It has long been understood that parties to a dispute should consider, and be seen to consider, whether their disagreement can be settled without recourse to litigation. Whilst it is said that the courts cannot order mediation, failure by a party to explore alternative means of achieving a settlement can result in punitive costs orders being made against them. Is there really any choice but to mediate?

Case law has repeatedly reinforced the point that any party refusing to entertain the possibility of mediation, or more generally any means of alternative dispute resolution, will do so at their own risk. Whilst, at the end of a dispute, it is usually accepted that costs follow the event, ie, the losing party pays, the courts are becoming increasingly willing to exercise their discretion and depart from the rule in order to reprimand parties who turn down the chance to keep matters out of court. Given that this is the case, litigants could be forgiven for wondering whether they can ever legitimately refuse a suggestion to mediate.

The decision to mediate?

Before mentioning one or two recent cases which address, or perhaps add weight to, this viewpoint it is worthwhile repeating the (non-exhaustive) list, set out in Halsey v Milton Keynes NHS Trust, of relevant factors to take into account when deciding whether or not to mediate:

1. Nature of the dispute

There are instances, for example when a point of law is in dispute, when a court ordered decision is necessary.

2. Merits of the case

A tricky issue; a party who believes they have a strong case still risks a finding that they unreasonably declined mediation if it is decided that their belief was unreasonable.

3. Use of other means of settlement

Mediation often succeeds where other settlement methods fail and parties cannot, therefore, rely solely on the fact that other methods have been tried when deciding they need not attempt mediation.

4. Costs

This is likely to be a more important factor in cases where the sums at stake are relatively low. Mediation can sometimes be as expensive as a day-long hearing.

5. Timing

If a suggestion to mediate comes late in the day and, if pursued, risks delaying a listed trial it may be appropriate to decline mediation.

6. Prospects of success

If the prospects of a successful mediation are remote, due to another party’s intransigence, then it may be acceptable to decline (or fail to suggest) mediation.

Recent developments

Halsey, and its immediate aftermath, suggested a reasoned and consistent approach to refusals to mediate. The last year has, however, seen something of a retreat from this methodical analysis to a point where, it could be argued, the courts will punish failures to mediate as a matter of course, unless there are good reasons not to.

Take the cases of Straker v Tudor Rose (25 April 2007) and Jarrom & Shepherd v Sellars (24 April 2007). Both cases involved, not offers to mediate proper, but pre-action offers to meet informally and discuss issues. In both cases the court penalised the party refusing (or ignoring) suggestions to meet. In Straker the successful claimant, who had refused to negotiate, was awarded only 60 per cent of his costs from the date of the defendant’s Part 36 payment into court (and none before that date). In Jarrom there was no order as to costs, even though the court acknowledged that a meeting was unlikely to fully resolve issues between the parties.

In a similar vein is the marginally earlier case of P4 Ltd v Unite Integrated Solution PLC (17 November 2007) in which a claimant succeeded on the merits of the case (and was awarded damages of just £387), but failed to beat the defendant’s Part 36 payment.

Ordinarily, for costs purposes, the defendant would have been held to have been the successful party, but in this case the court decided that the defendant had unreasonably refused an offer of mediation and, in consequence, the claimant was awarded costs, on a standard basis, up to the date on which the Part 36 payment could have been accepted. The defendant was awarded standard costs from that date onwards.

Whilst the tenor of case law may leave litigants feeling that they must mediate, the law is (happily?) not yet that uniform. In Palfrey v Wilson (15 February 2007) a boundary wall dispute between neighbours resulted in offers and counter offers being exchanged. Finally, approximately eight weeks before trial, the claimant repeated his earlier offer adding, in the alternative, an offer to mediate. The defendant rejected the offer on the basis that the claimant had already rejected the defendant’s reasonable offers, the proximity of trial and the likely costs of a formal mediation. The judge agreed with this approach and, in finding against the claimant, held that the defendant was entitled to indemnity costs from the date of the defendant’s reasonable offer. This decision was upheld on appeal notwithstanding the defendant’s refusal to mediate. A glimmer of hope for those brave enough to refuse mediation perhaps?

That glimmer may, however, be extinguished if the comments made recently by Mr Justice Lightman (at a reception for mediation users and providers) are taken further. He commented that “…no thinking person can but be disturbed by the imposition of the twin hurdles to mediation which the decision in Halsey creates to achieving the approximation to justice…”. By “twin hurdles”, Lightman J was of course referring to:

  1. the finding that a compulsion to mediate would contravene a party’s human rights (Article 6 European Convention on Human Rights) and
  2. the requirement that it is for the party seeking to have a penalty for failure to mediate imposed on a recalcitrant opposing party, to show that that unwilling party acted unreasonably.

Lightman J is in favour of a system in which parties can be compelled to mediate and where a party refusing mediation is expected, as a matter of course at trial, to prove that their refusal was reasonable. The confines of this article prevent a discussion of the merits of this view, but time will tell whether the courts agree with Lightman J and adopt his suggested approach.