Mediation Not Always a Panacea

In a case which revealed that alternative dispute resolution is not always a panacea, the Court of Appeal has lamented the 'melancholy fact' that the parties to an apparently commonplace commercial dispute were still engaged in costly litigation more than six years after submitting their differences to mediation.

The dispute concerned the supply of beauty products by a wholesaler to a retailer. The wholesaler launched county court proceedings claiming to be owed more than £90,000 for goods sold and delivered; however, the retailer counter-claimed on the basis that it had substantially overpaid for products supplied.

In an attempt to forestall litigation, the parties entered into a written mediation agreement by which each consented to be bound by the calculations of an independent accountancy firm. Pursuant to that agreement, the accountants' report concluded that the retailer had overpaid the wholesaler by more than £178,000. The wholesaler, however, refused to accept that conclusion.

Continuing to insist that it was owed substantial sums, the wholesaler argued that the accountancy firm's assessment was fundamentally flawed and, in particular, that certain invoices had been left out of account. However, the wholesaler's attempt to obtain rectification of the mediation agreement was rejected by a judge.

In dismissing the wholesaler's appeal, the Court of Appeal found that, even if it could be demonstrated that the accountancy firm's report contained arithmetical, clerical or other errors, it remained binding, 'because that is what the parties agreed'. If the wholesaler had a remedy, it was against the firm, not against the retailer.

The Court commented that it was 'most unfortunate' that the mediation agreement, far from achieving a mutually acceptable outcome, had resulted in years of fruitless litigation. However, the failure to reach a resolution that the wholesaler considered just was 'for the most part' due to its own error in failing to submit all relevant invoices to the accountancy firm before it produced its report.

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