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Succession planning – why the time to talk is now

Thu, 04 Mar 2021 16:20:53 GMT

Nobody likes talking about death, especially with our family.

We like to think we will always be around. Unfortunately, our inability to confront our own mortality can have a disastrous effect on those closest to us and our businesses.

All businesses need to deal with succession, but farming families are particularly vulnerable to the effects of failing to deal with succession.

Why is succession planning so important within farming?

One of the main reasons is that children are often involved in working on the family farm and there is this unwritten understanding that one day all of this will be yours.

Farming families are also notorious for not having partnership agreements in place, which again can leave the business open to potential disputes over the ownership of the business and its assets.

Issues within farming

One of the most common disputes that arise in farming families from a lack of succession planning is a proprietary estoppel claim – briefly put this is where:

A representation, promise, assurance or other encouragement by the defendant giving rise to an expectation by the claimant that he/she would have a certain proprietary interest.
There is reliance by the claimant upon that expectation.
Finally, the claimant suffers a detriment in consequence of his/her reasonable reliance on the promise.

When can mediation help?

During the planning discussions

Getting to the actual discussion about succession is often the first hurdle. Farmers are often so busy running the farm that they don’t have time to think about succession planning and for many people having this sort of discussion doesn’t come easy.

Family members don’t want to rock the boat – children don’t want to disappoint their parents by admitting they don’t really fancy running the farm.

Parents may feel that they are forcing their children into running the farm, but then equally children can be insensitive with their new ideas for the farm, which can often lead to disputes with their elders.

Having an open and honest conversation as early as possible – and before a problem arises, is the best course of action.

The children may not want to carry on the farm, but by knowing this the parents can plan for their retirement and have something to aim for.

Sometimes these discussions will get out of hand. Heated debate may take place and people may get offended and upset.

Mediation enables an independent third party to come in and speak with all of those involved.

The mediator can:

Explore the goals of each family member and what they want to achieve
Facilitate conversations between family members so that they understand what others feel and want
Enable the family to come up with a way forward together

Where no discussions have taken place and litigation ensues

Proprietary estoppel cases are fuelled with emotion and often to lead to lengthy, bitter and very expensive litigation. Whist there are practical steps you can take to avoid claims such as avoiding making promises and succession planning, this isn’t always the case.

If faced with a claim for proprietary estoppel the parties should consider the use of mediation over litigation as the advantages of using mediation include:

Confidentiality – farming communities are small, and these cases are ripe for local gossip and media attention.
Cost – a mediation costs between £1500 - £3000 per party vs legal costs of around £100,000 if it went to trial.
Speed – the mediation can be arranged within a few weeks and dealt with in one day - in comparison to the time it will take to bring the matter to trial (at least a year) and a possible 3 to 5 day hearing.
The parties decide on the solution rather than a Judge making a decision (which often suits neither party).

Lasting Power of Attorney Mediation

Wed, 17 Feb 2021 12:40:34 GMT

The importance of making Health & Welfare and Finance Lasting Powers of Attorney cannot be underestimated.

Despite popular opinion they are not something which should be only considered in later life, or at the onset of an illness but right now to ensure your wishes will be respected should you lose mental capacity, be that temporarily or indefinitely.

Lasting Powers enable you, the donor, to appoint someone you know and trust to act in your best interest, when you are unable to do so. Their purpose is to promote your independence.

Most attorneys will be appointed family members – children and grandchildren. Families do not always agree on things, and this will be no exception when it comes to making decisions as an appointed attorney.

What can cause issues?

•   Underlying family tensions
o   The initial appointment of the attorney(s) may have exacerbated tensions between family members, with some questioning why they were only appointed as replacement attorney for example.
•   Lack of consensus of agreement between attorneys
•   Lack of agreement between attorney(s) and other family members
•   Lack of agreement/consultation between attorneys, family members and medical professionals
•   Lack of inclusion/consultation with the donor

What kind of disputes can arise?

•   Accommodation decisions
•   Financial management
•   Property management
•   Care/treatment decisions
•   Gifts

Family disputes can increase the risk to the donor as the disputes may mean that not all decisions are being made in the donor’s best interests, which can have a negative effect on the donor’s care, health and wellbeing.

The Court of Protection and the Mental Capacity Act Code of Practice encourage those involved in an attorney dispute to attempt mediation.

The mediator must have regard to the Mental Capacity Act 2005 (“MCA”), and one of the areas where mediation helps rebalance the power between donor and attorney(s) is that any settlement must comply with Section 4 of the MCA:

“a decision made for a person who lacks capacity must be made in the best interests of that person”

Mediation is ideal when people are not communicating well or not understanding each other‘s point of view. It can improve relationships and stop future disputes, so it is a good option for attorneys as it is in their interest to maintain good relationships in the future.

Mediation
•   ensures issues are addressed in the best interests of the donor
•   involves the donor and takes into account their wishes and feelings
•   supports the donor in making decisions
•   enables parties to communicate effectively and understand each other’s points of view
•   likely cheaper than going to the Court of Protection

Mediating construction disputes

Mon, 01 Feb 2021 10:40:16 GMT

How does the UK resolve its construction disputes quicker than anywhere else in the world?

The latest Arcadis Global Construction Disputes Report 2020 has revealed that the average time taken to resolve construction disputes in the UK has fallen by 23% to just 9.8 months (previously 12.8 months). This reduction in time doesn’t correspond to a reduction in the average value of disputes, which have remained constant.

So why is the average length of dispute in the UK the lowest in the world?

The report looked at how the UK deals with its construction disputes with the top 3 most common methods pf resolving a construction dispute being:

1. Adjudication

2. Party to Party negotiation

3. Arbitration

So why doesn’t mediation make the top 3?

Mediation has lost its place in the top 3, having been overtaken by Arbitration – most likely due to the introduction of new low-cost schemes, such as the Chartered Institute of Arbitrators’ Business Arbitration Scheme.

Efforts have been made to encourage the early use of dispute resolution in the construction sector – such as the Construction Industry Council’s Model Mediation Agreement and Procedure, but this doesn’t seem to have made much of an impact.

Mediation offers a lower cost and a quicker option to those involved in the construction industry, so perhaps in time and with ongoing education as to the benefits more will come to use it.

Whatever the method – alternative dispute resolution is here to stay, and the construction industry success certainly serves as a shining example.

How Mediation works in 6 steps

Mon, 25 Jan 2021 12:30:39 GMT

Sometimes the thought of mediation can seem complicated - I decided to break it down to the basics

1. Choose your mediator

• Try and find a mediator who has experience in your type of dispute. Whilst in theory a mediator can mediate any type of dispute, if the matter is technical, we find it helps to have a mediator who understands the issues.

• Experience – all of our mediators have over 10 year’s experience (some over 20!). Make sure you have a safe pair of hands with the experience to get your dispute settled.

• Obtain the other side’s agreement to the mediator, be honest with your reasons and hopefully they will agree!

2. Pick a date

• Mediations can be arranged at short notice (even shorter if it is a virtual mediation)

• Let the mediator know the days you can’t do and they will liaise with the other party and provide you with a shortlist of suitable dates.

3. Sign the agreement to mediate

• You will receive a draft copy of the agreement. It contains everyone’s details and sets out the legalities of the mediation – such as its confidential nature.

• Make sure you sign this in advance of the mediation so that everything can proceed on the day – we like to use DocuSign.

4. Brief the mediator

• You will be asked to prepare a Position Statement. As you may have guessed this sets out your position and how you ideally see the matter being resolved.

• You will also need to provide the mediator with a bundle of documents that support your case (if appropriate). Sometimes the bundle will be agreed with the other side.

5. Exchange statements

• Parties have the option of exchanging their position statement with the other side before the mediation. This helps the parties know exactly where the other is coming from.

• This is entirely optional, and it is common for the position statements to remain confidential to the mediator – this is useful where you may feel your case is not that strong.

6. The Mediation

• The parties will be in separate room – virtual or actual, the choice is yours.

• The mediator will shuttle between the parties, discussing their case, its strength and weaknesses and finding common ground upon which the parties can build a settlement.

• Any settlement will be in writing and signed by the parties.

Mediation: Fact or Fiction?

Thu, 14 Jan 2021 16:57:58 GMT

We thought it time to dispel some common misconceptions surrounding mediation.

FICTION

❌ Mediations are mandatory

❌ What you say in a mediation can be used against you at a later date (for example in Court)

❌ You have to stay in the mediation until you settle

❌ The mediator can impose a solution on you (like a Judge)

❌ Mediation replaces litigation

❌ Mediation is more expensive than litigation

FACT

✅ The parties are in control of the outcome – they decide what terms they can live with

✅ The mediator is there to help the parties have a conversation – they may reality test your position, but they will never impose a solution on you

✅ Mediation is entirely voluntary

✅ You can leave the mediation at any time – but we’d prefer it if you stayed!

✅ Mediation is significantly cheaper than court proceedings –

✅ Mediation exists alongside litigation. If the mediation isn’t successful you are free to litigate.

5 Advantages to Mediating Online

Mon, 30 Nov 2020 14:24:43 GMT

Like it or not it's here to stay!

1.   Cost – There are no travel costs for the parties or the mediator. You don’t need to hire a venue or arrange for refreshments. The mediator’s fees will also be reduced as you don’t need to pay for travel time.
2.   Speed – Remote mediation removes the need for a venue and taking time away from the office. You don’t have to arrange child/pet care and consequently the mediation can be arranged more quickly than the usual face to face scenario
3.   Attendees – By removing travel time those at higher levels (CEOs etc) who wouldn’t normally have the time to commit to a mediation can no do so. They can take part but know that at a click of a button can be available to others.
4.   Less stress – Mediations can be incredibly stressful. Matters are often hotly contested and being with the other side in a joint session can be an anxious time for the parties. By moving things online the parties are taken out of that situation and often feel more at ease in their own surroundings.
5.   Flexibility – There is always a lot of ‘waiting’ in a mediation. Remote mediations allow the parties to work on other matters whilst waiting for the mediator. This is especially useful for those who wouldn’t normally have the time to take part – or even those who have to fit in childcare/home schooling. The parties can even leave the mediation and re-join at a later time, if not needed.

Top tips you don’t think of for online mediation

•   Make sure your phone and laptop are fully charged (if using)
•   Keep your charger handy – we found our iPad charger and iPhone 10 charger are super quick!
•   Let everyone know what you will be doing all day!
•   Plan – lunch, other people’s lunches and dinner (the last thing you will feel like doing is cooking at the end of the day!).
•   Know how to mute and turn off your video on zoom (we’ve all heard the conversations we shouldn’t have!)

Mediating Personal Injury claims

Sun, 08 Nov 2020 17:51:00 GMT

How mediation can help settle your personal injury and clinical negligence claims

Mediation has long been associated with family law and commercial disputes – but now we are seeing it being used more and more in personal injury and clinical negligence cases.

Claimants now have an alternative to the long drawn out, often incredibly stressful, court proceedings.

Mediation offers the Claimants the opportunity to reach a settlement, which they can live with. It is a very healing process – the Claimant is in control of what they accept, not a Judge, and not their legal representative. Unlike in a Joint Settlement Meeting (JSM) the parties are included at every step – it isn’t just left to the solicitors or barristers to do the negations on their client’s behalf. In mediation the process is the client’s.

Mediation also offers creativity – the settlement doesn’t need to be purely financial. Instead, mediation gives the Defendant the opportunity to apologise for what happened – something which could never be ordered by a Judge.

A court room can appear a cold and daunting place for a Claimant, by using mediation in personal injury and clinical negligence cases you can avoid the need for such formality. The entire process can be moulded to suit the Claimant, to make them as comfortable as possible. There are also the added benefits of cost, speed and flexibility.

By removing the need for a full trial, the Claimant will reduce their legal costs significantly. They can decide which mediator appeals to them, and what price range they are willing to pay for their services.

Personal Injury mediation also radically reduces the time to settlement. The Court system is already overloaded, and the pandemic has only served to worsen the situation. A mediation can be fixed up within a matter of weeks, with the case being resolved (all going well!) within 8 hours.

There will always be resistance to new methods, and the JSM remains popular, but with all the benefits mediation has to offer surely it can only be set to increase?

Is Mediation for Insolvency Practitioners and Lawyers or just for wimps? Mark Whittell tells us more...

Mon, 12 Oct 2020 07:56:21 GMT

Why insolvency practitioners should use mediation

As one of the few insolvency lawyers who is a mediator I still remain surprised that insolvency practitioners do not make more use of mediation.

While I appreciate that many lawyers still feel to suggest mediation is a sign of weakness in their case, that is quite simply wrong, it is just common sense. In any event experienced litigators know there are ways of engineering a mediation without showing weakness. Mediation provides a quick and commercial settlement and takes away the risks of any litigation. What more could an IP want?

Below I deal with some frequently asked questions to enable the practitioner to have a better understanding of the mediation process before going on to look at how it can be used in insolvency situations.

What is mediation?

It is a confidential and flexible process conducted by a neutral person who helps parties towards a negotiated agreement of a dispute during which the parties retain the ultimate control of the decision to settle and the terms of the resolution.

Practically mediation is an excellent method for settling any dispute quickly, commercially and without the cost, time and risk associated with the litigation process.

However, to maximise the benefit of the process it is not a case of simply sitting back and allowing the process to envelop you, but having a "game plan"

What is the role of the mediator?

He is there to facilitate a settlement of your case. He will not adjudicate on the merits or provide a judgment, but will work towards an agreed settlement.

A mediator starts the process by discovering the facts, before moving to reality test the merits of their case with the parties. He will look at the costs that have been incurred and will be incurred going to trial and the best case and worst case scenarios. Only then will he start to explore ideas for settling the case before moving to record the terms of settlement.

What are the advantages of mediation?

For the insolvency practitioner I believe there are three major advantages, namely:

Speed
Cost
Risk

A mediation could be organised in a day, but realistically can be organised within seven days if the parties want a speedy resolution to a dispute. The process normally takes a day. This is in comparison to the court process which can take from 12 to 18 months, if all goes well, and a court hearing that could turn into weeks.

Cost comparisons will vary depending on the size nature of the case. In terms of the mediation, the mediator will charge in an average case something in the region of £1,250 plus VAT per party. If the mediation lasts for over 8 hours the mediator will charge a further £150 per hour per party. Contrast this to the hourly charge out rate that you pay to your solicitor and the length of the proceedings and the trial where for a case with a 3 day hearing you will be billed in excess of £50,000. There will be significant cost savings.

Mediation puts you in control of the risk of losing and the adverse costs order. There are two sides to every story. One party is going to lose. The Judge is going to have to form a view of the parties and how they perform in the witness box. He is going to have to find for one party and the losing party always feels that he got it wrong. You assess the risks of your own case. You find out the strengths of the oppositions case. Then you can take a view of the "risks of litigation" and negotiate a settlement around that risk and the cost of proceeding to trial.

What are the disadvantages of mediation?

None.

The downside is that you will have had to pay for the costs of the day of the mediation.

However, if you have used the mediation process to its full extent, you will have had the opportunity to reassess the merits of your own case with an independent third-party, while at the same time you will have found out the strengths and weaknesses of your opponents case. This inevitably leads to narrowing the issues as you go forward and saving of time and cost.

What is the role of mediation in insolvency proceedings?

Mediation should be used by the office holder to maximise realisations for the creditors at the least risk

All reading this article will be aware of the costs of litigation and the risks associated with it. Even if the case is successful at trial there are still the problems of enforcement, often against an individual who has given personal guarantees to others to support the failed company.

Mediation provides the opportunity to settle the case. The mediator will ensure that the defendant's very best offer is available to you. Having prompted the mediator throughout the day to probe and discover the strengths and weaknesses of the defendant's case, while having listened to the mediator's own analysis of your case, which will have included an analysis of the cost and percentage chances of success, you will have to hand all the information you need to perform a cost risk benefit analysis.

Having undertaken mediation you are in a position to accept the defendant's offer, which you can justify to the creditors, or decide to risk the cost and time of proceeding to trial in the full knowledge of all the relevant facts.

What type of insolvency case is suitable?

The simple answer is that any dispute or conflict which arises within the case.

Any litigation involving the company or the bankrupt prior to appointment can be resolved through mediation.

Below I list some examples where I have also seen mediation used to resolve claims involving the office holder:

Transactions at an undervalue
Transactions defrauding creditors
Preferences
Misfeasance claims
Recovery of directors loans
Claims by the wife relating to the ownership of the matrimonial home
Retention of title claims

Conclusion

Mediation is a quick and cost effective method of resolving disputes. In the recovery of any asset or litigation it should be at the forefront of the IP's mind to maximise realisations of the assets for the creditors

Boundary disputes - the solicitor's nightmare

Mon, 05 Oct 2020 10:47:22 GMT

Mark Whittell offers a novel solution to the stresses and strains of the boundary disputes.

Yes the file we all dread – the boundary dispute

The client is acting on a point of principle
The client will be irrational and not act commercially
The costs will be totally disproportionate
The reality is one party will have to move for them to be happy
No matter how well you conduct yourself the Court is going to be highly critical of the fact you have not settled and the costs you have incurred
And it will hang around in your filing cabinet for ages as it will not have any priority

It all leads to a worried and dissatisfied client and a frustrated solicitor

The Problem

You will be litigating usually over a small strip/piece of land which will have a negligible value but because of the complexity of the arguments over title and adverse possession it will creep into multi-track and after the neighbours and the previous owners have all had their say you will be looking at a 3 day trial.

Court proceedings will be expensive and protracted. It will probably give the client 2 years of sleepless nights and it would not be unusual for the parties to spend £50,000, plus another £10,000 on VAT which they cannot recover.

Then there is the nightmare of an issue based costs order because quite often in the “tit for tat” exchange that follows into the pleadings the parties win some and lose some, and the reality is even if they have achieved a pyrrhic victory they end up paying most of their own costs.

After all the cost and anguish your client has to suffer the stresses and strains of a 3 day trial, the ordeal of being cross examined by a barrister for an afternoon, all to find the Judge takes a strict legal interpretation and makes a ruling no-one wants!

The Solution

It is not rocket science but a mediation can provide a quick and cheap practical solution in a relatively short period.

The mediator can ask relevant questions to bring home the reality of the situation which do not enter a judge’s mind such as:

Do you use this strip of land?

Will it add to the value of your house?

Will it detract from the value of your house?

Will a prospective purchaser be bothered?

Is it really important to you?

Is there something they could offer you in exchange?

He can go into the real reason behind the dispute and find a solution

One party can look into their living room

The unsightly mess they have to look out over

The neighbour blocked his planning application

A perceived land grab

The overhanging gutter leaking

The need to fit in an access road

The nuisance of lighting a fire as soon as you put out the washing

A judge can only determine the legal answer as to where the boundary lies and it might not suit either party. The mediator, on the other hand, can think laterally and, for example, suggest:

Relocating the boundary to suit the parties real needs
A land swap
A right of way over a different and less contentious area of land
Moving the boundary by a matter of yards to accommodate the real reason for the litigation
Making one party erect a fence to give the other side the privacy they require

If the parties are reluctant to settle rest assured:

the mediator will stress the costs they are going to have to pay you,
there will be a full and frank discussion about the risks of litigation
the mediator will bluntly ask them how they will pay the £100,000 bill if they lose at trial.
both parties will be asked if this small piece of land is really worth it

And although you will have done the same, when a neutral third party asks the same question in a mediation it will have more effect.

Tips

First, make the offer of mediation at an early stage and preferably before proceedings have been issued.

I find the costs can often become a block to any settlement in a situation where they are already in a stubborn mood. Both parties become entrenched because of needing to win to recover their costs. Most parties have not got the savings to fund an action at a cost of say £50,000 and run the risk of paying another £40,000 if they lose. Then they don’t know how to get out of the mess they have created.

Secondly, conduct at least part of the mediation on site.

The mediator can understand the physical proximity of the issues, and so can the solicitors, rather than looking at a scale plan. It enables the mediator to point out exactly what a small area is in dispute and how any changes to the boundary or area would affect the parties as he moots potential solutions.

Also, consider our mediation package tailored to reflect the length of time these very personal issues will take to resolve but also the value of the land in dispute.

Mark Whittell

Mediator

North West Mediation Solutions

www.nwmediationsolutions.co.uk

enquiries@nwmediationsolutions.co.uk

This article first appeared in the 30 November 2018 edition of New Law Journal and is reproduced with their permission.

Proprietary Estoppel: Be careful of what you promise your children

Tue, 08 Sep 2020 07:39:31 GMT

Proprietary estoppel cases are becoming ever more frequent, especially in the farming community. Below I take a look at principles of proprietary estoppel, I analyse a recent case and then consider how to avoid any claims. If a claim should arise, I explain how mediation might just be the solution for your client.

The typical farming proprietary estoppel case usually goes something like this:

One of the children takes a keen interest in farming, and the parent (and owner of the farm) promises the child that if they work on the farm for a minimal (or non-existent) salary then upon the parents’ death they will inherit the farm.
The child works on the farm and gives up any opportunities to work or study elsewhere.
Upon the death of the parents, the child discovers they have gone back on their promise and left the farm or shared it with a sibling.

So how does proprietary estoppel work? Basically, it effectively allows the court to step in and stop the parent from going back on their promise – where to not do so would be unconscionable as the child has relied on their promise to their detriment.

The requirements of a claim

To establish proprietary estoppel, you have to satisfy 3 key elements (as set out in Davies v Davies [2016] EWCA Civ 463):

A representation, promise, assurance or other encouragement by the defendant giving rise to an expectation by the claimant that he/she would have a certain proprietary interest.
A reliance by the claimant upon that expectation.
A detriment to the claimant in consequence of his/her reasonable reliance on the promise.

Once these 3 elements have been satisfied, the Court will consider what remedy to award. It has a wide discretion and each case is dependent on the facts. The Courts options can include:

monetary compensation,
removal of the legal owner’s right to possess the land, and
the grant of a lease.

Case example: Guest v Guest

In Guest v Guest the Court of Appeal dismissed a proprietary estoppel claim involving a family farm. Briefly summarised:

Tump Farm had been in the Guest family for three generations and was owned by David Guest, the father.
Andrew Guest, the eldest of two son and the claimant in the original case, had worked on the farm for over 30 years for low pay.
Andrew had always been led to believe by his parents that he would inherit a substantial interest in the farm.
In 1981 Andrew’s parents drew up wills ensuring that he and his brother would inherit Tump Farm in equal shares.
Whilst Andrew’s inheritance expectation did change over the years – from inheriting the farm entirely, to inheriting it along with his brother, what did not change was his anticipation and expectation that he would inherit sufficient to continue with the farming business.
Sadly by 2014 relations between Andrew and his parents has deteriorated and he stopped working at the farm.
In 2018 Andrew’s parents made new wills excluding Andrew from any entitlement.

The Court found that until 2014 the parents had led Andrew to believe that he would inherit the farming business. There were clear assurances on which Andrew had relied to his significant financial detriment. The court felt that although Andrew’s expectations of inheritance had changed there was still ‘sufficient clarity’.

The Court when awarding the appropriate remedy awarded a lump sum payment amounting to 50% of the market value of the farming business and 40% of the value of Tump Farm. The Court acknowledged that this would inevitably lead to Tump Farm being sold but felt that due to the total relationship breakdown a clean break was required.

How to avoid claims

As demonstrated in Guest v Guest, proprietary estoppel cases are fuelled with emotion and often to lead to lengthy, bitter and very expensive litigation. There are practical steps you can take to avoid claims:

Avoid making promises or expectations that you can’t keep
Plan – land owners should consider succession planning (with the subsequent tax savings) at an early stage with everyone fully aware of each other’s’ wishes.
Make a clear will – again discuss the contents with your family so that nothing comes as a surprise

Mediation

Whilst the above steps would help guard against any claim for proprietary estoppel, not everyone has the time or the knowledge of proprietary estoppel to put appropriate measures in place.

If faced with a claim for proprietary estoppel claim, the parties should consider the use of mediation over litigation as the advantages of using mediation include:

Confidentiality – farming communities are small, and these cases are ripe for local gossip and media attention.
Cost – a mediation costs between £1500 - £3000 per party vs legal costs of c £!00,000 if it went to trial.
Speed – the mediation can be arranged within a few weeks and dealt with in one day - in comparison to the time it will take to bring the matter to trial (at least a year) and a possible 3 to 5 day hearing.
The parties decide on the solution rather than a Judge making a decision (which often suits neither party).

Mediation allows the parties to have conversations and to get to the root cause of these disputes (these cases invariably involve a family breakdown and with mediation there is the chance that old wounds can be healed).

The one disadvantage of mediation is the cost of the day, if it does not settle, but from my experience even if the case does not settle the parties are able to narrow the issues and as a consequence they are able to make significant savings of time and cost during the litigation.

4 things employers are going to face as Furlough ends and 1 remedy

Mon, 07 Sep 2020 11:37:20 GMT

The Furlough scheme ends in October and with that comes the unfortunate reality that many businesses will have to make redundancies.

Most businesses will face some, if not all of the following:

Unfair dismissal claims

If you have made members of your staff redundant there will be those who do not believe it was fair process.

Potential areas of claim include:

• Furlough - Employers will need to have clear evidence of the reasons why staff were put on furlough, why they and not others were brought back.

• Performance - Covid may have also affected employees performance with their capability to do the job impacted.

Grievances

Grievances can be written or oral and could well include the following:

Home working versus coming back into the office
Terms & Conditions – many employers will be looking to update contracts to try and legislate for a second wave of Covid.
Flexible working requests – remember Employers have an obligation to consider all requests.
Health & Safety
Stress in the workplace
Why me – when others have not been with the company for as long/are not as good as me
Resentment of those who had a “holiday” while on furlough

Significant Cost

On average the legal cost of defending a claim in the Employment Tribunal will be £8,500+ VAT and disbursements.

Add to this the cost of a barrister, which can range from £750 to £5,000 plus VAT.

Time

On average a case in the Employment Tribunal can take up to 12 months – the timescales will vary for each case, but there is already a backlog made worse by the pandemic.

How can employers best protect their position to ensure the least financial damage to the business?

Mediation

Employers need to look at potential claims in a commercial context.

Employers may feel that they acted correctly but as with all litigation there is always a risk.

Mediation can be arranged quickly, it is confidential, and are usually resolved within 1 day.

The cost ranges from £750 - £1,250 plus VAT, depending on the complexity and number of parties involved, but is significantly less than the alternative.

How will the construction industry survive?

Fri, 04 Sep 2020 13:26:50 GMT

The construction industry is synonymous with disputes.

Throughout the years various steps have been brought in to try and alleviate these disputes – from adjudication to the Prompt Payment Code, but will the construction industry be able to weather the storm brought by the pandemic?

Force majeure

As soon as the pandemic hit the immediate response was to think ‘force majeure’. Unfortunately, this hasn’t always been the perfect solution parties thought and there has been significant debate over

Whose terms and conditions were incorporated in the contract?

Whether the FM clause was wide enough to cover the situation?

Did the FM clause incorporate disease and epidemic?

Has Covid-19 really impacted or is it just an excuse?

Does it terminate the contract or delay performance?

What obligations are there to mitigate loss?

FIDIC Model contracts

Under the FIDIC model contract, used many a lot of multi national companies, both parties are permitted to terminate where a continuous force majeure period exceeds 84 days. (The contractor must be reimbursed for any works already performed).

Looking at the FIDIC wording, COVID-19 would appear to qualify as a force majeure situation as per clause 19.1 of the FIDIC 1999 models it is an:

exceptional situation
beyond the contracting party’s control;
which such party could not reasonably have provided against before entering into the Contract;
which cannot be avoided or overcome; and
which is not substantially attributable to the counterparty.

This period of 84 days will expire in the next few months, depending on when notice was served, and obviously could give rise to a great number of disputes.

Is litigation/arbitration the only way?

Litigation is costly, lengthy and the outcome is always uncertain. We have been warned of the courts facing a huge deluge of litigation once we return to the ‘new normal’ world and so what was already lengthy litigation will take even longer to resolve – by which time the parties involved could be insolvent.

Litigation and adjudication, aside from being costly and imposing a decision on the parties also have the consequence of damaging relationships.

Mediation, although not the required method of dispute resolution in UK construction contracts, is nonetheless available to those in the construction industry.

Instead of costs, time and uncertainty, mediation offers the parties

A quick solution
Cost savings
The opportunity to talk openly about their real issues
Lateral thinking to provide a solution for both
The chance to maintain the contractual relationship for when matters calm down

Parties need to discuss disputes pragmatically, now is not the time to be getting embroiled in lengthy and costly litigation.

How to use mediation to deal with force majeure disputes

Fri, 04 Sep 2020 13:26:11 GMT

Industry is going to face the difficult times over the next few months and many companies are going to try and invoke their force majeure (FM) clauses to try and get out of the contractual obligations they cannot perform. There is going to be significant debate about:

Whose terms and conditions were incorporated in the contract?
Is the FM clause wide enough to cover the situation?
Does the FM clause incorporate disease and epidemic?
Has Covid19 really impacted or is it just an excuse?
Does it terminate the contract or delay performance?
What obligations are there to mitigate loss?

Companies are going to be fighting hard through necessity and to protect possibly their own continued existence. Can I suggest that the early use of mediation will:

Limit the legal costs which they probably cannot afford
Provide a quick solution
Allow them to talk openly about their real issues
Produce lateral thinking to provide a solution for both
Maintain the contractual relationship for when matters calm down

Founded in 2006, our team of 7 experienced mediators have been involved in over 1,500 mediations, settling 90% of disputes, which is well above the national average.

To find out more contact Victoria on vgreenwood@nwmediationsolutions.co.uk or visit www.nwmediationsolutions.co.uk

How mediation can help settle your personal injury and clinical negligence claims

Wed, 19 Aug 2020 14:03:18 GMT

Mediation has long been associated with family law and commercial disputes – but now we are seeing it being used more and more in personal injury and clinical negligence cases.

Claimants now have an alternative to the long drawn out, often incredibly stressful, court proceedings.

There will always be resistance to new methods, and the JSM remains popular, but with all the benefits mediation has to offer surely it can only be set to increase?

Negligent advice in Agri-business

Mon, 17 Aug 2020 11:03:36 GMT

For those involved in farming it is common to need the advice of a professional – from solicitors, accountants and surveyors, to vets and agronomists.

What happens when the advice they give you is wrong? What if your accountant gave you the wrong tax advice or a solicitor failed to correctly convey some land or record your wishes under your will? Or what if your agronomist gave you the wrong advice and your entire crop failed ?

Let’s take the example of the agronomist. With profit margins tight, farmers can no longer afford to guess their crop yields, and it is now commonplace to enlist the professional advice of an agronomists to ensure the crop is successful and in line with expectations. The agronomist will advise which herbicides to use, but what would happen if they got it wrong and the crop yield wasn’t up to scratch or even failed?

If a mistake has been made then it may be possible to bring a claim in negligence against the agronomist. To establish any negligence claim you would need to demonstrate the following:

1. The agronomist owed a duty of care
2. That duty was breached
3. The loss suffered was caused by that breach
4. The loss suffered was reasonably foreseeable.

Claims for professional negligence can often be complex , and whilst establishing the duty is often straightforward (most professionals will be instructed through a contract) establishing that the duty of care was breached can often be contested.

Equally, difficulties can arise when you need to prove that the loss you suffered was directly related to the breach of duty - often there can be other contributing factors, such as bad weather. Finally, any losses claimed must have been reasonably foreseeable as a result of any incorrect advice. Whilst at first glance this may appear easy to establish in agronomist claims, there could be situations, which no agronomist could have reasonably foreseen.

With any complex dispute the legal fees will be of upmost concern to any client, often reaching between £50,000 - £100,000 per party. In comparison, a mediation will usually cost between £1,500 - £3,000 a day, with the cost split between the parties.

Farming involves a relatively small circle of connected businesses, and court action can often permanently damage these relationships. Not only are the costs at stake but so too is your reputation. Also, any dispute with a trusted advisor may give rise to feelings of betrayal and mistrust - on both sides – which adds to the trauma of carrying on with the litigation. And then your solicitor cannot guarantee success but can only give you a percentage chance.

Remember, a 60% chance of success means that for every 10 times you go to court you would lose 4 – this is what a solicitor would call the risks of litigation!

The mediation process is well-suited to deal with all these issues and the legal arguments as the parties will be able to clarify their positions and agree on a settlement between them. It minimises the risk and neither party has to face losing in Court.

Just as important, mediation is confidential , so business relations and reputations can be shielded.

Are we getting closer to court mandated ADR?

Tue, 28 Jul 2020 10:51:59 GMT

A post – Lomax review

There have been two recent cases that have shown the Courts increased interest in ADR. The first, Telecom Centre (UK) Limited v Thomas Sanderson Limited [2020] EWHC 368 (QB) focusses on the use of Early Neutral Evaluation (ENE) and the second McParland & Partners Ltd and another v Whitehead [2020] EWHC 298 (Ch) saw the Chancellor of High Court hinting at the possibility of court-mandated mediation.

In Telecom Centre , Master McCloud in the Queen’s Bench Division suggested the use of ENE to help the parties settle the case. The parties had already of their own volition considered an ENE as a way of narrowing the issues. One of the problems Master McCloud focussed on was the lack of specific guidance on the use of ENE in the Queen’s Bench Guide and took this opportunity in her Judgment to share her approach to the process in order to inform other litigants and to perhaps aid the current author of the Queen’s Bench Guide.

The Judgment explains the purpose of ENE, when the process might be helpful and how it benefits the parties and the Court. Helpfully, the Judgment also included a precedent version of the order made in the case by Master McCloud, which gives helpful guidance as to what one should expect to be included in such an order.

Not only does this Judgment help other Judges who may wish to consider a direction, or even an order for ENE, but it also demonstrates the Court’s increasing interest in ENE following on from the Judgment in Lomax.

ENE obviously has advantages – as Master McCloud said in her Judgment it is especially useful where the resolution of some key issues would encourage settlement of others, however it is important to remember that it is an evaluative process, which can of course result in one party leaving the ENE with a significantly weaker position than it imagined.

This is the opposite of the facilitative approach of mediation, which offers no evaluation of the legal merits of the case but looks to bring the parties to a settlement, which both can live with, I.e. there is no winner but equally there is no loser – an attractive proposition to commercial parties.

McParland v Whitehead dealt primarily with the disclosure pilot scheme, but what is of interest from an ADR perspective is the Court’s encouragement of parties to use mediation.

Sir Geoffrey raised the issue of whether following on from Lomax it might be possible for courts to require parties to attempt mediation. He observed in his Judgment that the Lomax decision inevitably raised the question of whether the court might also require parties to engage in mediation despite the decision in Halsey v. Milton Keynes General NHS Trust [2004] EWCA Civ 576; [2004] 1 W.L.R. 3002 . You will recall that Halsey established that the Court could not compel an unwilling party to engage in mediation.

In this case the Court didn’t need to answer that question, as “fortunately” the parties had already agreed that a mediation was to take place.

It will be interesting to follow whether the Court is open to reviewing the Halsey position in future cases.

Cognitive bias in mediation

Fri, 17 Jul 2020 11:06:27 GMT

Why do we act the way we do?

Something I have been interested in for a long time is the psychology behind disputes. The scenario that springs to mind is a boundary dispute where the issue for legal advisors and mediators (which we have all encountered) seems to be:

a party puts a vastly inflated value on something which just does not make sense.

The theory behind this potential psychological block suggests there are 2 possible explanations for this seemingly irrational behaviour both of which can be facilitated within the mediation process:

the “endowment effect”, and
the “inner chimp”

The Endowment Effect

The endowment effect was first observed back in the 1980s at the University of Chicago, when economist Richard Thaler carried out his ground breaking studies.[1] In Thaler’s study participants were given a mug and then offered the chance to sell it or trade it for an equally valued alternative (in this case, pens). They found that the amount participants required as compensation for the mug once their ownership of the mug had been established, their (“willingness to accept”) was approximately twice as high as the amount they were willing to pay to acquire the mug (“their willingness to pay").

Simply put, it became apparent that once someone owns something, they place a higher value on it than they did when they first acquired it. They become endowed with a sense of possession, of “mine-ness”.

This behaviour is evident in a variety of dispute areas – from boundary disputes, disputed wills, rights of way, and even shareholder disputes. Let us consider the example of the boundary dispute. Often the strip of land is small, it has no real value, and in reality, there is nothing either party can do with that land. Why then, are these disputes so fiercely and emotionally fought? Is it as simple as an Englishman’s home is his castle? Not quite.

One side has usually been in physical possession of the land, and as such has an almost sentimental attachment to this object, a feeling of “mine-ness”. Consequently, that party will want far more for that strip of land than is reasonable, and more than the other party is willing to pay. The other side may have the legal title to the land, and as such feels ownership towards it and consequently will not be willing to part with the land for what would ordinarily be a reasonable sum. It would seem that each party may be willing to pay less to buy the land than it wants to receive, if it were to sell that land. This is often the stalemate reached in boundary disputes.

Expectations of what is “mine” are another area where the endowment effect takes hold. In disputed will cases there are often those who have always assumed they would inherit certain things; children expect to inherit from their parents, but what happens when that one child who has cared for their parents expects to receive more than her sister who lives abroad? How do we deal with the “mine-ness” issues that our clients have?

The Inner Chimp

In addition to this we are often faced with dealing with the “Chimp Paradox”. Professor Steve Peters in his book “the Chimp Paradox”, explained this as the “inner chimp” that we all have, the more basic, primal version of ourselves, whose primary drivers are power, territory, dominance and self-preservation.

Knowing about our inner chimp can help mediators and legal professionals deal with our clients, or even the other side, when this less desirable version of ourselves emerges.

Clients in a boundary dispute are already endowed with a sense possession over this strip of land, then add to the mix their inner chimp’s desire for territory and dominance and we can be facing a real block to settlement.

When a party loses their temper and their inner chimp emerges, it is time to take a step back. There is no point in presenting them with logical facts, as their chimp can’t process them. Instead, let them get it out of their system. It is a fact that you can only shout for a minute, after that you run of steam. Once they have got this off their chest you can start with the facts. The worse thing that you can do is fight back at their inner chimp.

The Mediation

So how do we as mediators deal with these psychological blocks to settlement?

The answer for the mediator is twofold and we must deal with:

the mind
the issue of possession.

The parties need to be in the right state of mind before any meaningful discussions can take place. As Professor Steve Peters explains in The Chimp Paradox, the use of facts, reason, truth, and logic will eventually calm the chimp down. It is not easy and may need much repetition and you can expect to encounter bouts of chimp-anger.

The mediator must deal with the issue of possession, that feeling of “mine-ness” that is so key in boundary disputes and disputed wills. One idea is to distance the parties from the item they wish to possess, for example putting their inheritance in a trust for their children or grandchildren.

Mediation has the benefit in that it allows:

The mediator to look for those type of ‘outside the box’ suggestions. If they don’t work then reality testing can be used to explain that with or without their agreement, if matters progress to trial, they face the risks and uncertainty of litigation and may lose what they hold so dear.
The parties to have a say in what they lose or gain and most importantly retain control – something of which their chimp would definitely approve!

Victoria Greenwood

[1] Kahneman, Daniel; Knetsch, Jack L.; Thaler, Richard H. (1990). " Experimental Tests of the Endowment Effect and the Coase Theorem "

Blackpool FC score own goal - another finding of reject mediation at your peril!

Wed, 24 Jun 2020 11:20:53 GMT

In the recent case of DSN v Blackpool Football Club [2020] EWHC 670 (QB) the High Court yet again emphasised that indemnity costs could follow as a result of not engaging in the ADR process.

I will not trouble you with the disturbing facts behind the case but Blackpool FC maintained they had a very strong case and would not entertain any negotiation or ADR. Their case was so strong that they lost that they failed to beat the Part 36 offer and costs were ordered against them. The Claimant sought indemnity costs because of the Defendant’s conduct and its failure to engage in settlement discussions.

The Master at the directions stage have made the usual provision that the parties had to consider settling the litigation through ADR but no attempts were made to settle the case

The Judge concluded:

“In summary, the Defendant in this case failed and refused to engage in any discussions whatsoever about the possibility of settlement”.

“The reasons given for refusing to engage in mediation were inadequate. They were, simply, and repeatedly, that the defendant “continues to believe that it has a strong defence””.

Mr Justice Griffiths went on to conclude:

“No defence, however strong, by itself justifies a failure to engage in any kind of alternative dispute resolution“.

The judge said that his experience was that disputes could be resolved in a way satisfactory to all the parties even if they did not consider the case to be well founded and that a settlement could allow for a solution which did not as not necessarily require any admission of liability or a payment of money. He was cognisant of the fact that the costs of an action were not always be limited to the financial costs but the trial would involve a significant expenditure of time and management time which could take a heavy toll on witnesses even for successful party.

There was a level of acceptable engagement in looking at the possibility of a settlement or mediation and Blackpool FC had not met that level.

The judge referred back to the case of OMV Petrom SA v Glencore International AG [2017] EWCA Civ 879 and recited the paragraph from the judgement of Sir Geoffrey Vos C

“ The parties are obliged to make reasonable efforts to settle, and to respond properly to Part 36 offers made by the other side. The regime of sanctions and rewards has been introduced to incentivise parties to behave reasonably, and if they do not, the courts powers can be expected to be used to their disadvantage. The parties are obliged to conduct litigation collaboratively and to engage constructively in a settlement process”

As mediators, we would always say that there is a benefit in mediating any case. The worst case scenario will be the loss of the cost of the day but the issues are always narrowed.

For those of you interested in cost cases, it was also interesting to see that the judge was prepared to follow costs budgets and award an interim payment of £200,000 on account of costs.

Some might say that Blackpool FC conceded more than one own goal in their handling of the case!

Using electronic signatures during Covid-19

Mon, 22 Jun 2020 13:12:06 GMT

How will the mediation settlement agreement be signed?

There are several challenges on how remote mediation will work but one of the most fundamental questions is how will any agreement be signed.

We have the ideal solution. There is no need to have access to office equipment such as scanners or a printer. We can use an electronic signature.

Below we look at how they work.

The Legal Position

Most contracts under English law can be made informally, that is to say they do not require a signature and can be created orally or by conduct. The only exception is a contract for land. However, in most formal situations, parties do wish to record their agreement in writing and sign their agreement to the terms. This is obviously helpful to show the parties intentions, especially if the matter should ever be litigated.

While a signature may not be strictly necessary, it has always been a fundamental part of the mediation process that you reach agreement, record it in writing and sign it to make it legally binding and that signed agreement can then be forwarded to the Court or form the agreement between the parties.

What is an electronic signature?

The EU eIDAS Regulation (Regulation (EU) No 910/2014), which remains part of English domestic law, defines an “electronic signature” as meaning:

“data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”.

With Article 25(2) of eIDAS providing that a qualified electronic signature “shall have the equivalent legal effect of a handwritten signature”.

An electronic signature may take many different forms. These include:

Typing your name or initials at the bottom of an electronic document, such as an email or a word document contract
Using a scan of your signature and pasting this into an electronic document
Clicking an “I accept” or “I agree” button on a website.
Using a finger to sign an electronic document via a touchscreen or on a tablet.
Using a web-based e-signing platform such as DocuSign to generate an electronic digital signature

Will my signature be legally binding?

Electronic signatures are valid under English law provided that:

the person signing the document intends to authenticate the document; and
any formalities relating to execution of that document are satisfied.

This was set out in the Law Commission’s 2019 report on Electronic Execution of Documents and recently endorsed by the UK Government in a Ministerial Statement on 3 March 2020 (https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-03-03/HCWS143/)

There are still certain cases where an electronic signature is not an option – such as documents needing to be filed at HM Land Registry or HMRC or a will.

Workplace Mediation during the pandemic

Thu, 18 Jun 2020 11:35:51 GMT

Is the furlough scheme stacking up grievances?

The issue

We are currently working in very different circumstances to normal. Employees have been furloughed, some are self-isolating and some are still working. For those who are continuing to work this can mean that they are seeing an increase in work – due to their colleagues’ absence. This can, understandably, lead to feelings of resentment amongst colleagues, which must be managed before it escalates into a more serious problem. Business owners and HR managers need to be alert to these issues, especially in light of the impact the pandemic is already having on our mental health.

You may be aware of some long-standing rivalries, or just a clash of personalities – these all have the ability to quickly spiral out of control. It is in no one’s interest to have employees going down the formal grievance procedure route and so if you are aware of issues then don’t delay and take action before matters escalate.

What is workplace mediation

Mediation is a process used for resolving disputes in which the independent mediator helps parties find a way forward. It is future focused and less concerned with who is right or wrong, and concentrates on solving problems so that they do not occur again.

The parties retain responsibility for achieving a solution.

The mediator in the course of a day, or sometimes through a series of meetings, will discuss the issues with both parties. First, he will establish the facts and the real issues troubling the parties before starting to explore possible means to a settlement and finally will record the agreement that the parties have reached.

Workplace mediation can help:

Improve performance, morale and profitability
Avoid formal grievance procedures
Retain staff
Avoid redundancies payments/tribunal claims/recruitment fees

What types of solution are envisaged?

A written settlement agreement
Apologies and explanations
Improvements for future communication
Training
Changes to systems and procedures
Revised job descriptions
Timetabled action plans
Review meetings

What type of disputes does it cover?

Any issue which is causing conflict or distress in the workplace, below is an example of some of the areas

Bullying
Sexual harassment
Sexual or racial discrimination
Interpersonal difficulties
Inappropriate behaviour
Management of change
Power struggles
Under performance issues
Absence from stress
Equality of pay and grading, terms and conditions, flexible working
Employment claims of unfair dismissal arising from any of the above issues

When is mediation appropriate?

It can be used at any point - from the time when HR become aware of a conflict, at any time during the grievance procedure, after a formal decision has been made (as often that will not solve the underlying conflict) and even during an Employment Tribunal case.

Unfortunately, in the market place there is still the old fashioned, but in our opinion, wrong attitude, that mediation is a “last resort”. At NWMS we advocate that mediation is used as a "first", not a "last" resort and not “after the event”. If used towards the end of the grievance process there is the risk that the attitudes of the employees have become entrenched and despite HR's best attempts to keep matters confidential, the issues are usually in the public domain and there is the issue of losing face.

At NWMS we promote that organisations should move their conflict procedures "upstream" to use the mediation process at the beginning of the conflict.

It is clear that the earlier a dispute is settled the better it will be for all concerned. There will be less disruption to the business, to the lives of the employees (leaving them to concentrate on their business roles) and the associated costs. For these reasons mediation should be used at an early stage to resolve employee conflict situations before they become either formal or subject to grievance /disciplinary proceedings

Dealing with disputes in the workplace is always difficult, but by taking a proactive stance and using a professional mediator you can find a practical and cost effective solution to the problem and minimise the disruption to your business.

Online mediation alternatives

Wed, 17 Jun 2020 10:17:13 GMT

How playing cards online made me reconsider remote mediation

I am one of a group of 6 university friends who travel 40 miles to meet once a month to play diminishing whist (for pride not money) and to take the mickey out of each other. We have now had to accept that for the first time in 35 years (bar August which we have allowed ourselves off for holidays) this current crisis will prevent us from meeting. Not to be deterred from our monthly fix, we have found an online card game application to keep the tradition going.

The point of sharing this story was to say how it struck me that playing cards online was like mediating online. If I am honest, it was great to see my friends online and to have some banter - we even managed to play a full game, but it was not quite the same. We did not have a break while someone dealt with the social niceties, as the application had a new set of cards in front of us within a second of finishing the previous round. It was an enjoyable experience but not quite the same. For example, it was much more difficult to see who was bluffing and these were friends who I have known for the majority of my life.

We all went away saying how much we had enjoyed ourselves and that we would carry on until the restrictions were lifted and this is what I’d like to persuade you for online mediation.

In a similar manner, mediation depends on the personal and communication skills of the mediator to establish a rapport and to develop the necessary trust with all of the participants. This enables the mediator to have credibility with the parties so that they will accept the challenges to the strength of their case and listen to the advantages of achieving a settlement.

Equally important to the mediator are the clues given by the participants as they discuss their case. It is sometimes the non-verbal cues, such as their facial expressions and body language or even the tone of their voice, that are most important to the mediator.

Just as online diminishing whist does not truly replicate the interpersonal skilled card game, so too online mediation is not the perfect substitute for a mediation around a table, but while the restrictions remain in place it is a way for litigants to resolve their cases.

We have to accept online mediation has its deficiencies but as well as enabling a mediation to take place with the current Government Regulations it also has some advantages. For example:

It avoids the time and cost of travel.
It eases the strain on people’s diaries and enables them to participate.
It provides greater flexibility in how the mediation is structured.
It does not leave people stuck in their break-out rooms for hours of the day
People do not have to devote the whole of their day to the mediation as they can be working out of their own office when not participating.
The parties still have the opportunity to discuss matters amongst themselves while the mediator is online with the other side
The opportunity still exists for reality testing or for you to pose questions to the other side through the mediator, which you hope will make them reflect on the merits of their case.
It still allows for the personal touch and mediators can see some of the body language on screen

The online tools such as Zoom do make this a very credible alternative and I invite you to try it. I am sure you will have much more success than I did at cards!!.

Proposed coronavirus legislation fails to stop winding up petition.

Tue, 09 Jun 2020 13:33:42 GMT

There has been considerable coverage of the plight of the high street since the outbreak of Covid-19.

Forced to close to prevent the spread of the virus, these commercial premises have no way of getting the footfall and its subsequent income, but still have the legal obligation to pay the rent and business rates. The Government recognised the issue and announced a three-month moratorium on evictions of tenants of commercial properties who were unable to pay their rent because of the coronavirus.

Whilst this was of comfort to the commercial tenants, Landlords were however also feeling the strain and many found alternative ways of recovering their overdue rents, such as winding up petitions and statutory demands.

In light of this the Government announced on the 23 April 2020 that they will be bringing in further measures to protect commercial tenants from these aggressive debt recovery methods. Alok Sharma, the business secretary, has acknowledged the strain commercial landlords find themselves under but has “urged them to show forbearance to their tenants” and to take advantage of the newly expanded Coronavirus Business Interruption Loan Scheme.

The government’s new emergency measures relating to the use of statutory demands and the presentation of winding up petitions will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. At present no draft legislation has been published and as such the law remains unchanged. With that in mind how then will the current applications before the Court be dealt with?

Judgment in the case of Saint Benedict’s Land Trust Limited and Shorts Gardens LLB v London Borough of Camden Council and Preston City Council [2020] EWHC 1001 (Ch)was handed down yesterday (27 April 2020) and dealt with an application to restrain a winding up petition, specifically citing the proposed Covid-19 legislation as one of the grounds.

Snowden J confirmed that his decision would be made on the law as it stands not the prospective legislation. He further added that the government’s legislation was envisaged to restrict statutory demands and winding up petitions that concerned debts that were unable to be paid because of the coronavirus, not debts that accrued before the virus, or were entirely distinct from the virus (in this case liability orders for non-domestic rates and costs orders).

The message to take away is that the coronavirus must be real reason behind any debt, failing which the aggressive methods of debt collection will remain to be available.

As a cautionary note, winding up is a great method of aggressive debt recovery until it doesn’t work. Then you have just wasted the court fee and deposit of £1680 (which you will not recover), you have lost any opportunity of cash and eventually the rates liability will fall to you on an empty property (as it is unlikely you will re-let the property quickly as we come out of lockdown with all the various problems we face).

Is a negotiated settlement with a small sum of cash, hoping that the tenant will recover and pay off the arrears, a less risky strategy?

The parties need to work collaboratively - mediation offers that independent third party who can get to the real issues and help facilitate a reasonable payment agreement that will work for all involved.

A copy of the judgment can be found here: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1001.html

Victoria Greenwood

My case is solid – do I still need to mediate? A case law update.

Mon, 04 Nov 2019 12:11:27 GMT

If a solicitor ever tells you that you have 100% chance of success he does not know what he’s talking about, as there are always the risks of litigation.

Mediation is the most viable ADR solution used to settle litigation cases, avoiding the risks of litigation. It is now enshrined in the litigation process, it appears in every protocol, it is the first question on the allocation questionnaire and usually the first direction of the case management conference.

However, what if my prospects of success are say 70/30 and my client is prepared to take the risk of the trial? The reality is that current case law states that if you choose to ignore mediation, your client will still probably face the risk of an adverse case costs order even if the case is successful.

The costs position first started to develop with the well known case of Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which introduced a merits-based approach. The court, in considering whether a refusal to mediate should give rise to costs sanctions, identified certain considerations (the Halsey Guidelines) to determine whether or not a party has acted unreasonably in refusing to mediate. Relevant factors include the merits of the case, the extent to which ADR was attempted and whether ADR would have had a reasonable prospect of success.

The position moved on in the case of PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288 where the Court of Appeal held that to remain silent to an offer of mediation was, as a general rule, unreasonable conduct meriting a costs sanction. This seemingly applied even in cases where mediation was unlikely to be successful, which clearly undermined the Halsey merits principle.

Keeping with that theme Northrup Grumman v BAE Systems [2014] EWHC 3148 (TCC) again highlighted the court’s attitude that mediation should be used, even in cases where it may not be appropriate. Here, the Defendant believed that it was right to refuse mediation as it reasonably believed the claim had no prospects of success, and it would never have paid out money to settle the case. As such the Defendant saw no reason to engage in mediation. Ramsey J did not agree this was sufficient to avoid a costs sanction stating that:

'[T]he authors of the Jackson ADR Handbook properly, in my view, draw attention at paragraph 11.13 to the fact that this seems to ignore the positive effect that mediation can have in resolving disputes even if the claims have no merit. As they state, a mediator can bring a new independent perspective to the parties if using evaluative techniques and not every mediation ends in payment to a claimant… [On] the merits of the case, I consider that BAE’s reasonable view that it had a strong case is a factor which provides some but limited justification for not mediating.'(emphasis added).

The next significant case didn’t concern a failure to mediate but rather a sluggish approach to responding to an offer of mediation – could that be justification for a costs order? Yes. Thakkar v Patel [2017] EWCA Civ 117 was an appeal against a costs order. The defendants were very slow to respond to the offer of mediation, to the extent that the Claimant wrote to the defendant setting out the history of attempts and concluded that it had lost all confidence in arranging a mediation between the parties.

In considering the appeal, Jackson LJ agreed with the Judge at first instance’s finding that there was a real chance that the case could have been settled by mediation, and that by “delaying and dragging its feet for no good reason” the costs order given was merited.

Only 4 months after the decision in Thakkar the Court of Appeal made a partial U-turn with the decision in Gore v Naheed [2017] EWCA Civ 369. The Claimant had declined an offer of mediation on the basis that the Defendants had no real prospect of success and that mediation would have only added further costs. The Defendants appealed the costs order on the basis of that some allowance should be made for the Claimant’s refusal to mediate, as per the ruling in PGF.

Briggs LJ, did make clear that a failure to engage in mediation, even if unreasonable, does not automatically result in a costs sanction – it is simply a factor to be taken into account by the judge when he exercises his costs discretion.

Patton LJ agreed with the Judge that it was not unreasonable for the Claimant to have rejected mediation, and agreed that the complex nature of the case made it unsuitable for mediation. He concluded that the judge’s “refusal to make an allowance on these grounds cannot in my view be said to be wrong in principle”.

Gore obviously raises some contradictions. It clearly goes against the decisions in PGF and Thakkar that mediation should always be seriously considered, despite the merits of the case. Additionally, the issue of complexity of a case being a barrier to mediation has previously been dismissed in other Court of Appeal cases – see Burchell v Bullard [2005] EWCA Civ 358.

There are some older cases which might provide assistance such as Hurst v Leeming where it has been held to be reasonable to refuse mediation. On that occasion it was held that the professional reputation of the barrister was a good reason for allowing the matter to proceed to trial.

The Gore case has thrown doubt on what had been the clear thrust of the Court that you must mediate or face the potential of the cost sanction. My own view is that to rely on the Gore case you will have to have strong grounds, which you will need to have set out very clearly in correspondence, preferably at an early-stage. The Court will still remain very pro-mediation.

Perhaps the moral of this story is that you will never know which way the Court will turn so it is safer to mediate.

Having said that, I feel there will be very few cases where mediation will not be advantageous in that you will be able:

To test the reality of the merits of the case through the mediator
To take the strength of the merits of your case into your negotiating stance to dictate the terms of settlement
To avoid the risks of litigation and an adverse costs order
To settle at a much earlier stage

Victoria Greenwood is the managing director at NWMS, and in her spare time is a litigator and partner at Gunnercooke LLP in Manchester.

She can be contacted on vgreenwood@nwmediationsolutions.co.uk or 01663 719442

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