Weaponizing Rule 41A

24 May 2022

Hendrik Kotze

Hendrik Kotze is a full-time Dispute Resolution practitioner who works as a Commercial Mediator. He is a qualified lawyer and practised as a Barrister at the Cape Town Bar from 1992 to 1998. He obtained his LLB in 1986 (Stellenbosch) and holds LLM degrees from Cambridge University (1990) and the University of Stellenbosch (1991). He is a lead trainer with Conflict Dynamics on their Commercial Mediation Skills Training Programme. Hendrik currently serves as the Chair of South Africa’s Dispute Settlement Accreditation Council [“DiSAC”], a body that regulates accreditation and practice standards for the mediation industry in South Africa. He is also a member of the Advisory Committee of the South African Law Reform Commission.

I recently had a conversation with an attorney who has been in litigation practice for a good 10 years. With me being a mediator, our conversation eventually turned to Rule 41A. I asked how this Rule was impacting her practice. She was quick to respond that everyone has now adapted to the new Rule. She indicated that mostly she and her opponents dealt with the Rule by doing two things. Firstly, they would agree that both parties will submit a Rule 41A notice to indicate that mediation was not appropriate. Secondly, they would place on record that the parties had attempted mediation by reason of the fact that the two attorneys had a conversation about a possible settlement of the case. She was confident that in this manner both parties were now safe from any negative consequences that might flow from Rule 41A.

To say that I was taken aback would be putting it mildly. The new dawn that we mediators believed was upon the industry with the introduction of Rule 41A was fast becoming obscured by dark clouds. The problem is that this strategy will feel familiar to many attorneys, and might well work in the short to medium term.

Pre-trial conferences

Prior to the introduction of Rule 41A the High Court Rules already asked questions about settlement and mediation (Rule 37(6) and Rule 37A(11). The intention was that parties (and particularly their legal representatives) should seriously consider and timeously explore settlement, and use mediation where appropriate. Practice over the years has shown that these Rules were mostly paid lip service. Practitioners typically confirmed in their pre-trial conference minutes that settlement was attempted and that neither party thought mediation appropriate. Similar responses are heard every day in case management conferences.

It was not until this obligation was given some bite through decisions like MB v NB (2010) (aka Brownlee v Brownlee) (3)SA 220 (GSJ) that many practitioners started to seriously consider settlement and mediation options.

In this case, the court precluded the attorneys from recovering the full fees that they would otherwise have charged their clients, and restricted them to charge fees at a reduced rate because they had failed to advise their clients about the availability of mediation as a process that could have been used to resolve their dispute.

This ruling undoubtedly also applies to the decisions that parties and their representatives make in executing Rule 41A. However, given the fact that this Rule is relatively new, and cost sanctions in terms of the Rule have (as far as I know!) not yet been imposed in any reported judgements, there is still no real perceived threat of judicial sanction to focus the mind.

The reality, therefore, is that like my acquaintance, many practitioners will follow the lip service approach to implementing Rule 41A. This not only gives them a (hopefully false) sense of security against the consequences of Rule 41A, but is also aligned with their own perceived financial interest in litigating disputes. We can but hope that the Bench will quickly act against this kind of approach by sanctioning attorneys who do not seriously consider and apply the provisions of Rule 41A. However, waiting for legal sanction to give bite to Rule 41A seems like waiting for Eskom to sort out load shedding. You know it's likely to happen, but no one quite knows when. And what do we do in the meantime?

Acting for claimants vs acting for defendants

Reverting back to my conversation with my attorney acquaintance, my next question to her was whether she takes the same approach to Rule 41A when acting for a claimant and for a defendant – which she confirmed. So I asked her if she experiences different needs from her claimant clients, as opposed to her defendant clients? Of course, she replied, the claimants want judgement tomorrow, and many defendants want the day of reckoning postponed for as long as possible.

Well, I said, do you think Rule 41A could potentially help your claimant clients get quicker results?

She thought about this and eventually conceded that if there was indeed a mediation, and if the mediation was successful, the claimant clients may well get much quicker results and be much happier. But, she added, the defendants won’t agree to mediation, and even if they did, how likely are we to get a settlement anyway? And, she added, as you know we have tried talking settlement.

The second objection – how likely are we to get a settlement – is of course the trust and experience deficit that mediation universally suffers from. Until practitioners know and understand, and have experienced mediation at work, they are unlikely to believe that it will regularly produce settlement (the statistics indicate at least 60% to 80% success rate). My acquaintance’s reference to “settlement discussions” with the opposing party as being “attempted mediation” was not said in jest or dishonestly – many practitioners still believe that there is no fundamental difference between these conversations and a mediation process. Only education and experience will remove this obstacle – and we as mediators need to take on the challenge of educating practitioners.

However, the first objection – the defendants won’t agree to mediation – is where this gets interesting. Yes, many defendants don’t want a quick resolution, as it means they have to pay, and may therefore be inclined to refuse to mediate.

So I asked my attorney acquaintance – don’t you think Rule 41A might be used as a weapon to force the defendant to the mediation table? How would I do that, she asked?

Weaponising Rule 41A

Well, firstly, when you act for the claimant, you should always indicate in your Rule 41A notice that the claimant is willing to mediate. That already puts the defendant in a difficult position – when the defendant now files its Rule 41A notice, it is much more difficult to state that the defendant is not willing to mediate, as that opens the defendant (and its legal representatives) up for cost consequences. So more often than not the defendant will then also file a positive rule 41A notice indicating that it is willing to mediate.

Secondly, once the defendant has filed its Rule 41A notice, you should - on record - ask the defendant to agree to a mediation process. Where the defendant has stated a willingness to mediate in its Rule 41A notice, it becomes almost impossible for the defendant to now refuse the request (though there may still be a conversation about when the mediation should take place). If they do refuse, they further increase their risk of incurring a negative costs order in terms of Rule 41A.

If they have filed a negative Rule 41A notice (i.e. declined mediation), their refusal of this direct request is likely further evidence of their unreasonable behaviour, and further increases their risk of a negative costs order. 

I get it, she said, I can weaponize Rule 41A to force the defendant into mediation. But that means that my client will have to pay additional costs for the mediation process. Well, I said, normally these costs are split 50:50 between the parties, so the defendant will also be paying. And if the case is settled, this means a huge saving for your client in terms of litigation costs and stresses not incurred and less fees for me, she said….

In conclusion

Yes, my fellow mediators, I came out of that conversation knowing that we have some way to go before Rule 41A changes our landscape. However, the Rule will at least introduce mediation to more and more practitioners, and we know that once people have seen the magic of this process in action, many do become believers.