Three reasons why you should settle out of court

Out of court settlement First published by the North London Chamber of Commerce.

Following the recent confirmation by the Ministry of Justice that as of 22 April a number of changes to court fees will come into effect, perhaps now is the time for more organisations and individuals to seriously consider out of court settlement mechanisms, such as mediation. In essence, litigation is becoming even more expensive, and it would be no surprise that this would be the first reason why you should settle out of court.

It is now evident that Shailesh Vara MP, Minister for Courts and Legal Aid, did not succumb to the stern opposition during the preceding consultation period, when these changes were proposed, which ran from 3 December 2013 to 21 January 2014. In its consultation response, the Law Society stated that ‘Higher court fees, it believes, represent significant barriers to justice for both individuals and small businesses.’

It follows that as of 22 April, a litigant who brings a compensation claim between £5,000 and £10,000 would have to pay £445 in court fee, up from £245 and a standard fee of £280 if the claim is about property repossession. Fees for claims below £5,000 are also likely to be hit with some increases, in addition to legal and all other litigation related costs. However, all hope is not lost – alternative dispute resolution (ADR), mediation in particular, is increasingly becoming mainstream across various sectors of society, as a far more commercially viable alternative to litigation. Mediation is discussed further below.

The second reason is that, although court fees are set to rise, the court itself recognises the need for dispute resolution to be inexpensive and for ADR to be used wherever possible. It has been emphasised that litigation should be a last resort. In demonstrating a strong support for ADR, the courts will honour mediation Settlement Agreements, and will even grant a stay of proceedings, for the parties to try and resolve the case peacefully through ADR.

In the 2004 case of Halsey v Milton Keynes NHS Trust, it was mentioned that ‘All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for mediation.’

The Court of Appeal took a more proactive approach in PGF II SA v OMFS Company 1 Ltd where the issue of potential costs consequences for a party refusing to mediate, was addressed. As it stands, a successful party who unreasonably refused to mediate prior to proceedings may be penalised in terms of costs. The courts can depart from the general rule that the successful party recovers their costs from the unsuccessful party. This level of judicial support means that the public should be confident in the use of mediation, albeit some are still sceptical, which is usually due to a lack of understanding of how it works. Suffice to say that London ADR provides free mediation awareness seminars to organisations, in order to educate and inform them about the use of mediation, and how it can be incorporated into their dispute resolution policy.

Lastly, the overall benefits of mediation, which is far-reaching is perhaps the most important reason why a party may want to settle out of court, using mediation techniques. As mentioned above, it is far more commercially viable for businesses and individuals.

For instance, the court fee for a compensation claim between £5,000 and £10,000 has now increased to £445 (not including lawyers’ and other related costs), whereas mediating a dispute with a value of between £5,000 and £15,000 will typically cost between £300 and £400. This is for a mediation session lasting no more than three to four hours, with a high success rate. At the end of a litigation the parties may be out of pocket and relationship, while at the end of a mediation process, the parties would have saved a significant amount in costs and would usually shake hands, having restored their business or personal relationship.

Mediation is a highly effective and sophisticated dispute resolution mechanism that can be strategically applied to prevent, manage and resolve a wide range of disputes. The cost benefit has always made it attractive, but its practicality cannot be underestimated. It empowers the parties to be as collaborative and creative as possible in deciding a mutually satisfactory solution to a dispute or conflict, with the assistance of a neutral and competent mediator.

At London ADR, we assist individuals and organisations to prevent, manage and resolve their disputes, in the most efficient, expeditious and effective way, so that they can find closure and look to a positive future. Our mediators are expert dispute resolvers, who will work with all parties equally, in a confidential and independent way, and help to facilitate quick and durable solutions, however complex the dispute.

Vincent Adon
Accredited Mediator
Director & Founder, London ADR