It has been over 10 years now since the case of Halsey v Milton Keynes General NHS Trust (2004) (“Halsey”) established the principle that an adverse order for costs could be made against a party if they had unreasonably refused to engage in alternative dispute resolution (“ADR”) – in Halsey the alleged unreasonable refusal was a refusal to attend mediation.
Despite the passage of time this issue continues to occupy court time, the latest case being Laporte & Anor v The Commissioner of Police of the Metropolis (2015) (“Laporte”).
In Laporte the claimants brought proceedings against the defendant seeking damages for alleged battery, assault, false imprisonment and malicious prosecution following their arrest when a protest at a local council meeting became somewhat heated.
At trial the claimants’ claims were all dismissed. As a consequence the defendant sought an order that the claimants should pay its costs on an indemnity basis. The defendant also sought a substantial sum by way of an interim payment. The claimants objected and sought no order as to costs contending that this was the right order to make because the defendant had unreasonably refused to attend mediation.
The claimants relied on several features of the defendant’s conduct over the course of the dispute including its failure to respond to a formal offer of mediation even after receipt of a court order requiring it to do so.
Following further communications from the claimants the defendant did eventually agree to attend mediation but arrangements for it had still not been concluded nine months later and the defendant then withdraw its agreement to attend mediation. No substantive reasons were provided by the defendant as to why it was no longer willing to attend mediation.
In considering the matter the court had regard to the six factors identified in Halsey as being necessary to address when considering the question of whether or not to agree to ADR.
(1) The nature of the dispute
The defendant argued that the nature of the claimants’ claim involving a point of legal principle regarding the scope of police powers and an allegation of misconduct by a police officer meant a private settlement was inappropriate.
The court noted that the damages claim did not depend entirely on these allegations being established and that there were issues of pure fact to be resolved in respect of which both parties ran the risk of adverse finding. Given this the court considered that it was unrealistic to suggest that settlement by way of ADR would be inappropriate.
(2) The merits of the case
The court considered the defendant’s apparent prior willingness to mediate was to be taken as a concession that the merits of its defence were not perceived to be so strong as to have justified a refusal to engage in ADR.
(3) Whether other settlement methods had been attempted
The defendant had not made any offers to settle the case or made other attempts at ADR before mediation was suggested. The court held it could not therefore assert it had exhausted all other opportunities of resolving the case without litigation.
(4) Whether the cost of mediation would be disproportionately high
Whilst the defendant had conceded that the costs of mediation would not have been disproportionately high it did contend that the amount required to settle would have included a large costs liability to the claimants, a factor which the court considered was potentially relevant to the question of whether mediation had a reasonable prospect of success (see below).
The court found that as the mediation proposal had been made well in advance of the trial date, there was no risk of a mediation delaying the trial and the defendant could not therefore rely on the possibility of such delay to justify its position.
(6) Whether mediation would have had a reasonable prospect of success
The defendant’s primary justification for resisting and ultimately refusing mediation was that it had (through its solicitor) formed the impression that the claimants considered a money offer to be a prerequisite to any compromise and that, as the defendant was unlikely to make such an offer, it considered any mediation attempt would be futile and not an appropriate use of time and resources.
The court rejected this argument, noting that the claimants had not insisted that the making of a money offer would be a precondition to ADR.
The court further noted that it was always likely a party’s representatives would seek to lower the other party’s expectations in preparation for a settlement discussion. However, a precondition as to what it might take to achieve a settlement, before the negotiations had even begun, did not entitle the other side to treat that, without more, as a precondition to settlement and justify it in dismissing ADR on the basis that it was doomed to fail.
In light of these findings the court concluded that the defendant had failed without adequate justification to engage in ADR which had a reasonable prospect of succeeding. Having regard to this and the defendant’s overall conduct in relation to the proceedings, the court ordered that it only be entitled to recover two thirds of its costs from the claimants.
Whilst it remains the case that ADR is a voluntary process, such that the court is prevented from compelling any party to take part in the process, this case serves as a useful reminder of the need to ensure that careful consideration is given before any refusal to engage in mediation is communicated to your opposing party. Even then detailed reasons following the guidelines laid down in Halsey should be provided by way of justification. Failure to do so is likely to result in an adverse order for costs being made.
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.