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Rowan Turrall
Rowan Turrall,
SENIOR ASSOCIATE - SOLICITOR
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Costs sanctions for refusal to mediate
03 February 2011

In his recent report on costs Lord Justice Jackson highlighted that alternative dispute resolution (“ADR”) is under used. Whilst he did not conclude that ADR should be mandatory he did consider that more could be done to encourage mediation. He emphasised that the court can and should make orders requiring parties to provide an explanation if they decline to mediate and to make costs orders which penalise parties who have unreasonably refused to mediate. Lord Justice Jackson was of the view that much of the question of whether mediation is appropriate will come down to the judgment of experienced practitioners and the court.

A successful party may therefore be faced with the possibility of being refused an order for payment of their costs by the unsuccessful party for having unreasonably failed to mediate. However, there will be cases when mediation is not appropriate. How then can a party try to protect its position and avoid a finding that it has unreasonably refused to mediate?

Considering the question of mediation

In Halsey v Milton Keynes General NHS Trust [2004] Dyson LJ considered a non-exhaustive list of factors might be relevant to the question of whether a party has unreasonably refused to mediate. Jack J reviewed the Halsey case in Hickman v Blake Lapthorn [2006] and extracted what he considered to be the key principles. The following non-exhaustive list of points from these cases should therefore be addressed when considering the question of mediation:-

  • The unsuccessful party must show why costs should not follow the event and why the successful party acted unreasonably in refusing to mediate. 
  • Nature of the dispute. Cases which might not be suitable for mediation on this ground include:-   
    • those where a party wants the court to resolve a point of law and where it is considered a binding precedent would be useful; 
    • where injunctive relief is required. 
  • Merits of the case – if a party reasonably believes he has a strong case that is relevant to the question of whether he acted reasonably in refusing mediation. The fact a party unreasonably believes his case is watertight is no justification. 
  • Extent to which other settlement methods have been attempted. If other settlement offers have been made but rejected then this is a factor that is relevant. 
  • Costs. If the costs of ADR would be disproportionately high then this is a factor the court may consider. 
  • Whether any delay in setting up and attending the mediation would be prejudicial. If for example a trial has been listed and setting up a mediation would delay the trial then this is a factor the court can consider. 
  • Whether mediation has reasonable prospects of success. This factor is relevant but not determinative of whether a party has unreasonably refused to mediate. The unsuccessful party must show there was a reasonable prospect that mediation would have been successful. In Halsey, Dyson LJ cited Lightman J in Hurst v Leeming [2001] in which he stated, “What appears to be incapable of mediation before the mediation process begins often proves capable of satisfactory resolution later.” This ground therefore needs to be considered carefully, particularly if it is the only ground on which a party relies when refusing to mediate. 
  • Where a party refuses to mediate despite court encouragement to do so then the court may take that factor into account when considering whether the refusal was unreasonable. Although a court cannot order parties to mediate, it can make orders encouraging them to do so. In these circumstances a party that refuses to comply with the order runs the risk of acting unreasonably. 
  • The successful party cannot argue that the unsuccessful party could have protected itself with a Part 36 offer. 
  • The court may consider the potential saving of costs in comparison with the amount in issue as being relevant to the question of reasonableness but this factor must be watched carefully.

Practice Points

Parties therefore need to tread carefully when considering the question of mediation. It is likely that a number of the factors above will come into play in any particular dispute. Point blank refusal is unlikely to impress the court. However, the court is willing to consider that not every case is suitable for resolution through mediation. The key is identifying those cases correctly.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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