Court imposes 5% costs penalty for solicitor's failure to comply with Mediation Act 2017

In a recent High Court decision, Mr Justice Kennedy imposed a 5% costs penalty on the Plaintiffs because their solicitor did not advise them to consider mediation in accordance with section 14 of the Mediation Act 2017.

Statutory Obligation to Advise on Mediation

Section 14 of the Mediation Act 2017 (the Act) provides that a practising solicitor shall, before issuing proceedings, advise their client to consider mediation as a means of resolving the dispute. Under the Act, solicitors must provide their clients with the names and addresses of mediators as well as the benefits of mediation. When commencing legal proceedings, a solicitor must file a statutory declaration evidencing the fact that they performed their obligations under the Act. When it comes to the question of costs, the court can have regard to any unreasonable refusal or failure by a party to consider mediation or attend mediation.

Analysis by Court of Statutory Obligation

The question that the court had to determine was how to address the breach of the statutory procedures prior to the launch of proceedings (which might or might not have led to mediation). In these proceedings, the Plaintiff's solicitor failed to comply with their obligations under the Act. The court found that the obligations imposed on solicitors in the Act were not unreasonable or burdensome and that even before the Act came into force, lawyers acting in their clients' best interest should already have explained to their clients the relevant options, including the advantages, disadvantages, risks, costs and benefits.  

The Act does not oblige plaintiffs to mediate. Nor does it oblige their lawyers to tell them to do so. The court acknowledged that in some cases litigation may be deemed necessary to protect a client's position. Solicitors are not prevented from warning their client that mediation may be inappropriate, premature or unlikely to succeed in the particular circumstances. However, that does not extinguish a solicitor's duty to advise their client to consider mediation. The statutory duty imposed by the Act is to explain the option, facilitating an informed decision by the client, allowing them to consider the alternatives to litigation.

While a solicitor must inform their client of the possibility of mediation and its benefits, the solicitor is entitled and in the court's view, obliged, to supplement that advice where appropriate with any countervailing views as to the feasibility of mediation in the circumstances.  

Application of the Principles

The court was of the view that these proceedings should not have been issued until the statutory requirements had been met. This is not simply a matter between the Plaintiffs and their solicitors since compliance with the Act is in the public interest as well as in the interests of the individual clients. The court accepted that the proceedings were urgent, but did not believe compliance with the Act would have unduly delayed the process. The issue could have been addressed while proceedings were being drafted. The court acknowledged that while rare situations could arise where proceedings need to be filed so urgently that it is truly impossible to furnish mediation advice prior to their commencement, then the advice on mediation should be furnished at the earliest opportunity. However, no attempt to do so occurred in these proceedings and no satisfactory explanation was proffered for the intervening inaction.

The Plaintiff argued that the Defendant would not have engaged in mediation. While the court believed this may have been correct and that tactically, there might have been reasons for the Plaintiff not to propose mediation at a particular point, none of these addressed or excused the solicitor's failure to comply with their obligations under the Act. The possibility (or even likelihood) that the litigants might have decided that the time was not right for mediation does not release the Plaintiff's solicitor from the duty to comply with the Act.

The chances of the parties actually engaging in mediation may have been low but they were not zero. Even if there was a 5% chance of engagement at the outset, then the Plaintiff should have been encouraged to at least consider the option which, if successful, could offer significant benefits for the parties and the courts prior to substantial costs being incurred. Even if the time is not right for the Plaintiff to propose mediation to the Defendant, "the seed is planted".

The court also discussed the reluctance of a party to suggest mediation as they may believe it demonstrates a perceived weakness in their case by making the first move. The court explained that if all parties refused to make the first move, then no dispute would ever settle. Even if there was any such nervousness, then the Act offers an ideal opportunity to overcome that perceived weakness as they are complying with their statutory and professional requirements.

Finding by the High Court

The court felt it should take account of the material breach of the Act and have regard to the failure to comply with the statutory precondition to issuing proceedings and avoiding unnecessary recourse to the Courts. If a failure to comply with the Act in the future were to occur, the court may adjourn the proceedings, at the Plaintiff's expense and stay the proceedings until the obligations had been discharged which is likely to have significant cost implications. The Court considered applying a deduction in costs of 10-15% but instead decided to make a relatively modest reduction of 5% on this occasion warning that courts "may be less lenient in future".

Take Away

The obligation imposed by practitioners by the Act must be complied with. This decision demonstrates that the courts will examine the obligations imposed on practitioners and cost consequences can flow as a result of non-compliance. The courts are encouraging parties to explore mediation as a means of resolving their dispute and this case demonstrates that costs consequences can follow if a Plaintiff fails to consider mediation before commencing proceedings.

For more information, please contact Thomas O'Dwyer or your usual contact in Beauchamps.