Mason and others v Mills & Reeve (A Firm) [2012] EWCA Civ 498  

One of the issues that the CA had to consider was an appeal by the successful party against the decision to impose a costs penalty for having refused to participate in a mediation. This refusal was despite the fact that proposals for ADR had not just been made by the claimants but also the trial judge. The position of the defendant was that the claim had no merit, a view that had been vindicated at the trial. The view, however of the trial judge was that claimants’ prospects of success “was at variance with the result in the judgment in a number of respects.” He in particular noted that a successful mediation would have avoided the risk of “collateral reputational damage” to the defendant and also that mediation would have allowed both parties to gain a better understanding of the weaknesses of their cases something which might have encouraged a settlement. This led the trial judge to hold that:

“It seems to me that the Defendant’s attitude in simply refusing even to contemplate the possibility of mediation on the grounds that the claim was utterly hopeless was an unreasonable position to take. Accordingly, I consider that the Defendant’s attitude to mediation is a factor that should be brought into account in making an overall assessment of what costs order should be made.”

The CA did not agree with this approach. Davis LJ stressed that the trial Judge had found that the defendant had been “vindicated” in its assessment of the strength of the claimants’ case which meant that its position, maintained throughout, had been shown to be justifi ed. Further the Judge did not explain what “weaknesses” in the respective cases would have been revealed in a mediation. It was also not said that if identifi ed, their revelation could have led to a mediated settlement. In addition Davis LJ did not understand why avoidance of “collateral reputational damage” to the defendant should have been considered a relevant factor, counting against the defendant. A settled professional negligence claim was capable, in some instances, of leaving behind reputational damage. Some professional defendants might, entirely reasonably, wish publicly to vindicate themselves at trial in respect of claims which will have been publicly aired by the commencement of proceedings. It would be unfortunate if claimants in cases of this kind could be encouraged to think that such a consideration as identifi ed by the judge could enhance their bargaining position.  

David LJ also had concerns in respect of the judge’s assessment that the possibility of a mediated settlement was “not unrealistic”. At all stages the parties “in reality were a hundred miles apart.” The claimants had sought £750k and costs. The defendant’s best off er had never been more than a “drop hands” approach.

It was therefore diffi cult to see how a mediation could have had reasonable prospects of success. Further, unlike many cases, nothing changed to necessitate a re-evaluation on the question of liability. Davis LJ concluded that:  

“A reasonable refusal to mediate does not become unreasonable simply by being steadfastly, and for cause, maintained. “

The key historic decision in these types of cases is , of course, the Halsey case (see Issue 47). Davis LJ noted that the CA here was concerned to make clear that parties were not to be compelled to mediate saying that ADR was not appropriate for every case. The CA in Halsey also identifi ed the situation where a party reasonably believes that he has a strong case as being the type of situation where ADR might not be appropriate, otherwise there was scope for a claimant to use the threat of costs sanctions to extract a settlement even where the claim is without merit. This was the situation here. The unsuccessful party (the claimants) was not therefore able to show that the successful party (the defendant) had acted unreasonably in refusing to agree to mediate. This lead the CA to reassess the original costs order, that the claimants pay 50% of the defendant’s costs. This could only be done with what was described as a broad brush which lead the CA to increase the percentage of costs awarded to the defendant to 60%.