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Atlantic Shellfish (all oysters and no pearls?) demonstrates the courts approach to mediation

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It is said one shouldn’t choose oysters where the month has the letter ‘r’ in the name, and this old adage seemed to hold true for the Irish courts in a recent Court of Appeal (“CA”) December 2015 decision[1]. The purpose of this paper is to examine, if the courts have missed a unique opportunity to place mediation and ADR in an elevated status within the dispute resolution arena. In short the court was ask by the applicant, Atlantic Shellfish, an oyster farming company to invite the disputing parties to engage in mediation/alternative dispute resolution (“ADR”).

Atlantic Shellfish commenced proceedings in late 2001. The Plaintiffs alleged in those proceedings that their oyster business had suffered significant damage as a result of poor water treatment caused by the Defendants in the area where their fishery was located. When making this application to the High Court to invite the parties to participate in mediation, the Plaintiffs were breaking new ground, and relying upon new and a rarely used (if ever used) process within  the Rules of the Irish Superior Courts under Order 56A Rule 2 RSC (“O56A.r2”).

To put this in context, O56A.r2 permits the Court on the application of any party to litigation, (or at the Court’s own motion/discretion), where it “considers it appropriate and having regard to all the circumstances of the case” to adjourn the proceedings in whole or in part “for such times as the Court considers just and convenient” to allow for the possibility of resolution of the dispute by ADR. The Court has considerable latitude, as it may “invite the parties to use ADR to settle or determine the proceedings or issue” or with the “consent”  of the parties refer the issue to an ADR process. In doing so, and for the purpose of such “invitation” the Court “may” invite the parties to attend “such information session on the use of mediation, if any, as the Court may specify”.

The Defendants sought to stress that the application was not brought in bona fides context. It was alleged that the Plaintiffs motivation was to secure a collateral costs advantage, where they knew the Defendants would decline the invitation to mediate, and where under Order 99 Rule 1B RSC (“O99.r1B”) permits a Court, when awarding costs, to take into consideration any ”refusal or failure without good reason” of a party to participate in ADR. 

The Court recognised that the application was novel under O56A.r2 and that it was the first or one of the first such applications considered.

The Defendants sought to avoid mediation arguing:

1)    that the claim raised public law issues which, when taken into account with the circumstances of the case and the State’s emphatic denial of liability, rendered the dispute unsuitable for mediation;

2)    it was “extraordinary” that the Plaintiffs should seek to impose mediation where a Court would be aware on review of the facts that the Plaintiffs’ collateral rationale was to ensure that a refusal to participate in mediation under O56A.r2 would give the Plaintiffs an unfair advantage (at a later date) under O99.r.1B.

Ultimately, the High Court Judge (Mr Justice Gilligan) was unwilling to direct the parties to enter mediation as he was satisfied that the Plaintiffs’ reasons for making this application were artificial. He found that the case was not a borderline situation, where for example the Court may choose to make an Order directing the parties to engage in mediation despite one of the parties setting out a bona fide reason why it would not be suitable in the circumstances.

On appeal, the Court of Appeal (CA) also upheld the earlier decision of Gilligan J.. In reaching this conclusion, the CA carried out a detailed analysis and review of the circumstances which it considered courts should assess and consider before making  an Order inviting parties to meditate under O56A.r.2.

The decision of the CA was delivered by Ms Justice Irvine who reiterated that there is a Judicial policy which seeks to encourage the increased use of ADR wherever possible. Critically, she noted that the courts can do no more than to invite parties to engage in mediation and that the Order sought was “discretionary”.  As such, the first exercise for the Court was to consider if, in the circumstances under review, it was “appropriate” to exercise the discretion. Only when the Court was so satisfied was it appropriate for the Court to move on to the next question, namely, to consider in the particular “circumstances of the case”, if the Court should grant the relief sought. When a court is looking at such individual circumstances of a case, it should then examine the following factors:

  • the manner in which the parties had conducted the litigation up to the date of the application;
  • the existence of any relevant interlocutory Order;
  • the nature and potential expenses of the proposed ADR;
  • the likely effect of the making of the order sought on the progress of the litigation, should the invitation be accepted and the ADR prove unsuccessful;
  • the potential saving in time and costs that might result from the acceptance of the invitation;
  • the extent to what the ADR can or might potentially narrow the issues between the parties;
  • any proposals made by the applicant concerning the issues that might be dealt with in the Courts of the ADR; and
  • any proposals as to how the costs of such a process might be borne. 

In the particular facts of this case, the CA refused the reliefs sought, but was heavily influenced by:

(i)  the fact that that the State Defendants argued forcibly that claims against them were not suitable for determination in, nor could they be narrowed by, mediation. This argument was accepted and the CA and concluded that it was not unreasonable for a party against whom complex legal claims have been made “to maintain their entitlement to have those issues resolved by the court”.

(ii)  a prior direction to split the trial between quantum and liability. The CA was of the view that it would be unreasonable to expect the Defendants to mediate when they may never have to deal with quantum at all.

(iii) the potential significant layer of costs that would be added by mediation should it prove unsuccessful.

Comments and missed opportunities

Although both decisions identified a clear desire to support other forms of dispute resolution (and in particular mediation), in this author’s opinion, these cases represent a missed opportunity to put mediation firmly on the Judicial roadmap. Arguably the decision has also neutralised future applications that will be brought under O56A.r.2.

The missed opportunity was not to invite the parties to attend the information session at which they would have had a forum to explore mediation in a safe, non-binding environment at moderate expense. The Court did not have to direct mediation where there was a reluctant party.

Such a limited direction to attend the information session, would have met the objective, that the parties were compelled to explore the wider options open to them in mediation - with a ‘red/green light’ system to engage fully or withdraw if dissatisfied.  A Judicial invitation to attend this information session would have been an important step, to demonstrate Judicial support for mediation. In making such an Order the CA could have reserved all costs on the application pending the outcome of the information session and also adjourned the proceedings for a short period to allow the information session to take place. No one would have been compelled to participate in a process that was unworkable, but the recipe for an alternative solution would have been put into operation.

If an Order had been made directing attendance at the information session, the Court could also have given initial directions on the timing, person to be appointed, and provided a facility for withdrawal if the process, proved unsuccessful, where the litigation could have been quickly revived at little cost in terms of time, or money. This I believe would have ensured that the parties principals would genuinely explore the options on the process in an open minded way, but without being compelled to do so. The process would have remained entirely without prejudice and non-binding too. Each party could then make an informed decision on whether to proceed further with the mediation, rather than simply refusing to explore it. Equally the perceived threat under Order 99.r1B for a negative costs order would have been neutralised. All of this would have been much cheaper and quicker than the original application to the High Court and the appeal to the Court of Appeal!  

In this author’s opinion, directing the invitation to attend before an agreed Mediator, on a shared costs basis, for the information session, with minimal information sharing would have better informed the parties as to whether mediation could help to narrow the issues in dispute. The costs if shared would have been inconsequential, in the context of complex litigation which had been running for 15 years. There would have been no need for all experts to attend, and all legal claims and counterclaims would have been put to one side for the duration of information session, and for any follow on mediation. To suggest that no such issues could have been narrowed is taking too narrow a focus, given the unique opportunities and tools available in a mediation for resolving disputes; which simply do not exist in court directed litigation.

The missed opportunity was the failure to realise parties seeking to use mediation, do not have to think outside the box - but rather think as if there is no box.

The implications and lost opportunity is not limited to Ireland. Judges and Tribunals, having unique opportunities to advance the cause of mediation and ADR – need to use every opportunity presented to them to unblock obstacles to dispute resolution.

This Article is written by Dermot McEvoy and Aidan Kirrane. Dermot is a senior disputes partner in Eversheds Dublin office, with 25 years’ experience as a commercial litigator and construction disputes expert. Dermot is also a CEDR accredited mediator since 2003 and regularly acts as mediator and is the current Chairman of the Irish Commercial Mediation Association. Aidan Kirrane is a Solicitor in Dermot McEvoy’s dispute team.

[1] 2015 IECA 283

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