ADR, Mediation

A failure to mediate can be costly: Romero

By Rob Lamberti, Contributor

A recent Ontario Superior Court ruling is a cautionary tale that a defendant's refusal to mediate could increase the award, says Toronto arbitrator and mediator Victoria Romero.

Romero, principal of the mediation and law firm VR Law, tells the recent decision added $20,000 to the final award of about $210,000 because of the defendant's unreasonable refusal to mediate, which deprived the parties of the opportunity to settle without a trial and incurring significant costs.

Although mediation for civil litigation is not mandatory in Belleville, where the case occurred, Justice Graeme Mew found the defendants unreasonable in their refusal. Mediation is mandatory in Essex County, Toronto and Ottawa under a decades-old pilot project, but there are potential risks if a party in another location unreasonably refuses to participate, Romero says.

In this case, the plaintiff was successful in a lawsuit against a speedway for injuries he received while trying to avoid a race car that had come from the track and was making its way to an overflow pit area. In awarding costs, the judge considered a multitude of issues, including the defendant's refusal to enter into mediation despite a number of attempts by the plaintiff.

The scope of the case's findings goes beyond the judge's ruling on mediation, Romero says. It's also important because it provides guidance on a number of matters related to indemnity, fixing costs, contingency agreements, the use of jury focus groups, and adverse cost insurance along with failing to mediate, she says.

The ruling provides lawyers with a checklist spanning a breadth of topics in a personal injury case, Romero says.

"It would be helpful for every lawyer to read this case because they will see how this judge looked at every factor and principle, and how he applied them," she says.

"I think it's a very interesting decision," she says. "It is a holistic ruling. The judge goes through every single factor needed when awarding costs.

"This is how courts look at the different elements, so Rule 57 of the Rules of Civil Procedure is key in this case," Romero says.

"Costs follow the events, meaning it goes to the successful party. Still, even if successful, a judge has the discretion to adjust it and, in this decision, the justice went through each of the principles that apply when fixing costs," she says.

"It would be helpful for every lawyer to read this case to see how this judge looked at each factor and principle and how he applied them."

Romero says the ruling finds that fixing costs is not a mechanical exercise but an assessment of a case's unique circumstances. In this matter, she says, the judge looked at the offers to settle that were exchanged between the parties.

In Mew's application of the principle of indemnity, however, Romero hoped for more clarity behind the decision to cut a senior lawyer's hourly rate from $850 to $400 — a 53 per cent decrease — and a junior's rate to $250 from $350 — a 28.5 per cent reduction.

Fixing costs reflects what clients typically pay lawyers, although it could vary because of "type of work, geographic location and the type of client, among other factors," Mew found.

"It would be helpful to know the parameters the judge used to set the hourly rates," Romero says. "More information is needed here to know how he arrived at the amounts."

Mew's ruling also noted how the plaintiff had adverse cost insurance and that its coverage was not relevant in factoring awards or fixing costs.

"This is good to know because the field of adverse cost insurance is growing," Romero says.

The key element to the case, however, is the risk in failing to mediate, she says. The plaintiff attempted to divert the dispute into mediation, but the defendant refused.

Romero says the defendants genuinely believed they had a strong case in liability and that their refusal was not unreasonable.

Mew, however, disagreed.

"The present case is not one of those circumstances where a plaintiff was trying to shake down an insurer by demanding mediation of a wholly unmeritorious case," he ruled.

"To the contrary, it is a case where the insurer took a tough and uncompromising stance. That, of course, is a defendant’s prerogative. Defendants do not have to settle. But if reasonable opportunities to mediate are spurned, that can be a relevant factor when fixing costs."

Mew said that it was unreasonable for the defendant to decline mediation and that should be factored into the disposition of costs.

"That refusal was unreasonable," he wrote. "It deprived the parties of an opportunity to settle the case without the necessity for a trial."

While mediation wasn't mandatory in this case, Romero suggests it's time the pilot project is expanded to make it uniform across the province.

"Twenty years is more than enough time to determine whether it's working," she says.

"A skilled mediator can bring parties together to reach an agreement," Romero says, adding that deals are based on the outcomes each side can accept. "You never know what is going to happen in mediation until you sit down at a table with the other party and go through the process.

"Sometimes it's important for the plaintiff to hear, without a lawyer's filter, the case from the defendant's point of view," Romero says, adding that it's also beneficial for defendants to observe how a plaintiff is doing.

"Each of the decision-makers is sitting at the table and has direct communication with one another and able to see for themselves what is going on," she says.

Romero says the speedway case shows that offers to mediate should be taken seriously, and refusing them unreasonably could be costly.

"Even for an insurance company, I think it's significant to pay $20,000 because you don't want to mediate," she says.

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