Costs jeopardising settlement

October 14, 2014
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Costs are often a serious obstacle to settlement, even where everything else can be agreed. This is frequently because parties mediate so late in the day and get bogged down in witness statements and disclosure.

It is sometimes felt that it is not possible to mediate until all those stages have been gone through so that “we can fully understand the other side’s case”.

This is to misunderstand the object of mediation.

It is not to win a case. It is to do a deal, based not mainly on the parties strengths and weaknesses – although these may be risk factors to be taken into account – but primarily on the interests of the parties. What do they want? What do they need? What can they live with? These are all questions that can be answered without going through the standard litigation process. The costs and disadvantages of going a long way down the litigation path before mediating is invariably out of all proportion to the benefits to be obtained by so doing.

Sometimes large costs are incurred prior to the mediation, which prevent settlement, only to lead to yet further horrendous costs afterwards – as demonstrated in this email from a client to a mediation I was involved in:

  • “If you recall our neighbour after all your efforts, refused to agree to both parties paying their own costs. Some £35,000 EACH later he finally agreed the costs issue. At the time of mediation we had spent around £20-25K so to achieve the same outcome but having to spend another £35K leaves a bitter taste. Had this gone to trial, the FURTHER estimated costs for each party was going to be around £75-£100K!
  • I thought I would drop you a line to let you know our boundary issue has now been settled, but, I’m not a happy bunny! Would you believe we settled ALL as per the mediation terms that you thrashed out in February.
  • I wanted to let you know the above and I would have no objection to you showing this email or mentioning the contents to any future parties that opt for mediation. They don’t want to get caught in the same trap as us.”

(Contents of the email reproduced in this post with the specific permission of the client.)


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