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Mediation, Unreasonable Refusals and Costs Sanctions - Main Action and Detailed Assessments

View profile for Richie Rees
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The Courts are placing an increasing emphasis on the importance of using mediation to resolve disputes. This is not a new concept, with Judges often prepared to impose costs sanctions against successful parties who may have won at trial, but who had unreasonably refused to mediate at an earlier stage where a similar final outcome may have been achieved. More recently, however, the courts have even punished unsuccessful parties for taking the same belligerent approach to litigation on top of the usual pay outs that follow from losing at trial, and have used other examples to clarify that a refusal to mediate will always be an important consideration when dealing with costs.
Here I consider the factors that may justify a reasonable refusal to mediate; how those factors could apply to costs proceedings in particular and how they have been applied by the courts recently; and how these developments should impact on practitioners' approach to main action and costs litigation.


Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576
Lord Justice Dyson & the Court of Appeal stated six factors that must be considered when deciding whether a party has unreasonably refused ADR or mediation:
1. The Nature of the Dispute;
2. Merits of the case;
3. Attempts to use other settlement methods;
4. The costs of the mediation – would it be disproportionate?
5. Delay (especially delay to a Trial listing); and
6. Reasonable prospects of the mediation succeeding; viewed objectively.

How could these factors apply to Detailed / Provisional Assessments?
Taking the six factors as listed above:
1. Costs disputes are always likely to involve a compromise of the sum claimed, and will only be a dispute about costs. Therefore surely a costs dispute will always be suitable in nature for mediation.
2. A reasonable belief that one party has a strong case can be grounds for reasonably refusing to mediate. Referring back to the fact that costs disputes are almost always resolved as a compromise to some extent, and are based on a starting point of one party already benefitting from a costs order, it would have to be a very strong case of recovering 100% (or gaining a DCC) to justify refusing to mediate on merits of your case alone.
3. The use of a more informal joint settlement meeting, or continued efforts to negotiate via email and telephone could support a reasonable refusal. If one party has clearly set out their objections or arguments in support of a Bill of Costs and the other has refused to engage by simply maintaining an unacceptable offer – you may reasonably believe that mediation will also fail.
4. Costs of mediation – this is where Provisional Assessment and Detailed Assessment may vary significantly. A half day mediation focusing on fiercely contested points of principle may be significantly cheaper than the costs of preparing for and attending a multi-day Detailed Assessment hearing. Conversely, the £1,500+VAT and Court fee limit on Provisional Assessment is likely to make any mediation on these matters disproportionately expensive.
5. With Detailed Assessment hearings frequently listed for over 12 months after the matter has been sent down; it is unlikely that an offer to mediate made at any point between settlement of the main action and listing of the hearing could be reasonably rejected on the grounds of delay. Furthermore a 12 month wait for a hearing provides parties with a guaranteed period in which mediation may be the only way of resolving the claim & avoiding the delay already caused by the listing.
6. The prospects of mediation succeeding are likely to be a combination of factors 1, 2 and 3 above. In principle costs disputes should be responsive to mediation due to their very nature. However if alternative attempts of settlement have already been utilised and the gap between the parties is such that one side will only move from their position on a definitive Order of a Costs Judge, then mediation may be pointless.


How have these factors been applied?


PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288
The Court of Appeal confirmed that the court’s power over costs orders stretched to overriding the principles of CPR 36 where there had been an unreasonable refusal to mediate. The Defendant had beaten its own Part 36 but the Court made no order as to costs on the basis that the Defendant had not given a good reason to refuse an earlier invitation to mediate. Of note was the Court's agreement that silence in response to an invitation is in itself an unreasonable refusal, even if there were reasonable grounds to refuse at that time.


Bristow v The Princess Alexander Hospital NHS Trust & Others, SCCO, 4 November 2015
Master Simons found that the paying party to a Detailed Assessment had unreasonably refused to mediate after taking three months to respond to a request for mediation and stating that the refusal was based on the fact that the matter had already been sent down for the assessment at the courts. The matter was eventually assessed and the Bill reduced by 43%, suggesting the parties' positions were rather far apart and the refusal to mediate would appear reasonable when considering the factors listed in Halsey.
However the Master's view was that the paying party's refusal had not been supported by a good reason; they had failed to set out the reasonable basis on which Mediation was rejected.
The paying party was ordered to pay the receiving party’s costs of the Detailed Assessment on the Indemnity Basis. The Master considered this to be a point of principle for which there should be a sanction against the defaulting party.


Laporte & Anor v The Commissioner of Police of the Metropolis [2015] EWHC 371 (QB)
The Claimants failed in their claim against the Defendant but sought no order as to costs, citing the Defendant's conduct and refusal to engage in ADR. The Defendant in turn sought Indemnity Costs. The Defendant was awarded its costs on the Standard Basis but limited to two-thirds as a starting point. The Court considered the Halsey factors and decided that ADR would have made settlement a “sufficiently likely possibility" but “by no means certain” and so the Defendant had to be reprimanded under the Court’s discretion, but still deserved some of their costs for succeeding at Trial.


Reid v Buckinghamshire Healthcare NHS Trust [2015] EWHC B21 (Costs)
In this clinical negligence matter, the costs were assessed after the first day of a two day Detailed Assessment. Master O’Hare then moved to consider the costs of the Detailed Assessment following the Claimant’s success. The Master noted that the Claimant had offered mediation and the Defendant responded six weeks later with a refusal. He found the refusal to be unreasonable, and therefore awarded the Claimant their costs of the Detailed Assessment on the Standard Basis up until 3 days after the date of the offer to mediate, and on the Indemnity Basis thereafter. The Master considered this to have been the date on which the offer to mediate would have reasonably been received, and therefore all costs from thereon followed the Defendant's unreasonably refusal.


What should practitioners do?
It is important to consider how significant decisions like this could be on the assessment of the costs of either the main action litigation or the Detailed Assessment, particularly for the paying party. On matters where the new approach to proportionality would usually bite on the Standard Basis, an unreasonable refusal during the litigation may open the doors for an Indemnity Basis assessment in which proportionality is set aside.
It is becoming clearer that offers of mediation will impact on costs awards of both the main action litigation and the subsequent assessment costs of the costs. Fee earners should therefore always consider the potential benefits of offering to mediate when it may reasonably bring the matter to a close. It may be that you already take this approach to litigation, but ensuring that the offer is made clearly and is recorded on the file could pay dividends when the issue of costs is addressed later on.
Alternatively, if you receive an offer to mediate at any stage, you need to respond. Properly consider the merits of mediation at that stage in the litigation, but also consider whether it would be objectively reasonable to refuse mediation. You may not want to mediate, but will that be enough to justify refusing the offer when the situation is assessed by a Costs Judge in several moths' time? If you do think it is appropriate to refuse make sure you convey that to your opponent along with your reasoning. Referring to the factors set out in Halsey may be the most obvious and persuasive way of protecting your client from an adverse costs decision regardless of whether you go on to win or lose the claim!

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