If a party is a signatory to a pre-existing dispute clause, that will normally be binding upon them save for specific circumstances outside the scope of this article[1]. Our present focus is where disputants are not bound to mediate, but one side proposes mediation.
Save where contractually or procedurally required, a party can ordinarily decline an offer to mediate. Our purpose is to examine when that offer can be declined without being deemed unreasonable. An unreasonable refusal can result in adverse costs being awarded in subsequent court proceedings[2].
Mediation is a confidential, facilitative process where parties are assisted by an independent mediator to find a mutually acceptable resolution of their dispute. Where parties are bona-fide participants, it is said that 60-85% of mediations settle[3]. A bona-fide participant is a litigant who has entered the process in good faith, with a view to seeking settlement.
There are, however, circumstances where mediation will not be appropriate. Mediation is a facilitative rather than adjudicative process, and is therefore unsuitable where the dispute requires a final binding adjudicative decision.
Fortunately, recent case law assists in ascertaining when a refusal to mediate is likely to be reasonable. Whilst many unwilling parties will express their refusal in unambiguous terms, they will sometimes fail to convey an explicit refusal, or will simply seek to frustrate the process through prevarication. In PGF II SA v OMFS & Another[4], the court held that silence could be equated with a refusal to mediate. In Thakkar v Another v Patel & Another[5], the court offered guidance suggesting that ‘foot dragging’ could also constitute refusal.
In Swain Mason v Mills & Reeve[6], the court considered when outright refusal would be reasonable. In that case, the Claimants had sought £750,000 plus costs from the Defendants. The Claimant put forward settlement proposals and the Defendants responded by offering to accept a ‘drop hands.’ (i.e. parties withdrawing their respective claims against each other and each bearing their own litigation costs). The court characterised the parties’ respective positions as being ‘in reality, one hundred miles apart.’[7]. Irreconcilable differences between the parties’ respective positions meant that there was no reasonable prospect of the dispute being settled in mediation. The court held it was reasonable to refuse to mediate where the mediation has no reasonable prospect of success. Furthermore, as noted by Davis LJ at paragraph 20, ‘a reasonable refusal to mediate does not become unreasonable simply by being steadfastly, and for cause, maintained‘.
When a court determines the reasonableness of party’s decision to decline to mediate, the court ‘…must judge the decision to refuse ADR at the time that it was under consideration‘[8] (i.e. when the decision was made). Hindsight might show that the decision to decline to mediate was wrong, but it is when the decision was made, that is important.
Parties are advised to respond to requests to mediate promptly and to give reasons for any refusal. The courts will look unfavourably on silence and/or prevarication. Reasons proffered to a court months or years after the proposal to mediate was advanced will lack credibility.
Amongst other things, case law [9] over the last 15 years suggests that it can be appropriate to refuse to mediate having regard to:
- The nature of the dispute;
- The strength of the refusing party’s case; refusal may be reasonable where the refusing party would succeeded on a summary judgment application (if the refusing party made one);
- The extent to which other settlement methods have been attempted;
- Whether the costs of the ADR would be disproportionately high; whilst mediation can be quick in certain circumstances, the costs that will accrue may be disproportionate to the value of certain claims;
- Whether any delay in setting up and attending the ADR will be prejudicial;
- Whether the ADR has a reasonable prospect of success;
- Whether, perhaps, a party ought to be entitled to have an issue dealt with in court; the existence of a particular allegation may warrant a party having the ability to challenge and disprove that allegation in an open and public forum.
For a recent illustration of these principles being applied, see Wales (t/a Selective Investment Services) v CBRE Managed Services Ltd [2020] EWHC 1050 (Comm) a decision of His Honour Judge Halliwell sitting as a Judge of the High Court. CBRE, a successful defendant, was awarded a costs order against the unsuccessful claimant, but for a reduced amount, because CBRE had refused to mediate on two occasions during the currency of proceedings. Recoverable costs were reduced for two period, by 50% and 20% respectively. See paragraphs 24 to 32, and 56.
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.
[1]Any normal contractual issue such as a lack of capacity may vitiate a pre-existing agreement to mediate. In addition, it would be important to look at whether the specific details of the dispute that has emerged is encapsulated by the terms of the pre-existing agreement. However, as stated these points are not substantively the focus of this article.
[2] Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 (11 May 2004).
[3] The Centre for Effective Dispute Resolution (‘CEDR’) offers statistics on the success rate of mediation in their biennial ‘Mediation Audit.’ Other statistics are also available from different groups and institutions to CEDR. The last audit was in 2018 and at the time of writing the authors have no details of when the 2020 audit will be published nor if same has been delayed as a result of the Covid-19 crisis. Details of the 2018 audit can be found by accessing the following link- here (accessed on April 15, 2020)
[4] [2014] 1 WLR 1386. In PGF II SA v OMFS & Another [2014] 1 WLR 1386, Briggs LJ (with whom Beatson LJ and Maurice Kay LJ agreed) said, at paragraphs 30 and 34:
‘The ADR Handbook, first published in 2013, after the period relevant to these proceedings, sets out at length in para 11.56 the steps which a party faced with a request to engage in ADR, but which believes that it has reasonable grounds for refusing to participate at that stage, should consider in order to avoid a costs sanction. The advice includes: (a) not ignoring an offer to engage in ADR; (b) responding promptly in writing, giving clear and full reasons why ADR is not appropriate at the stage, based if possible on the Halsey guidelines; (c) raising with the opposing party any shortage of information or evidence believed to be an obstacle to successful ADR, together with consideration of how that shortage might be overcome; (d) not closing off ADR of any kind, and for all time, in case some other method than that proposed, or ADR at some later date, might prove to be worth pursuing. That advice may fairly be summarised as calling for constructive engagement in ADR rather than flat rejection, or silence…
…
In my judgment, the time has now come for this court firmly to endorse the advice given in para 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 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. I put this forward as a general rather than invariable rule because it is possible that there may be rare cases where ADR is so obviously inappropriate that to characterise silence as unreasonable would be pure formalism. There may also be cases where the failure to respond at all was a result of some mistake in the office, leading to a failure to appreciate that the invitation had been made, but in such cases the onus would lie squarely on the recipient of the invitation to make that explanation good.‘
[5] [2017] EWCA Civ 117
[6] [2012] EWCA Civ 498.
[7] Supra, note 5.
[8] Corby Group Litigation v Corby District Council [2009] EWHC 2109 (TCC), Akenhead J, paragraph 23
[9] Akenhead J in Corby Group Litigation v Corby District Council [2009] EWHC 2109 (TCC) described, at paragraph 22, Dyson LJ’s expostion of the law in Halsey v Milton Keynes General Health NHS Trust [2004] EWCA Civ 576 (‘Halsey‘) as ‘[p]erhaps the most useful…’ Dyson LJ in Halsey had said, at paragraphs 15 onwards:
’15. We recognise that mediation has a number of advantages over the court process. It is usually less expensive than litigation which goes all the way to judgment, although it should not be overlooked that most cases are settled by negotiation in the ordinary way. Mediation provides litigants with a wider range of solutions than those that are available in litigation: for example, an apology; an explanation; the continuation of an existing professional or business relationship perhaps on new terms; and an agreement by one party to do something without any existing legal obligation to do so. As Brooke LJ pointed out in Dunnett at para [14]:
“Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the power of lawyers and courts to achieve. This court has knowledge of cases where intense feelings have arisen, for instance in relation to clinical negligence claims. But when the parties are brought together on neutral soil with a skilled mediator to help them resolve their differences, it may very well be that the mediator is able to achieve a result by which the parties shake hands at the end and feel that they have gone away having settled the dispute on terms with which they are happy to live. A mediator may be able to provide solutions which are beyond the powers of the court to provide.”
16. In deciding whether a party has acted unreasonably in refusing ADR, these considerations should be borne in mind. But we accept the submission made by the Law Society that mediation and other ADR processes do not offer a panacea, and can have disadvantages as well as advantages: they are not appropriate for every case. We do not, therefore, accept the submission made on behalf of the Civil Mediation Council that there should be a presumption in favour of mediation. The question whether a party has acted unreasonably in refusing ADR must be determined having regard to all the circumstances of the particular case. We accept the submission of the Law Society that factors which may be relevant to the question whether a party has unreasonably refused ADR will include (but are not limited to) the following: (a) the nature of the dispute; (b) the merits of the case; (c) the extent to which other settlement methods have been attempted; (d) whether the costs of the ADR would be disproportionately high; (e) whether any delay in setting up and attending the ADR would have been prejudicial; and (f) whether the ADR had a reasonable prospect of success. We shall consider these in turn. We wish to emphasise that in many cases no single factor will be decisive, and that these factors should not be regarded as an exhaustive check-list…
18. (b) The merits of the case. The fact that a party reasonably believes that he has a strong case is relevant to the question whether he has acted reasonably in refusing ADR. If the position were otherwise, there would be considerable scope for a claimant to use the threat of costs sanctions to extract a settlement from the defendant even where the claim is without merit. Courts should be particularly astute to this danger. Large organisations, especially public bodies, are vulnerable to pressure from claimants who, having weak cases, invite mediation as a tactical ploy. They calculate that such a defendant may at least make a nuisance-value offer to buy off the cost of a mediation and the risk of being penalised in costs for refusing a mediation even if ultimately successful.
19. Some cases are clear-cut. A good example is where a party would have succeeded in an application for summary judgment pursuant to CPR 24.2 , but for some reason he did not make such an application. Other cases are more border-line. In truly border-line cases, the fact that a party refused to agree to ADR because he thought that he would win should be given little or no weight by the court when considering whether the refusal to agree to ADR was reasonable. Border-line cases are likely to be suitable for ADR unless there are significant countervailing factors which tip the scales the other way. In Hurst , Lightman J said:
“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.”
In our judgment, this statement should be qualified. The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. But the fact that a party reasonably believes that he has a watertight case may well be sufficient justification for a refusal to mediate.
23. (f) Whether the mediation had a reasonable prospect of success. In Hurst , Lightman J said that he considered that the “critical factor” in that case was whether “objectively viewed” a mediation had any real prospect of success. He continued (p 381):
“If mediation can have no real prospect of success, a party may, with impunity, refuse to proceed to mediation on this ground. But refusal is a high risk course to take, for if the Court finds that there was a real prospect, the party refusing to proceed to mediation may, as I have said, be severely penalized. Further, the hurdle in the way of a party refusing to proceed to mediation on this ground is high, for in making this objective assessment of the prospects of mediation, the starting point must surely be the fact that the mediation process itself can and often does bring about a more sensible and more conciliatory attitude on the part of the parties than might otherwise be expected to prevail before the mediation, and may produce a recognition of the strengths and weaknesses by each party of his own case and of that of his opponent, and a willingness to accept the give and take essential to a successful mediation. What appears to be incapable of mediation before the mediation process begins often proves capable of satisfactory resolution later.”
Consistently with the view expressed in this passage, Lightman J said that on the facts of that case he was persuaded that “quite exceptionally” the successful party was justified in taking the view that mediation was not appropriate because it had no realistic prospects of success.
25. In our view, the question whether the mediation had a reasonable prospect of success will often be relevant to the reasonableness of A’s refusal to accept B’s invitation to agree to it. But it is not necessarily determinative of the fundamental question, which is whether the successful party acted unreasonably in refusing to agree to mediation. This can be illustrated by a consideration of two cases. In a situation where B has adopted a position of intransigence, A may reasonably take the view that a mediation has no reasonable prospect of success because B is most unlikely to accept a reasonable compromise. That would be a proper basis for concluding that a mediation would have no reasonable prospect of success, and that for this reason A’s refusal to mediate was reasonable.
26. On the other hand, if A has been unreasonably obdurate, the court might well decide, on that account, that a mediation would have had no reasonable prospect of success. But obviously this would not be a proper reason for concluding that A’s refusal to mediate was reasonable. A successful party cannot rely on his own unreasonableness in such circumstances. We do not, therefore, accept that, as suggested by Lightman J, it is appropriate for the court to confine itself to a consideration of whether, viewed objectively, a mediation would have had a reasonable prospect of success. That is an unduly narrow approach: it focuses on the nature of the dispute, and leaves out of account the parties’ willingness to compromise and the reasonableness of their attitudes.
27. Nor should it be overlooked that the potential success of a mediation may not only depend on the willingness of the parties to compromise. Some disputes are inherently more intractable than others. Some mediators are more skilled than others. It may therefore, sometimes be difficult for the court to decide whether the mediation would have had a reasonable prospect of success.
28. The burden should not be on the refusing party to satisfy the court that mediation had no reasonable prospect of success. As we have already stated, the fundamental question is whether it has been shown by the unsuccessful party that the successful party unreasonably refused to agree to mediation. The question whether there was a reasonable prospect that a mediation would have been successful is but one of a number of potentially relevant factors which may need to be considered in determining the answer to that fundamental question. Since the burden of proving an unreasonable refusal is on the unsuccessful party, we see no reason why the burden of proof should lie on the successful party to show that mediation did not have any reasonable prospect of success. In most cases it would not be possible for the successful party to prove that a mediation had no reasonable prospect of success. In our judgment, it would not be right to stigmatise as unreasonable a refusal by the successful party to agree to a mediation unless he showed that a mediation had no reasonable prospect of success. That would be to tip the scales too heavily against the right of a successful party to refuse a mediation and insist on an adjudication of the dispute by the court. It seems to us that a fairer balance is struck if the burden is placed on the unsuccessful party to show that there was a reasonable prospect that mediation would have been successful. This is not an unduly onerous burden to discharge: he does not have to prove that a mediation would in fact have succeeded. It is significantly easier for the unsuccessful party to prove that there was a reasonable prospect that a mediation would have succeeded than for the successful party to prove the contrary.’
In PGF II SA v OMFS & Another [2014] 1 WLR 1386 (‘PGF II SA’), Briggs LJ (with whom Beatson LJ and Maurice Kay LJ agreed) summarised the principles laid down in Halsey at paragraph 22, stating that in PGF II SA ‘…none of these guidelines was significantly in dispute on this appeal‘. Briggs LJ said, at paragraph 24 that:
‘In the 9½ years which have elapsed since the decision in the Halsey case, much has occurred to underline and confirm the wisdom of that conclusion, reached at a time when mediation in particular had a track record only half as long as it has now.‘
After considering 3 reasons in favour of the approach, at paragraphs 24 – 28, Briggs LJ turned to whether ‘…a party cannot just ignore a request to participate in mediation‘ (paragraph 29), at paragraph 29:
‘There are a few small indications in Court of Appeal authority that support the view that, at least in an appropriate case for ADR, a party cannot just ignore a request to participate in mediation. In Burchell v Bullard [2005] 3 Costs LR 507 , para 43, Ward LJ treated the Halsey case as making it clear that: “The parties cannot ignore a proper request to mediate simply because it was made before the claim was issued …” In Rolf v De Guerin [2011] 5 Costs LR 892 , para 48, Rix LJ described successive offers of mediation as having been “spurned” by the party’s failure to reply.‘
Briggs LJ then extended the Halsey principles/guidance, augmenting it with the guidance in the ADR Handbook, para 11.56 in relation to ‘…silence in the face of an invitation to participate in ADR…’ (paragraph 34)(set out fully in Footnote 4 above). Briggs LJ explained the basis justifying the extension to the Halsey principles/guidance, at paragraphs 35-39:
‘There are in my view sound policy reasons for this modest extension to the principles and guidelines set out in the Halsey case [2004] 1 WLR 3002, which concerned reasoned refusals, provided in prompt response to the request to participate in ADR. The first is that an investigation of alleged reasons for refusal advanced for the first time, possibly months or even years later, at the costs hearing, where none were given at the time of the invitation, poses forensic difficulties for the court and the inviting party including, in particular, the question whether the belatedly advanced reasons are genuine at all. The manner in which this issue was debated both before the judge and on this appeal is illustrative of those difficulties.
The thrust of [Counsel for the non-responding party’s] submission for the defendant was that the Halsey tests for the unreasonableness of a refusal were to be assessed purely objectively, by reference to the material facts about the litigation at the time, so that it made no difference whether the refusing party provided or withheld its reasons at the time of the invitation. I disagree. When the question concerns the reasonableness or otherwise of a party’s conduct, the party’s own perceptions may play an important part in the analysis, as is apparent from the treatment of a party’s reasonable belief in the strength of its case, in the Halsey case at para 26, rejecting as too narrow the purely objective approach applied by Lightman J in Hurst v Leeming [2003] 1 Lloyd’s Rep 379.
Secondly, a failure to provide reasons for a refusal is destructive of the real objective of the encouragement to parties to consider and discuss ADR, in short to engage with the ADR process. There are many types of reasonable objection to a particular ADR proposal which, once raised, may be capable of being addressed. Mediation may be resisted on the basis that some other type of ADR, such as early neutral evaluation, may be equally suitable and preferred by the objecting party. A proposed mediation may be expensive to the other party if, as is usual, the mediator’s fees are shared equally. In such a case it is not unknown for the proposing party to offer to bear the whole fee, or for some cheaper form of ADR, including judicial early neutral evaluation or financial dispute resolution, to be provided more cheaply by the court. ADR may be proposed before the other party has the requisite information, a difficulty capable of being addressed either by limited voluntary disclosure, or by ADR at a later date than that proposed.
Difficulties of this kind constantly arise in civil litigation, and the culture is now well established under which the parties should discuss these difficulties, and seek to narrow their differences, before those which are irreconcilable are put to the court for determination. This occurs routinely in relation to expert issues, and is now prescribed practice ahead of case management conferences and pre-trial reviews. I can see no reason why the same should not apply to ADR, thereby saving valuable court time in the case management process which, as the practice guides now all make clear, extends to the encouragement of ADR rather than merely to the giving of directions for trial.
This second reason is partly a matter of practicality, but also serves the policy of proportionality. A positive engagement with an invitation to participate in ADR may lead in a number of alternative directions, each of which may save the parties and the court time and resources. The invitation may simply be accepted, and lead to an early settlement at a fraction of the cost of the preparation and conduct of a trial. ADR may succeed only in part, but lead to a substantial narrowing of the issues. Alternatively, after discussion, the parties may choose a different form of ADR or a different time for it, with similar consequences. In some cases the exchange of views may lead to an early appreciation that the interests of the parties would best be served by the earliest possible trial of an issue of law or construction, as indeed occurred in the second of the cases under review in Halsey where, in the event, the trial lasted a mere two hours.’
On exercising discretion as to costs, Briggs LJ said, at paragraphs 51 and 52::
‘I agree with the general thrust of [Counsel for the non-responding party’s] submission, that a finding of unreasonable conduct constituted by a refusal to accept an invitation to participate in ADR or, which is more serious in my view, a refusal even to engage in discussion about ADR, produces no automatic results in terms of a costs penalty. It is simply an aspect of the parties’ conduct which needs to be addressed in a wider balancing exercise. It is plain both from the Halsey case [2004] 1 WLR 3002, itself and from Arden LJ’s reference to the wide discretion arising from such conduct in SG v Hewitt [2013] 1 All ER 1118, that the proper response in any particular case may range between the disallowing of the whole, or only a modest part of, the otherwise successful party’s costs.
There appears no recognition in the Halsey case that the court might go further, and order the otherwise successful party to pay all or part of the unsuccessful party’s costs. While in principle the court must have that power, it seems to me that a sanction that draconian should be reserved for only the most serious and flagrant failures to engage with ADR, for example where the court had taken it on itself to encourage the parties to do so, and its encouragement had been ignored.’
Dismissing the appeal against the balance of costs struck by the first instance judge, Briggs LJ said, at paragraph 56:
‘…this case sends out an important message to civil litigants, requiring them to engage with a serious invitation to participate in ADR, even if they have reasons which might justify a refusal, or the undertaking of some other form of ADR, or ADR at some other time in the litigation. To allow the present appeal would, as it seems to me, blunt that message. The court’s task in encouraging the more proportionate conduct of civil litigation is so important in current economic circumstances that it is appropriate to emphasise that message by a sanction which, even if a little more vigorous than I would have preferred, none the less operates pour encourager les autres.‘
