At the conclusion of court proceedings the court has a wide discretion to determine whether costs should be payable by one party to another. If the court decides to make an order on costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. However, the court may choose to make a different order. The risk of an adverse costs award is an important issue that potential litigants should consider before pursuing court proceedings.
The courts are increasingly encouraging parties to seek to resolve their disputes by alternative dispute resolution and not to unreasonably refuse opportunities to explore settlement. The general rule in relation to mediation is that a party may be penalised on the issue of costs for unreasonably refusing to mediate. The case of Murray and another v Bernard  EWHC (Ch) illustrates how the circumstances surrounding a refusal to mediate may impact on the court’s decision-making in relation to costs awards.
In the present case the court was required to determine the issue of costs following a five-day trial in which the defendant had unsuccessfully opposed a grant of probate being granted in favour of the claimants. A previous order made by the court recorded a refusal by the claimants to mediate. The master who made the order had stated in a preliminary hearing that this was a potentially high risk strategy by the claimants. However, following that hearing the claimants changed their minds and agreed to mediate. Mediation did not take place thereafter because the defendant said that he was not ready to take part and therefore the matter had progressed to trial without mediation having taken place.
At the end of the trial, the claimants succeeded overall and they sought their costs. The issues for the High Court to determine were:-
- whether the claimants' initial refusal to mediate meant that the court should disapply the presumption that the unsuccessful party should pay the successful party’s costs; and
- whether the defendant should pay costs on the indemnity basis.
The defendant’s argument was that there should be no order for costs in favour of the claimants because the claimants had failed to take an initial opportunity or accept an offer to mediate.
The High Court held that the general principle remains that a successful party's unreasonable refusal to mediate could warrant a reduction in the amount of costs to which he would otherwise be entitled. However, in the current case, it was clear that mediation did not take place because the defendant did not feel ready to take part. As such, the judge held that this was not a case in which it could be said that the claimants failed to mediate and nor could the claimants be criticised in this regard. The judge was entitled to take these circumstances into account when determining costs. The High Court exercised its discretion and concluded that there was no reason why the defendant, as the unsuccessful party, should not face the usual order as to costs.
The defendant was therefore ordered to pay the costs of the litigation on the standard basis. The court found that whilst the defendant should not have challenged the will, it did not consider that his conduct was such that indemnity costs should be awarded against him.
Although the decision in Murray and another v Bernard suggests that a delay or even an initial refusal to mediate will not automatically lead to an adverse costs award, it would be a risky strategy for a party to assume that if you initially refuse to mediate but later change your mind, this will have no effect on costs. In this case, the speed at which the claimants changed their minds (this appears to have been within two months of the master's order) and the fact that the defendant then refused to mediate, were clearly relevant considerations for the court. Given the wide discretion the court has in relation to costs, the facts of each case will be key in determining whether a party could be penalised for a refusal to mediate. In line with the overriding principles of the Civil Procedure Rules it remains wise for parties to consider engaging with mediation (or other alternative dispute resolution methods) wherever it may be possible and appropriate.