. Tonkin (n49) [31b].
1,1 48. P4 (n3).
49. P4 (n3) [34].
50. P4 (n3) [36].
51. P4 (n3) [37].
96 52. P4 (n3) [38].
53. P4 (n3) [39].
54. P4 (n3) [40].
55. P4 (n3) [41].
56. P4 (n3) [43].
57. P4 (n3) [44].
58. P4 (n3) [45].
59. P4 (n3) [51].
60. Witham v. Smith (n41).
61. Tonkin (n49).
62. T.J. Brent Ltd and another v. Black & Veatch Consulting Ltd [2008] EWHC 1497 (TCC) [43].
63. Brown v. Rice [2007] EWHC 625 (Ch) [20].
64. Aird v. Prime Meridian Ltd [2006] EWCA Civ 1866. The Court of Appeal in Aird found that
the joint expert witness report that had been used in mediation had been ordered by the TCC
under CPR 35.12 and therefore did not have privilege.
65. Rush & Tomkins Ltd v. The Greater London Council [1989] AC 1280 (HL).
66. Cumbria Waste Management Limited (1) Lakeland Waste Management (2) v. Baines Wilson
(a Firm) [2008] EWHC 786 (QB) [30].
67. Carleton v. Strutt & Parker (A Partnership) [2008] EWHC 424 (QB) [24].
68. [2000] 1 WLR 2346.
69. Carleton v. Strutt & Parker (A Partnership) [2008] EWHC 424 (QB) [72].

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Corresponding author
Penny Brooker can be contacted at: p.j.brooker@wlv.ac.uk

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