Settle down: The popularity of mediation

This month the results of a two-year research project into the cost savings and effectiveness of mediation were published. So far, most of the information we have about this has been anecdotal, so this survey, conducted by King’s College London and the Technology and Construction Court (TCC) between June 2006 and May 2008, asked parties in litigation at the TCC in London, Birmingham and Bristol about how they settled their disputes, and in particular their experiences with mediation during litigation.

Mediation is a method of dispute resolution that is most likely to be encountered in respect of a dispute that is already on its way to a hearing, either in arbitration or in court.

As most of the parties surveyed settled their disputes before judgment, the main issue was to find out how and when they settled, if this happened while they were in mediation, and whether it saved them any money.

The most frequently encountered issue in dispute at the TCC was defects (18% of all disputes). This was closely followed by payment issues (13%), design (12%), professional negligence (13%) and property damage (13%). Changes to the scope of works, delay and differing site conditions were lower down the scale.

This is surprising, as the last three categories are the ones that are most often associated with construction disputes, and in research carried out 10 years ago they were found to be the most common issues referred to the court. One might conclude that these bread and butter problems are now being dealt with in adjudication.

Many often believe that litigation is usually settled on the court steps – that is, shortly before the hearing. While there is some truth to this, the survey shows that most of matters settle at four main stages. The first is shortly after commencement of the action, so during the exchange of the pleadings (that is, claim, defence or counterclaim). Another large proportion is settled once documents have been disclosed. There is a further burst of settlement activity if a formal written offer to settle or a part 36 offer is made.

Finally, some settlements occur shortly before trial. However, by that stage a significant proportion of disputes have already been agreed.

Ten years ago, mediation was rarely used. Now one-third of all disputes are settled this way

The stage at which settlement occurs is to some extent reflected in the costs saved by the parties. Respondents to the survey indicated that they saved varying amounts. Notably, 9% considered that they had saved more than £300,000. These were respondents involved in complex multiple-issue disputes.

Clearly, settling earlier in the litigation process saves all of the legal and expert costs that would have otherwise been used in taking the matter to the hearing. In addition, mediations that take place late in the proceeding need to somehow factor in the legal costs that have already been incurred, thus making the issue more difficult to settle.

The results revealed that 35% of all the TCC matters that were settled over the two-year period were settled as a result of a mediation. This is a significant proportion. A small number were settled by other alternative dispute resolution processes, and about 60% settled by use of conventional negotiation.

Ten years ago, mediation was rarely used to resolve TCC disputes. Now one third of all disputes are settled in this way. Further, 76% choose of their own initiative to mediate, choose the timing of their mediation and their mediator. The most popular mediators are solicitors (41%), then barristers (34%), with construction professionals and TCC judges making up the balance.

Finally, and interestingly, most of the respondents believed that the litigation would have settled at a later stage if the mediation had not taken place. In other words, the mediation resolved the matter earlier than conventional negotiation would have.

In conclusion, the data gathered from the King’s College London and TCC mediation survey shows that mediation has been transformed from a novel idea into an indispensable tool for construction professional and litigators alike.