Mediation – Costs, Case Law and Consequences
If you have offered mediation and received a rejection from your opponent, or if your client wishes to reject an offer of mediation, there could be significant costs consequences that flow from an unreasonable rejection.
Can my client refuse an offer of mediation?
This is the key question. Mediation may be reasonably rejected for a number of reasons, such as: (i) the claim hasn’t been fully particularised yet; (ii) the terms of the mediation are unreasonable; or (iii) the case is unsuitable for mediation. However, each case will be tested on its own merits (see the case law section below).
There have been a number of recent decisions from various Courts, sanctioning a party for an unreasonable rejection of mediation or other form of ADR, which usually involve a costs penalty. The simple guidance is, each rejection of mediation will be tested on its own merits using the Halsey test.
A brief summary of some of the key decisions
One of the first (and often relied upon) decisions, which still apples today in deciding whether a rejection of mediation was reasonable or not, is the case of Halsey v Milton Keynes General NHS Trust  EWCA Civ 576 and Dunnett v Railtrack  EWCA Civ 302 in which the Court held that parties should be encouraged to engage in Alternative Dispute resolution (“ADR”) and failure to engage in ADR without good reason, would place the party refusing at risk of adverse costs consequences.
The Court of Appeal provided guidance to all lower Courts in considering whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case which include but are not limited to the following:
- The nature of the dispute
- The merits of the case
- The extent to which other settlement methods have been attempted;
- Whether costs in the ADR would be disproportionality high;
- Whether any delay in setting up and attending the ADR would have been prejudicial
- Whether the ADR had a reasonable prospect of success.
The Court’s further endorsement for ADR in general was set out in paragraph 34 of Briggs LJ’s Judgment in PGF 11 SA v OMFS Company 1 Ltd  EWCA Civ 1288:
“the time has now come for this court to firmly endorse the advice given in Chapter 11.56 of the ADR Handbook, that silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless of whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds.”
What type of sanctions can the Court impose if an offer of mediation has been rejected?
Normally the sanction imposed by the Court is a reduction (in the percentage of costs that can be recovered) in the costs recoverable by the party who has rejected an offer on mediation unreasonably. Or if the paying party rejected an offer of mediation unreasonably, the award of costs on the Indemnity Basis as well as enhanced interest to the successful party.
In the case of Laporte & Another v The Commissioner of Police of the Metropolis  EWHC 371 (QB) in which the successful Defendant refused an offer to mediate (where D was not found liable for any damages at Trial) the Court imposed a sanction on the successful Defendant that it could only recovering two-thirds of its costs utilising CPR 44.2, following trial by way of costs sanction.
There have also been two ‘costs’ decisions from the Senior Courts Costs Office also in 2015 where the paying parties had refused reasonable offers of mediation in the Detailed Assessment process. In both cases the paying parties were sanctioned for rejecting offers of mediation: Reid v Buckingham Healthcare NHS Trust  EWHC B21 (Costs); and Bristow v The Princess Alexander Hospital NHS Trust & Ors  EWHC B22 (Costs).
Early Neutral Evaluation – CPR 3.1(2)(m)
Lastly, in a very recent decision (Summer 2019) the Court of Appeal in Lomax -v- Lomax  EWCA Civ 1467 approved the use of Early Neutral Evaluation (“ENE”) which is another form of ADR, even when one party doesn’t want to engage in the same.
The Court of Appeal found that ENE can be ordered by the Court regardless even in cases where one of the parties doesn’t wish to participate in ENE. This is the first reported case in which the Court has ordered that a form of ADR take place, against the wishes of the one of the parties. As yet, there are no reported decision for a party refusing an offer of ENE. However, it is only likely to be a matter of time.
About the author: Tom Blackburn is a costs expert and litigator with over 15 years’ experience of representing clients at mediations. He is a Director at Croft Solicitors in London and Cheltenham.