The short answer is when you are in a position to make a commercial or business decision to settle your claim.
His Honour Judge Coulson considered this point in the case of Nigel Withman Ltd v Smith He said
It is a common difficulty in cases of this sort, trying to work out when the best time might be to attempt ADR or mediation. Mediation is often suggested by the claiming party at an early stage. But the responding party, who is likely to be the party writing the cheque, will often want proper information relating to the claim in order to be able to assess the commercial risk that the claim represents before embarking on a sensible mediation. A premature mediation simply wastes time and can sometimes lead to a hardening of the positions on both sides which make any subsequent attempt of settlement doomed to fail. Conversely, a delay in any mediation until after full particulars and documents have been exchanged can mean that the costs which have been incurred to get to that point themselves become the principal obstacle to a successful mediation. The trick in many cases is to identify the happy medium: the point when the detail of the claim and the response are known to both sides, but before the costs that have been incurred in reaching that stage are so great that a settlement is no longer possible.
The earlier you mediate the greater the possible savings in costs. Indeed if considerable costs have been incurred this fact alone can be an obstacle to settlement. On the other hand mediating too early when the parties are not in a position to adequately evaluate their case can be counter-productive and an unnecessary addition to costs. Just ask yourself am I ready to make a business decision to settle this claim?
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