Mediation: A Refusal to Mediate is Not Sufficient to Justify a Reduction in Costs, the Refusal Must be Unreasonable
Mr Justice Constable recently considered the impact of a refusal to mediate and whether the Defendant should be deprived of some of its costs as a result. The Court held that the refusal to mediate was not unreasonable and therefore no reduction was applied.
Background
The matter of Assensus Limited and Wirsol Energy Limited [2025] EWHC 503 (KB) concerned a dispute regarding contractual bonus terms. The Claimant made various proposals to mediate prior to issue of proceedings, none of which were acted upon by the Defendant. The Defendant was successful at trial and, as a result, was entitled to its costs of the action. The Claimant submitted that the Defendant should only receive 70% of its costs due to the refusal to mediate. The parties submitted written submissions and judgment was handed down on 7 March 2025.
Legal Position
Several cases were considered within the judgment. The matter of Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 confirms that there should not be a presumption in favour of mediation. An order to reduce costs due to a refusal to engage in ADR is an exception to the general rule that costs should follow the event and, as such, the burden is on the unsuccessful party to show that the successful party acted unreasonably in its refusal of ADR. Factors which could be relevant to this issue may include the nature of the dispute, the merits of the case, the extent of other settlement attempts, whether the costs of ADR would be disproportionately high, whether any delays encountered whilst proceeding with ADR would have been prejudicial and whether the ADR had reasonable prospects of success.
It was submitted by the Defendant that the Court of Appeal in Gore v Naheed [2017] EWCA 369 stated that a refusal to mediate does not result in an automatic costs penalty. The Claimant submitted that OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 supports that the parties should “conduct litigation collaboratively in order to engage constructively in a settlement process”. However Mr Justice Constable noted that the facts of this particular matter were materially different as the Defendant in OMV had simply run up the costs by ignoring a reasonable offer.
Court’s Findings
In the current claim, the Defendant had made a Part 36 offer in the sum of £100,000. Given that the Defendant was entirely successful at trial and the Claimant recovered nothing, its offer was in fact a very generous one. The Claimant had made various offers ranging from £725,000 - £1,041,589. Whilst no other formal offers were made by the Defendant, events indicated that the Claimant would have been unwilling to consider a settlement of £157,500 (which was the Defendant’s expert’s opinion of quantum in the event a contractual bonus did indeed exist). The Claimant had also previously refused a discretionary bonus of £257,000. Taking these points into consideration, the judge concluded that the prospects of conducting a successful mediation were low and consequently, the Defendant’s failure to engage was not unreasonable. Therefore, a reduction to the Defendant’s costs was not justified on this occasion.
Commentary
This is a further positive result surrounding conduct and mediation. Whilst the parties are clearly under an obligation to consider and attempt ADR where appropriate, it would not be sensible to incur the costs of the same where mediation was very unlikely to be successful. This is clearly recognised within the Courts and balanced appropriately against the need to engage where suitable. It should however be noted that the refusal to engage must be reasonable and this will of course differ on case by case basis.
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