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Dispute Resolution Update: Court of Appeal Warns Against Use of Mediation for Tactical Gain

08 June 2018

The recent Court of Appeal judgment in Danske Bank & Anor v S.C. is the first appeal since Mediation Act 2017 came into force. The judgment sets out the factors which will be considered by a court when dealing with applications to adjourn proceedings to facilitate mediation.

Background

The estranged husband of the defendant, in this case, borrowed funds from Danske Bank which were secured over a number of properties. In separate proceedings, the defendant was awarded an order for maintenance against her husband in the amount of €780,000, to be paid from the rental income of these secured properties.

A receiver was appointed over the secured properties, and also claimed entitlement to the rental income. The Bank and the receiver issued proceedings. They then brought an interlocutory application to protect the rent from being depleted until the main issue between the parties could ultimately be decided by the High Court.

The defendant first indicated to the High Court on the morning of the interlocutory application that she wished to avail of mediation. The Bank and the receiver declined her offer of mediation on the basis that the parties were already engaged in settlement talks. Despite this, the defendant issued a motion to adjourn proceedings to invite the parties to mediation, which was the subject of this appeal. She failed to inform the High Court that the parties agreed to attend settlement talks instead of mediation. 

The High Court refused her application to adjourn the proceedings to facilitate mediation. The High Court decided that it was not appropriate for it to delay the interlocutory application to allow for mediation.

The Court of Appeal

The Court of Appeal upheld the High Court ruling, for the following reasons:

  • A court should only exercise its discretion to refuse mediation applications where it considers it appropriate in the circumstances. The Bank and receiver were acting reasonably in seeking interlocutory relief for the rental income which was depleting. The delay caused by the mediation would benefit the defendant, but would go against the Bank and receiver.
  • The dispute between the parties should be suitable for mediation. In this case, two previous settlement discussions had failed, leading the Court of Appeal to believe that mediation was unlikely to be successful.

The application must be made bona fide. In other words, the applicant must be willing to engage in mediation to resolve the dispute rather than to improve its negotiating position. The Court of Appeal recognised that if the mediation order was granted, and the Bank and receiver refused to engage in mediation, a costs order could be made against them.

Conclusion

In determining whether to grant an adjournment to attend mediation, the court will consider the circumstances of the case, whether the dispute is amenable to mediation, and whether the application was genuinely to resolve the dispute at hand.

It is clear that the court will not tolerate abuse of the mediation process envisaged by the Act for the purpose of delay or as a bargaining chip in respect of costs. Any party suggesting mediation must do so at the earliest opportunity and demonstrate a genuine intention to resolve the dispute by mediation.

For more information on mediation or alternative means of resolving disputes, contact a member of our Dispute Resolution team.


The content of this article is provided for information purposes only and does not constitute legal or other advice.

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