Mediation for Complex Disputes

Corporate and commercial disputes are often complex in two senses: complex in law, and complex in the relationships and interests they engage. Mediation meets both. It allows terms that a court could not order, it keeps sensitive matters private, and it enjoys the express support of the Commercial Court.

The legal frame

Disputes within companies are governed by a detailed statutory frame. A member may petition the court on the ground that the company’s affairs “are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members” (Companies Act 2006, s.994(1)). The court may then “make such order as it thinks fit”, including an order providing for the purchase of a member’s shares (s.996(1), (2)(e)).

Other routes run alongside. A member may, with the court’s permission to continue it, bring a derivative claim in relation to a cause of action vested in the company, arising from “negligence, default, breach of duty or breach of trust by a director” (s.260(1), (3)). Directors must act in the way they consider, in good faith, would be most likely “to promote the success of the company for the benefit of its members as a whole” (s.172(1)). A limited liability partnership is a body corporate “with legal personality separate from that of its members” (Limited Liability Partnerships Act 2000, s.1(2)).

Each route, if contested, leads to a trial, a judgment and an order on the issues pleaded. That is the court’s function, and it performs it well. It is not always what the parties need.

Terms a court could not order

The Court of Appeal identified the advantage long ago.

A mediator may be able to provide solutions which are beyond the powers of the court to provide.

Brooke LJ, Dunnett v Railtrack plc [2002] EWCA Civ 303, [14]; adopted in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [15]

In a shareholder or partnership dispute the point is practical. The parties may agree a staged exit, a continuing supply arrangement, a revised governance structure or a settlement spanning several connected claims. They may include parties who would not be joined to the proceedings. A court decides the issues pleaded before it. A settlement may address everything the parties choose to include.

Confidentiality where it matters most

Corporate disputes frequently concern matters a company would not wish to air: governance failures, valuation, customer relationships and the conduct of directors. Mediation is conducted in confidence, and what passes is protected by without prejudice privilege (Farm Assist Ltd v Secretary of State for the Environment, Food and Rural Affairs (No 2) [2009] EWHC 1102 (TCC), [44]).

The court’s support

The Commercial Court builds settlement into its procedure. Its Guide records that the court may, at the case management conference, “stay the proceedings while the parties try to settle the case by alternative means” (Commercial Court Guide, para D7.11). Since October 2024 the civil courts have had an express power to order the parties to engage in alternative dispute resolution (CPR 3.1(2)(o)).

Making the settlement binding

Complex settlements need precise drafting. Mediation agreements commonly provide that no settlement binds until it is written and signed, and the courts give effect to that term (Brown v Rice & Patel [2007] EWHC 625 (Ch), [24], [53]). Where proceedings are on foot, the settlement may be recorded in a consent order providing for “the stay of proceedings on agreed terms, disposing of the proceedings, whether those terms are recorded in a schedule to the order or elsewhere” (CPR 40.6(3)(b)(ii)).

The limits

The strongest objection is that some complex disputes require a judgment. A point of construction may matter to future dealings. Allegations of serious misconduct may call for a public finding. The Court of Appeal has accepted that mediation is “not appropriate for every case” (Halsey, [16]).

The same court added at once that “most cases are not by their very nature unsuitable for ADR” ([17]). Complexity alone does not place a dispute in the exception. Very often it places it in the rule, because the more interests a dispute engages, the less a single order can resolve.

Conclusion

Complex disputes are rarely about one issue. They concern relationships, reputations and interests that a pleaded case captures only in part. Mediation allows the parties to address the whole, in private, with terms of their own design, and with the court’s express encouragement. Where a judgment is genuinely required, litigation remains open.

This article is general commentary on the law of England and Wales at the date of publication. It is not advice on any particular matter.