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How mediation works (and why it’s so effective) · Howes Percival Podcast

• Gary Pitt: Hello and welcome to the Howes Percival podcast where today we're discussing mediation. I'm Gary Pitt, a partner in the commercial dispute resolution team at Howes Percival in Leicester. Vicky Sandell: and I'm Victoria Sandell, a partner in the same team in Cambridge. Gary Pitt: So today, like I said, we're discussing mediation. Well, what is it? What does it do? How is it beneficial to you? Throughout this podcast, we will explain what mediation is. We will explain why you ought to know about it, why it's such a hot topic at the moment, and how we and the team at Howes Percival can help you. We will also explain how we can help you specifically if mediation is on your horizon at the moment. Vicky Sandell: So what is mediation? When people think about disputes, they often think about becoming very formal and costly very quickly. Lots long letters going back and forth and entrenching of positions. ⁓ Mediation offers a route, one that focuses on resolution rather than confrontation. At its core, it's structured conversation. It involves an independent third party, the mediator. Their role in that is not to decide what's right or wrong, but they're there to help the parties talk, listen, and explore possible solutions. aim of everybody on the day is to reach an agreement that everyone can live with. As say, it's not something that are going come out with a decision. It's not about winning or losing. The mediator can't impose an outcome and the parties are in control of the process and the outcome. ⁓ works in practice ⁓ that the agree to they're often in rooms and the mediator might shuttle between the rooms to ⁓ try and assist those negotiations. It might involve joint as well as private conversations with each side. Everything is confidential. and an agreement can be reached it's recorded in writing so that the can action that forward. ⁓ Gary Pitt: So why is mediation such a hot topic at the moment and why are we talking about it? There's a couple of things that factor into this. Firstly, the courts, as you've probably noticed, are massively under-resourced and are time poor. of that means that the reality is times to get the matter to trial. I don't know what you're saying at the moment, Vicky, but I think any claim we issue, I'm saying to clients, you're likely to be 18 months, 24 months before you're looking at a final trial. Vicky Sandell: Absolutely, that's the same for the county courts and to a lesser extent but still in the High Court too. Gary Pitt: So really there's massive delay baked into the system. Mediation is a flexible process, gives the parties much more control over timing and much more control over their costs as well. So if we were to agree with, if you were to agree with a litigation counterparty that you were going to mediate, the is that could probably happen within a month, maybe sooner if, you know, wind's behind you on that. Those issues with the sort of court systems they currently stand means that parties are looking at what's known as alternative dispute resolution. more widely anyway, of which mediation is probably the most well-known and most utilised version. On top of that, the courts are trying to help people with that decision as well. There is a move to encourage parties to mediate. There is also a move to actually force parties to mediate. There's been a run of case law, which I won't bore you with here, but basically the idea of mediating is being baked in to litigation as it moves forward. Smaller matters in the county court, you're basically getting mandatory mediation appointments and I would expect in reality that by the end of the decade we'll be talking of something akin to mandatory mediation right across the board. What that looks like at the moment is that courts are really encouraging parties that if they refuse to mediate they'll be punished heavily on costs at the end of a trial. Even if they win and they've refused to mediate they will see that their recovery of costs will be quite heavily impacted based on that decision to refuse to mediate. Vicky Sandell: And that's an interesting point as well, isn't it, Gary? Because can work two You might have people who are tick-boxing and to agree to mediate. And then you get people who perhaps wouldn't have agreed to it ⁓ before. Those rules, you are coming in. But once they're there on the day, they can be moved somewhat. Gary Pitt: Yeah, I think part of the process and what's helpful is because it's so less formal than court proceedings, even if you have got people who are there purely to go through the motion, you do have an opportunity to speak to them directly, right? It's not going through necessarily the filter of instructions your client, a letter written by a solicitor to a solicitor on the other side who then filters it ⁓ and gives outcome to their clients. You would get the opportunity during that mediation to talk. directly to the other side, you may have a conversation, you know, director to director or, litigate in person to, to solicitor or whatever it may be where you can impress on points ⁓ that are really, really urgent really important or things that will help people to get to settlement that may otherwise get lost in the filter. So even if they are there purely to tick the box and say that done it, it's ⁓ sometimes if you control that mediation well, if you're well-prepped and if you've got the relevant points there and you know what you need to say and how best to say it, you can make more progress than you would expect even if it's a tick box exercise at the outset. Vicky Sandell: Yeah, absolutely. we haven't touched on is ⁓ success rate of mediations. They're successful across the board. ⁓ There's out there putting it around their 80 % mark that settle on their day or shortly thereafter. So as you earlier, Gary, it's ⁓ the most well-known perhaps the most successful form of dispute resolution outside of the courts. Gary Pitt: Yeah, and think often there's that pressure that a mediation should settle on the day, right? And actually an awful lot of what happens at these is sometimes they don't settle on the day, but they'll settle within two weeks or within a month of that process taking place because there is that exchange of information. often also a sort of lowering of the guard from people ⁓ they adopt less entrenched positions because they're not bound everything that, as you say, it's confidential and without prejudice. So when people are able to talk a bit more freely, they get to the nub of what actually matters for them. And then all of a sudden, you find that people open up a lot more, that they aren't as far apart as they expected them to be, or that there is a route to settlement that hadn't previously been thought about. And it might not be possible to wrap that up in an eight hour day or a 10 hour day or whatever that mediation will be. when parties go away and ⁓ on it and have some time to think and everything else, they well come back and there's some letters that follow or a phone call or two between solicitors or whatever it may be. and suddenly within two weeks the mediation has been key in unlocking that process and you do get to a settlement eventually. Vicky Sandell: Absolutely. there's degrees of success too. So there might be a narrowing of issues, but that shouldn't be kind of, that's a successful day if you've been able to narrow some of the issues between the parties moving towards a settlement. And as you say, that ⁓ then sets you the track to hopefully settle before you actually to trial and all the costs involved in that. So how can mediation help you? are the main benefits? So when you're in a dispute, obviously Gary and I are always very interested in the legal points that we might want to be arguing about, but it's about the impact on time and energy and business and also your personal life, depending on precisely what the dispute is about. Mediation can bring practical benefits on the day we don't get to discuss those legal principles very much at all. ⁓ very much about how we can help parties move forward and to bring them out of the dispute. There's a benefits to mediation over above some of the other methods that you might use ⁓ trying to resolve disputes. of those include ⁓ preserving a relationship, there might be a continuing relationship between the parties and as was saying earlier, ⁓ being to sit down directly across the party in an open format, you have to be guarded necessarily about what you're saying, can often assist in any relationship even when a dispute has arisen. Gary's already mentioned the time costs and the speed of mediation. ⁓ you're able to agree a date for mediation fairly quickly within a month and you don't have those long delays with the court and also are able hopefully to settle for significantly costs which also assists in being a bit more nimble in terms of what you can agree. The other thing something which I think people overlook, I don't know about you Gary in terms of clients, ⁓ but the of being flexible about the outcomes. So there's things you can agree between yourselves that actually a court can't impose. example I always give to clients, is the ⁓ things like that. If that's really important to one of the parties, that's something which the court won't impose on anybody ⁓ give any sort of apology. ⁓ ⁓ obviously it depends on the situation. something like that or something else that the court can't impose can go a long way. Gary Pitt: think that's entirely right. And it is correct that, you know, a court judgment is a pretty binary thing when you get down to it at the end of it, you know, it's XOs, Y, you know, Z pounds or whatever it may be. But actually, by way of a mediation, you can agree all these things that will fall outside of the scope of that. Non-disparaging remarks, apologies, things like that are great. It's also something like a media statement. So you could agree how you're going to announce the change in a relationship between, you know, a customer and a supplier. How's that going to be announced at a wider market? You'd have total control over what that wording would look like, for example. But there's also things that would fall so far outside of what a court could order, but could fall into mediation. You could agree your working relationship going forward. You could agree whether you're going to be involved in future projects together. You could agree where you couldn't pay the cash sum of a judgment. You might agree that there's assets, vehicles, plant and machinery. intellectual property that you might transfer in satisfaction of that instead. There's all these alternatives that a court's not going to order but might be key in a dispute and allowing the parties to move forward in a productive and proactive that otherwise isn't there a sort of everyday option. Vicky Sandell: Absolutely. whether you're in, we haven't spoken about it much here, but whether you're in an arbitral proceedings or court proceedings, you lose control and mediation keeps that control within the parties, which is, you know, a big plus in terms of confidentiality, all those types of things. there's lots of benefits to mediating and whilst the day have lawyers, the will cost. ⁓ The of the day pales in to if you're able to reach a settlement that you'll be ⁓ very significantly ⁓ compared to going forward all the way to trial. Gary Pitt: That's absolutely it. And it's a consideration that people often overlook, I think, is not just money cost, but time cost as well. How much time is a trial going to take your key decision makers out of the business? ⁓ how much impact is a two-week trial going to have on you when you give witness evidence ⁓ for two three days of that and you cross-examine everything else? Your mediation is much more relaxed and you hopefully avoid some of the pressure that comes along with that. Vicky Sandell: Yes, yeah absolutely. I've only ever had one client say they enjoyed their time in the witness box. Gary Pitt: got something going on with them that needs looking into further, I would imagine. So the question then I think that we probably want to build on from there is how do you prepare for remediation? How do you make the most of the day? And how do you ensure that you have the best possible chance of coming away with a settlement? There's a few things that I like to discuss with clients before we go through the process of mediation. I'll run through a couple of them now. First one of those is ⁓ some exercises that Vicky Sandell: Hey! Gary Pitt: people need to do and there's a few I always say to my clients go and have a think about these. The first one is it's a time on a classic everyone is everyone has thought about best alternatives to a negotiated outcome and worst alternatives to a negotiated outcome i.e. what does it look like if you go all the way to trial and win and what does it look like if you go all the way to trial and lose what impact is that going to have on your business or on you from a positive and a negative approach. Those are considerations not just in terms of you know winning and losing at trial. but what's your cost recovery going to look like? What impact is it going to have on your commercial relationships with counterparty, but also with the market at large? What impact is it going to have on your management time? All those things need to be considered ⁓ that calculation as the best alternative and the worst alternative. And then the idea ⁓ with a mediation is that you probably fall somewhere between the two, right? ⁓ not as bad as it could be. It's not as good as it could be if you win absolutely at trial, but is controllable and it's a known entity. second exercise I always get clients to do before I go into mediation with them is I refer to this as marker offers. ⁓ I want people to do is think about three levels of offer that they would be happy with. ⁓ absolutely best ⁓ outcome that you'd be over the moon with and you'd skip out of that mediation clicking your heels if you got it. That's the first one. Have that in mind, but you're probably not going to get it. ⁓ second one is something that's dialed back from that. ⁓ painful, it's not everything you want, but it is something that you can live with and is acceptable. And then a third is something that's sort of closer to your line in the sand or your red line. Now, it won't be that because I always say there's no point in having a red line in a mediation because if you end up, you know, very close to it and then an offer comes in, it's nearly there, but not quite. going to walk away for the sake of being five grand under? I don't know. But having an arbitrary red line probably doesn't do it. ⁓ But I think these are really important to have in your mind throughout the process because there will come a point in the mediation where it will feel potentially like you are just batting numbers backwards and forwards, right? That's always the way these days sort of come. As you get down to the nitty gritty, there is a little bit of horse trading towards the end. And sometimes it feels that, you know, people have moved quite quickly on numbers or parties may come in thinking, well, you know, at the start of the day, I wanted them to pay me a million quid. We're now at a position where we're discussing whether I take less than half of that. Well if you can go away and say well actually look here's where you thought you would be at these points it forms a really useful checkpoint to come out of the of the mediation take a step back and look overall at these numbers that you would have been happy with much earlier on in proceedings and see where you sit in that but also to check back in with what your strategy was beforehand. The other one I always say and certainly not to give a podcast that's followed up with a reading list but I'd always recommend reading Never Split the Difference by Chris Voss in there, talks about the idea of black swans, which are things that sort of sit outside of ⁓ known world, know, are their behaviors or ideas or something that's driving this, claim the other side or this defense from the other side ⁓ that we know about. It's not in the pleadings, perhaps it's not an argument that's been aerated, but is there a market condition that's explaining why they're doing this? Is there some pressure going on internally that explains this behavior? Is there something that we can hypothesize now that might explain why they're behaving in that way? if we're right, how do we turn that to our advantage? How do we bring that to put a bit more pressure on them? It be that they're under pressure at a board level because of below average performance and they need to try and bring money in from somewhere else. And how do unlock that? Is it bringing them in on a future project? It might be that there's concern with some senior employees in the business who they think are going to leave and start their own company. How do we with that? Well, maybe we... use that to lock into a longer commercial relationship so that uncertainty disappears. Are there unknowns that we can identify and then start to use in a mediation that we wouldn't necessarily be able to do as head towards trial? And then other thing there, of course, is that we discussed it previously, is those alternative settlement points, the things that will never ⁓ order, can we those to our advantage? Can we have a brainstorm about what... it may be beneficial to offer to the other side that we couldn't otherwise get from a court and could that unlock things. don't know if there's other exercises Vicky that you tend to go through or any sort of preparation points that you really try and hammer ⁓ when you go into the preparation for mediation. Vicky Sandell: only one that I would add Gary to is to say that ⁓ a of people ⁓ are about making an offer first. my own view on that is that you don't need to be. And actually you make the first offer, you set the you set the structure and actually there's a lot of to doing so. ⁓ But I think there's this of, thought around it that it's a negative thing or it shows some sort of weakness ⁓ but I think it needs to seen in that way and actually it's human nature that when someone responds and not sure I've ever been at a where the first was accepted but when they do counter offer it's going to be on the same terms that you and according to the same structure that you've put forward. may be controversial or that might be the accepted view across profession now. I'm not sure ⁓ what your thoughts are on that, Gary Pitt: Yeah, I think it's interesting. think you're entirely right that you, by being the one that makes the first offer on the day, you structure what that offer will look like. And I've been to mediations where we've actually made the first offer before the mediation and the intention that you've set that structure out early. other thing I always say to clients who worry about making the first offer is that you have made the first offer by agreeing to go to a mediation, right? That the actual fact that you've engaged in that process shows the other side that you are not married to your absolute top end. that's set out in your pleadings because you must be willing to make a concession, otherwise you wouldn't be going through this process. So out of your mind the concern about not wanting to be the one that blinks first, as it were, because we've both blinked. We've agreed to come to this. We've stepped away from the confrontational of the pleadings and we've gone into a conciliatory process like mediation. ⁓ So with that properly and sort of try to put the posturing out of mind as much as you can. or you can never do it fully, of course not, just have that mindset, I think, is the way to approach it. Vicky Sandell: Yeah, absolutely. Gary Pitt: And then the other thing that factors into preparation, the final thing to touch on really is position statements. Before every mediation, you get the opportunity to write something known as a position statement, which is shared with the mediator and with the other side. I think there is a problem with the way a lot of people approach position statements in that they become a sort of restatement of the pleadings that have already been sent back and forward. It may be a restatement of the letter before claim. It may be a restatement of particulars or your defense. This the forum for that, right? You will prepare a mediation bundle. It will have all those pleadings in there. So there is no need to rehearse and rehash the old arguments that you've already made. It's not a pleading. ⁓ My ⁓ I'm strong with clients on this when we get down to it, is it is an opportunity say something new. It's an opportunity try and structure the settlement that you've just talked about there. Vicky, it's also an opportunity to focus on what you really want to achieve in a mediation rather than focusing on ⁓ arguments do you want to be presented to a court. It's an opportunity to say to the other side, know, we need to put this behind us. This is how we need to move forward. Or this is what I want to resolve this. And also to say things you think might be helpful. You know, if an apology is what's needed, it's an opportunity to air an apology a relatively safe space in which, you know, it is confidential. with that prejudice. And if you want to talk to the emotion behind situation that's got you here, it's an opportunity to do that. If you were in business for 20 years before this, you probably know each other, you probably get on pretty well. So you can speak to the relationship that was there alongside the commercial and the position statement is that opportunity to take some of the heat out of things, but also set out your position in quite clear way. And then I think the thing that follows on from that is often at mediations, you'll have an opening statement where you get ⁓ to sit the room together or an opening session. In these, mediators don't like them, some do. I'm increasingly of the opinion that they have a benefit actually and you should try to engage with them, even if it's just the opportunity to all be in the same room at the start of the day. But what it does allow you, it allows you the opportunity to talk absolutely directly to the other side. It allows the solicitor, if you want your solicitor to speak for you, to speak directly to the other side as an individual, not to their solicitor, to them, to the director, to the individual, whoever it may be. You put your arguments to them. but it also allows you the client the opportunity to speak in a way that you will not get anywhere else in the court process or in an arbitral process. You'll the opportunity to speak from the heart to explain why this is important to you. It's not confined ⁓ to witness statement. You can speak much more globally about what's going on and what want. And it's also an opportunity to air the emotion that as lawyers we're... ⁓ guilty of this a lot of the time, Vicky, is trying to take emotion out of all the proceedings, right? But actually it is something that's important for, you know, if you're engaged in litigation, it's an emotional process. And sometimes having the space to acknowledge that and just to say it helps an awful lot. And, know, some of the most powerful and successful mediations I have had have been ones where the clients have said at the start of the day, you know, I want to say something actually, I want to explain the toll this has taken on me or the reason I'm taking this course of action. it's a, I think it's a really... powerful instrument and it should be used where it's right to do so. Vicky Sandell: Yeah, I absolutely agree, Gary, and absolutely agree with your comment that ⁓ it really when the client speaks from the themselves ⁓ that has most impact. People have to listen to us lawyers all the time and, often people glaze ⁓ over. But it's when the clients directly each other that has the most impact in those opening plenary sessions. and it can be used very effectively as you've just articulated. Gary Pitt: Yeah, some people glaze over when they're listening to lawyers, but look, the people listening to this, Vicky, are voluntarily taking time to download a podcast with two lawyers talking about mediation. So there are clearly some people out there that don't glaze over entirely. That, or we are currently being used to help a number of people fall asleep of an evening, but whatever it may be, I'm perfectly happy to ⁓ service broadcasting at this point. Vicky Sandell: They have. Absolutely. Happy to oblige. Absolutely. Gary Pitt: So that was a ⁓ of an introduction to the world of If there's anything comes out this that you find interesting or you want further information or you've got a mediation coming up and you don't know where to turn, you can find contact details for Vicky and I in the description of this podcast or you can follow both of us LinkedIn. My full name, Gary Pitt. If you search that, you'll find me pretty quickly. Vicky Sandell: And same for me, Victoria Sandell. I should come up fairly quickly too. Otherwise, you've made it to the end here, thanks very much for listening and good with any disputes that you have going on. Do bear mediation in Thanks very much. Gary Pitt: Absolutely, thank you very much.