Most businesses run into a dispute at some point, regardless of the care taken to avoid doing so. Farming is no different and can often be more at risk due to a greater reliance on fragile relationships and oral, rather than written, agreements that can often lead to a difference in recollection or opinion. Farming disputes take many forms: a dispute between the partners or family members following a death or the breakdown of a relationship; the dissolution of a partnership; or when a promise of inheritance is broken. The background to a dispute will help to determine the best way of resolving it – and alternative dispute resolution, which includes mediation and arbitration may well be the most constructive method, not least as it can go some way to help mend family ructions.
Which ADR method is best?
The temperature of a dispute can ratchet up to the point where both parties can see no other way than going to court. Not only is this very expensive, it is also very time-consuming and emotionally draining. However, regardless of either party’s enthusiasm for having their ‘day in court’, it is now compulsory for both parties to consider engaging in alternative dispute resolution (ADR) first. Some disputes will be governed by contractual terms, for instance many contracts and partnership agreements will contain clauses that require disputes to be arbitrated. However, in the absence of contractual obligations, mediation is an increasingly popular method of ADR, not least as it enables both parties to be more flexible in both the subject matter of the mediation and how they reach a resolution. Courts must be prescriptive in their approach, only dealing with the specific facts set out in the Claim Form and judging one side or the other to be correct; there is no middle ground. The court process can lack nuance, a quality often needed when negotiating the delicate balance of a farming dispute where the resolution is likely to be found in apportioning land or the value in it, rather than cash.
Why use mediation?
Although not mandatory for disputes involving claims worth more than £10,000, courts can - and will - order parties to engage in mediation if appropriate. Mediation, as a non-adversarial approach to dispute resolution, has been gaining in popularity over the last decade or so, particularly in disputes between farming partners, or between farming families, neither of which wish to become unnecessarily embroiled in protracted litigation. Mediation, being more conciliatory and less confrontational, is also likely to be more successful in finding a resolution that both parties can live with if it means avoiding a trial at court. But there is an important caveat: for mediation to succeed, both parties must approach it constructively, in other words, both must want to participate and be willing to fully commit in the knowledge that some concessions will be needed to ‘meet in the middle’. The parties can walk away at any point during a mediation (although that is usually inadvisable) but it should be borne in mind that any settlement will not be legally binding until the terms are in writing and signed by both parties.
Unlike being in court, mediation allows the parties to deal with underlying issues that may have contributed to the dispute but may not have been included in the Claim Form (if issued). Because mediation is a collaborative process, an experienced mediator can often get to the nub of problem very quickly and encourage the parties to agree a more flexible remedy: although a financial settlement is an option, it is rare for a standalone cash settlement to be appropriate. It is much more common for a division of land, the allocation of subsidy payments, and/or the separation of partnership interests to be agreed. In some cases, the only thing one of the parties really values is an apology, a remedy that does not lie within the remit of the Court but can be included within the matters to be discussed at a mediation.
Who can conduct a mediation?
Mediators are independent, professionally trained individuals, many of whom are lawyers. For farming-related disputes, it is important to appoint a mediator who understands the farming sector and the specific pressures faced by farming families. It is also possible for land agents or chartered surveyors to be mediators, but they are less common. Mediators do not offer an opinion on the dispute; they are there to facilitate the parties reaching an agreement by highlighting the risks of litigation generally and working to find ways of bridging the gap between the parties’ respective positions. This is a more constructive approach than adversarial court proceedings which seek to find for one side only.
How does mediation work?
The process of mediation is less formal and very different from a court room setting. The parties agree the date of the mediation, a suitable venue (with at least three rooms), and the identity of the mediator. Once the mediator is instructed, the parties should agree a bundle and each provide a short summary of their case, known as Position Statement, which is sent to the mediator and the other party to the mediation. In advance of the mediation, the mediator will circulate an agreement setting out the terms of the mediation including provisions about confidentiality, an important aspect of the mediation process. Both parties can ask for someone to accompany them for moral support, but they will also be asked to sign an addendum agreement, binding them to the confidentiality terms. At the mediation itself, the mediator will set out the ‘ground rules’, following which the mediator will shuttle between the parties’ rooms, questioning the parties’ respective cases to draw out the salient facts and highlight any areas of risk; whether that be with the litigation process generally or specific to the case, such as lack of evidence on a particular point. The mediator will then be able to identify the extent of the scope for negotiation, narrowing the gap between the parties’ position and helping them to find the middle-ground towards achieving a resolution.
Having your solicitor present is helpful
A successful mediation relies on the mediator’s negotiating skills and their ability to help the parties reach a compromise with which they are broadly satisfied. It is rare for mediations to take place without legal advisers present and having your team there (usually both solicitor and barrister) means that you have access to legal advice on the spot as the negotiation process evolves.
The legal advisers will also draft a settlement agreement or, in some cases, Heads of Terms. The latter are subject to contract and a less preferable option. Because the mediator is neutral, they are not responsible for any drafting and cannot advise the parties on the settlement agreement. Therefore, it is imperative that a party seeks their own legal advice so that they fully understand the terms of the agreement by which they will be bound.
Examples where mediation can help
Often by the time mediation takes place, pre-action correspondence will already have been exchanged between the parties and proceedings issued at court. Mediation can be agreed at any point during a claim, before or during the court process.
In the context of agricultural disputes, proprietary estoppel and partnership dissolution disputes lend themselves particularly well to mediation. With proprietary estoppel claims where, for example, a child does not inherit the farm they were promised, a promise for which they made considerable personal sacrifice, mediation allows for a flexible and pragmatic approach to be taken. Practical solutions, which can make settlement a viable option in circumstances where a cash buy-out is not, can include the granting of tenancies to allow farming to continue; varying the terms of a will to redirect funds or assets to non-farming family members; granting a life interest to a party to secure their accommodation for life; granting additional rights of way to facilitate access for all of the parties involved (it is not unusual for this to be done to retain access to a burial site); or inviting Trustees to deal with trust assets in a particular way and for the benefit of one party in preference to another, providing that accords with the terms of the trust.
What are the risks of the court process?
If the dispute goes through the court process, the parties have no control over the outcome which remains uncertain until the final hearing. In cases where the key witness is deceased, the court process can be very risky, relying as it often does on oral evidence provided by family and friends. Recollections can be contradictory and inconsistent, leaving it to the judge to decide who is a reliable witness and who is not before imposing a decision. There are occasions when the court process is the only sensible course of action and indeed, some parties will not engage without being served with a sealed Claim Form, but nobody should be under any illusion about how emotionally challenging and costly the experience can be.
What does mediation cost?
This will depend on the cost of the mediator and whether you elect to have both your solicitor and barrister attend the mediation. Many mediators offer a day-rate, including their preparation and attendance on the day for up to 8 hours, with time spent thereafter charged at an hourly rate. It is fair to say that the costs of mediation are significantly less than going to court to a final hearing and, if the dispute is resolved at mediation and a settlement agreement is entered into between the parties, it is a legally binding conclusion to the matter. Nearly all mediations include all issues in dispute meaning that the settlement terms are ‘in full and final settlement’ (subject to any enforcement which may be needed in the event of non-compliance with the settlement agreement). In effect, a settlement agreement buys certainty. There have been numerous court cases where the cost of the litigation has exceeded the value of the claim because both parties became entrenched in their positions. Indeed, in Teesdale v Carter, which involved the ownership of a converted barn on a farm, the judge commented that it was ‘one of the most regrettable pieces of litigation that I have ever come across’ where the costs had spiralled out of control and a once close family had become irrevocably alienated.
In short, take mediation seriously
All too often farming-related disputes arise from a misunderstanding or a reluctance to retreat from a particular position. Mediation is an excellent way for everyone involved to stand back and consider what outcome they really want – and ending up in court with a big bill is unlikely to be the answer (although occasionally unavoidable). Mediation is a valuable method of dispute resolution which is why it is encouraged – and indeed, judges will criticise parties who come before them without having seriously considered it. They are also at liberty to impose adverse costs consequences on those parties who should have mediated but refused to do so or, did not meaningfully engage despite the opposing party making all efforts to set up a mediation. For many farming businesses and families, it will be the most cost-effective and efficient way of producing an outcome acceptable to all parties – providing everyone fully commits to the process.
How we can help
Following recent case law, the Court is now able to order parties to mediate; that was not the position previously. Mediation should always be considered and if anything, it is the timing of the mediation which needs to be agreed, rather than whether to mediate. It is cost-effective and, providing both parties are fully engaged in the process, should produce a better outcome than going to court. If you would like to find out more about mediation and whether it is the right route for you, please get in touch - we have several solicitors with considerable mediation experience who can advise on the level of support needed.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
