Awarding costs for attending mediation

Can the successful party in an employment case seek costs for attending mediation? 

The Employment Relations Authority and the Employment Court both have a statutory duty to direct parties to mediation if they haven’t utilised that process already, unless limited exceptions apply.  So attending mediation is virtually compulsory in employment matters.  But who pays for the costs of mediation where no settlement is reached?

This issue was considered by the Employment Court recently in RHB Chartered Accountants Ltd & ors v Rawcliffe.  While the facts of this case are unusual because the employee proceeded against the wrong parties to begin with, the Court’s decision traverses a number of prior decisions and ultimately awards $1,000 toward the mediation costs.

Competing policy considerations arise in this context, as the Court noted. Parties attend mediation in good faith and seek to speedily resolve issues. If costs become a factor, they could be reluctant to engage in the process. On the other hand, bringing costs into the equation could encourage an early resolution and mean that parties take the process more seriously.

Different approaches have occurred in previous cases, based on whether mediation occurred voluntarily or the parties were directed to attend.  In two of the cases mentioned by the Court:

·         Jinkinson v Oceana Gold (NZ) Ltd – the Court considered that further mediation directed pursuant to a statutory requirement should be regarded as costs ‘necessarily incurred in the proceedings before the court’ and so should be subject to the same considerations for recovery as other costs

·         Trotter v Telecom Corporation of New Zealand Ltd – it was not appropriate to award costs for a voluntary mediation process, because the parties owed it to each other to put resources towards a genuine endeavour to settle the dispute.

In the United Kingdom a similar distinction has been made, between pre-commencement and post commencement mediation costs.

In the RHB Chartered Accountants case, the parties were effectively compelled to attend mediation after the claim had been filed, so the Court identified it as a necessary step in the proceedings.  In this context, the Court noted that the issue of whether the parties were corrected cited could have instead been dealt with by way of a preliminary determination of the Employment Relations Authority, rather than it requiring the parties to attend mediation in the first instance.  In this vein, the Court noted that a costs award in this case might discourage hopeless attempts to litigate against the wrong person, while a modest award would not dissuade genuine mediation.

As the Court pointed out, a blanket rule should not be adopted on these issues because costs are inherently discretionary.   However, where mediation occurs by the direction of the Authority or Court, the costs of engaging in that process may ultimately be awarded to the successful party.

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