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Courts penalise failure to engage with the mediation process

by Philip McMullan on 07 Oct 2016

Refuse_mediation_process.jpgThe Civil Procedure (Amendment) Rules 2013, known colloquially as the Jackson Reforms, didn’t change the substantive rules governing when courts would require parties to engage in alternative dispute resolution (ADR). But the focus on efficiency, case management and controlling costs marked a change in tone which was always likely to advance the cause of ADR.

The benefits of ADR, in particular mediation, are clearly in line with what Jackson sets out to achieve in terms of driving value for money, efficiency and speedy settlement. And while the courts have long had the power to penalise parties in costs for unreasonable refusal to engage in the mediation process, application of that power has been inconsistently applied. A number of recent cases, however, demonstrate that the judiciary are increasingly frustrated with parties who do not engage with ADR when it looks reasonable and sensible to do so. 

Judgments penalising refusal to mediate

In Halsey v Milton Keynes General NHS Trust 2004, the Court of Appeal set out the principles which parties should take into account when thinking about whether to engage in ADR. Failure to consider these principles before refusing an offer to mediate can result in adverse cost consequences later in the dispute resolution process:

  • The nature of the dispute
  • The merits of the case
  • Whether alternative methods of settlement have been considered or attempted
  • Cost
  • Delay to the trial timetable
  • Whether mediation has a reasonable prospect of success.

A number of recent cases concerning costs have demonstrated that the courts are applying these principles more strictly and may not look kindly on refusal to mediate, even if the party refusing feels that the claim against them is without merit.

In Garritt-Critchley and others v Ronnan, Judge Waksman QC ordered indemnity costs against the defendants for refusing to engage with a proposal of mediation. In correspondence, the defendant took the position that their case was so strong that mediation would be inappropriate.

"Both we and our clients are well aware of the penalties the court might seek to impose if we are unreasonably found to refuse mediation, but we are confident that in a matter in which our clients are extremely confident of their position and do not consider there is any realistic prospect that your client will succeed, the rejection is entirely reasonable."

In a stinging judgment (which observed that the defendant’s position perhaps took optimism to a new level) Waksman J set out in clear terms that mediation should always be seriously considered.

‘Borderline cases are likely to be suitable for ADR unless there are significant countervailing factors which tip the scales the other way.’

And quoting from Mr Justice Lightman in the case of Hurst v Leeming: "The fact that a party believes that he has a watertight case again is no justification for refusing mediation. That is the frame of mind of so many litigants."

Judge Waksman drily endorsed the observation.

The more recent case of Laporte and another v The Commissioner of Police of the Metropolis is another example of the courts taking a dim view of failure to consider ADR. The facts are complicated involving the disruption of a local council meeting.

But while the defendant, The Commissioner of Police of the Metropolis, won on all substantive issue, Mr Justice Turner still made a one-third deduction from the cost award following the defendant’s: ‘failure fully and adequately to engage in the ADR process’, having reached its own decision that ADR would not succeed. This was despite the fact that the tribunal acknowledged the defendant ‘did ultimately win on every substantive issue and, although ADR made settlement a sufficiently likely possibility, it would have been by no means certain’.

Two other cost cases (Bristow v Princess Alexander NHS Trust & Ors and Reid v Buckinghamshire Healthcare NHS Trust) have seen the judiciary send a clear message that parties need to think very carefully before refusing mediation (regardless of their position.)

Guidance for Legal and General Counsel

Hannah Rawlins, Registrar of Costs ADR, gives the following guidance to practitioners:

“It is clear that mediation is becoming increasingly important in costs proceedings and parties should seriously consider if they refuse to mediate, whether that is conduct that is reasonable. To date, we have not seen a “reasonable refusal” in the courts in costs proceedings and it is in the interests of all parties to consider carefully how the courts will react should a reasonable offer to mediate be refused. The judgement from Master O’Hare previously [in Reid] and now Master Simons [in Bristow] provides a clear direction that mediation is being endorsed and that if invitations to mediate are addressed late, ignored, or refused altogether, sanctions will be imposed by the court on the offending party”.

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Topics: ADR, Mediation

Philip McMullan

Written by Philip McMullan